Bowden v Foster
[2007] NSWSC 29
•21 February 2007
CITATION: Bowden v Foster [2007] NSWSC 29
This decision has been amended. Please see the end of the judgment for a list of the amendments.HEARING DATE(S): 25/09/06; 26/09/06; 05/10/06
JUDGMENT DATE :
21 February 2007JURISDICTION: Equity Division JUDGMENT OF: Associate Justice Macready at 1 DECISION: Paragraph 76 CATCHWORDS: Family Law. Application for adjustment of parties' property interests under s 20 of the Property (Relationships) Act 1984. Consideration of whether contributions in an earlier relationship can be taken into account. Order made for adjustment. PARTIES: Gail Bowden v Terrence Patrick Foster FILE NUMBER(S): SC 4558 of 2003 COUNSEL: Mr Gulpers for plaintiff
Mr JR Drummond for defendantSOLICITORS: Bellantonio & Rees for plaintiff
Booth & Boormand for defendant
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
Associate Justice Macready
Wednesday 21 February 2007
4558/03 Gayle Bowden v Terrence Patrick Foster
JUDGMENT
1 His Honour: This is the hearing of a claim under the Property (Relationships) Act 1984 for the adjustment of the parties’ property interest under s 20 of the Act. The parties lived in a de facto relationship from either 1984 or 1986 until they separated on 2 October 2001. There were no children from the relationship but they each had children from a previous relationship.
Background history
2 The defendant was born on 5 December 1946 and he married his wife Susan on 5 June 1965. The defendant had purchased land at Valley Heights and he constructed a home on the land. They had a family and separated, according to the defendant, in April 1985.
3 The defendant leased premises in Church Street, Parramatta where he lived for 6 months. He then rented premises at Kingswood in January 1986 and says that the plaintiff moved in with him in February 1986. Thereafter he says that they lived together until March 1987 when they separated in June or July 1987. He says that there was a further break in September 1987 until November 1988.
4 The defendant, through his company Fencing Constructions Pty Ltd (Fencing) purchased land known as 50 Sylvan Road, Werombi (“Werombi property”) for $270,000 on 21 December 1987. The property was purchased from the plaintiff’s brother and after its purchase the parties recommenced living together at the property. The plaintiff says that she first commenced to reside with the defendant at Parramatta in September 1984. She differs from the defendant as to the extent of their earlier separations.
5 At the Werombi property there was carried on a thoroughbred breeding and spelling business known as “Sun Cherry Stud”. Fencing continued this business and it paid all the expenses and received the income. During the course of the relationship there were many improvements to the Werombi property.
6 On 30 August 1999 a business name “Serenity Park Australia” was registered. On 1 July 2000 a partnership commenced between the plaintiff and Fencing which carried on the former business under this name.
7 The parties are agreed that they separated on 2 October 2001. The plaintiff continued to work at the stud until 30 June 2002.
8 The Werombi property was sold on 8 August 2003 for $1,175,000 and settlement took place on 3 November 2003. A substantial part of the proceeds were used to pay liabilities.
Property of the parties at the commencement of the relationship
9 The start of the relationship is a matter of some debate but it seems to me that the plaintiff cannot point to any particular event which makes it likely that cohabitation commenced in 1984. She claims to have commenced work with Fencing in September 1984 and through her work at Fencing she met the defendant. Her position was assistant and office manager. However the records of Fencing that have been produced show that she commenced work in September 1985. Given the events, which were happening to the defendant in respect of his separation, I think his recollection is more likely to be accurate. I therefore accept that the relationship commenced in February 1986.
10 There was a separation in September 1987 and the plaintiff suggests that she rejoined the defendant early in 1988 after the purchase of the Werombi property. There is evidence from Martin Foster, the defendant's son, who was residing on the property at the time that she was not residing there in the period up until he left in November 1988. There was no cross-examination on his evidence and I accept the defendant’s evidence that she rejoined the defendant in November 1988.
11 This led to a submission by the defendant that because there was a substantial break I could not have regard to the contributions in the earlier period of the admitted de facto relationship which the defendant puts as starting in February 1986. This was dealt with in Jones v Grech [2001]NSWCA 208. In that case Justice Powell adhered to the view which he had earlier expressed in Roy v Sturgeon (1986) 11 NSWLR 454 that it was only contributions to the last period to which regard could be had in the absence of any grant of leave for extension of time to apply for an earlier period. Justice Ipp adopted an approach which I had suggested in Fotheringham v Fotheringham 19 November 1996 in these terms:
“70 It is not uncommon for parties to a de facto relationship to terminate their relationship and, thereafter, at a later date, to re-commence living in a de facto relationship. On occasions, the same parties may live in a de facto relationship over many intermittent periods. The question therefore arises whether, for the purposes of s 20(1), each one of the intermittent periods is to be regarded as constituting a separate and different de facto relationship, or whether the aggregate of the intermittent periods is to be considered as being one de facto relationship to which the Court should have regard.
72 With respect, I have come to a different conclusion. In my opinion, the wording of s 18(1) compels the inference that Parliament intended the court, for the purposes of s 20(1), to have regard to the total period (comprising any separate periods) during which parties live together in a de facto relationship.71 In Fotheringham v Fotheringham , unreported, NSWCCA, 28 August 1998, this court was concerned with an appeal where Master Macready had held that where parties had had been together in two separate de facto relationships (that is, over two separate and interrupted periods of time) then provided an application for relief under s 20 was made within two years of the termination of the last period, the Court could have regard, without any leave being granted under s 18(2), to the aggregate of the two periods. Powell JA expressed the conclusion that the Master was wrong in this view, but, in any event, upheld the appeal by dealing with the contributions made during the aggregate of the two periods. The other two members of the Court did not consider the issue.
73 Section 18(1) provides:
- “Except as provided by subsections (2) and (3), where de facto partners have ceased to live together as husband and wife on a bona fide domestic basis, an application to a court for an order under this Part shall be made before the expiration of the period of two years after the day on which they ceased, or last ceased, as the case may require, to so live together”.
In my opinion, the phrase, “they ceased, or last ceased, as the case may require” is significant. This phrase assumes that there will be more than one date upon which a de facto relationship may cease and, hence, contemplates that more than one period of living together may constitute a de facto relationship. This assumption in turn is based on the further assumption that each such period may be relevant for the purposes of “an application to a Court for an order under this Part”.
75 I consider that the policy underlying the Act leads to the same conclusion. It is sufficient to refer to the report of the New South Wales Law Reform Commission commented upon as follows by Gleeson CJ and McLelland CJ in Eq in Evans vMarmont (1997) 42 NSWLR 70 (at 81):74 In my view, in the light of s 18(1), the court, in having regard to contributions made under s 20, must take into account the aggregate of the periods during which the de facto partners have lived in a de facto relationship.
- “In par 7.42 of the report the Commission suggested that the courts should be given an ‘adjustive jurisdiction’ to alter property rights, taking into account contributions of a kind which the current law did not adequately recognise. In par 7.43 the Commission said:
‘… Specifically, the law fails to give sufficient recognition to two kinds of contribution to a de facto relationship:
· indirect financial and non-financial contributions by one partner to the acquisition, conservation or improvement of assets such as contributions to the family’s household expenses which assist the other partner to acquire assets in his or her own name, and
· financial and non-financial contributions by one partner to the welfare of the other partner or to the children of the relationship, including contributions made in the capacity of homemaker and parent.
This failure leads to injustice because it has the effect of permitting a de facto partner to be enriched at the expense of the contributions, whether financial or non-financial, made by the other partner. In a sense, the partner making the contributions can be said to have ‘earned’ an entitlement to a beneficial interest in property of the other partner. The injustice is equally stark whether the contribution directly increases the value of the property in dispute, or is a contribution to the well-being of the family which frees the other partner to earn income and accumulate assets. We think that injustice of this kind should be remedied.’
In par 7.44 the Commission recommended that legislation should be enacted to allow such contributions to be taken into account.
A comparison of the terms of those paragraphs with the language of s 20 of the Act indicates the purposes of the legislation.”
76 The purpose of the Act is remedial. It is intended to remedy injustice, inter alia, because the law prior to the Act had “the effect of permitting a de facto partner to be enriched at the expense of the contributions, whether financial or non-financial, made by the other partner.” For that intention to be adequately fulfilled, it is necessary, in my view, for the contributions made by a de facto partner to be assessed by reference to the entire period of the de facto relationship, irrespective of whether it is made up of a series of broken or intermittent periods or whether it is constituted by one continuous period of cohabitation.
77 There is also a question as to the relevance and treatment of contributions made prior to the commencement of the de facto relationship and after its termination. This is an issue that was canvassed during argument on appeal.
79 In Foster v Evans , unreported, SCNSW, 31 October 1997, however, Bryson J did not follow this approach. His Honour said:78 In Roy v Sturgeon (1986) 11 NSWLR 454 Powell J concluded (at 466) that it is not open to the court, when dealing with applications under s 20, to have regard to contributions made prior to the commencement of the de facto relationship.
- “In my respectful view para 20(1)(b) does not contain within its own terms a limitation to the period during which there was a de facto relationship as the period during which any contributions to the welfare of the family might have been made. … It is inherently unlikely but it is not impossible and contributions of kinds referred to in paras (a) and (b) might be made to the property financial resources of welfare of another [sic-the other] de facto partner after the relationship ended: people sometimes care for former partners. The possibility of a contribution to the welfare of a family including a child of the partners after the de facto relationship itself has ended can be clearly seen. I do not see what purpose would be served by limiting the contributions to family welfare which may be considered so as to exclude contributions made after a separation. There is to my reading no expression in subsection 20(1) of an intention to limit the time at which contributions are to be made.”
And concluded:
- “I respectfully differ from Powell J’s obiter dictum about the meaning of para 20(1)(b). In my opinion it is not required that a contribution under para 21(1)(b)[sic - 20(1)(b)] be made during the relationship”.
81 McDonald v Stelzer [2000] NSWCA 302 is determinative on the issue as to whether the court may have regard to contributions made before the de facto relationship commenced. At first instance Bergin J referred to Griffiths and Brodigan and said that she would take into account the nature of the relationship of the parties prior to the de facto relationship in reaching her conclusion as to what was just and equitable. The appellant submitted that her Honour erred in this respect. Sheller JA (with whom Handley JA agreed) upheld the approach of Bergin J, saying:80 In Griffiths and Brodigan (1995) 20 Fam LR 822 Chisholm J, exercising cross-vested jurisdiction, considered an application for an order under s 20. His Honour also declined to follow Roy v Sturgeon and held that contributions under s 20 could include contributions made before the commencement of the de facto relationship. In Fuller v Taaffe (1997) 23 Fam LR 702 Rourke J, also exercising cross-vested legislation in an application for relief under s 20, adopted the same approach as Chisholm J in Griffiths and Brodigan and held that contributions made by the parties after the de facto relationship had terminated were relevant to be taken into account under s 20.
- “I am not persuaded that her Honour erred in reaching her decision”.
Priestley JA said:
- “…in the circumstances of the present case, if Bergin J did take into account in reaching her conclusion any circumstances of or related to the relationship between the parties which occurred before April 1994, I would not think that that vitiated her decision”.
His Honour concluded that in the particular circumstances Bergin J was entitled to take prior de facto relationship contributions into account provided she treated the financial and non-financial contributions during the de facto relationship as fundamental.
82 In my opinion, there is no difference in principle between contributions made before the de facto relationship commenced and those made thereafter. The court may have regard to both.”
12 Davies AJA referred to the matter in these terms:
- “24 I agree with Ipp AJA that the application of s 20 of the Act, including the examination of the factors specified in s 20(1)(a) and (b), required the Master to look at events which occurred prior to the commencement of the last period of the de facto relationship. The actions of the parties must be placed into context and given weight and relevance according to the incidents of their relationship over time, including during any prior time when a relationship existed between them. As Gleeson CJ and McLelland CJ in Eq said in Evans v Marmont (1997) 42 NSWLR 70 at 75:-
- “It would be unrealistic to attempt to evaluate contributions of the kinds referred to in par (a) and par (b) for the purpose of determining what is just and equitable having regard to those contributions, in isolation from the nature and incidents of the relationship as a whole …”
26 Moreover, the factors specified in s 20 may include actions which have taken place prior to the commencement of the period of relationship which gives rise to the jurisdiction of the court. Thus, one or both of the parties may have contributed to the acquisition, conservation or improvement of the subject property at an earlier time. One or both of the parties may then have contributed in the capacity of homemaker or parent to the welfare of the other de facto partner or to the welfare of the family constituted by the partners and a child of the partners or a child accepted by the partners into the household. These are factors which may require examination.”25 In McDonald v Stelzer [2000] NSWCA 302, Priestley JA held that Bergin J had been entitled to take into account, “matters very closely connected in subject matter, time and relevance to financial and non-financial contributions during the period of the full de facto relationship” provided that her Honour gave “some weight, but not fundamental weight” to such factors. I respectfully agree with his Honour’s remarks.
13 It was submitted that His Honour was merely extending the matters to which one can have regard, to contributions before a relationship started if there was an appropriate connection. The submission was that His Honour was not agreeing with His Honour Mr Justice Ipp that contributions made in an earlier period of a relationship could be taken into account. If this is so then plainly there is a division of opinion in the Court of Appeal. It seems to me that I should, consistent with views which I have earlier expressed in Fotheringham and other cases, follow what I consider to be the right approach which is that adopted by Justice Ipp. I will therefore take into account contributions made during the earlier period of the relationship.
14 At the commencement of the relationship the plaintiff brought into the relationship the following assets:
· Household furniture and appliances worth $10,000
· Toyota Celica car worth $15,000
· Two horses worth $15,000
· Savings of about $15,000
15 The defendant had a number of companies through which he carried on business. In approximately 1969 the defendant and his then wife acquired a business with partners constructing and erecting fences. That business operated from premises situated in Toongabbie Road, Toongabbie. In 1971 the defendant and his wife purchased the partner’s interest in that business.
