EB v CT
[2008] QSC 303
•26 November 2008
SUPREME COURT OF QUEENSLAND
CITATION:
EB v CT [2008] QSC 303
PARTIES:
EB
(applicant)
v
CT
(respondent)
FILE NO/S:
BS No 5118 of 2003
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court of Queensland
DELIVERED ON:
26 November 2008
DELIVERED AT:
Brisbane
HEARING DATE:
15-17 September 2008
JUDGES:
Applegarth J
ORDER:
Pursuant to s 333(1)(d) of the Property Law Act 1974 the respondent pay the sum of $100,000 to the applicant.1.
The respondent be released from undertakings given to the court in respect of his Balmain property.2.
CATCHWORDS:
FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – GENERALLY – where applicant seeks a property adjustment under Part 19 Property Law Act 1974 (“the Act”) – where litigation occurred more than seven years after end of relatively short de facto relationship – where both parties had substantial assets on entering relationship – where parties effectively kept their property separate during relationship – where respondent’s financial contributions substantially exceeded those of applicant – where applicant’s welfare contributions substantially exceeded those of respondent – whether a property adjustment should be made under the Act
Acts Interpretation Act 1954, s 32DA(2)
Property Law Act 1974, s 99, s 282, s 286, s 291, s 292, s 293, s 294, s 295, s 297, s 298, s 300, s 304, s 305, s 306, s 307, s 309, s 333(1)(d)Superannuation Industry (Supervision) Regulations 1994
Baker v Towle [2008] 39 Fam LR 323, considered
Bilous v Mudaliar (2006) 65 NSWLR 615, cited
BLM v RWS [2006] QCA 528, considered
Challen & Challen [2007] FamCA 1292, applied
Chorn v Hopkins [2004] FLC 93-204, considered
CL v JMG [2007] QSC 169, cited
Delany v Burgess [2007] NSWCA 360, cited
Douglas & Douglas (2006) FLC 93-300, considered
Farnel, In the Marriage of (1995) 128 FLR 374, cited
Finborough Investments Pty Ltd v Airlie Beach Pty Ltd [1995] 1 Qd R 12, cited
FO v HAF [2007] 2 Qd R 138; [2006] QCA 555, applied
HAG v MAW [2007] QCA 217, cited
Hardman v Hobman [2003] QCA 467, cited
Harkianakis v Skalkos (1997) 42 NSWLR 22, cited
Kardos v Sarbutt [2006] NSWCA 11, considered
Manns v Kennedy [2007] 37 Fam LR 489, cited
Moore & Moore [2008] FamCA 32, cited
NFO v PFA [2005] QSC 176, considered
NHC v RCH (2004) 186 FLR 240, cited
Norbis v Norbis (1986) 161 CLR 513, cited
S v B (No 2) [2005] 1 Qd R 537, citedTownsend, In the Marriage of (1995) FLC 92-569, cited
COUNSEL:
The Hon T Carmody SC for the applicant
CJ Forrest for the respondent
SOLICITORS:
KL King & Associates for the applicant
Edwards Lawyers for the respondent
The parties have taken longer to litigate this case than their relationship lasted. They met in July 1997. The applicant, then aged 55, had worked as a counsellor for the same employer for 30 years. She was experiencing difficulties in her workplace, and her future employment was in doubt. The respondent, then aged 51, was still grieving over the death of his wife of 23 years, who died in late 1995. He met the applicant on his way to see a therapist. They exchanged emails and met socially in late July. Their friendship developed quickly.
There is a dispute about when their de facto relationship started. The applicant says it was 9 September 1997. The respondent says it was in late November 1997. There is no dispute that the relationship ended in June 2001. During this period of less than four years, the applicant and the respondent lived together at various times in Brisbane, Sydney and Melbourne. At the start of the relationship the applicant and the respondent each had substantial assets, including investment properties. At the end of the relationship each still had substantial assets registered in their respective names. They did not jointly acquire any substantial property.
More than seven years after the relationship ended, the court is asked to make a property adjustment order under Part 19 of the Property Law Act 1974 (“the Act”). Much has changed in those seven years, including the value of their respective assets.
The parties’ positions
The applicant seeks a lump sum payment of $500,000. The respondent says that she is not entitled to any order. He says that, if anything, his substantially greater financial contribution should be reflected in an adjustment in his favour, even after account is taken of all the matters the court is required to take into account in the applicant’s favour.
In essence, the applicant’s case turns upon what was submitted to be her contributions, both financial and non-financial, and the consequences, both financial and non-financial, to her of being in the relationship. Her contributions included assisting with the renovation of a property that the respondent acquired in Brisbane. The applicant supervised the renovation project whilst the respondent worked in Sydney. This contribution of time and effort was said to have had an opportunity cost in that the applicant was unable to devote time to developing her practice as a psychologist. The establishment of a private practice was disrupted by relocating to Sydney and Melbourne. The applicant says she contributed emotional and domestic support to the respondent. Finally, she points to the conduct of the respondent who, after the relationship ended, made complaints to professional bodies about the applicant. These complaints were said to have been personally devastating to the applicant and to have adversely affected her health and her earning capacity as a registered psychologist.
The respondent submits that the extent of the applicant’s contributions are
overstated. He says that the applicant owned more property at the end of the relationship than she went did at its start and that she did not contribute any of her property to the relationship, apart from some cash savings. He says that his contributions allowed the applicant to achieve this financial result. He acknowledges that the applicant provided her Brisbane property as a home for the parties for seven to eight months, but says that otherwise she was able to use the rental and other income that she received during the relationship to her own benefit, and that she made a minimal financial contribution to their joint needs. The respondent submits there is insufficient evidence to support a finding that the
de facto relationship has affected the applicant’s earning capacity. He says that her income earning capacity was, and is, unaffected by the relationship. He submits that the evidence does not suggest that the applicant had the capacity to earn a large income at the commencement of the relationship, or intended to exploit that capacity. He says that she regarded herself as being semi-retired after she was retrenched on 8 August 1997, and that she did not sacrifice any earning capacity for the relationship.
The issues
The parties acknowledge the difficulties in applying the four step approach discussed in FO v HAF[1] in a case in which:
[1][2007] 1 Qd R 138; [2006] QCA 555 at [51]-[52].
1. The duration of the de facto relationship was relatively short.
2. The parties effectively kept their property separate during the relationship, with the respondent buying and selling some properties during the relationship.
