Report 113 (2006) - Relationships - Law Reform Commission : Lawlink NSW

13.1 While alternative methods of dispute resolution such as mediation provide a useful and appropriate way of resolving many disputes under the Property Relationships Act 1984 (NSW) (“the PRA”), some of these disputes will still require a decision by a court. In some cases facilitative methods will not succeed in resolving the dispute: other cases will be unsuitable for facilitative methods such as mediation, for example because of the effects of violence. The importance of litigation in developing and interpreting the law in this area is also important. When disputes under the Act go to litigation they should be appropriately managed and decided. Of particular concern in this context is that some lesbians and gay men presently avoid the formal justice system, for a number of reasons, including their fear of, or the reality of, an inhospitable environment created by a lack of understanding of, or insensitivity to, gay and lesbian relationship disputes or by homophobia.

13.2 This Chapter reviews the formal court processes, practices and jurisdictional issues in the resolution of disputes under the Property (Relationships) Act 1984 (NSW), with particular reference to people in same sex relationships and in close personal relationships, with the aim of ascertaining whether the court processes deliver a fair and equitable outcome to all PRA litigants.

13.3 Currently, a party to a domestic relationship may apply to a court for an order for the adjustment of property interests, or for the granting of maintenance, or both.¹ Section 9 of the PRA provides that a person may apply to the Supreme Court or a Local Court for an order for relief. Proceedings instituted in a Local Court may be transferred to the District Court or the Supreme Court.² The District Court also has jurisdiction under its own legislation to hear claims under the PRA,³ however there is no mention of this in the PRA.

13.4 Conferring the District Court’s jurisdiction in PRA matters by way of the District Court Act 1973 (NSW) rather than by the PRA seems a somewhat indirect method of conferring jurisdiction on the District Court. In the Commission’s view, it would be preferable if the PRA expressly conferred jurisdiction on the District Court to hear matters under the PRA, as it does in relation to the Local and Supreme Courts.

13.5 Generally, the District Court may handle civil cases where the amount claimed is $750,000 or less. However, in relation to applications under the PRA, the court is limited to making orders for financial adjustment not exceeding $250,000.⁴ This limit refers to the amount claimed or the value of the order rather than the total value of the assets or property in dispute.⁵

13.6 In DP 44,⁶ the Commission suggested removing or lifting this jurisdictional limit to allow more parties access to the District Court. DP 44 also dealt with the issue of increasing what was then a jurisdictional limit of $40,000 in the Local Courts.⁷ The jurisdictional limit in the general division of the Local Courts is now $60,000 with a consent jurisdiction extending to $72,000.⁸ This is consistent with the jurisdictional limit of the Local Courts to deal with civil disputes generally. Matters are transferred to the District Court or the Supreme Court where the value exceeds the Local Courts’ jurisdictional limit.

13.7 Recent amendments to the Family Law Act 1975 (Cth) (“the FLA”) have repealed⁹ the property limit provision contained in the FLA which prevented the Federal Magistrates Court (“the FMC”) from exercising jurisdiction in property proceedings under the FLA where the value of the property exceeded $700,000 (unless both parties consented).¹⁰ According to the explanatory memorandum to the amending legislation, the “$700,000 limit creates unnecessary rigidity in the system”. As part of the package of reforms, the Family Court and the FMC are developing a combined registry for family matters “to provide a single point of entry” and to “enable property matters to be channelled to the most appropriate court and to provide opportunities for the courts to maximise their use of resources”.¹¹

13.8 While removing the limits may not be a viable option in New South Wales, given jurisdictional limits in other matters, the Commission is of the view that the current jurisdictional limit of the District Court in PRA matters should be increased to $750,000, in keeping with the jurisdictional limit in other civil cases. The Supreme Court should continue dealing with matters that are beyond the jurisdictional limit of the District Court. This would provide greater access to the District Court for a larger number of people.¹²

13.9 Proceedings instituted in or transferred to the Supreme Court under the PRA are dealt with in the Equity Division of the Supreme Court.¹³ The Registrar usually deals with preliminary matters such as adjournments, and can transfer proceedings either to the General List or the Master’s List. Most applications to the Supreme Court under the PRA are decided by an Associate Judge (previously called a Master). There are a number of Associate Judges who deal with PRA matters. To this extent, there appears to be an informal specialisation in practice. However, the level of specialisation in such matters would be far less than is evident in the Family Court, given the comparatively small numbers of PRA matters being dealt with by the Supreme Court.