16 On 15 August 1972 the defendant and his former wife caused Fencing to be incorporated. Following that incorporation the business previously conducted by the defendant and his former wife was transferred to and operated by Fencing from the same premises located in Toongabbie Road, Toongabbie.
17 In approximately June 1973 Fencing purchased vacant land known as Lots 13-15 Great Western Highway and Lots 48-50 Eskdale Street, Eastern Creek for the sum of $15,000. Fencing retained those properties until they were sold in November 1998.
18 On 9 December 1983 Fencing purchased vacant land known as 3 Colyton Road, Minchinbury (“the Minchinbury property”) for the sum of $86,550. To effect that purchase Fencing paid $8,655 by way of deposit, the balance being obtained by a loan from AGC (Advances) Limited. That loan was secured by a mortgage over the Minchinbury Property. Following the purchase of the Minchinbury property Fencing caused to be constructed on the land a building. The construction of that building cost approximately $100,000. To pay for the construction of that building Fencing obtained from AGC (Advances) Limited an increase in the loan to $180,000 secured over the Minchinbury property.
19 Following the completion of the building, the business operated by Fencing moved from the premises in Toongabbie Road, Toongabbie to the Minchinbury property.
20 From approximately 1984 until 2002 Fencing operated the business of constructing and erecting fences from the Minchinbury property.
21 As and from 1 April 1996 the defendant has been the sole director and secretary of Fencing. There are 210 ordinary issued shares in Fencing. Ten ordinary shares are held by the defendant and the balance by Tersus Investments Pty Ltd (Tersus).
22 T Foster & Sons Pty Ltd (Foster & Sons) was incorporated on 26 June 1973. Foster & Sons has since 1973 conducted the business of a retail hardware store. Prior to the purchase of the Minchinbury property Foster & Sons conducted its business from the premises at Toongabbie Road, Toongabbie.
23 Following the completion of the building on the Minchinbury property in 1983 or early 1984 Foster & Sons have conducted the retail hardware business in those premises to the present day.
24 As in the case of Fencing, the defendant has been the sole director and shareholder of Foster & Sons since 1 April 1996. There are 110 ordinary issued shares in Foster & Sons. Ten of those ordinary shares are owned by the defendant and the balance (100) by Tersus.
25 Tersus was incorporated on 15 August 1972. Tersus is the registered holder of 200 of the 210 ordinary shares in Fencing. Tersus is also the registered holder of 100 of the 110 ordinary shares issued in Foster & Sons. There are 10 A Class ordinary shares, 1 B Class ordinary share, 50 C Class ordinary shares, 50 D Class ordinary shares, 50 E Class ordinary shares and 50 F Class ordinary shares issued by Tersus. The defendant holds all of the above shares beneficially.
26 At the commencement of the relationship the defendant had the following assets:
· His interest in the three companies,
· Four racehorses
· A motor vehicle worth $35,000
27 The value of the companies was the subject of much debate in the case.
The property of the parties at the conclusion of the relationship
28 At the conclusion of the relationship the plaintiff had her half interest in the partnership Serenity Park Australia, a small amount of furniture and personal effects together with a Hyundai Accent motorcar worth $15,000. She owed $10,000 on the car.
29 The defendant still owned his interests in the companies which included Fencings half interest in the partnership Serenity Park Australia.
Non-financial contributions
30 The defendant concedes that the plaintiff provided most of the homemaking contributions to the relationship. For most of the time she was not working but was involved in operations of the stud carried on at the Werombi property.
31 In her affidavit the plaintiff described the work that she did as Stud Master at Werombi in these terms:
· making up feed and feeding about 80 horses, which increased to about 150 horses during the breeding season
· watering horses 3 times a day
· cleaning stables, yards and paddocks
· "teasing" mares as the breeding season approached
· preparing mares for the veterinarian
· assisting in having the mares covered by stallion
· "foaling down" the mares
· carrying out basic veterinary work for foals and mares, including washing and nursing foals
· weaning and educating foals and yearlings
· drenching the horses and assisting the farrier in trimming and shoeing
· preparing yearlings and horses for sale
· pre-training horses for racing
· general maintenance of the Stud Business grounds, including painting the interior of stables, fences and hayracks
· looking after the clients of the Stud Business, including arranging barbeques and lunches on weekends and during the breeding season
· carrying out the administration of the Stud Business, including doing accounts, Stud returns, bookkeeping, arranging sales, arranging stud servicing at Werombi and elsewhere and attending same.