3. The parties separated more than seven years before the hearing, during which time much happened to their properties and their financial resources.
4. No valuation of their respective assets, liabilities and financial resources as at the date of their separation has been undertaken.
5. The reasons for differential changes in the value of their respective assets were not explored in the evidence and could not be explained in submissions.[2]
[2]To take one example, the applicant’s St Lucia property grew in value from $280,000 to $1,000,000 between the commencement of the relationship and the hearing, whilst the respondent’s Balmain property grew from $680,000 to $1,000,000 during the same time.
To speak in the context of such a relatively short de facto relationship of an “asset pool” is something of a misnomer in circumstances in which each party had substantial assets at the start of the relationship, did not pool them during its short duration and retained their respective assets at its end. Attempting to assess what difference their respective contributions during the relationship made to the value of their collective assets at the date of the hearing is fraught with difficulty in a case in which seven years have passed since the relationship ended, and numerous supervening matters contributed to the value of those assets. However, in the absence of evidence of the value of the property, financial resources and liabilities of the parties as at the date of their separation in June 2001, it is appropriate to follow the four step approach. Accordingly, the principal issues for determination are:
1. When the de facto relationship commenced.
2. The identification and valuation of the property, resources and liabilities of the parties at the date of the hearing.
3. The identification and assessment of the contribution of the parties to their pool of assets and the determination of their contribution-based entitlements in accordance with s 291 to s 295 of the Act.
4. The identification and assessment of the factors in s 297 to s 309 of the Act to determine the adjustment to the contribution-based entitlement.
5. Consideration of the result of these earlier steps to determine whether that result is just and equitable in accordance with s 286 of the Act.
The commencement of the de facto relationship
A marriage commences on a certain date. The date that a de facto relationship commences can be uncertain. The Court of Appeal has observed that the legislation does not provide any great assistance in resolving this uncertainty.[3] None of the matters listed in 32DA(2) of the Acts Interpretation Act 1954 is necessarily decisive. The ultimate issue is whether the parties “are living together as a couple on a genuine domestic basis”. This phrase necessarily draws attention to whether the parties are living together “to maintain a household in a relationship which exhibits the characteristics of the relationship of marriage, save for the solemnities involved in the formal exchange of wedding vows”.[4]
[3]FO v HAF supra at [24].
[4]ibid.
The issue is not simply when the parties began to live under the same roof. Parties may spend most nights of the week in the same household but lack “the degree of mutual commitment to a shared life, including the care and support of each other”[5] which is indicative of “living together as a couple on a genuine domestic basis”. There is no general rule that a couple must maintain one joint household in order to be living together as a couple on a genuine domestic basis. [6] Accordingly, the fact that the respondent retained a unit in Brisbane until late November 1997 does not mean that he was not in a de facto relationship at an earlier date.
[5]Acts Interpretation Act 1954, s 32DA(2)(f).
[6]CL v JMG [2007] QSC 169 at [5].
During this period the applicant met the respondent she was separated from a former husband, and did not appear to the respondent to be interested in having a romantic relationship. The respondent says that he was not interested in a romantic relationship and was still going through a grieving process. However, the relationship between the applicant and the respondent quickly developed into a romantic relationship. They spent increasing amounts of time together. A sexual relationship started in early September 1997, and the applicant says that the respondent “moved in” with her to her St Lucia home at that time. The respondent acknowledges that in September 1997 he commenced staying overnight with the applicant at her home, and describes this as an “ad hoc arrangement” that continued until he sold his unit in Auchenflower at the end of November 1997. He says he stayed at her home “on an irregular basis”, whereas she says that he stayed there practically every night that he was in Brisbane.
In late 1997 the applicant encouraged the respondent to be discreet about being at her home, and he usually only went there at night. A predominant reason for having a discreet relationship was that the applicant did not want her former husband to know that she was in a new relationship. The parties’ desire to not publicise their relationship in late 1997 is equivocal in determining whether, at that time, they were living together as a couple on a genuine domestic basis.[7] The applicant’s desire that her former husband not know about her relationship with the respondent is consistent with her not wanting her former husband to know of a potential de facto relationship that she might enter. It does not prove that she was in such a relationship.
[7]cf. Acts Interpretation Act 1954, s 32DA(2)(i).
The respondent does not explain why he decided to sell his unit at Auchenflower. Settlement of that sale took place on 28 November 1997, and the respondent says that he had looked for temporary accommodation until the applicant offered him the opportunity to stay with her until he purchased another home. He says that he stayed at the applicant’s St Lucia property for longer than he had intended. This and other affidavit evidence was given in September 2007 when the respondent denied that he was involved in a de facto relationship with the applicant and when he swore that his cohabitation with the applicant at her St Lucia property up to and including July 1998 was “an arrangement that was mutually convenient to each of us and was without any commitment to each other”. I do not accept this evidence. The respondent did not persist with this position at the hearing and contended that the de facto relationship commenced on 29 November 1997.
The applicant has the onus of proving whether or not a de facto relationship existed at a particular date.[8] I am persuaded that a de facto relationship commenced between the applicant and the respondent no later than 1 October 1997. This is about the date that the applicant arranged for the respondent’s unit to be cleaned and liaised with real estate agents about its sale. By 1 October 1997 their
cohabitation was not simply a matter of mutual convenience. It involved a substantial degree of mutual commitment to a shared life. In the absence of satisfactory evidence explaining the respondent’s decision to sell his unit, I find that the decision was prompted by a desire to “move in” with the applicant, and to live together as a couple on a genuine domestic basis. I find that the de facto relationship commenced no later than 1 October 1997.
[8]S v B [2005] 1 Qd R 537 at 541, [5].
The course of the de facto relationship
The parties lived together at St Lucia for the first half of 1998. The respondent’s contract as a senior public servant expired on 30 June 1998 and was not renewed. The applicant earned fee income in her private psychotherapy practice of $11,950 between 12 August 1997 and 8 July 1998. Based on a rate of $70 per session this averaged approximately 3.5 sessions per week during that period.
Between December 1997 and January 1998 the applicant and the respondent travelled overseas together and paid separately for their travel packages, save for time spent in Canada at an apartment arranged by the applicant’s sister and for a week in New York which was paid for by the respondent. The respondent paid for most of the expenses on the overseas holiday totalling $11,500. The respondent purchased a ring for the applicant in New York which the applicant retains, and which was valued in 2007 at $5,305.
During the initial phase of their de facto relationship, the applicant and the respondent developed mutual interests and attended meetings and conferences. They discussed the idea of establishing a “retreat centre” which would use the applicant’s psychoanalytic training and the respondent’s management experience. The retreat centre would help senior managers with communication, negotiation and motivation techniques and provide psychological coaching. On 21 July 1998 the respondent registered a company named Retreat Services Pty Ltd. He denies that the applicant was to become involved with this company, which he said was set up after he consulted his accountant so that he could pursue the future option of trading as a consultant.
On 10 July 1998 the respondent contracted to purchase a property at Twigg Street, Indooroopilly (Twigg Street) for $395,000. The sale settled on 11 August 1998.
In August 1998 the respondent commenced employment in Sydney.
Renovations to Twigg Street were extensive and expensive. Major structural defects were found and engineering services were required. The applicant travelled to Sydney in late August 1998 and stayed with the respondent at his Balmain home until mid-October. The major renovations to Twigg Street occurred between October and late December 1998. The applicant coordinated and supervised this work. She also did demanding physical labour on the site. She sourced fittings and worked in close conjunction with a builder, Mr Reibel. She dealt with contractors and sub-contractors. Most of the costs associated with the Twigg Street renovations were paid for by the respondent. The applicant paid for some relatively minor items for which she did not seek reimbursement. They cost about $1,500. The respondent returned to Brisbane on several weekends and was involved in negotiations with contractors about the work.
At Christmas 1998 the applicant and the respondent travelled overseas and the respondent paid $15,855 for the costs of that trip. The applicant stayed in Sydney from 16 January 1998 until 2 February 1999 when she returned to Brisbane.
The renovations to Twigg Street were finalised shortly afterwards and the property was listed for rent. However, the property was not able to be rented and in March 1999 it was listed for auction. The property did not sell at auction. No bid was received. No offers to purchase it were received after the auction and it was withdrawn from sale in July 1999. It remained vacant until October 1999 when it was rented. Twigg Street was eventually sold in 2007 for $1,100,000.
The applicant moved to Sydney in about February 1999 and lived with the respondent at his Balmain property. Arrangements were made for one room in this property to be available to the applicant to see clients and another room had a computer that was available for her use. The applicant had only started to set up her practice in Sydney when the respondent’s employment in Sydney came to an end.
In April 1999 he commenced work with a new employer in Melbourne. The applicant decided to relocate to Melbourne with the respondent, where they lived in an apartment. They moved apartments in September 1999. During their time in Melbourne the respondent paid more than $2,000 per month for the rent of the apartment and paid for the cost of utilities and phones. The respondent paid for most household items.
During her time in Melbourne the applicant undertook some work as a psychotherapist and obtained guest list status with the Victorian Association of Psychoanalytic Psychotherapists. She saw some patients and attended various courses and meetings.
The parties made use of the applicant’s car and the applicant tended to drive the respondent. This always had been a feature of their relationship and became a necessity after the respondent’s new vehicle was stolen in Sydney and not replaced.
After the applicant left Brisbane in early 1999 her property at St Lucia was rented. She also received rent from another investment property. In November 1999 the applicant reached a property settlement with her former husband. As a result, she acquired unencumbered title in a property at Mermaid Beach on the Gold Coast in exchange for the payment of $15,000. In late 1999 the applicant inherited $48,902 from an aunt.
The parties travelled to Mexico in November 1999 and the respondent met costs of $7,255 associated with that trip. He also paid $1,151 towards the cost of a trip to New Zealand in October 2000. Between November 2000 and January 2001 the parties travelled to the USA and Mexico and the respondent paid $16,361 towards the cost of that trip.
Throughout their relationship the applicant performed almost all domestic tasks without assistance from the respondent. The respondent was either busy at work or absorbed in writing a book which was eventually published under the title: A Man’s Grief: Death of a Spouse.
Strains in the relationship developed, and by April 2000 the applicant and the respondent consulted a psychologist to discuss difficulties that they were experiencing. He saw them during 52 sessions, including 44 joint sessions, between April 2000 and June 2001, and the focus of the sessions was on “couple psychotherapy”. One aspect was the respondent’s continuing need for support in connection with his experience of loss. According to the psychologist, the divisions between the applicant and the respondent centred around the status of his deceased wife, his book and pictures of his deceased wife.
Strains in the relationship were exacerbated by an incident in February 2001. For some time after this incident the applicant and the respondent continued to reside in the same apartment. The respondent travelled overseas for a fortnight in March 2001. In May 2001 he attended Europe on business. By the time he returned to Australia in late May 2001 the applicant was living elsewhere in Melbourne. The applicant made preparations to return to Queensland and arrangements were made for the removal of her property. The relationship ended in June 2001.
Property held at the end of the de facto relationship
At the end of their de facto relationship the applicant had the following unencumbered property:
(a) St Lucia, Brisbane
(b) Toowoomba
(c) Mermaid Beach, Gold Coast
The applicant owned a car, artwork, jewellery and other personal possessions. She had approximately $66,000 in the bank. Her financial resources included superannuation.
At the same time the respondent had properties that were encumbered at:
(a) Balmain, Sydney
(b) Hamilton, Brisbane
(c) Twigg Street
(d) Wisemans Ferry, New South Wales.
He had personal possessions, artwork and money in the bank. He also had superannuation. Two adjoining properties at Wisemans Ferry had been purchased by the respondent for $215,000 in October 1998. There is a dispute about the purpose of their acquisition. The respondent says that he purchased them after the applicant and he visited the area and he intended to build a weekender there one day or even retire there. The applicant says that the properties were purchased with a view to be being used as a retreat centre. In any event, nothing came of that due to their relocation to Melbourne and the end of their relationship.
Events after the relationship
After the relationship ended the applicant lived on the Gold Coast. She used her professional qualifications and applied for jobs as a psychologist or counsellor. The respondent returned to live in Sydney. In July 2001 he obtained employment with the Commonwealth. He remains employed by the Commonwealth earning approximately $214,000 taxable income per annum. The respondent remarried in September 2004.
The proceedings were commenced by claim and statement of claim on 11 June 2003. They have had a protracted interlocutory history. Initially the applicant claimed declaratory relief in respect of the Twigg Street property.
In late 2004 the respondent made various formal complaints against the applicant to a number of professional bodies which are responsible for the registration, regulation and representation of psychologists and psychotherapists. The complaints were similar in substance. They alleged that the applicant had engaged in unacceptable professional behaviour by providing professional treatment to the respondent whilst she and he were cohabiting in a personal relationship between April 1999 and March 2001. The complaints were investigated by each of the professional bodies and were found to be unsubstantiated. They found no evidence of unprofessional conduct and found that no professional relationship existed between the applicant and the respondent. For instance, the Victorian Registration Board found that the applicant provided practical and emotional assistance to the respondent and that the respondent acknowledged that there was never a client/psychologist relationship. The complaints made against the applicant caused her acute distress and affected her health.
The applicant’s taxable income for the years ended 30 June 2005, 30 June 2006 and 30 June 2007 was:
(a) $85,104 including gross fee income of $38,376;
(b) $29,557 including gross fee income of $27,400; and
(c) $35,539 including gross fee income of $34,475
respectively.
The applicant sold her Mermaid Beach property and used the sale proceeds to purchase a property at Southport. She encumbered her Toowoomba property to the extent of about $64,000 and used $35,000 from this source towards payment of her legal costs. In recent years the applicant has accessed her superannuation and used in excess of $150,000 of it towards payment of her legal fees which total approximately $200,000.
The respondent sold the Twigg Street property in June 2007. The sale price of $1,100,000 was used to pay out a mortgage debt of $405,432. The respondent paid capital gains tax of approximately $118,000 on a capital gain of approximately $490,000.[9] In evaluating the financial consequences of the acquisition of Twigg Street, account must be taken of the respondent’s original contribution to its purchase price,[10] sums totalling $136,550 paid by him towards its renovation, his payment of outgoings and costs incurred in servicing the debt[11] and income derived by him from its rental. Rental income did not cover interest on the mortgage.[12]
[9] Transcript at 2-55 line 5; exhibit CT17 to affidavit of the respondent filed 5 September 2007.
[10] Affidavit of the respondent filed 5 September 2007, at par [45].
[11]ibid, exhibit CT15.
[12]ibid, at par [73].
The blocks at Wisemans Ferry were sold in 2007 and 2008. The respondent made capital gains on each property.
The identification and valuation of the property, resources and liabilities of the parties at the date of hearing
The parties’ property, financial resources and liabilities at the date of the hearing can be summarised as follows:
| APPLICANT | RESPONDENT | ||
| St Lucia property (free of capital gains tax) | $1,000,000 | Balmain property Subject to debt | $1,000,000 -$769,000 |
| Toowoomba Subject to debt | (A) $237,000 (R) $237,500 (A) $64,224 (R) $28,500(1) | Kiama property (equitable interest in half) | $337,500 |
| Southport property | $400,000 | Bank accounts | $1,700 |
| Car | $13,000 | 500 Rio Tinto shares | $55,000 |
| Artwork | $6,000 | Artwork | $61,000 |
| Household chattels | $15,000 | Household chattels | $10,000 |
| Jewellery | $10,700 | CGT Liability on sale Wisemans Ferry | -$48,409 |
| Bank accounts | $11,412 | ||
| Total | (A)$1,628,888 (R)$1,665,112 | Total | $647,791 |
| Superannuation | Superannuation | ||
| Macquarie Super Fund | $220,000 | Self managed super fund | $959,857 |
| UniSuper | $39,000 | Public Sector Super Scheme | (R) $220,000(2) |
| $259,000 | $1,179,857 | ||
| Total | (A)$1,887,888 (R)$1,924,112 | $1,827,648 | |
(1) This debt does not include a sum of about $35,000 spent on legal fees.
(2) This is based upon what is said to be the value of a pension of $22,558.58 per annum (subject to income tax) under a Public Sector Superannuation Scheme referred to in the respondent’s updated statement of financial circumstances filed 10 September 2008: Transcript at 3-31.
This table is based upon the submissions made by Counsel at the hearing on 17 September 2008 in the light of the evidence, including the parties’ updated statements of financial circumstances. Mr Carmody SC stated on that occasion that he wished to submit a revised document in relation to assets and liabilities.[13] Despite a written request from the Court dated 29 October 2008, and a further request from the Court dated 20 November 2008, the document was not provided until 21 November 2008. It asserted that the respondent’s superannuation totalled $1,270,648. The respondent’s September 2008 statement of financial circumstances about the value of his superannuation was read at the hearing and was not the subject of challenge. In the circumstances, the respondent’s superannuation total of $1,181,857 is adopted in the table.
[13]Transcript at 3-70.
The applicant also sought to add to the table credit card debts of $3,928 (Visa), $6,000 (AMEX) and an estimate of unpaid tax for 2007/2008 of $3,250. The credit card debts were included in her statement of financial circumstances which was read, and should be taken into account. The estimated tax debt was not listed as a liability, and should not be included, however it does not make a material difference to the resolution of the matter. The difference of $500 between the value of the Toowoomba property is immaterial. The difference between the applicant’s and the respondent’s figure for the debt on the Toowoomba property is addressed below in connection with the “add back issue” concerning legal fees.
The respondent’s solicitor, in a letter responding to the applicant’s late submission of suggested revisions to the table, made assertions concerning reductions in the value of the respondent’s Rio Tinto shares and his superannuation since the date of the hearing. An attempt to raise this issue and introduce evidence by this means is inappropriate. The respondent made no application to re-open the evidence during the period of two months taken by the applicant to provide final submissions concerning the table of assets as at the date of the hearing. The hearing was conducted on the basis that the relevant issue was the parties’ property, financial resources and liabilities at the date of the hearing. To permit the respondent to introduce evidence about the current value of his shares and superannuation would open the issue of the current value of the applicant’s superannuation, and more generally the current value of the parties’ other assets, including real property, which may have altered due to recent economic developments. The just resolution of the proceeding requires the agreed issue for determination, namely the valuation of the property, resources and liabilities of the parties at the date of hearing, to be determined. The various issues that were litigated should be determined without further delay in the interests of justice and because of the need for finality in litigation.[14]
[14]Finborough Investments Pty Ltd v Airlie Beach Pty Ltd [1995] 1 Qd R 12 at 16-17.