13.10 With regard to the numbers of applications, in 2005 there were 82 new cases commenced under the PRA in the Supreme Court;¹⁴ in 2004, 100 new matters were commenced, and in 2003, 111 matters were commenced. This compares with 77 new cases in 2002, 45 in 2001 and 48 in 2000.¹⁵ While these statistics clearly show an increase in the number of new PRA matters commenced in the Supreme Court since the 1999 amendments,¹⁶ no statistics are kept on the breakdown of PRA matters between opposite sex de facto cases and other relationship matters. It is therefore not possible to identify with any certainty the number of same sex or close personal relationship matters that have been commenced under the PRA and whether these numbers are on the increase.

13.11 Section 9 of the District Court Act 1973 (NSW) confers upon the Court a civil jurisdiction and a criminal jurisdiction. For the purpose of managing its workload, the Chief Judge has issued a number of Practice Notes. Practice Note 33 establishes a General List in the Court’s civil jurisdiction and details the manner in which cases within the List are managed. The Note also indicates that the Court maintains four specialist lists: the Construction List, the Commercial List, the Family Relationships List and a Defamation List.

13.12 The Family Relationships List deals with matters under the Property Relationships Act 1984 (NSW), Family Provisions Act 1982 (NSW) and the Testator’s Family Maintenance and Guardianship of Infants Act 1916 (NSW). Practice Note 46 sets out the manner in which the Court manages the Family Relationship List. Until 2004, approximately 75% of PRA matters were dealt with in Sydney.¹⁷ In 2004, the number of PRA matters dealt with in regional areas increased to 50% of the total. Sydney matters are dealt with by directions hearings. Once matters are ready, they are referred to the General List Judge for the allocation of a hearing date in the General List. In practice, there is a special list for PRA matters and one particular judge usually deals with these matters. However, the judicial registrar does most of the preliminary work.¹⁸

13.13 Country matters are managed by the same judge, who issues directions by telephone. Terms of settlement and consent orders are usually faxed to the Property List judge for approval and are returned promptly. A teleconference is held between the judge and the Clerk of the Local Court or the District Court Registrar who has the file, the legal representatives and/or the parties. Orders made are noted both on the Sydney file and the court file held in the country registry. Interlocutory matters which require judicial intervention are listed before the next available circuit judge. When the matter is ready for hearing it is listed by direction in the next available sitting commencing at that court.¹⁹

13.14 With regard to statistics in the District Court, the Commission has been advised that in the months from January to October 2005, 88 matters were brought under the PRA in Sydney and 82 in the country. In 2004, there were a total of 191 matters equally divided between Sydney and the country, and in 2003 a total of 194 matters were filed: 102 in Sydney and 92 in regional areas.²⁰ The new cases commenced between 2000 and 2004 consist of both opposite sex and other relationship matters. Again, as is the case in the Supreme Court, no separate statistics are available on the number of matters commenced by people in same sex relationships or those in close personal relationships.

13.15 In Sydney, PRA matters are dealt with in the St James Centre Local Court. Until April 2001, this court was referred to as the Local Court (Family Matters) as it dealt exclusively with family matters. However, since April 2001, it deals with children’s matters in addition to matters under the PRA and has been re-named St James Children’s Court. Since this court deals only with family law matters, it has developed some degree of specialisation in the area. This is not however the case in Local Courts in country areas.

13.16 The Civil Procedure Act 2005 (NSW) which has recently commenced, alters the procedures applying in the Local Court (as well as in all other NSW courts). Applications under the PRA will now commence by way of statement of claim in the civil jurisdiction of the Local Court in a similar way to proceedings in the District Court. In Sydney, statements of claim will normally be filed at the major civil registry at the Downing Centre Local Court. When matters are to proceed to a hearing it is likely that these matters will still be listed at the St James Children’s Court to ensure the continued use of magistrates with specialised knowledge in this area.

13.18 DP 44 raised the issue of whether State courts and, in particular, the District Court should have a specialist division for PRA matters. Many submissions were supportive of having such a division.²²

13.19 One of the main advantages of a specialist system is that its judges can be appointed on the basis of their particular experience and expertise in that area. The FLA provides that judges are appointed for their suitability “to deal with matters of family law by reason of training, experience and personality”.²³ Even failing previous specialist experience, judges dealing with particular matters on a daily basis may acquire a comprehensive understanding of the jurisprudence in that area.