32 There was evidence from Stephen McClintock, a veterinarian, about the extent of the work that was done by the plaintiff at the stud over these years. He gave evidence that in 1988 there were about 40 horses at the Sun Cherry Stud and that by 1999 the number of horses had increased to 100. At times thereafter the number of horses increased to as many as 140 horses. His observations confirmed the extent of the work which the plaintiff has described in her affidavit evidence. There was also evidence from Graham Daley, who had been employed in 1992 for a time at Sun Cherry Stud as the Stud Master. He carried out his occupation including teaching the plaintiff about the work to be done as a Stud Master. He also confirmed her ability and the work done by her.
33 It is plain that her contributions were substantial although in the upshot the evidence as to what a stud master would normally receive was not admitted. It was obviously a responsible role and the plaintiff attended to many of these duties herself in the absence of the defendant. He was, of course, engaged full time with his business at Minchinbury which were carried out by Fencing and Foster & Sons.
Financial contributions
34 During the period from January 1988 until 1 July 2000 Fencing in its capacity as the owner of the Werombi property and the proprietor of the “Sun Cherry Stud” made a number of improvements to the facilities located on that land. Those improvements included the following:
· Construction of a new machinery shed.
· Construction of a new hay shed.
· Construction of five new stables.
· Construction of new horse crush and veterinary room.
· Construction of a large shed (hay storage).
· Construction of six new spelling paddocks and shelters.
· Construction of a new shed and starting stalls.
· Conversion of a four stable complex to an eight stable complex plus adjoining accommodation.
· Significant extension to the main dam.
· Resurfaced exercise track.
· Establishment of 15 additional paddocks being fenced using post and rail fencing.
· Installation of additional irrigation to create pastures.
· Construction of an in-ground swimming pool at the residence.
· Construction of additional dams.
35 The evidence did not disclose the cost of these improvements.
36 The plaintiff did not contribute to the cost of these improvements which were quite substantial. As I have already mentioned, she did not contribute to the acquisition of the property or the stud.
37 The Werombi property was sold in November 2003 for $1,175,000, $100,000 less than that recorded in the financial statements of Fencing. After payment of the mortgage ($698,000) and associated expenses Fencing received $334,000 and the balance of the deposit after payment of commission (approximately $100,000). From the net proceeds Fencing has paid or is liable to meet the following liabilities:
Capital gains tax $ 65,000
Superannuation $ 78,750
BAS $ 20,685
Group tax $ 14,778
ATO fines $ 1,800
Total $181,013
38 The operations of Serenity Park Partnership also ceased in November 2003 when the remaining assets were sold. The accounts of that partnership for the financial year ending 30 June 2002 to 30 June 2004 disclose that it made the following losses.
| Financial Year | Loss $ |
| 2002 | 132,799 |
| 2003 | 49,400 |
| 2004 | 36,149 |
39 The effect of each of the above losses was to generate a deterioration in the capital accounts of the plaintiff and Fencing thereby reducing each partner’s capital account by one half of the net loss sustained each year as follows:
| Financial Year | Capital Account $ |
| 2001 | (3,610.00) |
| 2002 | (70,010.00) |
| 2003 | (94,710.00) |
| 2004 | (112,784.00) |
40 The partners' capital accounts reflected unsecured borrowings of the partnership to 30 June 2004. They were as follows:
| Entity | $ |
| Fencing | 144,421.00 |
| Defendant | 16,377.00 |
| Foster & Sons | 65,377.00 |
| $226,175.00 |
41 These figures demonstrate that the business of the partnership was a drain on the wealth of the parties during the course of their relationship.
Global or asset by asset approach?
42 In Norbis v Norbis (1985-1986 ) 161 CLR 513 at 523 the High Court said the following:-
"Although it is natural to assess financial contributions under s79 (4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as homemaker and parent either by reference to the whole of the parties' property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an "asset-by-asset" basis. Which of the two approaches is the more convenient will depend on the circumstances of the particular case. However, there is much to be said for the view that in most cases the global approach is the more convenient. It follows that the Full Court is quite entitled to prescribe that approach as a guideline in order to promote uniformity of approach within the Court. In saying this we are not to be understood as denying the legitimacy of the trial judge's ascertainment in the first instance of the financial contributions of the parties by reference to particular assets. It is difficult to conceive how the trial judge in many cases could otherwise take account of such contributions as he is required to by s.79 (4)(a) of the Act . In this respect we agree with the comment of Nygh J. in G and G that, although mathematical precision is certainly not required, there is ordinarily a need to know the circumstances in which assets were acquired and the general extent of each party's contribution to them."
43 In Lenehan v Lenehan (1987) 11 FAMLR 615 the Full Court of the Family Court said:
- “The judgement of the High Court in Norbis v Norbis (1986) FLC 91-712 demonstrate the very wide discretion which a trial judge has in the approach that he may adopt under s.79. In particular judgments in that case discuss the ‘global’ and the ‘asset by asset’ approaches, and demonstrate that this is largely a matter for the trial judge to determine in the exercise of his discretion. However Norbis’ case is not a carte blanche to adopt either view irrespective of the circumstances of the individual case.”
