Davies v Winters

[2020] NSWSC 375

Supreme Court

New South Wales

Medium Neutral Citation:	Davies v Winters [2020] NSWSC 375
Hearing dates:	7, 8 and 9 April 2020
Decision date:	11 May 2020
Jurisdiction:	Equity
Before:	Lindsay J
Decision:	Orders to be made for adjustment of property interests under the Property (Relationships) Act 1984 NSW.
Catchwords:	PROPERTY (RELATIONSHIPS) ACT 1984 – de facto relationship – adjustment of property interests
Legislation Cited:	Property (Relationships) Act 1984 NSW
Cases Cited:	-
Texts Cited:	-
Category:	Principal judgment
Parties:	Plaintiff: Clive Davies Defendant: Frances Winters
Representation:	Counsel: Plaintiff: G Elliott Defendant: PM Friedlander   Solicitors: Plaintiff: Blackshaw Lindsay Defendant: Sharah & Associates
File Number(s):	2017/00255719

Judgment

INTRODUCTION

1. In these proceedings the plaintiff (a male, born in October 1952) and the defendant (a female, born in March 1954), formerly partners in a de facto relationship, make competing claims (in equity and via sections 18 and 20 of the Property (Relationships) Act 1984 NSW) to ownership of a residential property in Wigram Road, Faulconbridge in the State of NSW, purchased in the name of the defendant during the currency of their relationship.

2. A determination of those claims incidentally involves consideration of: (a) the parties’ competing, historical claims to beneficial ownership of another residential property (purchased in the name of the plaintiff during their relationship, and sold by him at about the time the relationship ceased) located in St Georges Crescent, Faulconbridge; and (b) the plaintiff’s use of proceeds of his sale of that property in his purchase of his current residence in Double Bay without the consent of the defendant.

3. Passing reference must also be made to two other residential properties.

4. At the commencement of their relationship the plaintiff owned a property in Park Road, Springwood (which he sold in early 2006), the proceeds of sale of which later helped fund his purchase of the Double Bay property.

5. At the commencement of the relationship the defendant owned (as she still does) a property in Valley Road, Springwood. She and her children lived there before they commenced living with the plaintiff at the Park Road property in or about January 1993. Rooms in the Valley Road property are now rented out by the defendant.

6. Insofar as these proceedings fall to be determined by reference to the Property (Relationships) Act 1984, changes in their respective net asset positions over the course of their relationship can be measured broadly by reference to their acquisition of the St Georges Crescent and Wigram Road properties during the currency of the relationship.

7. At the commencement of the relationship, they each separately owned a residence: in the case of the plaintiff, the Park Road property; in the case of the defendant, the Valley Road property. At the time their relationship ceased (whenever, precisely, that may have occurred) they each retained those separate properties or (in the case of the plaintiff) an asset of equivalent value.

THE PARTIES’ DE FACTO RELATIONSHIP

8. The parties’ de facto relationship (as defined by section 4 of the Property (Relationships) Act 1984) commenced in or about January 1993, when the defendant commenced cohabitation with the plaintiff at the Park Road property.

9. Theirs was not a first relationship for either the plaintiff or the defendant.

10. At the time he took up with the defendant, the plaintiff had not long ceased to be in a de facto relationship with another woman.

11. At the time she took up with him, the defendant was recovering from a failed marriage to a man who had, with consequences for her wellbeing, suffered mental health problems.

12. At the time the plaintiff and the defendant commenced cohabitation, the plaintiff had no children of his own; the defendant had two teenage daughters by her former husband. The older daughter was born in July 1978, the younger one in September 1982.

13. The defendant’s daughters joined their mother as members of the same household as the plaintiff. They lived as a family, with the plaintiff and the defendant living openly as a couple.

14. By design, a son was born to the plaintiff and the defendant in February 1994. He was the plaintiff’s first and only child, the third child of the defendant.