The table of the parties’ property, financial resources and liabilities records assets totalling almost $4,000,000 at the date of the hearing. This was the basis upon which submissions were made.
The parties’ property and financial resources at the start of the relationship
The evidence does not permit an accurate comparison between the value of the property and financial resources of the parties at the start of the relationship and their value at the date of hearing because there was no evidence about the debt secured against the respondent’s properties at the start of the relationship. However, the following table provides an indication of their property and financial resources, and permits a comparison to be made between the value of specific assets and financial resources, such as superannuation, at that date and at the date of the hearing:
| APPLICANT | RESPONDENT | ||
| St Lucia property (Unencumbered) | $280,000 | Balmain property (No evidence as to debt) | $680,000 |
| Toowoomba (Unencumbered) | $75,000 | Auchenflower property (equity) | $230,000 |
| Half interest in Mermaid Beach property Subject to debt. A right of action for s.79 FLA property division with her second husband yet to be determined | $70,000 | Hamilton property (No evidence as to debt) | $190,000 |
| Car | $5,000 | Western Australia No evidence as to debt | $700,000 |
| Art | (A) $6,500 (R) $8,000 | ||
| Bank accounts | $59,000 | ||
| Chattels | $15,000 | ||
| Total | (A) $510,500 (R) $512,000 | Total | $1,800,000 (less debt) |
| Superannuation | Superannuation | ||
| AMP Super | $295,000 | Q Super | $39,410 |
| UniSuper | (A) $16,195 | ||
| Total | (A)$821,845 (R)$807,000 | $1,839,410 (less debt) | |
The add back issue
The applicant has expended approximately $200,000 of her capital to pay legal fees. Payment of those fees came from her superannuation and $35,000 of equity in her Toowoomba property. The respondent submits that this amount should be notionally added back to the pool of divisible property and financial resources[15] on the basis that legal fees should be added back to prevent one party using common property to pay legal fees concerning a dispute over common property. The applicant opposes any “add back” relying upon the general principle that the court takes the property of the parties or either of them as it finds it at the date of trial and that adding back to the pool is the exception, not the rule. She further submits that if legal fees are added back into the asset pool then a notional liability to pay them will need to be recognised.
[15]Townsend, In the Marriage of (1995) FLC 92-569; Farnel, In the Marriage of (1995) 128 FLR 374; NHC v RCH (2004) 186 FLR 240.
The applicant relies upon the summary of relevant principles by Murphy J in Challen and Challen,[16] which I respectfully adopt. His Honour considered a number of authorities including the decision of the Full Court of the Family Court in Chorn and Hopkins[17] which concerned the use of funds to pay legal costs. The authorities emphasise the importance of the source of the funds used to pay legal fees when determining whether they should be added back.
[16][2007] FamCA 1292 at [72]-[81].
[17][2004] FLC 93-204 at [32]-[60].
The property and financial resources that were used by the applicant to pay legal fees, namely superannuation and a house that existed at the date of separation, cannot be seen to be property in which the respondent had an interest on account, for example, of his direct financial contributions. The superannuation fund was at least partly generated by the applicant’s pre-relationship and post-relationship contributions. The house in Toowoomba was owned by the applicant at the start of the relationship, was not used in the relationship and the respondent did not contribute to its acquisition, maintenance or improvement. The mere fact that the applicant has expended money realised from assets and financial resources that existed at the date of separation should not necessarily result in that expenditure being added back. What is crucial is an assessment of the reasonableness of the expenditure. In circumstances in which the respondent has no claim to the applicant’s Toowoomba property or her superannuation fund it is inappropriate to “add back” the amount paid by her on legal fees.
An additional reason not to do so is that the issue of the respondent’s legal fees was not raised and it would seem inconsistent to add back the applicant’s legal fees but not the respondent’s. The respondent’s legal fees may have been paid from the proceeds of the sale of property, been funded to some extent by loans secured against his property, been paid out of his income or been funded by a combination of these. In any event, the payment of his legal fees out of his assets, income and financial resources can be argued to have diminished the “asset pool”. The same can be said of the applicant’s payment of her legal fees.
The preferable approach is to take the property of each of the parties, as it exists at the date of the hearing, in circumstances in which each party has incurred legal expenses and paid for them out of their respective resources. Although each party might be said to have an interest of sorts in the assets of the other on account of their respective contributions, the nature and extent of their assets and the absence of what can be regarded as common property makes it inappropriate to add back legal fees in order to value their property, financial resources and liabilities.
The property of the parties and contributions to it
Assets that were owned by each party at the start of the relationship, such as the applicant’s St Lucia home and the respondent’s Balmain home, were retained by them at the end of the relationship. The collective assets of the parties at the date of the hearing, which totalled almost $4,000,000, were not a pool of assets built up by contributions, both financial and non-financial, during the course of a long relationship. No jointly owned property was acquired in the course of the relationship. It is difficult to specify the extent to which the value of the parties’ collective current assets, or the value of individual assets, has been enhanced as a result of contributions, both financial and non-financial, during the period October 1997 to June 2001. Neither party favoured an asset-by-asset approach.[18] Both favoured a global approach with adjustments based upon percentage adjustments or a lump sum payment. Both parties recognise the difficulty of making a discretionary judgment in a case where the parties effectively kept their property separate throughout the course of a relatively short relationship and several years have passed since the relationship ended. However, this is the task that the court is required to undertake.
[18]cf. Norbis v Norbis (1986) 161 CLR 513.
The purpose of Subdivision 2 (Adjustment of property interests) of Part 19 of the Act is “to ensure a just and equitable property distribution at the end of a de facto relationship”.[19] The court may make any order it considers just and equitable about “the property of either or both of the de facto partners” adjusting their interests.[20] Property that is made the subject of a property adjustment order may include property that was owned by one of the parties prior to the relationship. For instance, where it is just and equitable to order that an interest in property be transferred to a de facto partner who provided a substantial welfare contribution, the court may order that property that was owned by the other de facto partner and never used in the relationship be transferred. A gold bullion bar that was held in a safety deposit box by one of the parties before and throughout the relationship is an example.[21] There is an important distinction between the property that may be subject to a property adjustment order and the property that was contributed to the relationship. Accordingly, care is required in treating all the property of one of the de facto partners at the start of the de facto relationship as an “initial contribution”. Such a term is apt to describe “a house, business or car which is actively used, maintained or changed into other property during the course of the relationship”.[22] In FO v HAF[23] the term “initial contribution” was used to describe the financial contributions of a party “to the relationship”. In BLM v RWS[24] the term “initial contribution” described a contribution by a party to fund the acquisition of a business that was carried on in partnership by the de facto partners. In that case, it was appropriate to divide the “asset pool” after deducting the currently assessed value of the appellant’s “initial contribution” to the acquisition of the business. In this case, it is inappropriate to treat all of the property of the parties at the commencement of the relationship as an “initial contribution” to the relationship. For instance, the applicant’s Toowoomba property was not a contribution “to the relationship”.
[19]Property Law Act 1974, s 282.
[20]ibid, s 286(1).
[21]cf. Baker v Towle (2008) 39 Fam L R 323 at 335-336, [52]-[54], [2008] NSWCA 73, in which Basten JA provides other examples of property that should not be treated as a “contribution” within the meaning of s 20(1)(a) of the New South Wales Act.
[22]Baker v Towle supra at [53].
[23]supra at [35] and [37].
[24][2006] QCA 528 at [39]-[47].
The Act contemplates that the property of either or both of the de facto parties may be the subject of a property adjustment order, including property that was owned by one of the parties at the start of the relationship. However, this possibility does not support the conclusion that their separately owned assets are all “initial contributions” or contributions “to the relationship” that are pooled.
The course of comparing the net value of the assets of the parties at the start of a de facto relationship with the net value of their assets at the end of the relationship has an obvious utility where the parties’ assets are in some way pooled even though they are not jointly owned, or in circumstances in which the parties’ incomes are pooled in order to service borrowings.[25] It has less utility where, as here, the parties did not pool their assets to acquire a property in which they lived or investment properties, and did not pool their income to meet mortgage payments on their respective properties. In any case, it is not possible to determine the value of their respective assets at the end of the relationship as a first step in determining the extent of any increase in their value during the course of the relationship, and the effect of their respective contributions (initial or otherwise) to that increase. The value of the parties’ assets at the end of the relationship is not the subject of evidence.
[25]
The value of their assets at the date of the hearing reflects, in part, movements in property markets in different parts of Australia between the end of the relationship in June 2001 and the hearing in September 2008, investment decisions, the extent to which properties were encumbered and numerous other factors which make it difficult to assess the extent to which their values, and increases in their values reflect contributions, both financial and non-financial, during the course of the relationship.
One such contribution is what may loosely be described as “free accommodation”. Each party enjoyed periods of “free accommodation” enabling them to save money and enhance the value of their assets. The applicant was able to rent her St Lucia home and not pay rent for substantial periods and this enhanced her financial position. The same can be said for the period that the respondent lived “rent free” at the applicant’s home in St Lucia. The value of those contributions cannot be assessed with mathematical precision and it is difficult to place a monetary value on the extent to which those contributions between 1997 and 2001 have enhanced the value of the property and financial resources of each party at the date of hearing. However, the impossibility of calculation of the value of the “free accommodation” that one party provided to the other during the relationship, and the long-term financial benefit that was derived from it, does not relieve the court of doing its best to assess that contribution in determining contribution-based entitlements in accordance with the Act.
The provision of “free accommodation” by one party to the other has a dual aspect under ss 291 and 292. It enables the recipient to rent their own house, or to not incur the expense of renting elsewhere. It contributes to the property or financial resources of the recipient. The rental income that is generated, or the expenditure of rent that is saved, can be used to acquire, conserve or improve their property[26] or to enhance their financial resources.[27] In addition to this financial aspect, the provision of “free accommodation” has a welfare aspect for the purpose of s 292. It literally puts a roof over the other party’s head. It is not necessary or appropriate to separately value a notional rent in respect of the “free accommodation”. Instead, it should be taken into account in an overall evaluation of the contributions made during the relationship.[28]
[26]Property Law Act 1974, s 291(1)(a).
[27]ibid, s 291(1)(b).
[28]Kardos v Sarbutt supra at [78]-[81], [100].
In the case of contributions to the welfare of the de facto partners,[29] one is concerned with, amongst other things, an assessment of the contribution made by the applicant in performing household tasks and providing emotional support to the respondent. Again, there is a potential dual aspect. The contribution of the applicant can be said to have indirectly contributed to the respondent being able to undertake demanding, full-time employment, and to have contributed to his income and earning capacity,[30] and indirectly to the acquisition, conservation or improvement of his property[31] and to his financial resources[32], such as superannuation. It also has a welfare aspect which must be evaluated under s 292. It is important to avoid double-counting.[33]
[29]Property Law Act 1974, s 292.
[30]ibid, s 304.
[31]ibid, s 291(1)(a).
[32]ibid, s 291(1)(b).
[33]Baker v Towle supra at [48].
It is invidious to place a monetary value on contributions to welfare, and the Act does not require it. The assessment of contributions is not undertaken by reference to the opportunity cost to a party in providing services, or the commercial cost that would have been incurred if those services had been acquired in the market. For instance, the housekeeping services provided by the applicant in Sydney and Melbourne meant she could not continue to practice as a psychologist in Brisbane. Any property adjustment order which takes account of her contributions in this regard does not directly compensate the applicant for lost income or impairment of her earning capacity. Instead, the extent to which the de facto relationship has affected her earning capacity may be separately considered as a matter under
Subsubdivision 4.[34] The assessment of the value of her contribution in providing housekeeping services is not undertaken by reference to the price that the respondent would have been required to pay to purchase housekeeping services in the market.
[34]Property Law Act 1974, s 306.
The assessment of contributions to wealth and welfare under ss 291 and 292 is not an exercise in awarding compensation. As Warnick J stated in Douglas & Douglas[35] in the analogous situation of a property settlement under the Family Law Act, 1975 (Cth):
“…I doubt that, at least without heavy qualification, intention and compensation are factors which ought influence alteration of property interests. In particular, I consider that the concept of compensation for income lost during a marriage (of itself) and compensation for a loss of living standard (of itself) are not factors which ought influence the outcome of a property settlement.”
[35](2006) FLC 93-300 at 81,072, [43].
