Del Gallo v Frederiksen

[2000] NSWCA 293

Reported Decision: [2000] 27 Fam LR 162
(2001) DFC 95-230

New South Wales

Court of Appeal

CITATION:	Del Gallo v Frederiksen [2000] NSWCA 293
FILE NUMBER(S):	CA 40626/99
HEARING DATE(S):	12 October 2000
JUDGMENT DATE:	24 October 2000
PARTIES :	Christine Del Gallo (Appellant) Neil Lewis Frederiksen (Respondent)
JUDGMENT OF:	Powell JA at 1; Heydon JA at 4; Rolfe AJA at 69

LOWER COURT JURISDICTION :	Supreme Court
LOWER COURT FILE NUMBER(S) :	ED 1017/98
LOWER COURT JUDICIAL OFFICER :	Master Macready

COUNSEL:	P Brereton SC/J Lloyd (Appellant) C M Simpson (Respondent)
SOLICITORS:	Beilby Poulden Costello (Appellant) Newnhams (Respondent)
CATCHWORDS:	Family Law - De facto relationships - statutory power to make orders adjusting property interests of parties - matters to be considered in making adjustments - pre-cohabitation contributions made by parties - improvement in the financial position of parties during the period of cohabitation - amount awarded by Master not manifestly inadequate - De Facto Relationships Act 1984, s 20. ND
LEGISLATION CITED:	De Facto Relationships Act 1984
CASES CITED:	Baumgartner v Baumgartner (1987) 164 CLR 137 Dwyer v Kaljo (1987) 11 Fam LR 785 Evans v Malmont (1997) 42 NSWLR 70 Mallet v Mallet (1984) 156 CLR 605 Muschinski v Dodds (1986) 160 CLR 583 Roy v Sturgeon (1989) 13 Fam LR 1 Suttor v Gundowda Pty Limited (1950) 81 CLR 418 Wallace v Stanford (1995) 37 NSWLR 1
DECISION:	Appeal dismissed with costs

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40626/99
ED 1017/98

POWELL JA
HEYDON JA
ROLFE AJA

Tuesday, 24 October 2000

DEL GALLO v FREDERIKSEN
JUDGMENT

1    POWELL JA: I have read in draft the Judgment which has been prepared in this matter by Heydon JA.

2    Although I remain of the view which I expressed in Roy v. Sturgeon (1989) 13 Fam LR 1, I agree with his Honour that, even if those views be in error, and it were open to the Master to take into account pre-cohabitation contributions, the Appellant has failed to demonstrate that the amount awarded by the Master was manifestly inadequate.

3    I agree with the Orders which his Honour proposes.
4   

HEYDON JA:

Background
This is an appeal by the plaintiff from an order made by Master Macready on 23 June 1999 that the defendant pay to the plaintiff by way of adjustment of the parties’ property interests the sum of $35,000. The order was made pursuant to s 20 of the De Facto Relationships Act 1984 (“the Act”). It was common ground on the appeal that it was that statute, which was amended and renamed with effect from 28 June 1999, less than a month before the Master delivered judgment, which applied, not the amended statute. Section 20(1) provides:
“ Application for adjustment
(1) On an application by a de facto partner for an order under this Part to adjust interests with respect to the property of the de facto partners or either of them, a court may make such order adjusting the interests of the partners 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 de facto partners to the acquisition, conservation or improvement of any of the property of the partners or either of them or to the financial resources of the partners or either of them, and
(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the de facto partners to the welfare of the other de facto partner or to the welfare of the family constituted by the partners and one or more of the following, namely:
(i) a child of the partners,
(ii) a child accepted by the partners or either of them into
the household of the partners, whether or not the child
is a child of either of the partners.

(2) A court may make an order under subsection (1) in respect of property whether or not it has declared the title or rights of a de facto partner in respect of the property.”

5    The Master found that the de facto relationship commenced in January 1993. That was challenged in Ground 1 of the Further Amended Notice of Appeal, but that ground was abandoned before the hearing of the appeal.

6    In January 1993 the plaintiff and her two children moved into a house at North Curl Curl, which was already occupied by the defendant. That house stood on the site of an earlier house which the plaintiff and the defendant had demolished. By their joint efforts the new house was constructed.

7 The Master acted on the view that it was not open to the court, when dealing with applications under s 20 of the Act, to take into account contributions made prior to the commencement of the de facto relationship. Hence the Master did not have regard to any contributions made by the plaintiff in 1991 and 1992.

8    The appeal raised two points. The first, propounded in Ground 2 of the Further Amended Notice of Appeal, was that the Master erred in concluding that he could not take account of pre-January 1993 contributions. The second point was that even if the Master had not erred in that respect he had erred in failing properly to consider the extent to which the defendant’s position had improved (Ground 4); and even if he had not erred in either of those respects, his order was a manifestly inadequate provision (Ground 5). The plaintiff invited this Court, if either point was made good, to exercise the discretion afresh and order that $150,000 be paid in lieu of $35,000.

9    In Ground 3 complaint was made of the fact that at one point the Master said the construction work on the new house took four months, whereas, as the Master found at several other points, it in fact took fourteen months. This was not relied on as an independent ground of appeal. The plaintiff’s entirely reasonable point was rather simply that if the discretion was to be exercised afresh, the correct period should be borne in mind.

10    It is convenient to deal with the second group of issues before the first group. But in order that both challenges be considered in proper context, it is necessary to set out the factual findings of the Master to which no challenge was made.

The Uncontroverted Facts

11    The parties met in September 1989.

12    The plaintiff was then aged 43. She had two children from a marriage which had broken down, aged 8 and 6. She resided at 66 Duncan Street, Maroubra, a substantial house subject to a mortgage. She was a school teacher.

13    The defendant was aged about 45. He was a naturopath. He owned the house at North Curl Curl.

14    In 1990 the parties began to go out together and commenced a sexual relationship. They usually slept together on Sunday nights at the defendant’s house and for three or four nights at the plaintiff’s house on Monday, Thursday, Friday or Saturday nights.

15    On 2 February 1991 the defendant moved from his house at North Curl Curl to a nearby house, 26A Surf Road, which he leased. This was necessary because the defendant procured the demolition of the house built on the land at North Curl Curl in July 1991. This took seven weeks. Construction of a new house was commenced in October 1991, and completed fourteen months later. The plaintiff gave substantial assistance in demolishing the old house and constructing the new by way of design, physical labour in demolition and construction, and financially. The plaintiff paid bills, amounting to $52,432.37, most of which was spent on the house. The defendant reimbursed $50,327. Her role from the financial point of view was thus as a short term financier. The actual building cost of $140,000 was paid by the defendant; he was the builder; and apart from his own labour and his efforts in the role of builder in engaging subcontractors, he procured the aid of several friends. The Master said (Red 118Q-S):

“there was a substantial mutual commitment and support between each other in respect of this venture and … such support continued over into the period after January 1993.”

16    In April 1992 the defendant moved back into North Curl Curl when the new house was in a partly completed state. In January 1993 the plaintiff and her children moved in. She placed rent-paying tenants in 66 Duncan Street, Maroubra.

17    On 16 January 1996 the plaintiff and her children left North Curl Curl and took up residence in another property at North Curl Curl, which she had bought in June 1995 out of the proceeds of sale of 66 Duncan Street, Maroubra in March 1995. The plaintiff had had it tenanted until just before she moved in.

18    The Master made the following findings about the property of the parties at the start of the de facto relationship (January 1993) and at its end (January 1996).

19    The plaintiff at the start had the following assets (Red 124H-P).

(a) 66 Duncan Street, Maroubra: its then value is uncertain, but it was sold in March 1995 for $388,000.

(b) A Mitsubishi car of uncertain value.

(c) Small superannuation entitlements (about $1,000 by 30 June 1993).

(d) Furnishings and personal possessions.

At that time the plaintiff owed solicitors $50,000, secured on 66 Duncan Street and repayable in May 1993. She also owed her father money and perhaps her sister money.

20    At the end of the period the plaintiff had the following assets (Red 125E-P).

(a) another property at North Curl Curl, bought for $335,000.

(b) A car (estimated value $24,000).

(c) Furniture worth $5,000.

(d) Superannuation entitlements ($12,000 by January 1997).

(e) An uncertain amount of cash.

21    The defendant at the start of the period had the following assets (Red 124R-125E).

(a) Curl Curl, worth $385,000.

(b) Unit 1/20 Pindara Crescent, Lismore, of uncertain value.

(c) Household furniture and effects.

(d) A 1982 model BMW car.

(e) Savings of $20,000.

(f) His naturopath practice.

22    The defendant at the end had the following assets (Red 126C-P).

(a) North Curl Curl, worth $460,000.

(b) Unit 1, 20 Pindara Crescent, Lismore, worth $80,000.

(c) Household furniture and effects.

(d) The same car.

(e) “Some savings” and “Telstra and AMP shares worth several thousand dollars”.

(f) Presumably, his naturopath practice (see Red 62Q-S, though no finding to this effect was made).

(g) 39 Griffin Road, North Curl Curl, purchased in July 1995 for $280,000
and rented out for $350 per week.

The defendant owed $220,000, secured on 39 Griffin Road.

23    The Master made findings that the plaintiff’s contributions to the defendant’s property or welfare in the January 1993-January 1996 period were as follows.

(a) Providing short term financial assistance by paying bills “of a small amount” (Red 127K).

(b) Advancing credit in the form of a debt of $2,105.64 which largely owed its origins to the pre-January 1993 period but remained unpaid in the 1993-1996 period (Red 127K-N).

(c) Doing $650 worth of work to North Curl Curl (Red 127P-Y).

(d) Paying the premiums for home contents insurance at North Curl Curl (Red 28K).

(e) Paying “most of the household expenses” at North Curl Curl (Red 128T).

(f) Performing many tasks in the nature of finishing the construction of North Curl Curl , some with the defendant’s assistance (the plaintiff alleged she spent hundreds of hours on these tasks, and though the Master did not make a specific finding on the point, he seemed a little sceptical about this particular claim: Red 129D-W).

(g) Giving assistance, including the provision of lunch, on one day while the defendant worked on 39 Griffin Road (Red 130K).

(h) Doing the majority of the housework (Red 131S and 132F) and of caring for the children (Red 132G) (caring for the children was relevant because, though they were not the defendant’s children, they were accepted by both parties into the household: s 20(1)(b)(ii) of the Act).

24    The Master found that the defendant made contributions to the plaintiff’s assets and welfare as follows.

(a) Giving the plaintiff and her children the use of North Curl Curl (Red 128B-E).

(b) Payment of rates on North Curl Curl (Red 128J).

(c) Payment of a minor part of the household expenses (Red 128T).

(d) Doing some work on the finishing of North Curl Curl (Red 129R).

(e) Doing a little work in preparing 66 Duncan Street, Maroubra for sale (Red 130P) and rather more work on readying another property at North Curl Curl, for occupancy by tenants (Red 130M-131E) (the Master opined that, apart from work on North Curl Curl , the defendant gave “some more attention” to the plaintiff’s properties than she did to his (Red 131G)).

(f) Doing the lesser part of the housework (Red 131S-132F).

(g) Giving some assistance in caring for the children (Red 132H).

Some Additional Facts

25    Apart from the facts just set out, various of the arguments propounded during the appeal render other factual material relevant. It is difficult to set it out simply, because the evidence in question is somewhat disordered and the Master’s findings are incomplete.

26    One aspect concerns the gains which the plaintiff was able to make after January 1993. When the plaintiff and her children moved into the defendant’s house at North Curl Curl, in January 1993, that left vacant her substantial house at 66 Duncan Street, Maroubra, which she and her children had been occupying. She rented that property to tenants, initially at $335 per week (Black 11G; Blue 122) and from 24 January 1994 at $380 per week (Black 11G-Q; Blue 124N-P). This rental stream was used partly to pay off a loan she had obtained from her father which she had entered into in order to buy out her husband’s interest in the matrimonial home: by October 1994 $35,285 had been paid in this manner (Black 11R-12H; Blue 122-123 - though that sum appears to include about $2,000 worth of payments made later). This continued until December 1994 (Black 17B-P).

27    On 10 March 1995 the plaintiff sold 66 Duncan Street, Maroubra, for $388,000 (Red 112M). On 30 June 1995 the plaintiff purchased another property at North Curl Curl, for $335,000. The total of real estate agents’ commission, solicitors’ fees and stamp duty on the sale and purchase was $22,328.26 (Red 24E-J). On 14 July 1995 she rented that property to tenants for $400 per week until 12 January 1996 (Red 112P-R). That produced income of approximately $10,400, less unquantified real estate agents’ and other expenses, and outgoings of $5,565 (Red 24M) spent on improvements to the property (such as fly screens, security doors, side gates and lights) so as to put it into a state in which it could be rented (Red 24M; Black 17P-19G).

28    The acquisition by the plaintiff of her former husband’s interest in the property at 66 Duncan Street, Maroubra had been funded in part by a $50,000 interest only mortgage from one Hirsch, a solicitor, taken out on 7 May 1990 for three years (Black 9S-11D). That $50,000 loan was duly repaid in May 1993 (Black 12H-W). The repayment was funded from the plaintiff’s savings to the extent of $40,000 and from a small loan from her father (Black 13C-P). The plaintiff used an inheritance from her grandmother to pay off some of the debts owed to her father (Black 14F-Q).

29    This not particularly clear evidence led the Master to make the following findings (Red 110U-111D; 112C-K, M-N and P-R).

“On 7 May 1990 the plaintiff mortgaged her home at 66 Duncan Street, Maroubra for $50,000 for three years and the funds were used to discharge a liability which she had to her sister. She had previously acquired the property by buying out her husband’s interest in it and to do this she needed assistance from both her sister and her father who gave that assistance.
… At this stage [in early 1993] the plaintiff let her premises at 55 Duncan Street, Maroubra, initially at $333 [sic]. From time to time thereafter she would repay her father sums which [she] owed him and in May 1993 the plaintiff discharged the mortgage for $50,000 which she had earlier taken out. Some assistance was provided by her father who advanced somewhere between $5,000 and $10,000 to enable this to happen. The plaintiff also received an inheritance of $15,000 which may also have been used. In January 1994 the rent for the plaintiff’s premises at 66 Duncan Street was increased to $380 per week.
… On 10 March 1995 the plaintiff sold her house at Maroubra for $388,000. … On 30 June 1995 the plaintiff purchased another property at North Curl Curl for $335,000. On 14 July 1995 she rented it out for $400 per week.”

30    At a later stage the Master described the effect on the plaintiff’s financial situation as a result of the decision to live with the defendant at North Curl Curl, as follows (Red 133J-P):

“This meant that the plaintiff could let out her Maroubra residence and another property at North Curl Curl which was purchased once she had sold Maroubra. The amount received by her was not insubstantial. The evidence would seem to establish that she was able to use the rent to substantially repay a major part of her loan of $50,000 less the amount of her inheritance of $15,000. By the time the matter was at the preparation stage when she swore her affidavits she was able to accumulate reasonable savings.”

The Master said the following about a submission that these transactions conferred benefits on the plaintiff (Red 134E-Q):
“… the suggestion that the plaintiff received benefits from her Maroubra properties ignores two crucial factors. These are:-
1. That it was the parties’ decision to live together jointly at North Curl Curl . At that time the defendant well knew that the plaintiff would be letting her house and the decision to live together was one made in that knowledge. There is some incongruity later, after the relationship ceases to exist, in maintaining a different position.
2. During the relationship the defendant himself acquired the Griffin Road property and he has had the benefit of the very substantial increase in the value of that between the time of its acquisition and the present time.”

31    It will be necessary later to consider the correctness of these conclusions. For the present, it is sufficient to note that the Master appears to have underestimated the total benefit gained from the move to North Curl Curl. That benefit can be analysed in two ways, which produce similar results. The first is as follows.

Payments to father up to October 1994
(with two later payments) $35,285

Payments to father in November-December 1994
at $380 per week $ 3,000 (approx)

Rent from 1 January 1995 to 10 March 1995 on
66 Duncan Street: ten weeks at $380 $ 3,800

Rent on another property at North Curl Curl from 14 July 1995
until January 1996 ($10,400 less unquantified
amounts for agents’ expenses) $ 9,000 (approx)
_______

$51,000 (approx)
_______

32    The second way of expressing the benefit is as follows.

Rent on 66 Duncan Street from February 1993
to 24 January 1994 (51 weeks at $335 per week) $17,085 (approx)

Rent on 66 Duncan Street from 24 January 1994
to 10 March 1995 (58 weeks at $380 per week) $22,040 (approx)

Rent on another property at North Curl Curl $ 9,000 (approx)
_______

$48,000 (approx)
_______

33    As a matter of background, it is of interest to note the changes in the financial position of both the defendant and the plaintiff from the time when pre-cohabitation contributions began to be made.

34    In 1990, when the plaintiff and the defendant began to go out together and sleep at each other’s houses, the plaintiff had equity in 66 Duncan Street, Maroubra. The extent of that equity is not made plain by the evidence. In May 1990 she had had to borrow the Hirsch loan of $50,000 for three years at interest of 16% (15% if paid on the due date) (Black 11B), and she was also indebted to her father and her sister to the extent of $70,000. In short, her net asset position was that while she owned equity in 66 Duncan Street, she owed about $120,000 (Black 10M-U). By May 1993 she had not only paid all the interest on the Hirsch loan, she had repaid the capital. The capital repayment was out of savings of $40,000 accumulated in the period 1990-May 1993; the balance was paid with the aid of a further loan from her father (Black 13G-P). In turn that loan was repaid out of an inheritance, the size of which the evidence does not make clear, from her grandmother (Black 14H). After May 1993 she was able to pay off at least $35,285 of her debts to her father. The evidence does not suggest that by 1996 she had any debts. If that is the case, she had repaid $120,000 in six years - in particular, she made the payments from February 1993 on. She had also paid high interest on the Hirsch loan. She had become absolute owner in turn of 66 Duncan Street and of another property at North Curl Curl.

35    Turning to changes in the defendant’s financial position from 1990 on, his principal asset was North Curl Curl. In April 1990 its value was $285,000-$310,000 (Blue 243). On 24 January 1993 its value was $385,000 ($300,000-$320,000 if the original house had remained: Blue 252). By 1996 its value was $460,000 ($360,000-$370,000 if the original house had remained). Over six years the value had thus risen by about $160,000.

Grounds 4 and 5: That the Master failed to give proper weight to the improvement in the defendant’s position, and was the order manifestly inadequate

36    It is convenient to consider first the adequacy of the Master’s order on the assumption that he was right to exclude pre-January 1993 contributions.

37    The plaintiff’s case was encapsulated in her written submissions thus:

“13. The plaintiff left the relationship in approximately the same position as she had entered it: she had another property at North Curl Curl (in place of Duncan St), a car, furniture, and superannuation; while it is true that her debt on Duncan St had been discharged, that had been partly from rents generated by that property, which she owned before the relationship, and partly with an inheritance. The defendant, however, left the relationship with his position vastly enhanced: while, of the property which he had at the trial, the Lismore property, car and furniture and effects were held by him at the outset of the relationship, (1) his savings were accumulated during the relationship, as were his shares, (2) his initial equity in Griffin Rd was provided, to the extent of $60,000, by funds saved during the relationship, and (3) North Curl Curl had increased in value from about $300,00 in 1990 to $650,000 at trial, and $150,000 of that increase was attributable to the demolition and reconstruction (had the old house remained, it would have been worth only $500,000 - this $150,000 increase on North Curl Curl reflects both the defendant’s financial contribution, and the non-financial contributions of both parties). Thus during the relationship the defendant, unlike the plaintiff, improved his position, and did so at least to the extent of $150,000 on North Curl Curl , $420,000 on Griffin Rd, plus his savings and shares.
14. This benefit to the defendant - in which the plaintiff did not share - was the product of the combined efforts of the parties during the relationship. It needs to be borne in mind that the plaintiff paid most of their household expenses, and although the evidence as to their comparative incomes is limited, so far as it goes the plaintiff’s was greater. Thus the defendant, largely to the exclusion of the plaintiff, derived the benefit of their combined efforts during the relationship. This was facilitated by the plaintiff’s bearing of the household expenses. He also obtained the benefit of her services as homemaker. Thus this was indeed a case in which there were disproportionate burdens and benefits which in justice and equity demanded satisfaction by an adjustive property order: cf Evans v Marmont (1997) 42 NSWLR 70, 76.”

The submissions then went on to advocate an “adjustive order” of $150,000.
“15. A proper exercise of discretion under s 20 would address this imbalance by restoring to the plaintiff a share of the benefits so gained by the defendant - his savings, shares, equity in Griffin Rd, and increased value of North Curl Curl , together with some recognition of her homemaker contributions. Proper recognition of those contributions required an adjustive order of not less than $150,000. Crudely, this represents the $35,000 which the Master found warranted having regard to contributions during the relationship to North Curl Curl and as homemaker, plus about one-third ($50,000) of the increased value of North Curl Curl attributable to the new house, reflective of her contributions thereto during 1990-1993 period, plus about 15% of the equity in Griffin Rd (reflecting her indirect contribution to the initial equity) equivalent to $65,000.”

38    Some points need to be clarified at the outset. These submissions, by taking together Grounds 4 and 5 and by arguing that there ought to be a re-assessment on the assumption that Ground 2 was made out, tend to obscure clear analysis. Thus the last sentence quoted and other parts of the submissions assume that it is open to the court to take account of pre-1993 contributions to the extent of $50,000, but this is contrary to the assumption on which the present discussion is proceeding. Clear analysis is also obscured by the fact that this submission compares the plaintiff’s position as at 1996 with the defendant’s position in 1999. The more material date must be 1996, but whichever date is chosen, it must be the same date for both parties.

The Relevance of Muschinski v Dodds

39    One other preliminary matter may be disposed of. The plaintiff submitted orally that there was one relevant item of property which the Master had not taken into account. Even if the Master was correct to leave out of account the plaintiff’s contributions before January 1993, her activities in 1991 and 1992 created an equitable claim which she could have brought against the defendant. That claim was of the type recognised in Muschinski v Dodds (1986) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137. That chose in action still subsisted when the relationship ended. It was submitted that this Court could, in return for an undertaking by the plaintiff to abandon that chose in action, give the plaintiff a higher “adjustive order”. Counsel for the defendant contended that the submission should not be entertained in this Court because it had not been put to the Master, and if it had been the trial might have been differently conducted by reason of other evidence having been called or elicited in cross-examination which might possibly have prevented the point from succeeding: Coulton v Holcombe (1986) 162 CLR 1 at 7-8. That contention of the defendant has more than usual force: the factual matters necessary to make out rights pursuant to Muschinski v Dodds are not identical with those arising under s 20 of the Act, and they were not pleaded. Accordingly this suggestion of the plaintiff’s must be put aside.

Ground 4

40    Is the contention put in Ground 4 of the Further Amended Notice of Appeal that the Master failed to take account of the extent to which the defendant’s position improved soundly based? It improved, arguably, in three respects. One is the rise in value of North Curl Curl, to the extent of $75,000 (Red 133B). The second is the acquisition of 39 Griffin Rd, North Curl Curl in which the defendant had an equity of about $60,000 at the time of acquisition (Red 125U). The third relates to cash and shares.

41    As to the cash and shares, the Master made no explicit finding that there was any improvement in the defendant’s position. He started with $20,000 in cash (Red 125T). He finished with “Some savings” and “Telstra and AMP shares worth several thousand dollars” (Red 126L-P). The “savings” were said to be worth $35,000 and the shares $3,000 (Red 63F-G). That reveals an improvement of $18,000. In my opinion failure to deal explicitly with this improvement would not be an appellable error in view of the relatively small amount involved and the necessarily indeterminate nature of the overall inquiry.

42    As to the rise in value of North Curl Curl, the Master analysed the valuation evidence and arrived at the following conclusions (Red 32L-133F). Its value in January 1993 with the new residence on it was $385,000; by January 1996 it had risen by $75,000 to $460,000; by the trial in 1999 it was worth $650,000. Had the old residence not been demolished, the property would have been worth about $310,000 in January 1993, $365,000 in January 1996 and $510,000 in 1999. The Master used these figures to arrive at the conclusion that the property was overcapitalised. The difference of $140,000 between the 1999 value of the land with the new house on it of $650,000 and the 1999 value with the old house of $510,000 had been achieved at the price of $140,000 in cash from the defendant, and the totality of the labour put in by the defendant and his friends as well as the labour put in by the plaintiff. But leaving aside issues of overcapitalisation, the fact is that in the period of cohabitation, the value rose by only $75,000. The Master said (Red 133C-F):

“How much of this was due to the matters such as the landscaping and other minor matters done by the plaintiff in contrast to the natural effects of inflation, does not appear in the evidence. It is appropriate, however, that I give consideration to this work and take some account of it in the figure to which I will arrive.”

43    The Master thus took account of the extent to which the value rose and endeavoured to take account of how much of that value was caused by the plaintiff. In my judgment it cannot be said that he failed to take into account or give any or any sufficient weight to the extent to which the defendant’s position had improved by reason of North Curl Curl.

44    As to 39 Griffin Road, North Curl Curl, the Master made findings about the purchase of the property, the source of funds, the fact that it was rented, and its present value (Red 125S-W, 126H, N and R). He also noted that the defendant “has had the benefit of the very substantial increase in the value of [the property] between the time of its acquisition and the present time” (Red 134N-Q). He did not explicitly state how, if it all, he took into account the increase in value between 1995 and 1999, except that he found that the plaintiff made a small contribution to work in relation to the Griffin Road property (Red 130B-K).

45    Counsel for the plaintiff contended that the acquisition of Griffin Road (and the rise in value of Griffin Road up to 1999) should have been taken into account. So far as the plaintiff’s direct contribution to whatever value it had is concerned, it was taken into account. Counsel for the plaintiff contended, however, that the rise in value in all the assets of the defendant should have been taken into account, and a conclusion should have been arrived at that the plaintiff’s efforts must have materially contributed to this. The plaintiff cited passages from authorities in support of a submission that in some types of case including the present, an appropriate starting point was to assume equality of contributions in relation to assets fairly to be seen as representing the fruits of a totality of efforts of income earning, home making and mutual support: Mallet v Mallet (1984) 156 CLR 605 at 635-6 and 640-1; Wallace v Stanford (1995) 37 NSWLR 1 at 5; Evans v Malmont (1997) 42 NSWLR 70 at 75-76, 85 and 98. It was also submitted that:

“the search is to be for proportion between the burdens of the relationship and the economic benefits from the relationship and if at the end of the relationship one party gains economic benefits disproportionate to the manner in which the parties have borne the burdens of the relationship, that is a strong indicator, if not a demand for an adjusted property order” (transcript page 43).

46    The plaintiff also made a more specific submission that while the Master may have erred in failing to take account of the benefits which the plaintiff gained by being able to obtain rental income from her house at 66 Duncan Street, Maroubra, and the house she bought in place of it at North Curl Curl, in substance he had taken those benefits into account because he “in effect … set off against the benefit which the plaintiff got from Maroubra the benefit which the defendant got from Griffin Road” (page 68). However, the plaintiff submitted that in this process of set off the Master had erred:

“what that exercise overlooked was that it wasn’t just a set off, the benefit which the defendant got was $60,000, he accumulated $60,000 to put into Griffin Road as against the plaintiff’s $35,000 for Maroubra.”

47    The latter submission, based on erroneous application of set off, is unsound. It was not the case that the plaintiff got only $35,000 by being able to rent her own houses to tenants. Over the three years she got nearer $50,000, which is not far short of the $60,000 equity in Griffin Road.

48    As to the more general submission about the balance of relative burdens and benefits, the principal burdens of the relationship borne by the plaintiff lay in the fact that she carried out the greater part of the housework and the parental duties and paid the greater part of the household expenses. It must be remembered that the work thus done had to be done not only because of the presence of the defendant, but also because of the presence of her and her two children. Had there been no de facto relationship, she would have had to have done the work in any event. The principal burdens of the relationship borne by the defendant were that he provided accommodation to three people for three years, and that advantage was worth about $60,000 (that being the approximate rent which the plaintiff’s two houses could have generated if leased over the whole three years, which is an approximate guide to the cost of alternative accommodation). It has not been established, balancing these burdens, that they fell disproportionately heavily on the plaintiff.

49    The submission requires an assessment of what the economic benefits to the parties arising out of the relationship were. Before attempting this, it is necessary to decide whether the Master was correct in excluding the benefits to the plaintiff of being able to move out of 66 Duncan Street, Maroubra, and if he was wrong in doing so, to arrive at an estimate of what they were. It will be remembered that the Master’s reasons for leaving the benefits out of account were as follows (Red 134E-Q):

“… the suggestion that the plaintiff received benefits from her Maroubra properties ignores two crucial factors. These are:-
1. That it was the parties’ decision to live together jointly at North Curl Curl . At that time the defendant well knew that the plaintiff would be letting her house and the decision to live together was one made in that knowledge. There is some incongruity later, after the relationship ceases to exist, in maintaining a different position.
2. During the relationship the defendant himself acquired the Griffin Road property and he has had the benefit of the very substantial increase in the value of that between the time of its acquisition and the present time.”

The first of these two factors is not a valid reason for failing to conclude that the decision to move to North Curl Curl, conferred benefits on the plaintiff to be weighed against benefits she had conferred on the defendant. Indeed the third of the three sentences set out is incomprehensible. Counsel for the plaintiff did not defend this part of the Master’s reasoning either in chief or in reply.

50    The second of the two features set out by the Master is a relevant matter so far as it establishes that the defendant may have gained a benefit from the relationship in the form of his equity in the Griffin Road property; but it too does not constitute a valid reason for concluding that the decision to move to North Curl Curl, did not confer benefits on the plaintiff. Though there are difficulties in relating the evidence to every precise detail of the Master’s findings, counsel for the plaintiff did not dispute the factual contention that the rent gained from 66 Duncan Street, Maroubra, enabled the plaintiff to improve her net financial position by reducing her total indebtedness by at least $35,000. Nor did counsel for the plaintiff dispute counsel for the defendant’s submission that the rent from another property at North Curl Curl, improved the plaintiff’s financial position. In my judgment the Master should have taken those gains, and this Court should take those gains, into account.

51    As was shown above, the actual gains were not of the order of $35,000, but approximately $50,000. The use of the figure of $35,000 by counsel for the plaintiff in submissions must be qualified to that extent. But the plaintiff submitted that whatever the total figure, it could not be treated as a gain arising from the move to North Curl Curl. Counsel for the plaintiff said that only about $10,000 or $15,000 should be taken into account because the cause of the advantages flowing to the plaintiff after she left 66 Duncan Street, Maroubra, was not only the accommodation which the defendant provided for her at North Curl Curl, but also the capital asset she had acquired by her own efforts at 66 Duncan Street.

52    I would reject that argument. The plaintiff’s capital asset was certainly the product of her efforts as distinct from those of the defendant. But she could only use it as a house for personal accommodation, and could not use it to generate income, until the defendant provided his property for use by her as a home. The income earning aspect of 66 Duncan Street was thus brought into existence as a practical matter by the defendant’s provision of accommodation at North Curl Curl and by nothing else. His contribution of accommodation was thus the sole cause of the conversion of the plaintiff’s house from a non-income earning asset to an income earning asset.

53    Thus the advantages gained by the plaintiff as a result of the defendant’s provision to her and her children of accommodation for three years are items which the plaintiff received in return for her contributions. The defendant is entitled to have “the value of what the plaintiff has received in return” for her contributions taken into account, to use language of Hodgson J in Dwyer v Kaljo (1987) 11 Fam LR 785 at 793 which was approved by Gleeson CJ and McLelland CJ in Eq in Evans v Marmont (1997) 42 NSWLR 70 at 75.

54    In the period 1993-1996, the plaintiff was able to pay off loans of $120,000 (in part because of the income received from 66 Duncan Street and another property at North Curl Curl). At least $80,000 of that improvement in financial position is attributable to events in the 1993-1996 period itself: a further $40,000 of the repayment was saved in the period from 1990 to May 1993, which overlaps with the period of cohabitation (Black 13J-P), but it is not clear how much of the $40,000 was saved after January 1993. Her superannuation position also improved to the extent of nearly $10,000. In that period the financial position of the defendant improved to the extent of about $153,000. This was made up by his acquisition of equity in Griffin Street ($60,000), the improvement in his cash and shares position of $18,000, and the rise in the value of North Curl Curl by $75,000. The trial judge was unable to evaluate the extent to which the rise in the value of North Curl Curl over the three years was due to some element of inflation itself. The same is true of the plaintiff’s two houses, particularly since the value of 66 Duncan Street at the start of the period and of another property at North Curl Curl at the end of the period are unknown. It is thus unknown how much 66 Duncan Street rose in value from January 1993 to March 1995 or how much another property at North Curl Curl rose in value from 30 June 1995 to January 1996.

55    The plaintiff’s argument in relation to Griffin Street placed considerable emphasis on the rise in value of Griffin Street from the time of its acquisition in 1995 to 1999 (being a rise in value which caused the defendant’s equity to rise from $60,000 to $420,000). But two other factors must be remembered. One is that to some extent that rise in the defendant’s equity occurred because the defendant paid off $40,000 of the debt over a four year period, most of that period being a time after cohabitation had ceased (Red 63K). The other is that the rise in value of the plaintiff’s assets after January 1996 must be borne in mind if it is relevant to consider the rise in value of this asset of the defendant’s. Between 30 June 1995 and 1999 another property at North Curl Curl rose in value from $335,000 to $425,000. In any event the most material date must be the date when cohabitation ceased. Later events may not be irrelevant, but they are not of primary significance. The fact that the trial did not take place until 1999 is in a sense an adventitious circumstance. The parties’ rights crystallised in January 1996 and could have been ascertained soon afterwards if proceedings had been instituted and the trial expedited. In these circumstances the plaintiff’s claim to 15% of the total equity of $420,000 in Griffin Road does not appear to rest on any compelling basis of principle.

56 Assuming for the sake of argument that the plaintiff’s submission that the Master had erred in failing to take into account the improvement in the defendant’s asset position is sound (and there are reasons for doubting its soundness), in my opinion if that improvement is taken into account, and compared to the improvement in the position of the plaintiff against the background of the burdens each bore during the period of cohabitation, it cannot be said that the Master’s award of $35,000 was appellably wrong. The defendant obtained $60,000 in 1993-1995 to use as his contribution to the purchase of Griffin Road. The plaintiff gained about $50,000 by reason of the accommodation which the defendant supplied. The rise in value of North Curl Curl was caused by the efforts of the parties before 1993 (which on the present approach must be left out of account) and by general inflation: so far as the latter was the cause, it must have had a favourable impact on the plaintiff’s assets too. The exercise called for by s 20(1) is not one which can be conducted in accordance with precise and determinate criteria. In all the circumstances the figure at which he arrived has not been shown to be an unreasonable one.

57    Accordingly I would reject Ground 4.

Ground 5

58    For the same reasons I would reject Ground 5. On the assumption that Ground 4 has not been made out, it cannot be said that the Master’s order was manifestly inadequate.

Inadequacy of Master’s Award if Ground 2 Made Out

59    That leaves for consideration the contention that, assuming that the Master ought to have taken into account the plaintiff’s pre-cohabitation contributions in 1991 and 1992, the award of $35,000 was too low.

60    If the plaintiff’s contributions in 1991 and 1992 are to be taken into account, it must be permissible also to take into account the defendant’s contributions.

61    The plaintiff’s contributions in the 1990-1993 period consisted of financial accommodation to the extent of $52,432.37, largely repaid, and substantial quantities of work in relation to North Curl Curl. The defendant’s contributions, which must also be considered, consisted of monetary contributions of $140,000, and much greater quantities of work at North Curl Curl.

62    This balance does not favour the plaintiff. Her monetary contribution was slight while his was large. Her non-monetary contribution was substantial, but his was very much more substantial.

63    It is true that the defendant, in consequence of the contributions of himself and the plaintiff, gained the chance of retaining a permanent benefit, since the plaintiff’s contributions were made towards his property and remain part of that property. But in a sense the contributions of both defendant and plaintiff to North Curl Curl were futile, because the “improvements” on it have caused it to be overcapitalised. The following table of values for North Curl Curl is based on the Master’s findings at Red 132P-S and the evidence at Blue 243.

Date Value with new residence Value without new residence
(mean of range)

1990 - $297,500

1993 $385,000 $310,000

1996 $460,000 $365,000

Increase
1993-1996 $ 75,000 $ 55,000

Trial 1999 $650,000 $510,000

This shows that two years of effort by the defendant and the plaintiff, and $140,000 of the defendant’s money, had produced a rise in value of $75,000 by 1993, $95,000 by 1996, and $140,000 by 1999. A relevant comparison is between the $140,000 in 1991-1992 money values which the defendant put in, and the $140,000 gain achieved in 1999 money values. That indicates that there has in truth not been any net gain at all. In these circumstances, even if one could value the plaintiff’s contributions in 1991 and 1992, it would be wrong to make a substantial adjustment to the Master’s order to allow for it. Both plaintiff and defendant would have been far better off if they had made no contributions in the 1991-1992 period. While the fact that the plaintiff made substantial contributions is an argument favouring recognition of those contributions in an order, the fact that it produced no financial benefit to the defendant indicates that the amount in question cannot be significant.

64    This reveals the fallacy in the following submission of the plaintiff:

“ North Curl Curl had increased in value from about $300,000 in 1990 to $650,000 to trial, and $150,000 of that increase was attributable to the demolition and reconstruction (had the old house remained, it would have been worth only $500,000 - this $150,000 increase on North Curl Curl reflects both the [defendant’s] financial contribution, and the non-financial contributions of both parties).”

That submission was the basis for a contention that the plaintiff should receive $50,000, being one-third of the $150,000 “increase”. That $150,000 “increase” was achieved at the cost of $140,000 in money, much labour by the plaintiff and much more labour by the defendant and others whom he procured. The increase is in truth illusory.

65    The adjustive order of $150,000 which the plaintiff sought was said to be made up as follows:

“Crudely, this represents the $35,000 which the Master found warranted having regard to contributions during the relationship to North Curl Curl and as home maker, plus about one-third ($50,000) of the increased value of North Curl Curl attributable to the new house, reflective of her contributions thereto during 1990-1993 period plus about fifteen percent of the equity in Griffin Rd (reflecting her indirect contribution to the initial equity) equivalent to $65,000.”

Obviously the $35,000 should not be disturbed. The $50,000, representing one-third of the “increased value” of North Curl Curl reflects contributions by the defendant alone in money and effort much greater than that sum: in reality the value did not increase. And an allowance of $65,000 in relation to Griffin Road ignores the financial benefits which the plaintiff made out of the move to North Curl Curl and the overall improvement in her financial position.

66    In all the circumstances, I do not see any justification for altering the Master’s award upwards even if he erred in failing to take the plaintiff’s pre-1993 contributions into account.

Ground 2

67    It follows that there is no point in considering Ground 2, i.e. the issue of whether the Master erred in not taking account of pre-cohabitation contributions. Even if he was in error in that respect, the error could make no difference to the final result. In one respect the facts of this case pose the issue of law sharply, since on one reading of the evidence, the plaintiff’s pre-cohabitation contributions were not mere contributions before cohabitation, they were in mutual anticipation of it and with a view to furthering it in the sense that the contributions were to assist in building a house to be used as the parties’ common home (see Red 15L-18F, 56T-U and 117C-J; Black 76K and 77H-N). Whether the Master erred in law was an issue hotly contested in very detailed arguments before this Court, but the resolution of that contest is better postponed to a case in which the issue is crucial to the financial outcome.

Orders

68    I would dismiss the appeal with costs.

69    ROLFE AJA:

I have had the advantage of reading in draft the reasons of Heydon JA. I agree with his Honour’s detailed analysis of the relevant contributions and, hence, with his conclusion that the appeal should be dismissed with costs.

70    I also agree with his Honour’s reasons for rejecting the submissions by the appellant to which reference is made in paragraph 36. I am firmly of the view that parties should be confined on appeal to the way in which they conducted the case at first instance, save in the very exceptional circumstances recognised in cases such as Suttor v Gundowda Pty Limited (1950) 81 CLR 418.

71    I consider that it is arguable that, upon a proper construction of the De Facto Relationships Act 1984, pre-relationship contributions made in mutual contemplation of and for the purpose of the relationship which, ex hypothesi, came into existence, should be taken into account in making the adjustment which the Act permits. However, as his Honour has demonstrated an evaluation of those contributions in this case would not have caused a change in the order the appellant obtained. In these circumstances, as with his Honour, I agree that a decision on this issue should await proceedings in which such contributions impact to a relevant extent on the adjustment.

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