44 In Kardos v Sarbutt [2006] NSWCA 11, Brereton J, at [52]-[55] dealt with the issue as to whether or not it was appropriate to approach the assessment of contributions on a “global” or “asset by asset” approach. After citing the above passage Brereton said at [52]:
- “To this might be added that, in the necessary and exact exercise involved in discretionary matrimonial property adjustment, judicial reasoning can be aided by the use in any case of more than one approach, so that one serves as a check method for the result reached by the other.”
45 Then at [54] Brereton J said:
- “As Lenehan shows, the principal indicator for an ‘asset’ analysis is discrepant identifiable contributions of the parties’ different assets: in that case, the proportionate contribution of the parties to the acquisition, conservation and improvement of the matrimonial home on the one hand, and to the business assets of the other, were quite different. Such an approach will often be contraindicated where, as here, there has been a pooling of income. …”
46 His Honour then adopted an asset by asset approach using the “global” approach as a check.
47 The plaintiff suggested that there should be a global approach in the matter. She called an accountant, Mr Llewellyn Judge, to prove what he described as the movement of the wealth of the defendant and his companies. He picked as a starting date 30 June 1988 and an end date of 30 June 2002. His conclusion in his report was that the movement in wealth of the defendant was increased over the period by $1,691,751. In his oral evidence he amended this figure to $1,761,761.
48 The dates selected by Mr Judge were as a matter of convenience having regard to the accounts which were available to him. The starting date was not the start of the relationship and a date in 1986 would have been more appropriate. The concluding date was some time after the relationship finished in October 2001. The plaintiff’s case thus involved a presentation of the parties’ assets by means of this evidence as at a date approximating the date of separation. There was no evidence on the part of the plaintiff to deal with the situation as at the date of trial which, of course, is the normal course in these matters.
49 There are a number of problems with Mr Judge’s methodology and the principal one is that he simply uses balance sheet figures without regard to whether they were figures based upon some historical cost or based upon some valuation of a property. There was no attempt by the plaintiff to provide any valuations of the relevant properties so that one could compare the fair market value of the properties, say, at the commencement of the relationship and the same property’s value at the conclusion of the relationship or, as would have been more appropriate, at the trial. In these circumstances the analysis is of no assistance when trying to determine the value of the assets when plainly there was no relevant evidence of their proper value.
50 There are a number of instances of the inaccuracy of this approach which were pursued in cross-examination. Examples were the value of the Minchinbury property held in Fencing’s books as at 30 June 1988. The accounts showed it had a value of $156,769 which plainly was an historical cost based upon the purchase of the property in 1983 and the construction of the improvements shortly thereafter. Mr Judge seemed to have a fair idea of the movements in the value of properties. When it was put to him that in 1992 the property had been revalued at $400,000, he seemed to be prepared to accept that as at the end of the 1980s it was likely to have had a value of approximately $450,000. In these circumstances the value of the property at $293,231 was plainly under estimated at the commencement of the period.
51 Another illustration of the problem of the selection of the cut-off date of 30 June 2002 was the fact that the Werombi property was sold in November 2003. This led Mr Judge to apply a value to the property of $100,000 more than was actually realised shortly thereafter. There was also an increase in the mortgage of $233,000 and some capital gains tax liability of $68,000. The effect of adopting the date of 30 June 2002 rather than taking account of what was the actual value of the property as demonstrated by its sale was that there was an over valuation of $401,000.
52 Mr Judge sought to justify the use of balance sheet figures on the basis that there were appropriate increases in a consistent way over the period of the time of the balance sheets. A perusal of the balance sheets does not support his hypothesis.
53 It seems to me that there are a number of reasons why it would have been more appropriate to adopt the position at the trial as the relevant date to determine the value of the assets. The first of these is the matter which I have already mentioned, namely, 2003 was when the Werombi property was sold. This crystallised what was in effect the value of the property and the liabilities at that stage. The plaintiff continued to work after separation and she was paid a wage up until July 2002. The affairs of the partnership, Serenity Park, continued on and it was wound up in November 2003. The plaintiff remained a member of the partnership until the winding up and the position of the partnership could not be determined until that winding up was completed. There is a difficulty as a result of the winding up of the partnership and the losses which it incurred over its few years of operation which means that there are liabilities which the plaintiff has which have to be taken into account. These are now known as a result of the completion of the operation of the partnership.
54 It is not suggested that there were any activities by the defendant that were inappropriate in the winding up of the partnership or the sale of the property which occurred after the parties had decided to go their separate ways.
55 It was suggested by the plaintiff that factors suggesting that the earlier date of separation should be adopted were the lack of her involvement after separation and what was said to have been the fact that she ceased to be a partner. That in fact was quite wrong as she continued to be a partner until there was a dissolution in 2003. The plaintiff also suggested that as the Serenity Park partnership no longer existed at the date of the trial that this was a reason why it should be valued at the date of separation or close to it. Given the fact that the partnership was a loss making exercise I think this would be misleading and it seems to me that the situation of the parties as at the trial, which takes account of the winding up of the partnership and the sale of the property, would be a preferable approach.
56 In these circumstances it seems to me that the evidence of Mr Judge is of no assistance to the Court in trying to determine whether there is any relevant increase in value of appropriate assets by the date of the trial.
57 If one goes to what figures are available to ascertain the interests of the plaintiff and the defendant in the partnership and the defendant’s interest in his companies it is a difficult exercise but has to be done. I have earlier in this judgment set out that the final resolution of the Serenity Park partnership which was owned half by the plaintiff and half by Fencing, was that each party’s capital account had a deficiency of $112,784. This reflected the asset situation which was that it had no assets but owed a total of $226,175 to Fencing, the defendant, and Foster & Sons in various amounts.
58 In submissions the defendant carried out an exercise to increase the deficiency in the capital account on the basis that the wages which had been paid to the plaintiff by Fencing should really have been shown as drawings in the partnership. That could have been a way that the parties may have treated them but in fact they did not treat them in that way. They were simply wages paid to the plaintiff by Fencing. In the circumstances, for this particular exercise, I do not think it is appropriate to make those adjustments as suggested by the defendant.
59 I have earlier set out the company structure of the defendant. In respect of Foster & Sons it is plain that since 1973 that company had conducted a retail hardware store first from Toongabbie Road and later from the Minchinbury property. The company never employed the plaintiff nor did she do any work for it and she made no contributions to it.
60 The company Tersus was an investment company and never carried out any business operation. It was simply a holding company for Foster & Sons and Fencing.
61 It seems to me that the most critical company and entities to be considered are the ones with which the plaintiff was involved. They are, of course, the partnership Serenity Park and Fencing which was the defendant’s company which held real property and was the company which is the only one which holds any assets of significance.
62 The last financial statements of Fencing are for the year ended 30 June 2005 and give the only clue as to the defendant’s assets at the date of trial. I have earlier pointed out that the plaintiff did not put on any evidence of value of assets at the date of the trial and, indeed, this was also the case with the defendant.
63 In Fencing’s balance sheet for 30 June 2005, current assets were $893,375 made up of loans to Foster & Sons of $748,955 and Serenity Park of $144,420. As at 30 June 2005 Foster & Sons had an excess of liabilities over its assets of $439,741. When one adds to that what would be the irrecoverable loans from Serenity Park (that partnership having no assets) the excess would be an amount of some $505,922. It is apparent therefore that there is little chance of Fencing receiving the whole of those loans. At most it could on paper receive $470,311 but given the nature of those assets it would be likely to be substantially less than that figure. The main asset was, of course, the Minchinbury property which is shown in the accounts as having a value of $690,000. There was also plant and equipment of $321. Using these assets and deducting the existing liabilities the net worth of Fencing at 30 June 2005 was only $640,950 plus whatever might be recovered from Foster & Sons. The same problem remains with the lack of valuation evidence. All that the balance sheet entry demonstrates is that there has been a director’s resolution at some time prior to the balance sheet date.
64 Although as I have said above there is little relevance in considering the position at 30 June 1989, if the Minchinbury property at that stage had a value of $450,000, examination of the balance sheets suggest that the company had net assets of $282,457. All this suggests is that there has been some modest increase in the Minchinbury property over the years of the relationship. That, of course, was the property on which Fencing carried on its business. As I have mentioned, the plaintiff, apart from her initial employment, at the commencement of the relationship, did not take part in or contribute to the operation of that business. The plaintiff suggested that on occasions she might have helped when someone was sick but I do not think this was anything of substance. The position of Fencing to which I have referred takes account of the net funds of some $249,987 received as a result of the sale of the Werombi property.
65 The plaintiff’s contribution to Serenity Park and Fencing fall into a number of different categories. The first is, of course, the homemaking contribution which was substantial in the sense that she performed most of the homemaking in a way which the defendant described as very good. They did not have children and, accordingly, the homemaking contribution has to be seen in that context. The other contribution by the plaintiff was a contribution to Sun Cherry Stud and Serenity Park which I have earlier set out. That contribution was substantial and is for the period from 1988 until the end of the relationship.
66 The plaintiff was paid wages from 1990 to 2002. Fencing paid the wages and I accept the plaintiff’s evidence that this in effect replaced the contributions towards housekeeping which were provided by the defendant in previous years. In the beginning the gross weekly wage was $349 and the net weekly wage was $293. By the end of the period it had risen to $552 and $439.
