The Clock is Ticking – Limitation Periods for Commencing Property Proceedings

By Rocky Zhou & Joy Dehaini

Married and de facto couples may initiate proceedings in the Federal Circuit and Family Court of Australia (‘the court”) to determine how their assets, liabilities and financial resources should be split.

There are time limits to make an application:

If you were married – an application must be made within 12 months of your divorce becoming final. If you are married and your divorce has not been finalised, you can apply for financial orders any time.

If you were in a de facto relationship – within 24 months of the separation date.

Out of Time Applications

If you do not institute property settlement proceedings before the statutory time limit, you must seek leave from the court to initiate the proceedings.

Leave to apply out of time

When considering whether the court should grant leave for an “out of time” application, you must demonstrate that hardship would be caused to a party or child of the relationship if leave were not granted. To determine hardship, you must demonstrate the following:

1. You have a prima facie, or arguable, case with a “real” probability of success;
2. The estimated legal costs to be incurred are not likely to exceed the benefits you are likely to receive; and
3. Your have reasonable grounds for the delay in commencing proceedings.

Once the three elements are satisfied, the court will then consider whether the opposing party will suffer prejudice due to the delay in commencing proceedings. Prejudice refers to any impairment the other would suffer, or costs associated with responding to an out of time application. It is presumed there is prejudice against the respondent until the applicant can prove otherwise – see Sharp & Sharp (2011) 50 FamLR567.

Breaking down hardship

PRIMA FACIE CLAIM

The recent Full Court decision of Welland & Hawthorn [2021] FedCFFamCIA 43 (“Welland“) confirms the applicant has the obligation to demonstrate there is a reasonable claim to be heard. The court must be satisfied that:

1. First, the prospective property settlement claim is sensible or arguable; and
2. Second, the applicant will suffer hardship if their application is denied.

In Welland, the property proceedings were brought 21 months out of time. The primary judge accepted the claim was reasonable and there would financial hardship to the applicant if leave were not granted, although the primary judge did add that it was not clear that the hardship would be to the extent alleged by the applicant. In saying this, the primary judge noted that the costs of the proceedings would not be insignificant.

COSTS VS BENEFITS

The court will consider whether the applicant’s legal costs are likely to exceed the benefit they may receive from the property settlement. This will involve considering several factors, such as the potential asset pool and the likely entitlements of the applicant to that asset pool.

ADEQUATE REASON FOR DELAY

The applicant must have an adequate reason for their delay in issuing the property settlement proceeding and provide sufficient evidence to reflect this.

In Welland, it was found the applicant had received legal advice from “multiple solicitors” about the need to bring property proceedings, both before and after the limitation period had lapsed, and had been urged by those lawyer to commence proceedings earlier. The applicant did not bring an application for leave to proceed for almost two years and she did not sufficiently explain this lengthy delay to the primary judge. While the applicant satisfied the first element as there was a prima facie claim, the court did not grant the applicant leave to proceed out of time due to her failure to explain the delay.

Main take-away points

1. The responsibility is on the applicant to prove the elements of “hardship”. “Hardship” is not limited to financial hardship.
2. The court has discretion and leave will not always be granted even if all elements are satisfied.
3. For a marriage, an application for property settlement should be filed within 12 months from the date the divorce order becomes final.
4. For a de facto relationship, it is crucial to pinpoint the separation date as it determines the relevant limitation period for initiating property settlement proceedings.
5. It is prudent to begin the preparation for initiating property settlement proceedings as soon as possible after the breakdown of the relationship, or at least to ensure that applications are commenced before the limitation date has expired.

If you are out of time, the team at Kennedy Partners can assist you with determining whether an application is suitable in your circumstances.