Fowler v Zoka

[2000] NSWSC 1117

CITATION:	FOWLER v ZOKA [2000] NSWSC 1117
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2402 of 1998
HEARING DATE(S):	05/06/2000, 19/10/2000
JUDGMENT DATE:	13 December 2000
PARTIES :	Michael Peter Fowler v Lisa Zoka
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr P. Dowdy for plaintiff Mr A.M. Gruzman for defendant
SOLICITORS:	Cassidy Gibson Howlin for plaintiff Stafford & Associates (Wollongong) for defendant
CATCHWORDS:	Family Law. Application under Property Relationships Act for adjustment of parties' interests. Time at which property should be valued. Held that in the usual course it should be valued at the hearing.
CASES CITED:	Calverley v Green (1984) 155 CLR 242; Taggart v Gaston Master Macready 7/12/92; Wardman v Hudson (1978) FLC 90-466; Walters v Walters (1986) FLC 91-733; Conganitis v Conganitis (1979) FLC 90-643; Mackie v Mackie (1981) FLC 91-069; Howes v Howes (1981) FLC 91-044; P v P (1985) FLC 91-605; Hauff v Hauff (1986) FLC 91-747; Faraone v Shabalah (1988) FLC 91-956; McDonald v Morris - Windeyer J; Jones v Jones Master Macready 7.8.92
DECISION:	Para 29

- 1 -

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

MASTER MACREADY

Wednesday 13 December 2000.

2402/98 MICHAEL PETER FOWLER v LIZA ZOKA

JUDGMENT

1 MASTER: This is an application under the Property Relationships Act to adjust the parties property interests pursuant to section 20 of that Act. 2 The plaintiff and the defendant lived in a de facto relationship between August 1994 and October 1997. The proceedings were commenced on 13 May 1988. There were no children of the relationship, nor did the parties have any other children as part of the household. Initially the parties resided in rented accommodation in East Sydney. 3 At the time of the commencement of the relationship the personal property of the defendant consisted of a lounge suite valued at $15,000, television and entertainment goods $5,000, whitegoods $12,000 sporting goods, jewellery, artwork and collectables not valued, associated furnishing and chattels valued at $5,000 and a Ford Laser worth about $17,000. These items totalled $54,000. The defendant was also the registered proprietor of a property 13 Wills Road, Woolooware which had been transferred to her by her father earlier that year. The circumstances in respect of that transfer I will return to later. 4 The plaintiff’s assets as at the date of commencement of the relationship amounted to a small amount of cash of about $2,000 a motor bike valued at $8,000 on which he owed $4,326, some furniture and personal effects. 5 In February 1995 the plaintiff inherited $30,000 from his mother’s estate. As a result discussions ensued concerning a proposal for the parties to move into the property at 13 Wills Road. Although the property had been transferred to the defendant’s name by her father it was being offered for sale up until the time of these discussions. It was not then occupied. As a result of the discussions the parties were allowed to occupy the property upon terms that they paid out an amount to the defendant’s father’s company it having been the original owner prior to the transfer to the plaintiff for a consideration of some $183,000 in June 1994. There is no suggestion that the plaintiff paid this sum. The plaintiff contributed $20,000 and the parties borrowed $180,000 from the National Australia Bank. The total of these amounts namely $200,000 was paid to the defendant’s father’s company in May 1995 and the parties moved into the premises. 6 After separation the defendant left the home and went overseas. She asked the plaintiff to mind the home while she went away. She came back and in early January 1998 the plaintiff who had remained residing in the home then vacated and the defendant occupied the home. She paid the mortgage repayments from the time of separation and has continued in occupation. 7 There has been valuation evidence as to the value of the property at the time the parties occupied it in 1995. The two valuers, Mr Steege and Mr Hope are agreed that the property in May 1995 had a value of $290,000. In submissions the defendant referred to a note in Exhibit 5 which was a bank manager’s file note dated 3 April 1995 showing the property having a “OEMV $320,000”. This valuation was neither supported by evidence, cross examined upon or put to the valuers who gave evidence. In the circumstances I prefer the two valuer’s agreement of the value at 1995 at $290,000. One of the valuers, Mr Hope for the defendant valued the property in February 1998 at $310,000 and they both valued it at a later time. Mr Steege, the valuer for the plaintiff, valued the property in September 1999 at $430,000 and Mr Hope, for the defendant, valued it in May 2000 at $380,000. 8 It is necessary to resolve this difference as well as determine which is the appropriate time to consider the value of the property. 9 The debate between the valuers as to the present value of the property did not centre at all upon the fact that the plaintiff’s valuer valued it at late September 1999 and the defendant’s valuer in May 2000. Apart from matters going to the credit of one of the valuers the debate centred upon comparables. Surprisingly the valuers had a different range of comparables and had none in common although each chose a particular villa unit from a development in Denman Avenue, Woolooware as a comparable. 10 In respect of the defendant’s valuer, Mr Hope, his first comparable was in Kurnell Road, Cronulla. It is abundantly clear from the transcript that Mr Hope was in error in describing that as a 3 bedroom townhouse. Mr Steege took the trouble to check with the occupier how many bedrooms it had and apparently, according to the information he was given by the occupier it had two bedrooms. Mr Hope said he had been given information that it was three without elaborating on his source of knowledge. I will refer later to his refusal to accept an assumption of this error. In these circumstances it is not really comparable. The two separate units in the same development at Denman Avenue, Woolooware require a consideration of that development. The plaintiff’s valuer referred to a sale of unit 16 on 27 May 1999 for $370,000. He described it as a ten year old medium density villa in an inferior location and an inferior property. The defendant’s valuer referred to villa 13 which was sold for $375,000 in November 1999 and suggested that it was in a better position near the Woolooware golf course. Matters that emerged as a matter of comparison, quite apart from the fact that this development was 10 years old, in contrast to the 4 or 5 year old subject property, included that the comparables were:-

(a) A block of 20 townhouses of which 6 were owned by the Defence Services Personnel Department.

(b) Strata Title rather than Torrens Title which was the title of the subject property.

11   I tend to think that the age difference and the apparent ambience of the subject property in contrast to being part of a block of 20 might well support the plaintiff’s valuer’s view that the sales were not comparable. 12   The third comparable the defendant’s valuer referred to was one at Caronia Avenue, Cronulla which had a value of some $420,000 sold in February 2000. This would be support for the plaintiff’s valuation. The other valuations referred to by the plaintiff’s valuer were one in Cabramatta Road which sold in May 1999 for $474,000 which was considered by him to be slightly superior and a property in Searl Road, Cronulla which sold in July 1999 for $525,000 with a double lockup garage close to Cronulla Golf Club which he considered superior. 13   There was also criticism of the plaintiff’s valuer in that he did not take account in his valuation of the existence of an open drainage easement 2.44 metres wide at the northern boundary. Certainly the defendant’s valuer did take it into account but did not ascribe a value to it. 14   In general I felt more comfortable with the plaintiff’s valuer’s use of comparables in contrast to that of the defendant’s comparables. As is apparent from their description, the plaintiff’s comparables did, however, have a large difference in price from the subject property. 15   This does illustrate the importance of the opinions of the valuers in arriving at a value for the property. In the present case I found the defendant’s valuer to be less than satisfactory. It became perfectly apparent from the attitude he displayed in the witness box that he was a committed advocate for his client. In particular he refused to make assumptions and would not answer questions based upon assumptions. He showed that he was dogmatic in this regard. Indeed, not only would he not make assumptions when asked about, for instance, the difference in the accommodation in the Kurnell Road, Cronulla, property, but he refused to concede the accuracy of that matter. He gave no information to support his claim that he had been given information that it was a 3 bedroom unit. There are other examples of his argumentative nature rather than that of a dispassionate witness. See for example his responses to questions about increases in prices over the whole Sydney Metropolitan area. His conclusion is no doubt correct but the way he approached the questions indicates an advocate’s approach. In these circumstances I prefer the evidence of the plaintiff’s valuer and I will adopt a value as at September 1999 of $430,000. 16   At the conclusion of the relationship the parties situation is not precisely clear although it is clear that the property was still in the name of the defendant. At the end of 1998 she found the repayments under the existing mortgage burdensome given her lower income and renegotiated the loan. A fresh loan being interest only was taken out for $165,000 and the old loan discharged. In addition some $2,100 was paid in advance for interest on that mortgage. She conceded clearly in cross examination that up until that time the plaintiff had been a joint borrower with her and was liable on the existing mortgage. After the refinancing she alone became liable for the mortgage. 17   It is worth noting the arrangements under which the defendant came to be the proprietor of the property. I have set out some detail of these earlier but it is clear that the property was transferred to the plaintiff by her father’s company for $183,000. The company took a mortgage back for the same amount and paid the stamp duty on the transfer to her. She says that she did not know the details of the arrangement. It is clear, and the defendant concedes this, that her father was trying to sell the property after it was in her name up until February or March 1995. It was in the hands of agents, contracts having been submitted showing the defendant as registered proprietor. There is evidence from the father that he intended his daughter to have the unit and that on any sale she would take the surplus of any amount achieved over $183,000. At the time this transaction occurred a similar transaction occurred with the defendant’s sister and she had transferred to her the other unit in the development. That sister was intended to be benefited by her parents in that respect. As I have earlier mentioned the parties approached the bankers for the defendant’s father’s companies and arranged a loan of $180,000. To this was added the $20,000 that the plaintiff had available and it was suggested that in exchange for paying $200,000 that the parties should occupy the unit. That event occurred and the loan was taken out with the National Australia Bank. As a result the mortgage from the defendant to her father’s company was discharged and in effect replaced by the National Australia Bank loan. The father’s companies obtained the $200,000 and the parties moved into occupation. 18   Given that at that time, which was in May 1995, the property had a value of $290,000 it is clear that the parties in generic sense and in particular the defendant in whose name the title was, received the benefit of the property at less than its market value. In effect there was a gift by the defendant’s parent’s company of some $90,000. This clearly was intended on the evidence to be a benefit for the defendant and not for the parties jointly. The plaintiff himself conceded that in cross examination so in any adjustment process the defendant has to have the benefit of the $90,000 contribution which the parties achieved under the arrangements. The plaintiff, of course, has to be credited with $20,000. 19   As has been pointed out in Calverley v Green (1984) 155 CLR 242 the parties also contributed by them both entering into a joint mortgage although the defendant was the only proprietor. In this sense each party also contributed one half of the mortgage. One thus has a contribution on the plaintiff’s part of some 38% and on the defendant’s part some 62% to a villa then valued at $290,000.

The defendant’s submissions as to how the matter ought to be further considered in terms of the adjustment process.

20   The defendant submitted that in determining the adjustment in respect of the property one should look at the value of the property at the date of separation this value being some $310,000 as I have recounted above. The plaintiff on the other hand contended for the date of hearing as the appropriate date. There are a number of decisions both in the family law field and in cases dealing with claims under the present Act where these matters have been addressed. 21   I considered the matter at some length in a decision of Taggart v Gaston 7 December 1992 where I said at page 42 the following:-

“The defendant submits that as a matter of principle the date of hearing is appropriate because:
(a) The relevant section in both the Family Law Act and the De Facto Relationships Act refers to "the property of" the parties/partners;
(b)As a matter of construction, their "property" can only mean their property at the time of hearing because it is at that point of time (hearing) that the Court is called upon to do justice and equity by recourse to it;
(c) The use of the term "property" necessarily imports all aspects of the property including its (present) value. Its value is the most fundamental aspect that it has for purposes of adjustment (or non-adjustment) so as to do justice and equity between the parties/partners;
(d)Hence the legislation in its terms requires the court to make orders which will do justice and equity from the standpoint of the present value of the property of each of the parties/partners.
(e) Further, even if the legislation did not require such an approach, such an approach should be followed because it is always possible to identify and recognise in orders past contributions (ie. up to the date of hearing) from the standpoint of present value, whereas it is not always possible to do so looking through an earlier window in time."
The question has been dealt with in the Family Court of Australia in respect of S.79 of the Family Law Act and by two masters decisions in this court when dealing with the De Facto Relationships Act. As a starting point when considering the Family Court cases it is appropriate to refer to the decision of the full court in Wardman v. Hudson (1978) FLC 90-466. The court stated the principle in the following terms:-
"It appears to us that these matters raise issues of some general importance in the hearing of applications under sec. 79. The first question is as to the appropriate date for determining the value of the property in order to decide what orders are appropriate. In times of inflation and in times when values of properties may fluctuate significantly with the passage of a relatively short period, the choice of the correct date at which to determine the matter can frequently be of critical importance. It appears to us that whilst no hard and fast rule may be capable of being laid down, at least in relation to a jointly owned property or a property acquired or built up by the parties through their joint efforts over a number of years, of which the matrimonial home is the most obvious and most frequently encountered example, the property time for determining the value of the property is at the date of the hearing of the application under sec. 79. (See generally Zappacosta (1976) FLC 90-089 at p.75,421 and Wells (1977) FLC 90-285 at p. 76,529.) If the parties to the proceedings were strangers to each other as distinct from being husband and wife then in ordinary circumstances if the Court were to make an order severing their joint ownership that consequence would flow as at the date of the order and the parties' rights would be determined accordingly. It appears to us that as a generality the fact that the parties are husband and wife should not prima facie alter that position. Otherwise one party may achieve a substantial wind-fall because of an increase in value over the period of time since the separation, that period of time often being due to no more than delay in the hearing of the application in this Court.
There may, of course, be a number of circumstances which would indicate that this is not the appropriate time (as to which see for example Hayne (1977) FLC 90-265 and Healy (1977) FLC 90-295) and no doubt ultimately each case has to be determined upon its own facts, but in our view as a generality at least within the limited scope referred to above, this is the proper approach."
That there may be circumstances in a particular case which would tend to the use of the date of separation is clear from this passage. The use of the date of separation does not mean that the court can make an order solely by reference to the property at separation. The courts powers to make an order under S.79 is only in respect of property available at the time of the hearing. See Walters and Walters (1986) FLC 91-733 and the cases referred to earlier in my judgment.