Discussion
67 When one looks at the situation at the date of trial the parties’ financial situation has become more certain because the relevant assets have all been realised. There is nothing to suggest that they have not been realised for their proper value. Fencing still owns the property at Minchinbury which it owned well before the relationship commenced and on which the defendant carried on his business as a hardware store and fencing the latter of which is no longer operating. These were businesses to which the plaintiff did not contribute. The joint efforts of the plaintiff and the defendant in the period of their relationship were directed towards the Werombi property and the businesses carried on at the property. What little net proceeds that were received from the sale of the property are already reflected in the defendant’s interest in Fencing. It is plain that the partnership at Serenity Park operated at a loss and this was a drain on the resources of the parties. It is also clear that it was the defendant who contributed all of the funds through Fencing for the purchase of the property and the many improvements that were carried out on the property over the years that the parties continued with this venture. The high bank debt at the time of sale reflects no doubt the cost of all those improvements.
68 By the time of the trial the affairs of the partnership had been wound up and it is plain that the plaintiff and the defendant are liable to contribute to the debts of the partnership. This is reflected in their capital accounts with each showing a debit of $112,784. The plaintiff effectively owes that proportionately to Fencing, the defendant and Foster & Son as these are the entities that have not been paid and the debts are outstanding in the partnership.
69 It is plain that a proper resolution of the parties’ interest will require that the amount due by the plaintiff to the defendant’s companies and the defendant should be off-set against any amount which should awarded to her in respect of her non-financial contributions.
70 As I have mentioned the plaintiff made no financial contributions and such wages as she received during the course of her employment from outside entities in the early period of the relationship were substantially used by her for her own purposes.
71 The wages paid by Fencing to the plaintiff between 1990 to 2002 were not substantial and effectively were merely the housekeeping which was paid to her over those years. According to the plaintiff she was recorded on the payroll so that she would be covered by Workers Compensation insurance if she had an accident. I accept her evidence on this aspect contrary to that which was put by the defendant who seemed to suggest that they were payments of household expenses and wages when he was cross examined about the matter as the payment of these wages were effectively the provision of the couple’s housekeeping expenses, one has the very substantial contribution which were made over the period from 1988 until the end of the relationship. As I have mentioned they cannot be quantified in terms of equivalent salary but the Court must give them substantial recognition because of the extent of their nature. It was said in Black v Black 15 Fam LR 109 at 117 that such contributions are to be recognised in a substantial and not a token way.
72 During this period that the plaintiff worked on the property the property itself was also increasing in value. The evidence shows a substantial number of alterations which were provided by Fencing and the defendant and the increase in sale price, no doubt, reflects the increase in value as a result of the improvements as well as some increase as a result of inflationary trends. As in many areas in this case the evidence is deficient and one cannot either form any conclusion as to the extent of the increase in value as a result of the improvements or the extent of the improvement as a result of inflationary pressures.
73 Although it was the defendant who provided the funds for the property and the improvements it was that property which was focus of the plaintiff’s and the defendant’s effort during the period of their relationship. It was indeed their common interest although the defendant spent much of his time running his business enterprises which were ones which he had set up well before the commencement of the relationship.
74 The net proceeds of the sale of the Werombi property were $252,987. This was after meeting expenses resulting from the operations of the property. The property had originally been purchased for $270,000 and it is plain that that purchase used borrowed funds. The extent of the borrowed funds is not known and therefore one cannot get an accurate idea of what might have been the overall increase achieved in respect of the sale of the property and the increase in its value due to inflation. All I can conclude is that it is likely that some part of the $252,987 was as a result of improvements and inflation. A share of any inflationary increase should be attributed to the plaintiff in any final adjustment.
75 I have earlier indicated that there were increases in the value of the Minchinbury property over the period of the relationship. However, in the circumstances of the this case, as the plaintiff had little to do with that business and it was not the focus of their joint attention other than to provide an income through Mr Foster’s exertions, I think that should be put to one side.
76 One thus has to try and assess the plaintiff’s contributions with all the imponderables and the lack of evidence to which I have referred. Doing the best I can I think an appropriate figure to select is the sum of $200,000. If one is to set off that amount against the amount of $112,784 which she owes the defendant and his associated entities, the amount which is payable by way of adjustment is $87,216.
77 The parties should bring in short minutes to reflect such an adjustment and such mechanisms as they wish to adopt in order to provide the appropriate off set to the relevant entities.
78 Having regard to the comments made by the Court of Appeal in Kardos v Sarbutt (No2) [2006] NSWCA 206 at paragraph 26 and following regarding costs in these matters the appropriate order, subject to any submissions, is that each party pay their own costs.
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