13.20 Although the establishment of a specialist division within the courts for PRA matters has clear advantages, there are some difficulties in its implementation. First, while there is some evidence of a specialist division working in the Local Court in the St James Centre in relation to relationships matters, a specialist division would be much harder to implement in the District and Local courts in country areas since the volume of work in PRA matters would not justify such a course. Indeed, it may be difficult to justify the costs of establishing a specialist division in any of the courts dealing with PRA matters.

13.21 Further, it is unlikely that economic considerations would justify the establishment of a specialist division, even in Sydney, once most defacto claims become matters of federal law.

13.22 It is evident that although the courts may be cognisant of the special skill needed to deal with relationships matters, generalist courts cannot really afford the level of specialisation that the Family Court, being a specialist court, offers to its users.

13.23 The Commission notes that the current system allows for a certain degree of informal specialisation. However, we are of the view that the litigation environment would improve if all court staff, particularly Judges and Registrars, were provided with regular training and development in dealing with relationship matters. Such training would need to focus specifically on the particular issues that face couples in gay and lesbian relationships and people in close personal relationships and would be best provided by the Judicial Commission of New South Wales.

13.24 While training and development would be of great benefit to court staff, coherence of outcomes would improve greatly through access to reported decisions. The District Court does not currently have a reporting system. If instituted, such a system would be of great benefit to lawyers and judges. Apart from ensuring some degree of predictability of outcome by reference to decided cases, the body of specialist knowledge developed over a period of time if reported and accessible in soft and hard copy would be of great value to judges who may be new to or not have much experience in the area of relationships law.

13.25 While it is understood that there are few PRA applications by persons in same sex relationships, and it is likely that very few people in such relationships use the PRA and make an application in court, the fact that the actual numbers of PRA applications by persons in same sex relationships and close personal relationships are unknown is not helpful, and suggests a need for more detailed statistics to be kept.

13.26 Submissions and consultations with the gay and lesbian community have also revealed a general lack of awareness of the avenues available to same sex couples to resolve property disputes arising out of relationship breakdown. The Gay and Lesbian Rights Lobby submitted that many same sex couples are unaware that the PRA is available to them. Their submission suggested that the Government should fund an education campaign to increase awareness of the available recourse²⁴ which may result in more matters being dealt with in the courts. Many participants in the focus groups shared this view.²⁵ So does the Commission. We have given effect to it in Recommendation 4.

13.27 The PRA is silent on the issue of costs between the parties. The cost rules applicable in the Supreme Court and District Court generally apply the principle that costs follow the event. Accordingly, once a dispute is determined, the Court will hear the submissions as to costs and unless there are reasons to deviate from the general rule, will award costs to the party who makes out his or her claim. There are, however, instances where indemnity costs are ordered against an unsuccessful applicant if the claim is considered high handed or where an application has no chance of success.²⁶

13.28 The general rule in the Family Court is that each party to the proceedings must bear their own costs.²⁷ Costs can be privately funded by the parties or publicly funded through legal aid. They are not tax deductible. The Family Court may make an order as to costs and security for costs if the court considers it just to do so. Matters required to be taken into consideration in making the order include the financial circumstances of each party, the conduct of the parties, and the terms of any written offers to settle the proceedings.²⁸ Accordingly, the Family Court has made orders as to costs in cases where, for instance, one party has failed to disclose substantial assets,²⁹ or where one party had disregarded earlier orders.³⁰ The Family Court is also empowered to dismiss proceedings or make an order as to costs if it considers the proceedings to be frivolous or vexatious.³¹ The discretion to award costs in certain circumstances is considered an effective way of ensuring that proceedings are conducted effectively and efficiently by the parties.

13.29 In DP 44,³² the Commission made the point that PRA matters are more comparable to matters heard under the FLA, and that there was good reason to apply to PRA matters the same cost rules applicable to FLA matters. Another option suggested in DP 44 was that costs should prima facie come out of the joint estate.

13.30 There is also some concern among judges in the Equity Division of the Supreme Court that costs of applications under the PRA and the Family Provision Act 1982 (NSW) are out of proportion to the amount ultimately awarded.³³

13.31 In an attempt to provide some guidelines, Justice Young suggested in a family provision case³⁴ that ordinarily some special justification would need to be shown to warrant an order for more than $35,000 for the costs of a successful plaintiff in an application. In another family provision matter³⁵ which has close analogies to the powers under the PRA for adjusting property interests, Justice Young said that the plaintiff’s costs be capped at an amount equal to the amount of extra provision that the Court ordered be made to the plaintiff. In similar vein, Justice Campbell, while noting that a rule of thumb cannot always be applied,³⁶ suggested in a PRA matter that a useful rule of thumb in proceedings for property adjustment was that the costs awarded ought not to exceed the amount recovered.³⁷

13.32 The costs rules applicable in the FLA appear to be much fairer and more suitable to the type of matters heard under the PRA. In addition, wherever appropriate and possible, the Commission would favour consistency with the FLA. This is particularly important, if, as we expect, the Commonwealth takes up the reference of powers in respect of opposite sex de facto couples. The Commission recognises that people in same sex relationships and close personal relationships have similar issues to people in opposite sex relationships in relation to property settlements and hence, should, wherever possible, have access to the same laws as their opposite sex de facto couple counterparts, particularly when such laws appear to be more equitable.

13.33 Accordingly, the Commission recommends that the PRA be amended to mirror the FLA costs rules in s 117 of the FLA whereby each party pays their own costs.

13.34 The Commission also recommends that the PRA be amended to incorporate a provision similar to s 118 of the FLA which allows the court to dismiss proceedings or make such orders as to costs as it considers just, if it thinks the proceedings are frivolous or vexatious.

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4. District Court Act 1973 (NSW) s 134(1)(g) extends the District Court’s jurisdiction to any application under the PRA. Section 134(3) qualifies that jurisdiction. Section 134(3) states that the Court has no power to make an order for financial adjustment under Part 3 of the PRA that will or may result in the amount of the adjustment so made exceeding $250,000.

5. For example, in Howlett v Neilson [2005] NSWCA 149, the amount of the adjustment or the value of the order made by the Court was $131,000. The total value of the assets in that case was $313,000. See also Moore v Cureton [2002] NSWCA 188.

7. See Local Courts (Civil Claims) Act 1970 (NSW) s 12. That Act was repealed by the Civil Procedure Act 2005 (NSW) Sch 4.

8. Local Courts Act 1982 (NSW) s 4, s 65 and s 66. The consent jurisdiction can be either expressed, whereby the parties sign a joint memorandum agreeing to the extended jurisdiction, or implied, where one party makes an application to extend the jurisdiction and the other party does not object.

9. Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth) Sch 7.

10. See Family Law Act 1975 (Cth) s 45A and Family Law Regulations 1984 (Cth) reg 12AC (now repealed by the Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth) Sch 7).

11. Revised Explanatory Memorandum to the Family Law Amendment (Shared Parental Responsibility) Bill 2005 (Cth) at 154.

12. The 1998 amendments to the District Court Act 1973 (NSW) which increased the jurisdictional limit had the effect of providing greater access to the court for members of the community in both city and regional areas. It was hoped that the increased jurisdiction would enable litigants living in the country to have access to the court without having to bear the additional expense of a city agent.

14. Information provided by Ms Jeannie Highet, Manager, Caseload Analysis Division, Supreme Court of NSW, 31 May 2006.

15. Information provided by Ms Jeannie Highet, Manager, Caseload Analysis Division, Supreme Court of NSW, 1 March 2005.

16. The 1999 amendments expanded the coverage of the PRA to include same sex de facto couples and people in close personal relationships.

18. Information provided by Judge Ainslie-Wallace of the District Court of NSW, 4 March 2005.

19. Information provided by Judge Ainslie-Wallace of the District Court of NSW, 4 March 2005.

20. Information provided by Mr Ken Sims, Policy Officer, District Court of NSW, 4 March 2005.

21. The Operations Manager of the Local Court informed the Law Reform Commission that the system used to process PRA matters does not allow it to sort PRA applications from others.

22. Equity Division of Supreme Court of NSW, Submission at para 70; NSW Law Society, Submission at 10; NSW Young Lawyers, Submission at 14; D Farrar, Submission at 3.

26. Kolar v Dernovsek [2005] NSWSC 838. See also GE Dal Pont, Law of Costs, (LexisNexis Butterworths, Australia, 2003) Ch 7 generally.

36. In Van Zonneveld v Seaton [2005] NSWSC 175, there were some complicating factors which needed to be taken into account and allowed for in making an award of costs.