It is necessary to refer to the cases where a court has adopted the date of separation. In Conganitis v. Conganitis (1979) FLC 90-643 the court adopted the date of separation as one of the assets was a business which had substantially been built up by the husband after separation. The assessment of the wife’s entitlement was therefore made as at the date of separation.
See Mackie v. Mackie (1981) FLC 91-069 the parties separated when their house was partly built. The husband, after separation, won the lottery and completed the house. The court decided that the date that the husband started completion of the house after separation was the appropriate date. ie. before he expended any of his windfall gain on construction.
Howes v. Howes (1981) FLC 91-044 reiterates the general approach but adopted the date of separation as the property was valued at that time and the wife was paid at that time for her entitlement to the property.
P v. P (Tax evasion) (1985) FLC 91-605 concerned an agreement entered into between the parties at separation which was intended to be an agreement under S.87 but which was never submitted for approval. It was carried out and the wife took over the liabilities on the home at that time in the belief it was her property. The court held that separation was the appropriate time to value the assets.
Hauff v. Hauff (1986) FLC 91-747 concerned superannuation entitlements which under the Family Law Act is not "property" but a "financial resource" of a party. I do not find this case to be helpful as it deals with an area of consideration which is separate from what I have to consider. The concept of "financial resource" has no application to cases under the present act.
Faraone v. Shabalah (1988) FLC 91-956 was another case where the parties had made an agreement for division at separation and the court held that value should be determined at the date of separation.
All of these cases are ones where the value of the assets at the time of separation was less than that at the hearing. In all of them there were appropriate reasons given their particular circumstances, for adopting the date of separation. In the present case however the value of the assets at the date of separation are far greater than at the time of hearing.
In McDonald v. Morris Windeyer J. in dealing with a claim under the De Facto Relationship Act used the date of separation when dealing with a case concerning homemaker contribution. His Honour said at page 9:-
"The plaintiff's counsel submitted that I should look at the value of the assets, now agreed at about $430,000, and give the plaintiff some proportion of those assets. I do not cavil with the principle that it is usually the correct approach, at least in dealing with adjustments for contribution of the types referred to in s.20(1)(a) of the Act, to look at those assets at the time of the hearing, but here we are not dealing with such contributions. Perhaps it makes no difference, as at the time of separation the properties were worth $471,000 and there is no evidence of any liabilities at that time. But, in any event, in circumstances as they exist here, where the claim is for a homemaker contribution, it seems to me the proper course is to determine what adjustment is appropriate up to separation and add interest thereafter."
I have also adverted to the matter in a decision of Jones v. Jones given on 7 August, 1992. The circumstances in that case which led me to the view that it was appropriate to look at the time of separation was that the defendant had engaged in unsuccessful business transactions after the date of separation which substantially increased the debts of the defendant. There still remained at the time of the hearing sufficient property to meet the order.
As a matter of principle I think the comments by the Full Family Court in Wardman and Hudson are appropriate when one considers the De Facto Relationships Act subject to the limitation that a court can not order payment of a sum greater than the property available at the time of hearing.
In the present circumstances it is particularly difficult to decide whether to adopt the date of separation as it would be too easy to use this as a penalty to be imposed upon the defendant for not making full disclosure. I do not think that the court in the exercise of its discretion should be motivated by a desire to penalise a party for not complying with their obligation to the court. I have already held that I can not identify or quantify the amount of other assets which the defendant has probably accumulated. If I could identify the broad quantum of such likely assets then it may be appropriate to then have regard to the value of known assets at separation. However I cannot do that and accordingly I will have regard to the value of the assets at the time of the hearing.”

22   I still think it appropriate to adhere to the view which I then expressed. 23   In the present case the defendant has made all payments on the mortgage from October 1997 and she had occupation of the unit from January 1998. The amount of the mortgage at the time of separation was about $170,000 and by the time of the hearing it was $160,000. It is also important to note that the defendant herself at the end of 1998 took over the whole of the mortgage and relieved the plaintiff of any burden in respect thereof. This was because she took out a fresh mortgage to which he was not a party. A substantial part of the increase that followed after separation is thus attributable to the maintenance of the mortgage by the defendant alone. In these circumstances, I think it inappropriate to allow any amount for the defendant’s occupation of the premises and I will make an appropriate adjustment giving credit to the defendant for the reduction of the mortgage principal sum by some $10,000 over the period from early 1998 until the hearing. Consistent with the principles I have set above I will, of course, be adopting the value of $430,000 as the adjustment basis. I also note that it was the defendant who paid the rates and taxes and all other outgoings on the property from October 1997. 24   The other area of financial contributions that has to be looked at is the contribution to the mortgage during the period of the relationship and contributions to household expenses. There was a disproportion in the salaries of the parties the plaintiff receiving a salary of approximately $50,000 and the defendant a salary of approximately $30,000. The plaintiff endeavoured in his evidence in chief to construct tabulations of the contributions to a joint account which was used to repay the mortgage amongst things showing a preponderance of contributions on his part. Under cross examination that proved to be in error and a revised schedule was submitted which showed contributions on his part of some $39,781 and on the plaintiff’s part of $24,016. Although this disparity is somewhat large, it only led to a reduction in the mortgage over the period of the parties’ relationship of some $10,000. Apart from payments to a joint account for the mortgage it seems clear that the parties shared on a roughly equal basis other household accounts. 25   Although the plaintiff’s superannuation entitlements increased from some $800 to $8,000 during the period of the relationship, the evidence is not clear as to whether this was contributed from his own funds and, in any event, there is no evidence that would suggest that it was by reason of some factual contribution by the defendant that he was able to obtain this entitlement. Accordingly, in accordance with the principles in Green v Robinson (1995) 36 NSWLR 96, it would not be appropriate to take this into account in the adjustment process.

Non-financial contributions

Homemaker contributions

26   No homemaker contributions were alleged by the defendant in her affidavit evidence. However, in cross examination of the plaintiff it is apparent that he studied and obtained some qualifications by attending university at night during the course of the parties’ relationship. He suggested that this made little difference to the homemaking but it would seem to me it would make some difference as a greater burden would fall upon the defendant. However, it is to be borne in mind when considering these contributions that there were no children and that each party was working an ordinary day’s work. I would allow in the adjustment process something for these contributions.

Conclusion

27   I have identified above some homemaker contributions which have to be considered. In the financial contributions I have referred to a greater contribution by the plaintiff to the expenses of the household including repayment of the mortgage. The plaintiff takes the position that one should balance out these contributions and then proceed to consider the main item of property, namely, the Wills Road property. This seems to me to be appropriate given the extent of the reduction of the mortgage as a result of the parties’ joint endeavours over the period of the relationship and the extent of the greater homemaking contributions by the defendant. 28   This turns one back to the question of the property. One has a property having a value of some $430,000. It is entirely the defendant who has reduced the mortgage in respect of the property after separation and, allowing therefore the mortgage figure at its separation amount, the equity in the property is $260,000 and 38 percent of that is $98,800. 29   I note that the parties have conducted the matter on the basis that the defendant proposes to retain the property and, accordingly, I think an appropriate order would be that on the basis of the defendant retaining the property, that the plaintiff should be paid by the defendant the sum of $98,800 by way of property adjustment. 30   I direct the parties to bring in short minutes to reflect these reasons.

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Last Modified: 12/14/2000