Horton v Russell

[2006] NSWSC 506

Reported Decision: (2006) DFC 95-334

New South Wales

Supreme Court

CITATION:	Horton v Russell [2006] NSWSC 506
HEARING DATE(S):	15 and 16 May 2006
JUDGMENT DATE :	30 May 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Associate Justice McLaughlin at 1
DECISION:	(1). I order that the net proceeds of sale of the property situate at and known as 21 Garden Street, Eastlakes (after discharge of the mortgage thereon and payment of the costs of sale and any associated costs and disbursements and any agent’s commission) be held by the parties in the following proportions: the Plaintiff as to one-third; the Defendant as to two-thirds. (2). I make no order as to costs, to the intent that each party will bear her or his own costs of the proceedings. (3). The exhibits may be returned.
CATCHWORDS:	Family Law. De facto relationship. Parties resided together during six separate periods. Whether one single (but at times interrupted) de facto relationship or six separate de facto relationships. Respective contributions of parties. House property acquired by parties as joint tenants (and subsequently held by them as tenants in common in equal shares). Whether respective interests of parties in proceeds of sale of that property should be adjusted.
LEGISLATION CITED:	Property (Relationships) Act 1984
CASES CITED:	Baumgartner v Baumgartner (1987) 164 CLR 137 Bilous v Mudaliar [2006] NSWCA 38 (27 April 2006) Davey v Lee (1990) 20 FamLR 688 Kardos v Sarbutt [2006] NSWCA 11 (14 February 2006) Muschinski v Dodds (1985) 160 CLR 583
PARTIES:	Kenya Horton (Plaintiff) William Francis Russell (Defendant)
FILE NUMBER(S):	SC 5169 of 2003
COUNSEL:	Mr. B. Levet (Plaintiff) Mr. A. Hill (Defendant)
SOLICITORS:	Kinghan & Associates (Plaintiff) John R. Quinn & Co (Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE McLAUGHLIN

Tuesday, 30 May 2006

5169 of 2003 KENYA HORTON –v- WILLIAM FRANCIS RUSSELL

JUDGMENT.

1 HIS HONOUR: These are proceedings under the Property (Relationships) Act 1984.

2 The proceedings were instituted by statement of claim filed by the Plaintiff, Kenya Horton, on 7 October 2003. That statement of claim named as Defendant, William Francis Russell. Subsequently the Plaintiff filed an amended statement of claim on 5 February 2004 and a further amended statement of claim on 25 October 2004.

3 The Defendant filed a defence to the amended statement of claim on 26 February 2004. No defence to the further amended statement of claim was filed, the Defendant taking the attitude that, since the only differences between the amended statement of claim and the further amended statement of claim were in the relief claimed in those two pleadings, the filing of an amended defence was unnecessary.

4 It should here be observed that by his defence the Defendant, somewhat curiously, claimed certain items of substantive relief. It will be appreciated that such relief should appropriately have been sought by way of a cross-claim. However, the Plaintiff did not raise objection to the claim for that relief being, as it were, incorporated in the defence and not being claimed in a separate pleading, and to that claim being determined in the same hearing as the claim of the Plaintiff.

5 By her further amended statement of claim (and by her earlier pleadings) the Plaintiff seeks substantively relief by way of orders in respect to the interests of the parties in property, in particular in respect to a residential property situate at and known as 21 Garden Street, Eastlakes (“the Eastlakes property”). During the course of the hearing it was noted that the Plaintiff now sought substantive relief only in respect to prayer 4 in the further amended statement of claim (which related to the Eastlakes property), and that such substantive relief was confined to a claim for 50 percent of the net proceeds of sale of the Eastlakes property. Further, that the Plaintiff no longer sought relief in the terms of prayer 3 in the further amended statement of claim (which related to the property situate at and known as 12/58 High Street, Randwick (“the Randwick Property”)).

6 The Eastlakes property was acquired by the parties as joint tenants in December 2000. The purchase price of that property was $450,000, that purchase being financed entirely by a loan from the ANZ Bank at Randwick, secured by mortgage over that property. That loan was also secured by mortgages over two other properties owned by the Defendant. Subsequently the joint tenancy was severed by the Plaintiff, and the property was held by the parties as tenants in common in equal shares. The Eastlakes property was sold on 26 April 2006 for a price of $645,000. An amount of $412,220 is outstanding on the mortgage to the ANZ Bank. Thus the parties have an equity in that property in an amount of $232,780. However, from that amount there will doubtless be deducted estate agent’s commission, and costs and outgoings associated with the sale. It is prudent to proceed upon the basis that the net proceeds of sale will probably not exceed about $210,000. Settlement of that sale is expected at the end of May 2006. Unless an order is made by the Court adjusting the interests of the parties in that property the Plaintiff will be entitled to a one half share of the net proceeds of sale thereof. An order to that effect is the only substantive relief which the Plaintiff now claims. In monetary terms, that would be in amount of about $105,000.

7 Since the Plaintiff is now seeking substantively only an order for the payment to her of a one half share in the proceeds of sale of the Eastlakes property, and since she would, in any event, be legally entitled to that one half share without the intervention of the Court, it is to be wondered why the Plaintiff instituted the present proceedings. It would appear to be the action of the Plaintiff in instituting the present proceedings that has precipitated the claim in respect to the Eastlakes property which the Defendant now makes (in the manner which he has done), being a claim for an order that he receive the totality of the proceeds of sale of the Eastlakes property.

8 The Plaintiff was born on 18 March 1941 and is presently aged 65. The Defendant was born on 28 December 1946 and is presently aged 59. No children were born of the relationship between the parties, although each party had adult children by earlier relationships.

9 It was not in dispute that at various times between the 1970s and the 2000s the parties lived in a de facto relationship. However, the periods and the dates during which they so lived were in dispute. It was asserted by the Plaintiff that she and the Defendant lived in a de facto relationship for six separate periods, identified in the further amended statement of claim as follows:

· Mid-1978 to October 1980

· September 1990 to March 1992

· Late 1993 to early 1995

· 1996 to late 1997

· May 1998 to mid-1999

· 14 December 2000 to mid-April 2003

10 The Defendant agreed that he and the Plaintiff lived in a de facto relationship for six separate periods, identified in his affidavit of 2 September 2004, as follows:

· August 1978 to September 1979

· September 1990 to November 1991

· Late 1993 to early 1995

· A short period in 1996

· 1 July 1997 to March 1999

· 14 December 2000 to 14 April 2003

11 It was, however, submitted on behalf of the Defendant that it is not necessary for the Court to make specific findings concerning the precise date of commencement and the precise date of termination of each of the periods during which a de facto relationship obtained between the parties. I am in agreement with that submission.

12 Of greater significance to the claim of the Plaintiff are the respective contributions of the parties of the nature identified in section 20 of the Property (Relationships) Act. Subsection (1) of that section provides,

On an application by a party to a domestic relationship for an order under the Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties 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 parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and
(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:
(i) a child of the parties,
(ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties.

13 At the commencement of the first period of the relationship neither the Plaintiff nor the Defendant had much in the way of assets. Neither of them owned any real property at that time. Each of the Plaintiff and the Defendant had savings in their respective bank accounts of less than a few thousand dollars. Each was in employment, and, indeed, throughout the entirety of the periods of the relationship and throughout the intervening periods has largely remained in constant employment (although the Plaintiff was not working for a period of about 14 months in 2001-2002, in the latter part of which period she accompanied the Defendant on a travelling holiday within Australia). The Plaintiff’s various employments were usually in managerial positions. The Plaintiff owned various household goods and appliances, whilst the Defendant did not have any household furnishings, but only his personal effects. Throughout the earliest period of the relationship the Plaintiff’s two children, then aged about 12 and about 8, resided with the parties, and were supported by their mother, who did not receive any maintenance from their father.

14 For much of the time from the commencement of the first period of the relationship to the termination of the last period the Defendant was self-employed as a contract driver, his gross income from that source ranging between $1,600 and $3,000 a week, that being considerably more than the gross income of the Plaintiff throughout the same period.

15 From the time when they first entered into a de facto relationship until the termination of the last period of their relationship the parties acquired various pieces of real property.

16 By the time of the commencement of the final period of their relationship in December 2000, the Plaintiff owned the following assets:

Home unit situate at and known as 11/58 High Street, Randwick, which was unencumbered

One-third interest in a home unit situate at and known as 5/20 Boronia Street, Kensington, which was unencumbered

Hyundai Excel motor vehicle

Shares in IAG and Telstra

Cash savings of about $10,700

Superannuation entitlement

Household and personal effects

One-half interest as joint tenant in the Eastlakes property

17 The evidence was somewhat imprecise as to the value of the Plaintiff’s superannuation entitlement at the commencement of the relationship. By 30 June 2003 it amounted to $52,000.

18 The High Street, Randwick property had been purchased by the Plaintiff in 1983 for $44,000 (subject to a mortgage, which the Plaintiff had discharged from her earnings in 1986). The Boronia Street property was owned conjointly by the Plaintiff, her son and her former de facto partner, each as to a one-third share. It was purchased by them as an investment in 1996 for $165,000, subject to a mortgage which was discharged in 1999.

19 At that time the assets of the Defendant consisted of:

Home unit situate at and known as 12/58 High Street, Randwick, having an estimated value of $275,000

Home unit situate at and known as 4/67-69 Queens Road, Hurstville, having an estimated value of $296,000

Toyota Hi-ace work van

Superannuation entitlement, about $12,000

Cash savings of about $15,000

Furniture and personal effects

IAG shares and Telstra shares, $16,800

Workers compensation claim

20 The Randwick property was subject to a mortgage of $56,000. The Hurstville property was subject to a mortgage of about $150,000.

21 As a result of an industrial accident the Defendant received a worker’s compensation payment of about $44,000 in late 2001. The amount of $44,000 was paid into the joint bank account of the Plaintiff and the Defendant.

22 In July 2002 the Defendant sold the Hurstville property for $295,000. After the discharge of the mortgage on that property (about $162,000), the Defendant expended $44,328 in discharging the mortgage outstanding on his property at 12/58 High Street, Randwick, and deposited the balance of about $86,500 in the joint account. That sum was expended by him in the purchase of a Pajero motor vehicle for about $59,000 (which is presently owned by the Defendant), the purchase of caravan for $25,000 (which was subsequently sold for $17,000 in Western Australia during the course of the caravan holiday of the parties in 2002), and $2,500 went towards the costs of that caravan holiday.

23 At various times the Defendant’s property at 12/58 High Street, Randwick, which he had purchased in April 1991 was rented out, at other times the Defendant resided therein. Throughout the final period of the relationship between the parties that property was rented at between $280 and $300 a week. That rent was paid into the joint bank account of the parties.

24 During the final period of the relationship the net income of the Defendant was said by him to have been in the amount of almost $70,000 for the tax year 2001 and about $66,400 for the tax year 2003. (He was unable to locate his income tax return for the tax year 2002.)

25 In December 2000 the parties opened a joint account with the ANZ Bank at Randwick. Throughout the remainder of the relationship the Plaintiff’s earnings and those of the Defendant were deposited into that account. In addition, the rental income which the Plaintiff received from her High Street, Randwick property and the compensation of about $6,000 which she received in consequence of an unfair dismissal claim were also deposited into the joint account. The total deposited by the Plaintiff in that account was about $46,000. From that account she withdrew $32,220 (which included $20,000 withdrawn by her at the termination of the relationship and which the Defendant said was withdrawn without his knowledge or consent). The Plaintiff also maintained a bank account in her own name with the St. George Bank. Into that account were deposited the Plaintiff’s share of the rents received from the Boronia Street property.

26 According to the Defendant, throughout the final period of the relationship amounts totalling about $217,000, from his earnings, were deposited by him in the joint bank account, and additional amounts totalling about $126,000, from such other sources as the sale of a Toyota van and caravan, share dividends, worker’s compensation payments and rental payments, were also deposited by him in the joint bank account. That is, the Defendant paid into the joint account a total sum of about $343,000.

27 The mortgage payments in respect to the Eastlakes property were sourced from the joint bank account. Throughout the period of the relationship those payments totalled $77,331. Since the termination of the relationship the Defendant alone has met all of the mortgage payments.

28 There was considerable dispute between the parties regarding their respective financial contributions during the various periods of the relationship, as well as such respective non-financial contributions as maintenance and gardening at their various residences. There was also dispute concerning their respective contributions as homemaker.

29 I have had the benefit of receiving a written outline of submissions and a chronology from Counsel for the Defendant. Those documents will be retained in the Court file.

30 At the outset it should be appreciated that, apart from the last period during which the parties were in a de facto relationship (from 14 December 2000 to 14 or 15 April 2003), each of the earlier periods of the relationship came to an end a considerable time before the commencement of the present proceedings on 7 October 2003. Section 18(1) of the Act provides,

If a domestic relationship has ceased, an application to a court for an order under this Part can only be made within the period of 2 years after the date on which the relationship ceased, except as otherwise provided by this section.

31 The definition of “domestic relationship” in section 5 of the Act includes a de facto relationship. