Bilous v Mudaliar

[2005] NSWSC 71

Reported Decision: (2005) DFC 95-315

New South Wales

Supreme Court

CITATION:	Bilous v Mudaliar [2005] NSWSC 71
HEARING DATE(S):	13/09/04-17/09/04
JUDGMENT DATE :	18 February 2005
JUDGMENT OF:	White J
DECISION:	Direct counsel for the plaintiff to bring in short minutes of order in accordance with these reasons.

CATCHWORDS:	Property Relationships - Contributions by the parties - Whether an adjusting order is just and equitable having regard to the parties' respective contributions and expectations of continuing relationship.
LEGISLATION CITED:	Property (Relationships) Act 1984 (Cth) Supreme Court Act 1970 (NSW)
CASES CITED:	Del Gallo v Frederiksen [2000] NSWCA 293 Beattie v Read (2002) 31 Fam LR 204 Davey v Lee (1990) 13 Fam LR 688 Gazzard v Winders (1998) 23 Fam LR 716
PARTIES:	John Bilous v Jayanti Mudaliar & 1 Or
FILE NUMBER(S):	SC 5338/03
COUNSEL:	Plaintiff: Mr D Murr SC & A Givney Defendant: Mr P Maiden
SOLICITORS:	Plaintiff: The Charlestown Law Firm Defendant: Hills Solicitors

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Friday, 18 February 2005

5338/03 JOHN BILOUS v JAYANTI MUDALIAR & 1 Or

JUDGMENT

1 HIS HONOUR: This is an application under s 20 of the Property (Relationships) Act 1984 (Cth) for an order adjusting interests in property of the first defendant and for consequential relief. The second defendant is a company of which the first defendant is the sole shareholder and director. Until it becomes necessary to refer to the position of the second defendant, I shall describe the first defendant as “the defendant”.

Introduction

2 The plaintiff is a schoolteacher by profession. The defendant is a medical practitioner. From either December 1989 or March 1990 the parties lived together in the defendant’s house at 29 Hatfield Street, Merewether, a suburb of Newcastle. They lived together as de facto partners until at least Christmas of 1996 or March 1997. At Christmas 1996 the parties had an argument and the police were called. The plaintiff went to stay with friends for a short period. He later returned to the property although the parties then occupied separate bedrooms. In March 1997 he took up an offer of employment as a schoolteacher in Childers in Queensland. The parties continued to communicate by telephone regularly during his residency in Queensland. He returned to the Hatfield Street property during school holidays in 1997. In March 1998 the plaintiff returned to Merewether and again lived with the defendant in her Hatfield Street property. On 21 August 1998 the parties moved from Hatfield Street to a property purchased by the defendant at 11 Shortland Esplanade, Newcastle. On 12 August 1999 they adopted a child. The defendant contends that the parties separated on 20 July 2000, although the plaintiff continued to live in the house at Shortland Esplanade. The plaintiff left the property at Shortland Esplanade on 28 December 2001. Thereafter the plaintiff lived at 1/71 Berner Street, Merewether. That is a property of which the defendant is the registered proprietor and which she holds as trustee of a trust known as the Berner Property Trust.

Whether Leave Required

3 The question of whether the parties’ domestic relationship ended on 20 July 2000 or at some later time assumed some significance, because the proceedings were not commenced until 17 July 2003. The defendant contended that their domestic relationship ceased on 20 July 2000 and that accordingly the plaintiff required leave to commence the proceedings pursuant to s 18(2) of the Act. However in the course of final submissions, the defendant accepted that if leave were required for the making of the application pursuant to s 18 of the Act, leave ought to be granted.

4 In any event I am not satisfied that the de facto relationship between the parties ceased prior to 17 July 2001. Although the parties experienced difficulties in their relationship after 20 July 2000, and I can infer from their sleeping arrangements that a sexual relationship had ceased, they continued to live together as a family with their child. I do not consider that the application was out of time.

Plaintiff’s Assets at Commencement of Relationship

5 At the commencement of the relationship in either December 1989 or March 1990 the plaintiff was not teaching. He was a shareholder and director of a company called Audio Junction Pty Ltd which carried on a business known as “Audio Junction” and a business known as “Charlestown Hi-Fi”. The company sold audio hi-fi equipment to the public. The plaintiff worked in that business as an employee until 30 October 1992. He sold his shares in the company at the end of 1992 and was paid $66,000 either for his shares, or as a combination of dividends and shares.

6 Another asset which the plaintiff owned at the commencement of the relationship was a sum of $11,361. This was money held in the account of a Mr Tanet Phanichewa kept with the Newcastle Permanent Building Society. The plaintiff contended that part of the monies in the account were initially monies belonging to Mr Phanichewa, and part belonged to him. The amount owing to Mr Phanichewa was paid out to Mr Phanichewa so that the balance of the monies belonged to the plaintiff. The plaintiff did not declare the interest which accrued on the credit balance which was admittedly his. I think it probable that a reason for the holding of the monies in the name of Mr Phanichewa was to avoid declaring this income. On 27 April 1990 the plaintiff caused a building society cheque to be drawn in favour of the defendant for $11,361.35, thereby closing the account.

7 The plaintiff says that he also brought to the relationship, or accumulated up to 1992, cash totalling $20,000. He says this was money drawn from the Audio Junction business. He says that he spent the money in paying for the services of tradesmen and on materials in connection with renovations which he carried out to the Hatfield Street property. Those renovation works were carried out between 1990 and 1996.

8 There was no corroboration that the plaintiff spent his own cash in this way. No receipts or invoices for the work paid by cash were produced. Although evidence was called from a builder who was engaged in the work, a Mr Ross Ferris, who confirmed that he was paid in cash, his evidence was general and was based upon what he said was his usual or preferred practice to be paid in cash. His evidence did not disclose the source of the cash; whether it was money belonging to the plaintiff or the defendant. Nor did his evidence establish the amount which was paid. Although I accept the plaintiff’s evidence that he had cash which he had drawn from the Audio Junction business and that he paid for some of the work on the Hatfield Street property in cash, I am not persuaded that he had $20,000 of cash which he applied in this way. All I can say is that an unknown amount of the plaintiff’s own cash was paid in connection with these works. Having regard to the lapse of time, the plaintiff’s interest in the suit, and the absence of any persuasive corroboration, I do not regard the plaintiff’s statement that he spent $20,000 of his own cash in this way as being reliable. That is an extraordinary amount of money for a person of his modest means to have kept about him.

Defendant’s Assets at Commencement of Relationship

9 In 1990 the defendant conducted a medical practice in partnership from The Junction, Newcastle. After graduating from medicine in New Zealand, she had completed her internship and residency in Australia by 1985. In September 1990 she moved her practice to Merewether for a brief period and amalgamated her practice with that of another practitioner. However in February 1991 she moved her practice back to The Junction and conducted her practice as a sole practitioner.

10 At the commencement of the relationship her assets were modest. She owned the property at 29 Hatfield Street, Merewether. The uncontested valuation evidence is that at 1 March 1990, the property in its then condition was worth $135,000. The defendant had purchased the property with her former husband in 1984 for $90,000. In 1989, as part of a property settlement made with her former husband, she acquired his interest in the Hatfield Street property but had increased the mortgage over the property. As at 18 August 1989 the property was mortgaged to Westpac Banking Corporation to secure an advance of $72,000. I infer that at the time of the commencement of the relationship her equity in the property was about $65,000. She also had possession of a Nissan motor vehicle which was on lease. She also had savings of about $16,000.

11 Of most significance is her ownership of the Hatfield Street property and her earning capacity.

Children

12 Neither party had children until they adopted a son in 1999.

Section 20

13 Section 20(1) of the Property (Relationships) Act provides as follows:

“ 20 Application for adjustment
(1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to:
(a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and
(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:
(i) a child of the parties,
(ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties.”

14 Most of the evidence for the plaintiff was directed to contributions which he made of the kind referred to in paragraph (a). Although there was evidence of his contributions as a homemaker to the welfare of the plaintiff, subject to one exception, it was not suggested that there was an imbalance between the contributions which each made to the welfare of the other as would justify an adjusting order pursuant to s 20(1)(b). The exception is that it was submitted for the plaintiff that his contribution made in and from 1999 to the welfare of the parties’ adopted son was such as to warrant an adjusting order in his favour. I will return to that submission in due course.

Parties’ Assets at Termination of Relationship

15 To understand the assets which each party had at the termination of their relationship it is necessary to describe their dealings in property and their superannuation arrangements. These were complex.

16 By 29 November 1991 the defendant had discharged her mortgage over the Hatfield Street property. On 17 December 1992 the parties entered into a contract to purchase a property at 71 Berner Street, Merewether which was intended to be an investment property. They purchased that property as joint tenants. The purchase price was $162,500.

17 On 20 January 1993 they contracted to purchase a property at 51 Berner Street, Merewether which was also intended to be an investment property. Again the property was purchased by them as joint tenants, although the defendant says that she believed that she was the sole purchaser of the property. I do not accept that evidence. However ultimately nothing turns upon it. The property at 51 Berner Street was purchased for $150,000. The purchase of both properties was financed by a loan from Westpac Banking Corporation in an amount of $336,000.

18 In 1994 the property at 51 Berner Street was sold for $215,000. The money was used to reduce the debt to Westpac Banking Corporation.

19 Between late 1994 and August 1995 the property at 71 Berner Street was sub-divided and two townhouses were constructed on it. There is a dispute as to the costs of the development. The plaintiff says that the cost of construction was $200,098. The defendant says that it was in the order of $310,000. The property was developed by the plaintiff as “owner/builder”. The construction was financed from further borrowings.

20 On 16 September 1994 the parties established their own self-managed superannuation fund called the J & J Superannuation Fund. They established a corporate trustee, J & J Superannuation Pty Ltd, of which they were the sole shareholders and directors. They transferred their existing superannuation entitlements to this fund. At 30 June 1995 the plaintiff’s balance was $43,314 and the defendant’s balance was $116,424.

21 On 22 September 1995 a trust known as the Berner Property Trust was established. The defendant was the trustee. The trust was a unit trust. All of the units in the trust were issued to J & J Superannuation Pty Ltd. On 28 September 1995 the townhouse at 2/71 Berner Street, Merewether was transferred by the parties (who held the property as joint tenants) to the defendant. The consideration for the transfer was $180,000. J & J Superannuation Pty Ltd subscribed for 180,000 units in the Berner Property Trust. To subscribe for the units it transferred $180,000 to the defendant in her capacity as trustee of the Berner Property Trust. The defendant paid $180,000 which she held as trustee of the Berner Property Trust to herself and the plaintiff to purchase the unit. They then applied the $180,000 in reduction of an equity access loan account with the Westpac Banking Corporation to reduce the balance of that loan.

22 On 27 July 1998 the parties transferred the townhouse at 1/71 Berner Street, Merewether to the defendant, who then held the property on the trusts of the Berner Property Trust. The consideration for the transfer was $270,000. (This figure is taken from the transfer 5197156L which is part of annexure D to Ms Melville’s affidavit). J & J Superannuation Pty Ltd subscribed for more units in the Berner Property Trust to enable this transaction to occur. On 28 July 1998 it transferred $120,000 to the defendant as trustee of the Berner Property Trust. This money was used towards her discharging a loan (then of $144,845) owed to BMC Mortgage Corporation.

23 The effect of these transactions was that the parties used their existing superannuation balances to reduce their mortgage debts.

24 It is suggested that at about the same time the Hatfield Street property was “transferred to the Trust” for $280,000. No evidence was adduced that the defendant declared a trust of the Hatfield Street property. However the financial statements of the Berner Property Trust recorded the property as an asset which was later realised at a capital loss. The Hatfield Street property was sold on 1 October 1999 for $218,500.

25 On 13 August 1998 the defendant purchased a property at 11 Shortland Esplanade, Newcastle for $750,000.

26 During 2003, (i.e. after the termination of her relationship with the plaintiff), the defendant formed her own superannuation fund with her then current partner. This was called the JIVA Superannuation Fund. On 18 June 2003 she caused a valuation to be made of Units 1 and 2, Berner Street Merewether. Each property was valued at $350,000. In August 2003, (i.e. after these proceedings were commenced), the defendant unilaterally altered the investments of the J & J Superannuation Fund and, to use her accountant’s expression, “rolled her funds out of the J & J Superannuation fund to the JIVA Superannuation Fund”. The units held by J & J Superannuation Pty Ltd in the Berner Property Trust were redeemed by the defendant. She purportedly did so exercising her power as trustee of the Berner Property Trust pursuant to clause 19 of the Berner Property Trust Deed. I say “purportedly”, because clause 19 permitted the trustee to redeem the units only after giving notice to the withholder and seeking to reach agreement with the unitholder upon a fair value of the units. As the plaintiff was not consulted, and as he was one of only two directors of J & J Superannuation Pty Ltd, no effective notice was given to, nor was an agreement attempted to be reached with, J & J Superannuation Pty Ltd. No claim has been made by J & J Superannuation Pty Limited to set aside the redemption. Nor has J & J Superannuation Pty Ltd sought equitable compensation against the defendant for breach of trust.

27 In August 2003 the Berner Property Trust had liabilities to J & J Superannuation Pty Ltd for monies borrowed from it. As at 30 June 2003 those loans totalled $147,509. The units in the Berner Property Trust were worth $556,417 on the assumption that the land and improvements were valued at $700,000. On or about 11 August 2003 the defendant, as trustee of the Berner Property Trust, paid cheques totalling $706,425 to J & J Superannuation Pty Ltd. The units were redeemed. In August 2003 the J & J Superannuation Fund had assets totalling $711,899 and a taxation liability of $17,874, so that there were net assets available to pay benefits of $694,025. The defendant transferred her member’s balance of $503,652 to the JIVA Superannuation Fund. In turn, it paid $503,652 to subscribe for units in the Berner Property Trust. The balance of $190,373 held by J & J Superannuation Fund represented the plaintiff’s superannuation benefit. It was represented by cash at bank of $162,027 and by “loans to other persons” of $27,846.

28 Immediately before the transfer of the defendant’s member’s balance to the JIVA Superannuation Fund, the plaintiff’s proportion of the assets of the J & J Superannuation Fund was 27.4%. ($190,373 out of net assets of $694,025). At all times the plaintiff had had a smaller interest in the J & J Superannuation Fund than the defendant. The proportions of their interest varied according to their contributions.

29 The result of the establishment of the Berner Property Trust, the transfer of the two townhouses to the defendant as trustee of that trust, and the subscription for units in the Berner Property Trust by J & J Superannuation Pty Ltd on behalf of the J & J Superannuation Fund, was that monies in the superannuation fund were used to pay off borrowings on the property. Before the property was acquired by the defendant as trustee of the Berner Property Trust, the plaintiff had a 50% beneficial interest in the property. When the units in the Berner Property Trust were redeemed, the superannuation fund, in which he then had a 27.4% interest, obtained the then assessed value of the property. Any further increase in capital value of the property would accrue for the benefit of the JIVA Superannuation Fund.

30 The valuation on the basis of which the units were redeemed was too low. The uncontested evidence at the hearing was that as at mid August 2003 the market value of Unit 1/71 Berner Street was $392,500 and the market value of Unit 2/71 Berner Street was $378,000: a total of $770,500 rather than the $700,000 used to calculate the redemption. The effect of the under-valuation was to reduce the plaintiff’s superannuation entitlement as at that date by 27.4% of $70,500, that is, by $19,317, less his proportion of the additional capital gains tax J & J Superannuation Pty Ltd would have been liable to pay had the valuation used for calculating the redemption price been $70,500 higher. The uncontested evidence of a Mr Heffron was that had the higher valuation been used, the plaintiff’s member balance of the J & J Superannuation Fund would have been $207,949 not $190,373.

31 The plaintiff’s solicitors asked the defendant’s solicitors to identify what was the “loans to other persons” of $27,846 in the balance sheet of J & J Superannuation Fund. The defendant’s solicitors represented that this was a debt owed by the plaintiff for unpaid rental arising from his occupation of Unit 1/71 Berner Street. However that property was never an asset of the J & J Superannuation Fund. It is clear from the movement of cheques on the redemption of units that the debt is one owed by the defendant to J & J Superannuation Pty Ltd. A cheque for $27,846 was drawn by the Berner Property Trust, (or the defendant as trustee of it), in favour of J & J Superannuation Pty Ltd and then endorsed by it to the defendant, who paid that same amount back to the Berner Property Trust.

32 The cash sum of $162,027 held by J & J Superannuation Pty Ltd as at 29 August 2003 was derived after deduction from the bank account of two sums of $2,120 and $15,754. They were payments to meet the taxation liabilities of the J & J Superannuation Fund. It was suggested during the course of argument that this withdrawal prejudiced the plaintiff because it in effect made him liable for the whole of the taxation liabilities of the Fund. However it is clear from the Fund’s financial statement that that is not so. The tax expense was apportioned between each of the members and was met by the fund. The balance in the bank account represented monies wholly belonging to the plaintiff beneficially because the Fund had met its taxation expense. But they were not the only assets owned by J & J Superannuation Fund that were held for him. J & J Superannuation Pty Ltd is also owed the debt of $27,846 by the defendant.

33 Had the plaintiff’s superannuation entitlements been determined on the basis of the now agreed value of the Berner Street townhouses he would have been entitled to an additional $17,576. Leaving aside questions of interest, the defendant is liable to pay $70,500 to J & J Superannuation Pty Ltd, which after, paying any capital gains tax would hold 27.4% of the balance on trust for the plaintiff. The parties agreed that one of the plaintiff’s assets is an amount of $45,422 which the defendant is liable to pay to J & J Superannuation Pty Ltd. As the trustee may be liable to capital gains tax on the receipt of 27.4% of $70,500 (i.e. $19,317), she should pay $47,163 ($19,317 plus $27,846) to the trustee, to be held on trust for the plaintiff.

34 On 30 October 2003 a company called Jeevan Investments Pty Ltd purchased a property at 3/74 Cleary Street, Hamilton (another suburb of Newcastle). The purchase price was $468,000. The defendant is the sole director and shareholder of Jeevan Investments Pty Ltd. It is a trustee of another trust called the JJS Property Trust of which Jasper, the child of the parties, is the beneficiary. Jeevan Investments borrowed $370,000 for the purchase price from the defendant. She in turn borrowed the money from the National Australia Bank on security over the property at 11 Shortland Esplanade Newcastle. The balance of the purchase price was “contributed” by the defendant. I infer this was by way of gift.

35 The parties presented a statement of what was said to be agreed figures of their assets and liabilities as at the hearing. However there were some errors in the statement. Corrected for those errors, at the hearing, the plaintiff’s assets consisted of the following:

(a) he had superannuation entitlements as at 29 August 2003 of $190,373 of which $162,557 was represented by cash. The balance of $27,846 is a debt owed by the defendant to J & J Superannuation Pty Ltd;

(b) in addition J & J Superannuation Pty Ltd is entitled to $70,500 from the defendant as the result as her redemption of its units at an under-value. The plaintiff’s beneficial share of that chose in action is 27.4%;

(c) he owned a 1992 BMW motorcycle valued at $5,000 and a 1998 Holden Commodore valued at $10,000.

These sums total $224,690.

36 Otherwise the plaintiff had no material assets, nor liabilities, apart from a liability arising from his occupation of the property at 1/71 Berner Street. The rental value of that property as at 8 January 2004 was $300 per week. The plaintiff has occupied the property from the beginning of 2002. He has asserted that he occupied the property with the defendant’s agreement on terms which did not include an obligation to pay rent. However the plaintiff’s counsel accepted, in my view correctly, that on any assessment of the plaintiff’s claim for relief under the Act, he had to give credit for the value of that occupation.

37 The defendant owns the property at 11 Shortland Esplanade valued at $1,250,000. The agreed statement of the parties’ financial position showed that she owned 3/74 Cleary Street, Hamilton, which was valued at its purchase price of $468,000. However that is an asset of Jeevan Investments Pty Ltd. She is owed at least $370,000 by Jeevan Investments in respect of the loan made by her to it for the purchase of 3/74 Cleary Street Hamilton. She also owns a BMW motor vehicle purchased in 2003 for $59,000. She owns shares valued at $5,000 and has superannuation entitlements of at least $550,151. The parties agreed that the value of her superannuation entitlements as at August 2003 was $758,100. This could not be so as the value of her superannuation entitlement had to reflect both the value of the Berner Street properties and her debt as trustee of the Berner Property Trust. However I can assume from the agreed figures that that debt is included in the agreed value of her liabilities. Hence, in calculating her assets, I adopt the figure agreed by the parties for her superannuation entitlements of $758,100. She owns a medical practice valued at $78,212. She has liabilities totalling approximately $1,052,000 apart from her liability to J & J Superannuation Pty Ltd. Her net assets therefore, including her superannuation entitlements are about $1,421,000.

38 The plaintiff sought an order under s 20 of the Act adjusting the parties’ property interests such that he should receive 40% of their combined net assets. On the above figures the parties’ combined net assets are about $1,646,000. Hence the plaintiff seeks orders for payment of $448,000 together with orders to secure the payment of the monies owed to the J & J Superannuation Fund. In fact the plaintiff claimed more than this but I have adjusted the figures to apply the plaintiff’s methodology to the agreed financial position of the parties after correction.

39 There is a stark contrast between the comparable financial positions of the parties at the beginning and end of their relationship. That is principally due to the defendant’s greater earnings and the capital gain on her investments in real property.

Plaintiff’s Claimed s 20 Contributions

40 The principal contributions made by the plaintiff to the acquisition, conservation or improvement of the defendant’s property, or to her welfare or the welfare of their family, can be summarised as follows:

(a) he organised extensive renovations to 29 Hatfield Street, Merewether between 1990 and 1996 and carried out extensive labour himself in connection with those renovations and made payments towards them;

(b) he assisted the defendant in establishing and maintaining the premises at which she conducted her medical practice and assisted her in the administration of the practice during their relationship;

(c) he pooled his income with hers, contributed to household expenses, rates and the costs of maintenance and repairs, and paid to her, or applied for their joint benefit, his savings and moneys received on the sale of his shares in Audio Junction Pty Limited ;

(d) he conceived of the plan to conduct the property development at 71 Berner Street and became the owner/builder for the development, he secured the development and building approvals for it, managed the construction of the two units, carried out a substantial amount of building work on the development and maintained it after it was built;

(e) he gave up his entitlement as a joint tenant of 71 Berner Street to a 50% share of the capital gain of the property, by transferring the two townhouses to the J & J Superannuation Fund in which he had a lesser beneficial interest;

(f) he carried out building repairs and improvements to the property at 11 Shortland Esplanade, successfully negotiated a compensation claim with the Department of Fair Trading for poor building work on the property resulting in an award of compensation of $100,000, and supervised further repairs to the property;

(g) he contributed as homemaker and parent to the welfare of the family by caring for Jasper.

41 The details of these claimed contributions were disputed by the defendant, although in broad terms they were made out. However the defendant said that no adjustment to property interests was warranted because the plaintiff’s contributions were matched, or more than matched, by countervailing benefits which he derived during their relationship. In particular she paid the plaintiff wages from the medical practice and claims that he was paid wages for the work which he did on the 71 Berner Street development. She made substantial contributions to his superannuation. Although she made the repayments on the loans to finance the purchase and development of the Berner Street properties, the plaintiff received half of the income tax deductions from the negative gearing of those investments. She provided the plaintiff with accommodation. She provided him with the use of motor vehicles including a Holden Commodore motor vehicle registered in her name which she acknowledges he should retain. She paid the greater share of their joint expenses. She paid some of his debts. She says that she made greater contributions than did he to the care and upbringing of their child.

Plaintiff’s Contribution to Conservation and Improvement of 29 Hatfield Street

42 The plaintiff claimed that the sum of $11,361 withdrawn from the account of Mr Thanet Phanichewa was used to reduce the defendant’s mortgage secured over that property. The defendant denied that the money was applied in that way and claimed that it was used to pay medical expenses for the plaintiff’s mother between March and August 1992 and some other personal expenses of the plaintiff. I do not think that the money can be earmarked in that way. It was received by the defendant in April 1990. The various payments from her cheque account for medical expenses were made in 1992.

43 The fact remains however that in 1992 the defendant paid various medical expenses totalling $9,790 for the benefit of the plaintiff’s mother. Although this may not be itself a contribution from the defendant falling within s 20(1)(a) or (b), it is nonetheless a reciprocal benefit to be considered. The plaintiff contended that the medical expenses were paid from $10,000 which his father had given the defendant for the purchase of a Nissan Pulsar motor vehicle which she retained and later sold to her former husband. I do not accept his evidence in relation to that transaction. The effect of his evidence was that the defendant was paid $10,000 by the plaintiff’s father for her motorcar, but that between them they retained both the car and the $10,000. There was no corroboration of the evidence.

44 By the same token there was no evidence to show that the sum of $11,361 was in fact applied in reduction of the mortgage over the Hatfield Street property. However I do not think that much turns on this. Whether the money was used to reduce the defendant’s debt to the bank, or whether she received it as an increase in her cash resources, the payment should be given the same weight. She did not contend that it formed part of the cash resources to which both parties had recourse to pay their day-to-day expenses.

45 The evidence given by the plaintiff as to the renovation work on the property was extensive. To a significant extent it was corroborated by affidavits by tradesmen who were engaged in the project. It involved the arrangement and co-ordination of the tradesmen, the supervision of their work, and extensive labour. The plaintiff also claimed to have paid for some of the work in cash. He said that the $20,000 of cash which he drew from the Audio Junction business was spent on these renovations. As I have said, I do not accept that he had that much money. Rather he paid an unknown amount of his own cash in connection with the works. The defendant accepts that he paid for and installed a slow combustion heater at the property.

46 There is no doubt that the builder, Mr Ferris, who did work on the property was paid in cash. However neither the amount he was paid, nor the source of the cash to make the payments, was established.

47 The plaintiff said that after his money ran out the costs of the renovation were paid by the defendant. She prepared a schedule of those payments by trying to reconstruct her cheque butts for the relevant period. The amount which she initially claimed was $47,850.72. There were however errors in the schedule. Two that were established total $8,200. As to the balance of her claim, there is substance in the plaintiff’s contention that it involved a post-facto reconstruction of the cheque butts. The plaintiff queried some other claimed items. Certainty is not possible, but so far as the position can be ascertained I accept that the defendant spent from her own money between $35,000 and $38,000 on the Hatfield Street renovations.

48 More significant than the financial expenditure was the amount of time and labour that the plaintiff put into the work. Without being exhaustive, he excavated an area for the installation and then installed a new hot water system. He excavated new footings, built a new pier, corrected the fall of land from the house to an adjoining path to prevent water inflow, built stairs to the garage, installed a combustion heater, installed a replacement bathroom and toilet, carried out various plumbing works by laying pipes and the like, completed the construction of an outside deck, paved a set of concrete steps, built a retaining wall, painted the timber deck, removed ceramic tiles, demolished a dividing wall, installed steel support beams and removed two internal walls, inspected the installation of new stairs, sanded and lacquered a large floor area, did various painting work, assisted in the laying of tiles, and installed kitchen appliances. He also organised a number of tradesmen and checked the work which they did.

49 These labours did not result in a substantial increase to the capital value of the house. In its then condition as at 1 March 1990 it was worth $135,000. It was sold on 1 October 1999 for $218,500. I infer that the prices of real property in Newcastle moved upwards during that period, so that not all of the increase in value could be attributed to the improvements to the property. Indeed the fact that the parties attributed a value of $280,000 to the property in 1998 suggests that they seriously overestimated the extent to which the improvements had increased the capital value of the property. Nonetheless, I can assume that the renovations improved the property’s capital value to some extent and were of benefit to both parties in their enjoyment of the property, at least when the building works were not in progress. The plaintiff also carried out maintenance and gardening at the property.

50 It must however be remembered that the plaintiff was living in the defendant’s property. Counsel for the plaintiff submitted that to treat the defendant’s provision of accommodation to the plaintiff as a countervailing benefit was novel. However there is authority that the burden borne by one party to the relationship in providing accommodation to the other is a matter to be taken into account, as is the corresponding advantage to the other party. (Del Gallo v Frederiksen [2000] NSWCA 293 at [48]-[50]). There is no difference in principle between a party who is provided with accommodation being advantaged by being able to let out his or her own property for rent, and a person who is provided with accommodation being spared the expense of rent.

Contributions to Defendant’s Medical Practice

51 The plaintiff made some contribution to the conduct of the defendant’s medical practice. He wrote up books of account from other financial records. He assisted in the movement of fittings and the installation of fittings and equipment in her surgery. He helped with the installation of a computer for the surgery and provided some assistance to the staff in the operation of computer programs. From time to time he accompanied the defendant when she made night calls to patients. He organised the installation of a security system and installed a security screen door. He prepared payslips and group certificates and attended to the payments of employees’ superannuation. He was given the title of Practice Manager, but that was an exalted description of the work which he did for the practice.

52 According to the defendant, for the financial years ended 30 June 1994 and 30 June 1995 she paid the plaintiff $254.80 per week net by way of wages and that for the financial years ended 30 June 1999 and 30 June 2000 she paid the plaintiff wages of $111.50 net per week from the medical practice. In addition she says she paid him what she called “bonuses in the form of wages” in order to provide him with needed money in 1993, 1994, 1995, 1996 and 1998. The payments which she described as wage bonuses totalled $55,349.40.

53 A clearer picture emerges from the parties’ tax returns. Not all of the plaintiff’s tax returns were produced. However the evidence establishes that the defendant paid or credited the plaintiff with wages between 30 June 1993 and 30 June 2000 as follows:

1993 $ 6,000
1994 $ 21,540
1995 $ 13,000
1996 $ 12,795
1997 $ 10,400
1998 $ 38,420
1999 $ 1,899
2000 $ 8,836
2001 $ 600
$113,490

54 There is no question that if the wages with which the plaintiff was credited were in fact paid to him that he was more than adequately compensated for the work he did in connection with the defendant’s medical practice. He did not contend that he did not draw the wages which he declared in his tax returns. However financial reports prepared by Coopers & Lybrand for the defendant from 30 June 1993 to 30 June 1999 were tendered. They included balance sheets of the defendant which included liabilities to the plaintiff in amounts ranging from $33,120 as at 30 June 1993 up to $151,010 at 30 June 1997. Neither the plaintiff nor the defendant had any explanation as to how such debts could have arisen. One possible partial explanation is that the wage expense declared by the defendant in her income tax returns for the plaintiff was not paid to the plaintiff. However the evidence does not permit of such a finding. The accountants who prepared the financial reports were not called. There was no supporting material to explain the entries. Counsel could not explain how the reported debt arose. In the circumstances I would not be justified in placing any reliance upon that part of the defendant’s financial statements.

55 In the result the plaintiff was well paid for the work he did for the defendant’s medical practice.

56 The plaintiff claims he assisted the defendant in other ways in her career. He attended conferences with her, typed assignments for her and assisted her in giving a presentation. These are relevant but slight contributions to her welfare under s 20(1)(b).

Pooling of Income

57 The plaintiff’s taxable income, so far as it can be ascertained from the records produced was as follows:

Year ending 30 June:
1990 $22,305
1993 $47,399: (includes wage and franked dividends from Audio Junction Pty Ltd of $32,350 and wage of $6,000 from defendant).
1994 $25,276: (includes wage of $21,540 from defendant, $17,298 from the Department of Education and a net rental loss after interest expense on Berner Street properties of $15,141).
1997 $35,493: (includes wage of $10,400 from defendant, $28,161 from NSW and QLD governments and a net rental loss of $3,670).
1999 $88,772: (includes wage of $1,899 from defendant and a capital gain of $35,885 on transfer of 1/71 Berner Street).
2000 $48,911: (includes wage of $8,836 from defendant).
2001 $52,276: (includes wage of $600 from defendant).

58 One of the intractable difficulties in this case in determining the parties’ respective financial contributions is that not only did the defendant pay money to or for the benefit of the plaintiff, but the plaintiff paid money from time to time into the accounts of the defendant. It is futile to try to trace the various payments. Whilst I accept that the plaintiff did pay money from time to time into the defendant’s bank accounts for her use, it is not possible to quantify the amount paid. However his after-tax earnings were not high. He had no significant savings at the end of the relationship. I conclude that substantially all of his income was applied towards a pool of funds from which both parties drew.

59 The defendant’s earnings were substantially higher. She drew $500 or $1,000 per week to pay household expenditure for the benefit of both parties. Because of her higher income she was able to pay and did pay more than half of the day to day household expenses.

60 The defendant’s taxable income from the 1991-1992 financial year was as follows:

1992 $118,261
1993 $ 62,816
1994 $ 31,996
1995 $ 33,017
1996 $ 55,278
1997 $ 75,082
1998 $ 76,034
1999 $121,040: (includes capital gain on transfer of 1/71 Berner Street of $35,885).
2000 $ 86,635
2001 $90,817

Her income was struck after claiming deductions in relation to her medical practice, including payments made to the plaintiff and after taking into account half the net rental losses arising from the negative gearing of the Berner Street properties.

61 The plaintiff also contributed $11,361 and whatever was the amount of his cash spent on the Hatfield Street renovations. I referred to these in paragraphs 42-45.

62 The plaintiff also contributed $66,000 received on the sale of his shares in Audio Junction Pty Limited. He claimed that part of this money was used to pay the deposits on the purchase of 51 and 71 Berner Streets. The evidence did not clearly show that this was so. The deposits were paid before the time he said he received the payments for his shares in the company, although his counsel submitted that his evidence of when he received the money, may have been affected by a misreading of the bank statements from which he tried to reconstruct the receipts. There is evidence that moneys totalling $26,462 were paid from the plaintiff’s bank account to the defendant’s bank account in December 1992 which were applied towards the deposit on 71 Berner Street. This was before the date he gave as to when he was paid for his shares in Audio Junction Pty Limited. It is not clear where the moneys into the plaintiff’s account came from.

63 Nor is it necessary to attempt a tracing exercise. The purchase price of the two properties was fully geared by a loan obtained by the defendant from Westpac. The plaintiff was not able to say whether the amount of $45,000 which he claimed he put towards the deposit was repaid.

64 Whatever the physical movement of funds between accounts, the defendant financed the entire purchase price of the 51 and 71 Berner Street properties by borrowing from Westpac. It does not matter whether some of the plaintiff’s money went towards the deposits. If it didn’t, it nonetheless went to living expenses for the joint benefit of the parties. Based on the approach I have taken to the 71 Berner Street development which is explained below, it has equal significance whether it was applied towards the purchase of the properties or not.

65 The defendant submitted that for the plaintiff to claim credit for the three sums of $11,361, $20,000 cash (as he claimed) and $66,000 would be for him to seek to obtain a benefit from illegal conduct. She submitted that it would be against public policy to have regard to contributions which were the proceeds of illegality and referred to the decision of Master McLaughlin in Beattie v Read (2002) 31 Fam LR 204. There the Court disregarded contributions claimed to fall within s 20 which were found to be the proceeds of a criminal enterprise.

66 In this case there is no evidence that the moneys contributed by the plaintiff were the proceeds of crime. Whilst it appears that the plaintiff did not pay tax on the interest of the money held in the name of Mr Phanichewa, that does not mean that the moneys themselves were obtained illegally. I have not been able to quantify the cash which the plaintiff spent on the Hatfield Street property, but there is no evidence that it was obtained unlawfully. Nor was I able to understand the submission that the $66,000 paid by way of dividends, or as the purchase price of shares, or, as the defendant submitted, as repayment of a loan, was money unlawfully obtained. I reject the submission that it would offend public policy to take account of these contributions pursuant to s 20.

The Berner Street Development

67 The parties jointly decided to seek out properties for investment. 51 Berner Street was located as a suitable investment through one of the defendant’s patients telling her that the next-door house was available for sale. The defendant claimed that she thought that she alone had purchased the property. She contrasted her intentions with respect to 51 Berner Street and 71 Berner Street. She said that her understanding was that “I was purchasing 51 and I was purchasing 71 with John”. As the defendant signed the transfer for the property at 51 Berner Street as a joint transferee with the plaintiff, and as in her tax returns she claimed only half of the net loss on revenue account and half the capital gain from the investment in 51 Berner Street, I do not accept that she had the understanding to which she deposed about the ownership of 51 Berner Street. However, as the 51 Berner Street property was later sold and the proceeds of sale applied to reducing debt, the question of her intention as to the ownership of 51 Berner Street is immaterial. However her evidence does confirm that she intended the plaintiff to have a 50% beneficial interest in 71 Berner Street, notwithstanding that the loan to acquire the property was taken out in her name alone.

68 The plaintiff found the property at 71 Berner Street as he knew the vendor. The defendant claimed that the plaintiff asked her if she would borrow the money for the purchase, because he did not have any assets or a regular job to borrow money and that he told her that he would make the loan repayments. I think that is unlikely. It was the plaintiff’s evidence that the defendant suggested the loan be in her own name so that she could deduct the interest from the income to reduce her tax and that he agreed to that course. In the event both the gross rent and the interest expense and other expenses were accounted for jointly by the parties. The plaintiff paid the instalments of interest and principal on the loan. I think it must have always been intended that she should do so, as she was the one with the earning capacity to meet the repayments.

69 The plaintiff was the owner/builder for the construction work carried out at 71 Berner Street. He consulted an architect who drew up plans for the construction of two townhouses on the property. He gave instructions to solicitors and to surveyors in order to have the land subdivided. Development consent for the construction of the two townhouses was obtained in about September 1994. The construction was completed in about August 1995. The plaintiff was involved in the demolition of the existing house and supervised the construction of the two townhouses. He both supervised the sub-contractors and laboured himself on the construction work. He described the progress of the construction and his involvement in it in some detail which it is unnecessary to recount in these reasons. I accept his description of the work which he did.

70 The defendant claimed that the plaintiff was paid for the work which he did. She said the investment loan which was drawn down to pay for the costs of construction was partly applied in paying wages to him. However there were no records of any such drawings from the investment loan towards payment of his wages. Any wages drawn by the plaintiff during this period were wages drawn from the defendant’s surgery account purportedly for work done in connection with her medical practice. The plaintiff’s tax return for the year ended 30 June 1995 was not produced. In the view I take of these matters it is unnecessary for me to decide what amounts if any were paid to the plaintiff by way of wages for work on the property. However the evidence does not support the view that any wages were paid to him, except in connection with work in the defendant’s medical practice.

71 There was a dispute as to the costs of construction of the Berner Street property. The defendant deposed that the loan facility was drawn down to an amount of approximately $310,000 in order to complete the project. However it is not at all clear that that was the amount expended to complete the construction of the townhouses. The plaintiff kept a record of the cost of the construction financed from the defendant’s loan account. The total of those expenses is $200,098.20. The special purpose financial statements for the defendant prepared by Coopers & Lybrand record what appears to be capital expenditure called “71 Berner Street Costs” of $175,036 for the year ended 30 June 1995 and a further $28,494 for the year ended 30 June 1996. These sums total $203,530 which is broadly consistent with the plaintiff’s record of such costs. I adopt the figure of $203,530 as the costs of the development and construction of the two townhouses. Thus the costs of acquisition of the 71 Berner Street land and construction of the two townhouses totalled $353,530, plus stamp duty and legal and incidental expenses on purchase.

72 After the townhouses were built, the plaintiff carried out repairs and maintenance to the properties, as it was required.

Transfer of Beneficial Interest in 71 Berner Street

73 The costs of purchase and construction were met by borrowings. At the commencement of the project there was no or very little “equity” in the project. The parties’ intentions and expectations were that the loan repayments would be partly met by rental from the properties and to the extent there was a shortfall would be paid by the defendant, who had the greater income. The plaintiff would do the work of securing approval for the development and having it carried out. He would attend to the maintenance and repairs. When the property was acquired the parties were joint owners. I infer that it was the parties’ intention at the time that the defendant should have a 50% beneficial interest in the property notwithstanding that it was understood that the plaintiff should bear the costs of the loan to pay for the purchase of the property and to pay for the costs of construction. I infer that they regarded this as fair and appropriate having regard to the existing state of their relationship and what they envisaged each would do. Rather than the defendant claiming to be entitled to contribution for 50% of the mortgage repayments which she made and the plaintiff claiming to be entitled to an amount for his labour, they would both have shared the capital gains equally had their relationship continued happily.

74 But for the desire to reduce debt by obtaining access to superannuation monies, it could have been expected that in due course the parties would share equally in the increase in capital value of the property. However the parties could only access their superannuation balances through the device of transferring the properties to a trust and issuing units in the trust to the trustee of the superannuation fund. It is unnecessary to consider whether this complied with the existing laws regulating superannuation funds or their entitlement to concessional taxation treatment. However by taking this course their ultimate beneficial interests in the Berner Street development were changed from 50% each, to the proportion from time to time of their respective balances in the superannuation fund. This always favoured the defendant. In effect the plaintiff lost 22.6% of the increase in the capital value of the property. If, at the time the Berner Property Trust was established, the parties had turned their mind to such a consequence, I do not think it is one that they would have intended. However they did not at that time have any expectation that their relationship would end as it did, nor did they turn their minds to the financial consequences if the relationship were to break down. I consider that the plaintiff’s acquiescence in these arrangements was a contribution by him to the financial resources of the defendant which warrants an adjusting order under s 20. I am of the view that an adjusting order designed, so far as practicable, to restore to the plaintiff his 50% interest in the increase in the capital value of the Berner Street property is just and equitable.

11 Shortland Esplanade

75 When the parties moved into Shortland Esplanade in August 1998 the plaintiff carried out various repairs to the property where steel fittings and the like had been corroded and needed replacement. He also arranged for the construction of a storage area under the house and associated works. He repaired a pump, cleared filters, regularly cleaned the garage and carried out certain excavation and plumbing works to improve the drainage of the site. About six months after the parties moved in they discovered that there were serious building defects which had led to water encroachment, damp walls and white ant infestation. These works had been carried out before the property was purchased. The builder who carried out the works was insolvent and the Department of Fair Trading ultimately paid an amount of $100,000 towards the cost of the building repairs. The plaintiff claimed that he was principally responsible for obtaining that order for compensation from the Department of Fair Trading. Given his building expertise I accept that that was so.

76 The repair work was carried out by a builder called Cooks Hill Constructions. The payment from the Department of Fair Trading covered most of the repairs which that firm carried out. The plaintiff liaised with the builder, provided advice to the builder, not all of which was taken, and generally checked their work. Additional costs involving the construction of a path, the installation of kitchen and bathroom appliances and tiling, totalling in all about $8,000 were paid by the defendant.

77 A major reason the defendant’s net assets by August 2003 were over $1,400,000, whilst the plaintiff’s was about $200,000 was that between 1998 and 2003 the Shortland Esplanade property increased in value by $500,000. The evidence did not establish how much, if any, of that increase was due to the plaintiff’s efforts and how much was due to movements in the market price of land in the area generally. Nor does the evidence establish that without the plaintiff’s help the defendant could not have acquired the property.

78 I do not think the carrying out of this work by the plaintiff warrants a substantial adjustment of property interests in his favour. He was living in the property without paying rent. Using his building expertise to do the best he could with the Department of Fair Trading as well as doing repairs and construction himself and supervising building repairs of Cooks Hill Constructions was of benefit to the defendant. At this time the plaintiff was earning a larger income than in previous years and was also contributing part of his income to household expenses including payment of rates. However I accept that over the course of their relationship the defendant paid more of the domestic expenses for the plaintiff’s benefit than did he for hers, as well as meeting the costs of her borrowings which were applied, amongst other things, to provide the house in which they both lived. He received reciprocal benefits for the work which he did such that he did not suffer a substantially disproportionate burden, particularly when regard is had to the adjusting order which I propose to make as outlined in para 74 above. However I am of the view that some further adjustment is warranted on this score.

Contribution as Homemaker

79 The plaintiff accepted that he made no disproportionate non-financial contribution as homemaker, except in relation to his contributions for looking after Jasper. Jasper was adopted as a three-month old baby in about August 1999. The plaintiff took three months leave to care for Jasper. The defendant was unable to take time off work as she was in sole practice as a doctor and the parties could not meet their financial commitments without her continuing income. After the initial period of adoption leave the general pattern was that on week days except Thursday the plaintiff cared for Jasper after school hours (from about 4.00pm) until the defendant returned to the home at about 6.00pm. Babysitters were employed and paid by the defendant who looked after Jasper during the day on Mondays, Tuesdays, Wednesdays and Fridays. Initially after the plaintiff returned to work, I infer in the new school term in 2000, he only worked two days a week and looked after Jasper on the other days.

80 Although the evidence is not entirely clear it seems that on Thursdays Jasper was cared for by the defendant and on the weekends by them both.

81 Although the plaintiff thus spent more time with Jasper than did the defendant I do not think that any further order adjusting property is warranted by this consideration. This is not a case where a party has sacrificed his or her employment prospects in order to look after children for an extended period of time. There must have been a reciprocal benefit to the plaintiff in being able to spend time with his son whilst the defendant worked and paid for their joint living expenses. Nor do I consider that there was a material imbalance between the contributions made by the plaintiff and by the defendant towards the care of Jasper such as to warrant an adjustment to their property interests.

Countervailing Benefits

82 During the course of these reasons I have referred to some, but not all, of the reciprocal benefits afforded by the defendant for the benefit of the plaintiff. As well as providing accommodation, the defendant paid the greater part of the household expenditure. She made weekly drawings from her work account of between $500 and $1,000 to pay such expenses which benefited both parties. Although the plaintiff also contributed his income from time to time I am satisfied that the greater contribution was made by the defendant. She paid the plaintiff wages to which I have referred in para 53. She also met the cost of joint overseas holidays and from time to time paid some money to the plaintiff to pay off or reduce his credit card expenses, although the defendant only had records of paying $1,500 in this way. Between 1996 and 2000 she paid $24,589 in payment of the plaintiff’s income tax liabilities. Of that amount $18,256 was paid on 25 May 2000 as being capital gains tax payable on the transfer of the unit at 1/71 Berner Street to the defendant as trustee of the Berner Property Trust.

83 The plaintiff’s tax liabilities were diminished by the deductions he claimed as a net rental loss on the Berner Street properties. The interest and other expenses were paid by the defendant.

84 The defendant also provided motor vehicles for the plaintiff’s use. At the beginning of 1998 the plaintiff purchased a Porsche motor vehicle from an acquaintance. The cost was the sum of $10,000 which the defendant provided and a utility motor vehicle for which it was swapped. The utility motor vehicle had been purchased from the practice, that is, it had been purchased by the defendant and tax deductions were claimed in respect of it as a vehicle used in connection with the practice. In September 1999 the Porsche was sold and the proceeds paid to the defendant. She purchased a Holden Commodore motor vehicle which the plaintiff used.

85 In addition the defendant made the following superannuation contributions on behalf of the plaintiff:

1993 $ 13,000
1994 $ 13,641
1995 $ 25,000
1996 $ 10,000
1999 $ 28,420
2000 $ 10,000
$100,061

There is conflicting evidence as to the superannuation contribution in 1996. The defendant’s tax return suggests the payment was only $905, but $10,000 was paid from her account. It is also unclear whether any part of the amount of $38,420 paid by the defendant to the plaintiff in the year ended 30 June 1998 (see para 53) was a superannuation contribution rather than wages.

Conclusions on What Adjustment is Just and Equitable

86 The starting point to deciding what adjustment to the parties’ property interests is just and equitable is that the plaintiff should be secured in his superannuation entitlements. The parties agreed that his assets included superannuation entitlements, to obtain which the defendant must pay $45,422. In fact, for the reasons I have given, having regard to the likely liability of J & J Superannuation Pty Ltd to capital gains tax, the amount to be paid should be $47,163. That was the sum payable at 31 August, 2003. Interest should also be payable.

87 Hence I will order that the defendant (i.e. the first defendant) pay to J & J Superannuation Pty Ltd $47,163 together with interest pursuant to s 94 of the Supreme Court Act 1970 (NSW) from 31 August 2003 to the date of the order. That sum comprises the debt of $27,846, and $19,317 representing the shortfall in the valuation of the Berner Street properties used to calculate the price of which the units in the Berner Property Trust were redeemed. Those monies will be held by J & J Superannuation Pty Ltd on the trusts of the J & J Superannuation Fund. It appears to me that the power to make orders pursuant to s 38(1)(a) extends to making such an order even though J & J Superannuation Pty Ltd is not a party to the proceedings. The parties agreed that the shortfall in the plaintiff’s superannuation account arising from the redemption of the units was a matter in respect of which an order under the Act could be made. It would be inappropriate for an order under s 20 to be made directing a payment directly to the plaintiff as that would subvert the laws relating to superannuation.

What Other Adjustment if any is Required?

88 In Davey v Lee (1990) 13 Fam LR 688 McLelland J (as his Honour then was) said than rather than putting a monetary value on each alleged contribution to reach an accounting balance, the Court was required to make an holistic value judgment in the exercise of a very general discretionary power. I do not think it automatically follows that where a plaintiff has made contributions to the property or welfare of the other party, or the family constituted by the relationship, which are not met by reciprocal benefits or contributions of the same kind from the other party, that an order adjusting property interests is necessarily required. The question is always whether such an order is just and equitable having regard to the plaintiff’s qualifying contributions. A preponderance of qualifying contributions does not necessarily mean an adjusting order is just and equitable. A de facto partner can make gifts to the other in money, property, labour or services without thought of return if their relationship fails, and for which he or she may receive intangible returns in day to day life, which cannot be specifically identified years after the event when the relationship has failed. That is one reason it is futile to attempt to put a monetary value on each alleged contribution. Even where the contributions are reduced to money, a larger financial contribution by a partner with larger means may not warrant an adjusting order where the poorer party contributes roughly the same amount as a proportion of his or her means. (Gazzard v Winders (1998) 23 Fam LR 716). However one reason it may be just and equitable to make an adjusting order to the parties’ property interests is that the contributions were made in the expectation of the relationship continuing. That expectation not having been fulfilled it may be just and equitable to make an adjusting order.

89 For the reasons in paragraph 74 an adjusting order should be made under s 20 to restore to the plaintiff, so far as practicable his 50% interest in the capital value of the Berner Street property. The evidence permits of such an adjustment as at 31 August 2003. The unrealised capital gain on 71 Berner Street up to August 2003 was the difference between its then value ($770,500), and its purchase cost ($162,500 plus stamp duty and legal expenses), and construction costs ($203,530). For present purposes it is not appropriate to take into account the cost of borrowings as being a relevant cost as the essence of the arrangement between the parties was that the defendant would meet those costs. Thus the capital gain was in the order of $404,000 less stamp duty and legal costs. The notional cost of realising the investment if it had been sold in August 2003 should also be recognised, as should the capital gains tax which would have been payable on sale. However, most of the capital gains tax liability has already been taken into account. The $18,256 capital gains tax liability paid by the defendant for the plaintiff is taken into account in weighing the countervailing benefits provided by the defendant against the plaintiff’s s 20 contributions. Capital gains tax arising from the revaluation in 2003 (based on the valuation of the townhouses at $700,000) has been paid by J & J Superannuation Pty Ltd. J & J Superannuation Pty Ltd will be liable for capital gains tax when it receives compensation representing the plaintiff’s 27.4% share of the amount by which the units were under-valued in 2003. I infer from Mr Heffron’s report that the total liability would be $6,425 of which the plaintiff’s 27.4% share would be $1,760. (He determined the fund’s value as at 31 August 2003 as $758,100 on the basis of Mr Parson’s valuation of the townhouses, an increase in net value of $64,075 rather than $70,500). Stamp duty on the purchase would have been $4,177.50. The other costs were not quantified. Although precision is not necessary and not possible it is appropriate to recognise a capital gain over the period of $380,000.

90 Part of that gain was captured by the plaintiff through his membership of the J & J Superannuation Fund. However by entering into the transactions which they did, the plaintiff in substance gave up 22.6% of that capital gain, an amount of $86,000. Interest should be paid on that sum from 31 August, 2003 at the rates prescribed pursuant to s 94 of the Supreme Court Act from 31 August 2003 to the date on which orders are made.

