Appleby & Winchester
[2023] FedCFamC2F 347
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Appleby & Winchester [2023] FedCFamC2F 347
File number: BRC 6308 of 2017 Judgment of: JUDGE YOUNG Date of judgment: 9 March 2023 Catchwords: FAMILY LAW – property – where there are non-compliant structures built on the land of the former matrimonial home – where the wife has been threatened with enforcement proceedings by the council – where the wife says she did not know the structures were non-compliant prior to the parties reaching a property settlement – where the husband says the wife was aware the structures were non-compliant – where the court accepts the wife’s evidence as truthful – where the court does not accept the husband as a truthful witness – the husband is to pay compensation to the wife Legislation: Building Act 1975 (Qld)
Local Government Act2009 (Qld)
Cases cited: Blackwell & Scott [2017] FLC 93-775 Division: Division 2 Family Law Number of paragraphs: 19 Date of hearing: 6-9 March 2023 Place: Darwin Counsel for the Applicant: Ms Davison Solicitor for the Applicant: HCM Legal Counsel for the Respondent: Mr Kissick Solicitor for the Respondent: Ferrall & Co ORDERS
BRC 6308 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR APPLEBY
Applicant
AND: MS WINCHESTER
Respondent
order made by:
JUDGE YOUNG
DATE OF ORDER:
9 MARCH 2023
THE COURT ORDERS THAT:
1.That the Orders dated 27 April 2018 be varied to insert the following “Order 20A: That the Respondent shall pay to the Applicant an additional sum of $75,500.”
THE COURT FURTHER ORDERS:
2.That the Applicant file and serve written submissions in relation to costs within 14 days.
3.That the Respondent file and serve any written submissions in response within a further 14 days:
(a)Any affidavit on which he seeks to rely; and
(b)Any written submissions in response.
4.That the Applicant file and serve any written submissions and any affidavit in reply within a further 14 days.
THE COURT NOTES:
A.These orders have been amended pursuant to Rule 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Appleby & Winchester has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Ex TemporeJudge Young
This is an application pursuant to section 90SN of the Family Law Act by the de facto wife, whom I will refer to as “the wife”. She seeks, in summary, the costs of rebuilding two structures which have been called “the patio” and “the entertainment area” and which are unapproved structures built on the land at the former matrimonial home at D Street, Suburb E. She seeks the cost of rebuilding those structures so as to comply with the building regulations. The case was also run on an alternative basis that she should be awarded the costs of demolition and removal of the structures so as to comply with the building regulations. The wife has been threatened with enforcement proceedings in respect of the structures which I am satisfied might include rectification of the works by the City F Council and/or prosecution. The de facto husband, whom I will call “the husband”, seeks dismissal of the application.
SECTION 90SN
The wife alleges that prior to the agreement reached between the parties on 27 April 2018 and reflected in consent orders on that date the husband suppressed evidence by failing to disclose to the wife information of which he was aware and which was highly relevant to the matters resolved by the consent orders, that is, his knowledge that the two structures, the patio and the entertainment area, were non-compliant with the building regulations. Precisely how the husband was aware of that is somewhat unclear. He admits that at all relevant times he was aware of those matters. It is possible that he had become aware of those matters by virtue of his long experience in the building industry, and he was, it is apparent, familiar with building codes and regulations and associated matters.
The husband, as I say, admits that he was aware at all relevant times that the structures were non-compliant with building regulations but he says there was no miscarriage of justice and no relevant failure to disclose information because the wife was aware of the information at the time of settlement in early 2018. He does not deny it was relevant information which, if unknown to the wife, ought to have been disclosed. He says, further, that even if there was a failure to disclose information the wife has not suffered any loss because:
(a)The value of the property has increased since 2018, or alternatively;
(b)The unapproved structures do not diminish the value of the property.
It should also be noted that the parties have expressly stated to me that the only basis on which they seek to vary — not set aside — the consent orders is on a compensatory basis for the loss, if any, of the wife. They do not seek to reopen the whole settlement and, given the position of the parties, I am satisfied that that is the correct approach.
While the matter is to be determined on a compensatory basis, as I will call it, the parties appear to agree that the legislative provision provides a mechanism which ought to be interpreted liberally to achieve justice and equity between the parties. I have approached the dispute in that way but I also keep in mind that there are some common law related notions, such as the duty to mitigate loss which may have some relevance.
BACKGROUND
The chronology of the matter is highly relevant. In 2006 the property was purchased in the husband’s name alone. The husband said there were financial reasons for this, suggesting some credit history of the wife as the reason. It is unnecessary for me to make any finding about that. At the time, the property purchased had two non-compliant structures: the patio, an area about four metres by four metres, which is, in effect, an enclosed veranda attached to the back and side of the house; and the entertainment area, which appears to have been a large open steel framed structure, perhaps originally a garage or something of that nature, which later held a barbeque area and a pool table. It was a large area with what appears to have been a steel frame and some kind of roofing.
The entertainment area was non-compliant with building regulations principally because it was built to the boundary of the property. The building regulations require a 900 millimetre setback. Dispensation from the setback requirement can be obtained from the regulatory body, in this case the City F Council, but according to the expert evidence, for any dispensation to be granted it would require the construction of a firewall to prevent the spread of fire between the properties.
In mid-2015 the parties applied for and obtained approval to construct a balcony on the upper level at the front of the house. This work was never completed by the parties, principally because the balcony, sometimes called decking in the evidence, required the addition of a balustrade. The husband says that he was unable to complete that work due to the separation of the parties. The work was never completed, and the approval lapsed in 2016. The parties separated in 2017. Around this time, the City F Council was interested in the construction of the balcony. According to the husband, City F Council staff inspected the property on a number of occasions. He says that the wife became aware of the non-compliance of the patio and the entertainment area through these visits. For reasons which I will explain in a moment, I reject that evidence. In late 2017, the City F Council issued a notice of intention to enter the property under the Local Government Act 2009 (Qld). The only matter referred to in that notice was the unfinished balustrade on the balcony, which was said to make it unsafe. On 26 April 2018, which was the day before the conciliation conference between the parties and which resulted in consent orders, the wife’s solicitors wrote to the husband, who was unrepresented at that time. I will not repeat the entirety of the letter but one part was relevant, and it said:
Our client has been approached by the Council in relation to the noncompliance of the decking at the [D Street] property. Could you please therefore, in particular given [Mr C] [a reference to the parties’ youngest child] is living in this residence, provide to us all information in relation to that issue in addition to any safety concerns that may be in existence.
The husband replied on the same day, and said, in effect, that he designed and built the balcony but had been unable to complete it because of the parties’ separation. No other matter was raised by him. In other words, he did not disclose at that time any further information.
On 27 April 2018 consent orders were made by the Federal Circuit Court. Under those orders, the wife retained the former matrimonial home at D Street, Suburb E. The parties had previously obtained a valuer’s report in late 2016 which valued the property at $450,000. That report specifically excluded any reference to non-compliant structures and recommended that the parties make their own enquiries. In mid-2018, the property was transferred to the wife. A short time later, the husband wrote to the City F Council by email. The email appears to have been headed “Noncompliance [sic] building structure”. After an introductory sentence, the husband said:
I am writing in regards to an existing backyard permanent structure that was illegally built prior to me purchasing the property. I had planned to pull down this existing structure whilst I was the owner of the [D Street] property, as the structure was illegally built on the boundary line, and possess [sic] a potential risk from fire or structural collapse and may cause potential personal injury to my son (who still resides at the residence) or the neighbours. I have now shown my duty of care in this matter, and as I am no longer the resisted [sic] owner of the [D Street] property, take no responsibility in any non-compliant structural failure, and all liability is now with the Council and new owner of the property.
In mid-2018, the husband wrote to a Mr G at the City F Council. Mr G’s role is unclear but it is evident from the email that Mr Appleby considered Mr G was the relevant or responsible officer at the City F Council. I quote:
My name is [Mr Appleby]. I have been in contact with you on many occasions in the past concerning the construction of the balcony at [D Street], [Suburb E]. The reason for our conversations were in regards to the development permit expires [sic] and due to me being ousted from the [D Street] property, I was unable to finish the balcony build, I discussed with you on a few occasions that the property matter was going through court and pending the outcome would determine the result.
The letter goes on with another sentence that is not relevant. I note that there is no mention by the husband in his letter to Mr G of having discussed any non-compliance issue other than the balcony.
In early 2019 the City F Council wrote to the wife. I will read relevant parts of the letter but not its entirety:
It has come to Council’s attention that a breach of the Building Act (1975) has occurred in relation to the covered balcony and rear covered entertainment structure on your premises. In particular, the following matters have been identified.
I will not read those matters as they are not relevant for present purposes but they simply make clear that the Council is aware that the matters it refers to, which I am satisfied are the patio and the entertainment area, are non-compliant structures. The letter went on to say:
You are encouraged to obtain a retrospective building development approval, or to remove the building/structure to rectify this matter.
Council is not commencing immediate compliance action at this stage. However, Council’s property records will be updated to reflect that there is unlawful development on the premises which will be identified in any property search by a prospective purchaser.
I will omit the following sentence, and the quote continues:
Please note that Council may take compliance action for the unlawful development at any time, and this advisory letter does not preclude further action, particularly if additional complaints are received.
In early 2019 the wife subsequently obtained a quotation from H Company to rectify the works. The letter from the engineers also informed the wife that the City F Council was aware of the non-compliant patio, if that was not already clear from their letter that I just referred to. The engineers suggested that removal of both structures may be the best response. The wife obtained a quote but she does not appear to have acted on that advice at that stage. A short time later, the City F Council wrote to the wife demanding amended plans and a plan for rectification of the works to comply with the National Construction Code. After this, on various dates, there appears to have been correspondence between the wife or her lawyers and the City F Council seeking delay in any further action by the Council. In early 2023 the City F Council wrote a letter to the wife referring to non-compliant structures on the property, including the patio, the entertainment area, a spa and the balcony, to which I have already referred, and threatening enforcement action or prosecution or both. In relation to the spa and the balcony, I have already referred to the balcony, and the wife does not seek any redress. Similarly, in relation to the spa, she acknowledges that she was aware of those matters and does not say that there was any relevant non-disclosure by the husband about that.
CREDIBILITY
The wife was an emotional witness, and at times unresponsive to questions, or confused in her answers, although she genuinely appeared to have trouble understanding some of them. The husband, on the other hand, was a composed and careful witness. He stated clearly in his written and oral evidence that the wife was aware of the non-compliant nature of the patio and the entertainment area before the settlement in 2018. He said there were two or perhaps three sources of the wife’s knowledge:
(c)Before the purchase, the wife’s father had flown up from New South Wales and inspected the property. The husband asserted that the wife’s father had some qualifications, which were unspecified, to recognise non-compliance. However, there was no specific evidence from the husband about what the wife’s father may have said and to whom. I am not satisfied that the wife’s father was either qualified, or in fact, that he said anything useful to the parties about the non-compliant structures.
(d)The husband said that on numerous occasions the City F Council visited the property, and the Council was aware of the patio and the entertainment area non-compliance. Those matters had been discussed with the council officers and the wife was present. However, that evidence is inconsistent with the correspondence that I have referred to. It was not a date in early 2019, that is, after the consent orders, that the City F Council sent a letter where it said that it had come to “Council’s attention” that there were non‑compliant structures and that, letter of course, followed close on the heels of the husband’s letter of mid-2018 to the Council where he said:
I have been in contact with you on many occasions in the past concerning the construction of the balcony at [D Street], [Suburb E].
I would have expected, if there had been any prior discussion between the husband and the Council about the other non-compliant structures, Council would not use the language it used in early 2019 that it had “come to Council’s attention”. Nor would the husband have said that he had been in contact on many occasions in the past concerning the construction of the balcony. It was conceded by the husband that there was no evidence in the subpoena material returned from the City F Council prior to this point that the Council had recorded any knowledge of the non-compliant structures on the property, that is, before the husband’s own letter in mid-2018. I am satisfied that the husband’s evidence that the City F Council was aware of the non-compliance before his email of mid-2018 is deliberately false and his intention in giving that evidence was to convey the false impression that the wife was aware of the non-compliant structures through the Council visits to the property.
(e)The husband also said that on many occasions prior to settlement he had discussed the non-compliant structures with the wife. Given my finding that his evidence about the wife’s awareness through visits from the City F Council was deliberate and calculated untruthful evidence, I find that he is not a witness of truth. I am also satisfied that the City F Council was not aware at any point prior to the husband’s letter of mid-2018 of the non-compliant structures of the patio or the entertainment area. I am satisfied the husband’s untruthfulness was motivated by his recognition that the wife did not know about the non-compliant structures. I accept her evidence about her lack of knowledge as truthful. It follows that I am satisfied there was suppression of relevant evidence by the husband by failure to disclose relevant information.
LOSS
The wife says that the appropriate measure of her loss is the cost of rebuilding the structures, being the patio and the entertainment area, so as to be compliant with building regulations. It was submitted that this is what she “bargained for”, using the language of the Full Court decision in Blackwell & Scott [2017] FLC 93-775. I do not accept that case is analogous. Here, the home was always affected by the non-compliant structures. There was no representation, for example, that the structures were compliant and thereby added value to the property. The wife could never have obtained at settlement in 2018 a property with compliant structures. I accept that the wife might have decided not to take the property if she was aware of the non‑compliant structures, and for example, taken money instead. She gave evidence that that was an option because the husband also wanted to retain the house. While I cannot make a finding that the wife would have done something differently, I accept the information was relevant to the bargaining process and the wife was disadvantaged by the non-disclosure by the husband.
I also reject the husband’s contention that:
(a)There is no loss because the property has appreciated in value since 2018.
(a)Any loss should be limited to the diminution in value of the property according to the valuation evidence, from $660,000 to $620,000.
It is true that the property has appreciated but this is simply one factor. It would have appreciated more in value if, as is clear from the valuation evidence which I will refer to in a moment, the non-compliant structures were not present. Limiting the loss to the diminution in value does not protect the wife from the consequences of enforcement actions by the Council which would appear to potentially involve the Council making good the defective structures or removing them and charging the cost to the wife or against the property. Prosecution would also appear to be a possibility. She could potentially avoid those consequences by selling the property at a diminished value but that would involve additional unspecified expense, including sale, and perhaps purchase of another property with significant attendant incidental expenses such as agent’s commission.
It appears to me that it is just and equitable to compensate the wife for the lowest amount that it would cost to rectify the non-compliant structures and compensate her for the consequent diminution in value of the property. In rough terms that appears to be about $60,000 for the works to remove the entertainment area and re-establish the garden and so on, including about $10,000 for either rebuilding the patio so it is compliant, or removing it, amounting to about $60,000 in all. Further, according to the valuation evidence, the removal of those structures would, in fact, diminish the value of the property by about $15,000.
THE EXPERT EVIDENCE
Mr J, a building estimator, gave evidence as a single expert. He gave evidence that demolition of the entertainment area and reinstatement would cost $45,000 to $50,000. He said rebuilding the entertainment area to make it compliant would cost $96,998. He assumed a 15 per cent mark up or profit margin for the builder, but he accepted in cross-examination that that could be higher, and as much as 30 per cent, certainly for the rebuilding of the structure, and at one point, counsel for the wife asked him to recalculate his cost if it was a 30 per cent profit margin on rebuilding both structures. The amount was in excess of $200,000. However, I accept that the appropriate course here is for demolition of the entertainment area and reinstatement of the area, and I accept that the correct figure is the higher figure offered by Mr J of $50,000.
In relation to the patio, the evidence was somewhat inconclusive. Mr J appeared to think that making some relatively minor additions to the patio, and thereby remedying the defects, was a cheaper option. He nominated a figure of $10,438 for that. He also discussed the option of simply demolishing the patio and making it good, and there were a number of variables in his calculation, which are, for example, whether a wall needed to be removed, or whether a slab could be left, and so on. I was not able to make findings about what the likely cost of demolition was. It would appear to range from about $9,000 to $14,000. I am satisfied I should accept the cost estimated by Mr J for making good the patio at $10,438. Taking all of that as a round figure, I consider that the cost of rectification and/or repair is $60,500.
Mr K, a valuer, gave evidence as a single expert. He initially said the value of the property was $660,000, a value he said was unaffected by non-compliant structures. He said that in that area of Brisbane there was a higher market toleration for non-compliant structures. He said, further, that removal of the structures would likely reduce the value of the property by $15,000, to $645,000. He said, however, the threat of enforcement proceedings and the alteration of the Council’s records so as to make it clear to any prospective purchaser on a search that those enforcement proceedings and call for rectification were still outstanding would mean that the property was in fact worth $620,000 without any rectification. By way of comparison of the various options, he also said that simply remediating the works and rebuilding the structures at potential cost, according to Mr J, of something in excess of $200,000, would only add $10,000 to the value of the property.
All in all, I think that the just and equitable solution is that the husband should pay the wife the cost of rectification, $60,500, and compensate her for the consequent reduction in value of the property of $15,000, which is a total of $75,500.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Young. Associate:
Dated: 9 March 2023
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