15. The de facto relationship between the plaintiff and the defendant came to an end no earlier than 2003, after which (following a domestic argument about care of their son) the plaintiff and the boy commenced living separately from the defendant. By this time, one of the defendant’s daughters (young adults) had left home and the other was on her way.

16. Although the parties’ de facto relationship underwent a radical readjustment in 2003, it continued in a modified form. The plaintiff came and went, at will, to a variety of residences primarily occupied by the defendant and their son. They shared custody of the boy albeit that, in his earlier years, he spent most of his time with his mother. They continued to maintain a monogamous sexual relationship. Their finances continued to be pooled in the sense that joint or several expenses were routinely paid without close attention to the identity of the member of the household to whose account the expense might be attributed by a third party creditor. Although they maintained separate bank accounts, much of their economic activity (centred on small business activities, the collection of rent and the like) was conducted in cash, with unsystematic transfers of cash between them from time to time. They engaged in periodic attempts (particularly in 2005 and 2006) to reach a property settlement, each time without success. Occasionally, they went on holidays (with one or more of the children) as a family. In default of an agreement about the terms upon which their relationship should end, it continued to limp on with neither party willing or able to let go.

17. Objectively, the parties’ de facto relationship, should be taken as having ceased in mid-2007 when their sexual relationship came to an end. At about that time, the defendant emphatically rejected unwanted advances of the plaintiff and began to contemplate other relationships. For his part, within a year, the plaintiff re-partnered.

18. Selection of mid-2007 as the time when the parties’ de facto relationship “ceased” is reinforced by the fact that in July 2007 the plaintiff (without reference to the defendant) sold the St Georges Crescent property and retained the whole of the net proceeds of sale for himself, leaving the defendant in occupation of the Wigram Road property. Later that year he purchased his Double Bay residence without seeking, or obtaining, the defendant’s consent to his application of St Georges Crescent proceeds of sale towards the Double Bay purchase.

EXTENSION OF TIME TO APPLY FOR A PROPERTY ADJUSTMENT ORDER

19. Section 18(1) of the Property (Relationships) Act 1984 prescribes that, unless the Court makes an order (pursuant to section 18(2) of the Act) extending time, an application to the Court for an order under section 20 of the Act (for an adjustment of property interests) must be made within the period of two years after the date on which the relationship ceased.

20. During the course of the final hearing of the proceedings, the parties each consented to the making of an order (under section 18(2) in favour of the other for an extension of time within which to make an application under section 20 in these proceedings.

21. Fortified by the parties’ agreement as to the correctness of this approach, I was satisfied (as required by section 18(2)) that greater hardship would be caused to each party if a grant of leave were not made in favour of that party than would be caused to the other party if leave were to be granted.

22. Although a determination is to be made as to the parties’ respective entitlements to property in equity, their reciprocal engagement of section 20 focusses attention on the “just and equitable” criterion, and the “relevant factors”, identified in that section as material to an application for a “property adjustment order”.

23. The parties agree that precision in a finding about the date their relationship “ceased” is not required in light of the orders made under section 18(2). The course of their relationship may nevertheless be relevant to an understanding of their respective contributions to, or enjoyment of, property or, at least, the claims they assert in these proceedings.

24. The plaintiff, in particular, contends that the defendant obtained a “rent free” occupancy of the Wigram Road property or the rents of the property for which she should be required to account in his favour. That may be a factor to be taken into account, but it pays less than full regard to the ownership interest of the defendant in the property, and her maintenance of the property.

PROPERTIES THE SUBJECT OF DISPUTE

25. The evidence in the proceedings ranged far and wide, but a primary focus of the parties’ competing contentions was on whether, at or about the time of commencement of their de facto relationship, there was an agreement between them (as alleged by the defendant) that they would, during the course of their relationship, pool their resources, jointly acquire investment properties and, upon sale of those properties, share equally the proceeds of sale. The plaintiff denies the existence of an overarching agreement of this character. He contends that the acquisition of each property was a separate, stand alone transaction, each one of which was acquired substantially for his personal benefit to the exclusion (in whole or part) of the defendant. The defendant, for her part, responds that the agreement for which she contends was reaffirmed each time a property was purchased.

26. There were two properties purchased during the course of the parties’ relationship. The first of those was the St Georges Crescent property (the land contained in folio identifier 9/9210), purchased in 1995. The second was the Wigram Road property (the land contained in folio identifier 5/553546), purchased in 1996. At the time of each purchase, both parties regarded themselves as being in a committed marriage-like relationship. They did not turn their attention to what might happen if their relationship were to end.

27. As it happened, the parties’ intention that the St Georges Crescent property be purchased in their joint names miscarried. Because of arrangements the plaintiff made for funding for the purchase, the property was purchased in his name alone.

28. The purchase was funded by a loan taken out by the plaintiff, secured by a mortgage over the Park Road property (owned by him alone), to the repayment of which the defendant contributed.

29. In the context of the St Georges Crescent purchase in the name of the plaintiff alone, by design the Wigram Road property was purchased in the name of the defendant alone. Without the intervention of a solicitor, the plaintiff personally attended to conveyancing tasks necessary to effect a transfer of the property into the defendant’s name. After completion of the purchase he retained the duplicate certificate of title for safe keeping and provided a copy of it to the defendant. She became registered proprietor of the unencumbered fee simple in the property. The plaintiff’s explanation for arranging for the property to be purchased in the name of the defendant alone is that, by that means, he calculated that he would not be exposed to a liability for land tax, having regard to other properties held in his name.

30. The defendant’s evidence is that in their earlier discussions about proposals for the purchase of investment properties together, as when they discussed purchase of the Wigram Road property, the plaintiff explained to her that he wanted them to share equal ownership of their investment properties so as to minimise any exposure to land tax liability.

31. The Wigram Road property was purchased, largely, using funds of the plaintiff acquired when he accepted a redundancy package from his then employer. Because he funded most of the purchase price, he contends that the property was acquired in the name of the defendant on trust for him.

32. He concedes that, in 2005, he proposed that the defendant might have the benefit of a half share in the property (a concession to which he adheres) but his basic proposition is that the property was purchased on trust for him, or on trust for both parties in proportion to their financial contributions to its acquisition.

33. His counsel concedes that the plaintiff’s contentions in this regard are subject to any finding made by the Court as to the existence of an agreement as to the terms upon which property was to be acquired.

34. The defendant contends that, the St Georges Crescent property having been purchased in the name of the plaintiff, the agreement between them at the time the Wigram Road property was purchased was that they would each have a one half share in both the Wigram Road property and the St Georges Crescent property (or, alternatively, if the plaintiff is entitled to retain the proceeds of sale of the St Georges Crescent property without accounting to her for a half, she is entitled to sole beneficial ownership of the Wigram Road property).

35. The plaintiff did not lodge a caveat on the title to the Wigram Road property until 30 October 2012 or thereabouts. The caveat (registered dealing number AH340708) remains on the title to the property. It grounds the plaintiff’s claim to a caveatable interest in the property on the basis of claims that: (a) the plaintiff paid the entire purchase price for the property; (b) the plaintiff held the certificate of title for the property; and (c) the defendant had acknowledged the plaintiff as a “co-owner” in an instrument dated 18 February 2006.

36. Factually, the first ground relied upon for a caveatable interest is, in the abstract, substantially but not literally correct. The plaintiff paid all but about $4,000 of the costs of acquisition of the property.

37. Factually, the second ground is literally correct. After completion of the purchase transaction the plaintiff retained the duplicate certificate of title to the property issued by the Registrar General, but gave the defendant a photocopy of it for her records. Both documents have been admitted into evidence. Accordingly, the duplicate certificate of title is presently in the control of the Court.

38. Factually, the third ground is correct only in the sense that the plaintiff, the defendant and the plaintiff’s father each signed a single page document dated 18 February 2006 recording an agreement about the terms upon which the Wigram Road property was to be “leased” to the plaintiff’s father for an initial period of 12 months, able to be extended. The document was not prepared with the benefit of legal assistance. Properly characterised and construed, it is not an acknowledgement by the defendant that the plaintiff has a legal or equitable interest in the land. In a domestic context, it falls short of such an acknowledgement. The plaintiff and defendant signed it as “house owners”. Its terms commenced, “We agree to lease our house…”. It provided for the payment of a weekly rent to the defendant alone. The plaintiff’s father signed it simply against the word, “Noted”.

39. The grounds relied upon in support of the caveat must be viewed in context; particularly:

1. the agreement, or agreements, between the parties for the acquisition of the St Georges Crescent property and the Wigram Road property as family investments;

2. the fact that the instrument dated 18 February 2006 was signed at a time when the parties’ de facto relationship remained on foot;

3. the fact that at the time the instrument was signed the plaintiff had not yet unilaterally sold, and retained for himself the proceeds of sale of, the St Georges Crescent property, which he did on or about 19 July 2007;

4. the fact that, according to its own terms, at its highest in support of the plaintiff’s case, the instrument described him as no more than a “co-owner”, moreover one to whom no rent was to be paid;

5. the fact that, as an informal “family” document, it is at least debateable whether an intention to create or affect legal relations can properly be attributed to any party in their execution of it; and

6. the fact that the plaintiff retained custody of the duplicate certificate of title following purchase of the Wigram Road property in the name of the defendant is unremarkable as he attended to the conveyancing aspects of the purchase.

40. One of the ways the plaintiff puts his case is that:

1. He should be held beneficially entitled to the whole (or substantially the whole) of the Wigram Road property.

2. Nevertheless, accepting that the St Georges Crescent property was purchased on the basis that the parties were to have an equal entitlement to proceeds of its sale, he is (and has been for some time) prepared (without being under any obligation to do so) to allow the defendant to have a half share of the value of the Wigram Road property so as to compensate her for the fact that he did not, upon his sale of the St Georges Crescent property, give her a half share of the net proceeds of sale of that property.

41. In my assessment, it is more likely than not that the decisions made to acquire the St Georges Crescent property and the Wigram Road property were each preceded by an agreement between the parties that, upon a sale of the particular property, the net proceeds of sale would be equally shared.

42. Both properties were acquired at a time when the parties regarded themselves as being in a committed long-term relationship. For the plaintiff, there was a general concern to structure property holdings in a way calculated (in the abstract, not necessarily in particularised detail) to minimise exposure to land tax; and he was confident of his ability, in a domestic setting, to persuade the defendant to acquiesce in his view of property dealings. For the defendant, coming off a failed marriage relationship, with dependent children, there was a deep yearning for security, including a concern that, if the plaintiff did not remain in continuous employment, she might have to carry financial burdens beyond what she could bear.

43. On balance, and mindful that the Wigram Road property was purchased substantially with the benefit of the plaintiff’s superannuation funds, I prefer the defendant’s account of their discussions leading to the purchase of property.

44. This finding cuts both ways. The design each party has on establishing an interest in property registered in the name of the other depends upon a reciprocal acknowledgement. Any entitlement the plaintiff may have to an interest in the Wigram Road property is conditional upon him accounting for the defendant’s share of the proceeds of sale of the St Georges Crescent property, traced into the Double Bay property. Any entitlement the defendant may have to such an accounting is conditional upon her recognition that the plaintiff has an interest in her disposition of the Wigram Road property, if not what happens in the meantime.

45. Having agreed that orders should be made under section 18(2) of the Property (Relationships) Act for the Court’s discretion under section 20 to be enlivened, the parties have invited the Court to facilitate a final determination of their financial relationship by accommodating any claim the defendant may have to the plaintiff’s Double Bay property in an adjustment to the parties’ respective entitlements to the Wigram Road property.

46. This is consistent with the direction in section 19 of the Property (Relationships) Act that the Court should, “so far as is practicable, make such orders as will finally determine the financial relationship between the parties to a domestic relationship and avoid further proceedings between them”.

47. The plaintiff seeks to hold his Double Bay property free of any obligation to the defendant. She, for her part, wants to be able to hold the Wigram Road property free of any obligation to him – accepting that, if he holds an interest in the property, she will have to buy him out or submit to orders for a sale involving a division of the sale proceeds.

41. The parties agree that a property adjustment can be made by the Court on the basis of agreed calculations of value (insofar as financial contributions to their relationship are to be taken into account):

1. When the St Georges Crescent property was sold in July 2007, the profit on sale (in 2007) was “about $155,400”, of which a one half share can be taken to have been $77,700.

2. The purchase price of the Double Bay property was $660,000. Its current market value is $1.4 million.

3. The current market value of the Wigram Road property is $625,000, a one half share of which is $312,500.

49. Upon the basis that the plaintiff was obliged to bring into account in favour of the defendant the sum of $77,700 upon the sale of the St Georges Crescent property, and the Double Bay property was purchased for $660,000, the defendant effectively provided 11.77% of the purchase price of the Double Bay property. An application of that percentage to the current value of the Double Bay property produces an equivalent “entitlement” with an estimated value of $164,780.

50. Accepting that the current market value of Wigram Road is $625,000, and upon an assumption that the property is to be sold at the time of publication of this judgment, the defendant would be required to bring into account in favour of the plaintiff the sum of $312,500.

51. Setting off against that sum an amount of $164,780 to be brought into account by the plaintiff in favour of the defendant, the raw figure for an adjustment of the parties’ respective interests in the Wigram Road property in favour of the plaintiff is $147,720 ($312,500 less $164,780).

52. On these figures, if the plaintiff were to be regarded as having a proportionate interest in the Wigram Road property, his share of the value of the property ($147,720 / $625,000) would be 23.6352%, roughly a one quarter share.

53. Before one gets to consideration of the parties non-financial contributions to their relationship:

1. The plaintiff contends that there should be brought to account in his favour an amount of $14,983 representing payments totalling $11,983 he made to her in 2006 (in hope of effecting a settlement) and $3,000 for a motor vehicle which he says he bought for her, and she traded in, in or about 2007.

2. The defendant contends that adjustments should be made in her favour for (unquantified) contributions she made towards payment of the mortgage over the Park Road property (which funded the purchase of the St Georges Crescent property), as well as adjustments for improvements she made to the Wigram Road property and her financial support for the family during long periods when (by choice) the plaintiff was unemployed (broadly speaking, between 1995-2001 and 2003-2005).

54. Mathematical precision cannot be brought to an assessment of the respective financial contributions of the parties given the informality of their dealings, the intermingling of their affairs in a family context and a lack of reliable records.

55. Upon an assessment of the parties’ respective non-financial contributions to their relationship, an allowance should be made for their shared parenting of the three children, who at one time or another were part of the family circle, recognising however that the burden of homemaker and primary carer of the children was borne principally by the defendant, all the while endeavouring to earn a living.

56. Taking all these factors into account, in my opinion a just and equitable adjustment of their property interests would be one in which:

1. the plaintiff retains the Double Bay property unencumbered by any claim by the defendant;

2. the Wigram Road property is held by the defendant on trust for the parties as tenants in common:

1. as to 20%, on behalf of the plaintiff; and

2. as to 80%, on behalf of the defendant;

3. the parties share the rents and profits, and bear the rates and other outgoings, of the Wigram Road property in these proportions from the date upon which orders are made to give effect to these reasons for judgment.

4. trustees for sale of the Wigram Road property are appointed by the Court with a view to the property being sold as soon as may be practicable, reserving to each party liberty to bid at any auction for the sale of the property and staying the order for appointment of the trustees for a period of not more than two months to facilitate inter partes negotiations for an agreed disposition of the property.

57. Prima facie, each party should pay their own costs of these proceedings.

58. Upon publication of these reasons for judgment I will allow the parties an opportunity to make submissions about the form of the Court’s orders and costs.

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Decision last updated: 11 May 2020