91 The other s 20 contributions made by the plaintiff are substantially matched by countervailing benefits provided by the defendant. On the one side there is his work on the Hatfield Street property, his payment of an unknown amount of cash to the costs of those renovations, his work in the medical practice, his payment of $11,361 formerly in the name of Mr Phanichewa, his payment of $66,000 from the sale of his shares in Audio Junction Pty Ltd, his contribution of after-tax income to their joint benefit, and the work done on 11 Shortland Esplanade. (I regard his role as a homemaker as not disproportionate to that of the defendant.) On the defendant’s side there is her provision of accommodation at Hatfield Street and at 11 Shortland Esplanade until the parties separated, her payment of wages and superannuation contributions for the plaintiff, her payment of medical expenses for the plaintiff’s mother, her payment of more than half of the joint household and travel expenses (whilst recognising that she had more money with which to pay such expenses), the provision of motor vehicles and the payment of his debts.

92 Up to the time the parties moved to 11 Shortland Esplanade, I consider that the plaintiff’s contributions do not warrant any adjusting order in his favour other than the adjusting order in respect of 71 Berner Street. There were benefits for both parties in their arrangements which were adequately provided for by their sharing the capital gains of the 71 Berner Street development equally.

93 The position is somewhat different from the time the parties moved to 11 Shortland Esplanade. For one thing, the plaintiff’s earnings, which he contributed for their joint benefit, were higher. His wages from the defendant were lower. He continued to receive other benefits from the defendant, including accommodation in the house, but from August 1999 it was the home of their family including their son, Jasper, for whom they both cared.

94 His work on the 11 Shortland Esplanade property and his work in arranging a settlement of the claim upon the Department of Fair Trading which paid for the cost of needed repairs, has been of enduring benefit to the defendant, even though it is not possible to say to what extent it has improved the capital value of the property. However it is not a contribution of a kind which should entitle him to an order which in effect gives him a beneficial interest in the property, such that he participates in its capital appreciation. I take it that the parties intended when the defendant bought the property that she should be its sole owner.

95 It is impossible to explain why one sum rather than another should be selected as an appropriate adjusting sum, in order to do what is just and equitable, having regard to all the relevant considerations. I consider that an additional $25,000 is an amount which it is just and equitable the defendant pay to adjust the parties’ property interests by reason of the above matters.

96 I have not adopted the plaintiff’s submission of making an adjusting order to divide the parties’ aggregated property in some proportion. Any such proportion would be equally arbitrary. Nevertheless there are cases where such an approach may be warranted: e.g. where one partner is not working but acts as homemaker, or where the contributions of one partner directly or indirectly enable the other partner to accumulate assets.

97 This is not such a case. The parties agreed on what properties should be put in their joint names. The defendant did not agree that the plaintiff should have a beneficial interest in 11 Shortland Esplanade. Moreover her greater wealth is in large measure due to her greater income. Whilst the means and needs of the parties may be relevant as subsidiary factors as providing the context in which a judgment as to what adjustment is just and equitable should be made having regard to the matters in s 20(1)(a) and (b), the primary considerations are those in s 20(1)(a) and (b). There is no jurisdiction to make an adjusting order to divide up the defendant’s property merely because she is wealthier than the plaintiff, nor because a judge might think that it was fair that after an 11-year relationship the parties should divide their aggregated property acquired during the relationship, in roughly equal proportions. In this case such an approach is not warranted by the terms of s 20(1).

Plaintiff’s Occupation of 1/71 Berner Street

98 There is a further adjustment, this time in the defendant’s favour, to be taken into account. It is the value of the plaintiff’s occupation of the unit at 1/71 Berner Street since the breakdown of the relationship. As at August 2003 the unit had a rental value of $300 per week. He was in occupation of the unit from January 2002 and has not paid rent. Had he paid rent up to August 2003 he would have derived a benefit from the payment in the proportion which his share of the J & J Superannuation Fund bore to the totality of that fund. There should be an allowance in the defendant’s favour of 72.6% of the rental value of the townhouse from January 2002 to August 2003. I assess that allowance as $19,000. From 31 August 2003 to the date of the orders, or until the plaintiff vacates the premises, whichever is the earlier, there should be an allowance in the defendant’s favour of $300 per week.

99 For these reasons, in addition to the orders to secure the plaintiff’s superannuation entitlements, I will make orders under s 20 adjusting the parties’ interests in property by ordering the defendant to pay to the plaintiff a sum being:

(a) $86,000 plus interest on that sum from 31 August, 2003 to the date of the orders; plus
(b) $25,000; and less
(c) the amount determined in accordance with para 98.

Other Orders

100 The defendant acknowledged there should be an order transferring the ownership of the Holden Commodore motor vehicle to the plaintiff, if he still has possession of it.

101 I shall also make an order requiring the plaintiff, who is a director of J & J Superannuation Pty Ltd, to indemnify the defendant against any claims of J & J Superannuation Pty Ltd once the orders that she pay money to that company are complied with. Such an order is warranted pursuant to s 19 of the Act. That section imposes a duty on the Court so far as practicable to make orders as will finally determine the financial relationships between the parties to a domestic relationship and avoid further proceedings between them. It is arguable that the defendant is liable to J & J Superannuation Pty Limited for the entirety of the shortfall in the value at which the units in the Berner Property Trust were redeemed, (not just the plaintiff’s then share of the J & J Superannuation Fund), as well as the debt of $27,846. However for the plaintiff to take the additional benefit of such a claim would be to depart from the basis on which the hearing was conducted and on which my orders have been arrived at.

102 In accordance with s 19, it is also necessary to make an order in relation to the plaintiff’s residence at 1/71 Berner Street. He is not entitled to permanent rent-free accommodation at the defendant’s expense. I have taken into account the value of his occupation of the premises up to the date of the orders which I will make. To end his financial relationship with the defendant it will be necessary that he vacate the premises, otherwise he will have a continuing liability to her for rent. It appears to me that such an order can be made at least pursuant to s 38(1)(h)(i). It will be an order for the protection of or otherwise relating to the property or the financial resources of the defendant.

103 The plaintiff sought orders that the defendant vacate the premises at 11 Shortland Esplanade and that that property be sold. Counsel however agreed that it was unnecessary to consider what incidental orders might be required to enforce any order that was made until I had given judgment.

The Second Defendant

104 The plaintiff also sought orders against Jeevan Investments Pty Ltd, who became the second defendant to the proceedings, in relation to the property at 3/74 Cleary Street, Hamilton. He sought a declaration that that property is held on trust for the plaintiff or on trust for the plaintiff and the first defendant in such shares as the Court might determine. No submissions were made in support of that claim and the evidence did not establish the existence of any such trust. The declarations so sought will be refused.

105 It was indicated that the claims against Jeevan Investments were sought pursuant to s 42 of the Act which empowers the Court to set aside instruments or dispositions made to defeat existing or anticipated orders under the Act. However, as counsel acknowledged, it would not be possible to set aside either the purchase by Jeevan Investments of the property at 3/74 Cleary Street, Hamilton, nor the loan made by the defendant on security of the property at 11 Shortland Esplanade from the National Australia Bank through which the property was purchased. Nor do I see any necessity to do so. The evidence discloses that Jeevan Investments borrowed $370,000. That borrowing was from the defendant who in turn borrowed the money from National Australia Bank. If it were necessary to do so, it would be possible to make an order securing the amount I have ordered to be paid, inter alia, by charging the debt owed by Jeevan Investments Pty Ltd to the defendant. However having regard to the submissions made by both parties I will stand over for further submissions what additional orders, if any, need to be made.

106 Both parties also asked that the matter be stood over so that questions of costs could be determined having regard to my findings. Accordingly at this stage the only order I make is to direct counsel for the plaintiff to bring in short minutes of order in accordance with these reasons. I will stand over the proceedings to a convenient date to hear submissions on the question of costs and on what orders should be made to give effect to these reasons.

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