The task of the court is not to compensate the applicant for disappointed expectations, for instance, the expectation that she and the respondent would remain together and establish a business providing “retreat services” to business executives. Detrimental reliance and disappointed expectations are not compensated under the Act or comparable provisions of the Family Law Act.[36] Instead, the applicant is entitled to a recognition of her contributions to the renovation of Twigg Street which were undertaken in the belief that it might be used in a business venture or become a home for her and the respondent.
[36]cf. Moore & Moore [2008] FamCA 32 at [302].
Because the parties to a de facto relationship usually do not conduct their financial affairs on the basis that one day, following a parting of the ways, each would be in a position to give accurate evidence as to the financial contribution made by each to the relationship, and as to the value of that contribution when the relationship ended, contributions cannot be determined on the basis of mathematical calculations.[37] The task is not akin to an accounting exercise.[38] However, the assessment of contributions, particularly financial contributions, requires attention to be given to the manner in which the parties, individually and together, conducted their financial affairs during the relationship.
[37]Hardman v Hobman [2003] QCA 467 at [3].
[38]Kardos v Sarbutt supra at [36]; Manns v Kennedy [2007] 37 Fam LR 489 at 499, [2007] NSWCA 217 at [62]-[66].
Disputed questions of fact and the reliability of witnesses
The assessment of contributions, both financial and non-financial, the assessment of relevant matters under ss 297-309, the determination of whether a property adjustment order should be made, and the terms of any order depend, in part, on a resolution of disputed questions of fact. The parties are agreed that it is unnecessary to resolve many of the disputed questions of fact that emerge from the affidavit material. One reason is that substantial parts of the affidavit material were directed at issues that became non-issues by the time of the hearing. For instance, the respondent denied until shortly before the hearing that a de facto relationship existed and much of the affidavit material was directed at that issue. The applicant originally sought a declaration concerning the extent of her interest in Twigg Street. This application was not pressed. The respondent filed substantial material in relation to the Twigg Street renovations and the applicant filed material in reply. In submissions the respondent acknowledged that the applicant made unmatched
non-financial contributions in the form of unpaid labour in renovating Twigg Street over a period of months. The submissions acknowledged that she was “heavily involved in supervising and actually physically working on renovating the Twigg Street property between October and late December 1998 alongside a builder whose services were paid for by the respondent”. The course of the proceedings and these concessions make it unnecessary to dwell upon the minutiae of evidence concerning the applicant’s work in the renovation of Twigg Street.
Both the applicant and the respondent were prone in their evidence to rewrite history, to exaggerate the extent of their contributions and to ignore or devalue the extent of the other party’s contributions. Neither are reliable witnesses of events in their relationship.
I formed an unfavourable view of the applicant’s reliability as a witness. Many of her answers were unhelpful or evasive. For instance, she was unable or unwilling to clearly explain the circumstances under which she took “sick leave” from her employment in early 1997, or the reasons she saw a therapist between 1995 and 1997. Her evidence concerning financial matters was unreliable in many respects. For instance, she suggested in the course of her oral evidence that she received an inheritance of about $80,000 when, in fact, the amount was $48,902. On the eve of the hearing the plaintiff provided an updated statement of her financial circumstances which stated that the value of her St Lucia property was $650,000. The valuation agreed by the parties was $1,000,000. The applicant gave no satisfactory explanation as to why the value placed upon her interest in the property was so substantially below the property’s value, and her evidence that she was not aware of general newspaper reports concerning trends in residential property was unconvincing. To like effect, her updated statement of financial circumstances gave a value of $125,000 to a property that she owned in Toowoomba. Its value was $237,500. No satisfactory explanation was given for this sizable disparity.
Whilst denying that she had effectively retired as a psychologist by late 1997 and denying that she considered herself to be semi-retired at that time, she was unable to explain why she wrote a letter in late 1997 to a colleague in North America which stated that she had “just retired”.[39]
[39]Exhibit 5.
The respondent’s evidence also was unreliable. Because of appropriate concessions made on his behalf by recently engaged counsel at the start of the hearing, the extent of his cross-examination was limited. However, the fact that the course of evidence relieved the respondent from cross-examination on this evidence does not prevent the court from forming an adverse view of the reliability of substantial parts of his affidavit evidence. He denied that he was in a de facto relationship during his time at the applicant’s St Lucia property,[40] or at any other time[41] and he made a general assertion[42] (not limited to the time at St Lucia) that he and the applicant “did not have a mutual commitment to a shared life with each other”. This is inconsistent with the facts, and his belated admission of a de facto relationship. He denied that he said to the respondent in respect of the Twigg Street property words to the effect “I only want my money back. You can keep any profit.”[43] However, I prefer the evidence of the applicant’s daughter that he said words to this effect.
[40]Affidavit of respondent filed 5 September 2007 at par [32].
[41]ibid at par [122].
[42]ibid at par [198].
[43]ibid at par [69].
The respondent’s evidence is that there was never any suggestion that the applicant was to become involved in Retreat Services Pty Ltd.[44] Whilst I accept that she was not involved in discussions about the company’s incorporation, the respondent did not acknowledge that it was envisaged that the applicant would play a role in this business. I find that both parties contemplated the establishment of a business venture in which the applicant would play a prominent role. Contrary to the respondent’s denial, I find that he said to the applicant words to the effect that he wanted to work with the applicant and use her skills to set up a retreat centre to help others in the same way that the applicant had helped him.[45] I find that they discussed the joint business venture with Ms Tilyard. Contrary to the respondent’s denial,[46] the properties that he acquired at Wisemans Ferry were in contemplation as a possible site for a retreat centre. I accept the evidence of the applicant that she undertook activities including accompanying surveyors, attending upon council offices, consulting architects and other steps in anticipation of developing a retreat centre at the Wisemans Ferry property.
[44]ibid at par [39]. This may refer to involvement as a shareholder or director.
[45]Affidavit of applicant filed 9 August 2007 at par [17]; cf. Respondent’s affidavit at par [135].
[46]Affidavit of respondent filed 5 September 2007 at par [77].
The respondent’s evidence devalued or ignored the extent of his dependence on the applicant for emotional support.
These unsatisfactory aspects of the respondent’s evidence and the unconvincing manner in which he gave his evidence lead me to place little reliance on his evidence concerning matters in dispute.
Because I regard both the applicant and the respondent as unreliable witnesses, it is not possible to express a general preference for the evidence of one over the other in relation to disputed questions of fact. The bitterness associated with the end of their relationship and the disappointment of earlier expectations about their future life results in neither party being able to give an objective account of their respective contributions and events during their relationship. It is impossible to reach any general conclusion about whether the truth lies closer to the evidence given by the applicant or the evidence given by the respondent. Accordingly, I will resolve questions of fact on matters of substance in the course of considering the matters that I must consider under ss 291-309.
Contributions to property or financial resources:s 291
The respondent lived at the applicant’s St Lucia home after 1 October 1997 and prior to his relocation to Sydney in August 1998, and also when he returned from Sydney on weekends in late 1998. The applicant estimates her direct costs of food, electricity and other utilities, rates and other costs during this period were about $25,000. Of course, a substantial part of these costs would have been incurred by the applicant in any event. However, they provide some assistance in assessing the applicant’s contribution in providing “free accommodation” to the respondent during this period.
The applicant incurred some costs for which she did not seek reimbursement associated with the renovations to Twigg Street. These total approximately $1,500. She also incurred mobile phone costs in organising for the delivery of equipment and materials for the Twigg Street property.
The work that the applicant undertook at Twigg Street is described in an affidavit of the builder, Mr Riebel, and there is no reason to not accept Mr Riebel’s evidence since he was not required for cross-examination. In essence, the applicant attended the property each day during the renovation period from around 7:30 am and did not leave until it was dark. She gave directions to Mr Riebel and approved work. She was responsible for the hiring of and supervision of tradesmen at the property. She undertook demanding physical labour in connection with landscaping, rectification of a retaining wall, assisting tradesmen with transporting materials and securing the property. In Mr Riebel’s words, she “worked like a labourer” and her efforts contributed to the work being effectively completed by Christmas 1998. I accept the applicant’s evidence concerning the off-site work that she undertook in sourcing materials and fittings.
The applicant’s contribution to the renovation of Twigg Street enabled the property to be put in a condition to be advertised for sale and, when no sale eventuated, to be rented. The applicant did not contribute to the cost of acquiring Twigg Street, or outgoings such as mortgage repayments and rates. Her disappointed expectation that Twigg Street would be a base for a proposed joint business, and the respondent’s words to the effect that he only wanted his money back and the applicant could keep any profit, are relied upon by the applicant in the context of contending that she indirectly contributed to the acquisition, conservation or improvement of the property. These matters may explain her motivation in working as she did on the property’s renovation. However, her disappointed expectations about Twigg Street and any financial benefit that she hoped to derive from it do not qualify as a contribution under s 291. Her substantial contribution in connection to the property’s renovation does. The respondent ultimately derived a capital gain from the sale of Twigg Street. The applicant’s contribution to the Twigg Street renovation can be said to have contributed to the conservation or improvement of the property and thereby assisted the respondent to derive rental income from it and an eventual capital gain. However, it was the respondent who made the major financial contribution to the Twigg Street property by funding its acquisition, almost all of the cost of its renovation, repayments of mortgages, payment of outgoings and sale costs. The respondent made the financial commitment associated with acquiring and improving the property and is entitled to the return on his investment arising from its sale 10 years later, subject to appropriate recognition of the applicant’s role in connection with its renovation.
A similar position applies in relation to the capital gain that the respondent realised in respect of the sale of the Wiseman Ferry properties. The applicant may have expected that these properties would become a part of a jointly conducted business, but this did not happen. Her contributions in connection with surveying the property, attending at council and consulting with architects and others in connection with the property and its potential future use as a retreat centre did not make a substantial contribution to the acquisition, conservation or improvement of the properties as events transpired, or enhance their capital value. Instead, these services relieved the respondent of the task of attending to these matters personally.
Fourth stage
Finally, I consider the results of the earlier steps in order to determine whether the result is just and equitable in accordance with s 286 of the Act. Consideration of contribution-based matters in accordance with ss 291-295 of the Act resulted in an adjustment in the respondent’s favour of 2.5 per cent. Assessment of relevant factors in ss 297-309 of the Act resulted in an adjustment of five per cent in the applicant’s favour. The end result is an adjustment in the applicant’s favour of
2.5 per cent. The total pool of assets and financial resources at the hearing was slightly less than $4,000,000. Two-and-a-half per cent of $4,000,000 equates to $100,000. A property adjustment order of $100,000 in the applicant’s favour is just and equitable in all the circumstances.
The parties each acknowledged the difficulties in arriving at a discretionary judgment in a case that involved a relatively short relationship which ended more than seven years before the hearing. I have adopted the four stage process notwithstanding the difficulties that are identified at the start of this judgment. Ultimately, in deciding whether to make a property adjustment order in respect of the parties’ property I have been required to consider the parties’ property, financial resources, earning capacities and incomes at the date of the hearing, and to determine the extent to which the de facto relationship affected these matters. I also have assessed the other relevant matters specified in Subdivision 2 of Part 19 of the Act. Having regard to their respective contributions as required by the Act and the other matters that I have found to be relevant in deciding what order adjusting interests in property is just and equitable, I consider that the result that I have arrived at, namely a property adjustment order in the applicant’s favour of $100,000, is just and equitable.
Other orders
I will hear the parties about the terms of any order in respect of payment of the sum of $100,000 including the date for payment and whether the payment be in a single amount or by instalments, and wholly or partly secured.
I will hear the parties in relation to costs.
The respondent gave an undertaking to the court to not sell or deal with his Balmain property. The respondent sought an order that he be released from that undertaking upon the giving of my judgment and there was no opposition to this course.
Orders
I order that:
1. Pursuant to s 333(1)(d) of the Property Law Act, 1974 (Qld) the respondent pay the sum of $100,000 to the applicant.
2. The respondent be released from undertakings given to the court in respect of his Balmain property.
See, for instance, Kardos v Sarbutt (2006) Fam LR 550, [2006] NSWCA 11, in which each party brought significant assets to a relationship that lasted a little under three years. The parties were employed and pooled their incomes, including rental income, into a joint account that was applied to living expenses and mortgage payments. In such a case it may be appropriate for the parties’ assets to be divided proportionally to the assets owned by each of them at the start of the relationship. cf. Bilous v Mudaliar (2006) 65 NSWLR 615, [2006] NSWCA 38; Baker v Towle supra at [62].
HAG v MAW[2007] QCA 217 was a case in which the parties took out a joint loan to cover debts on all of their properties.
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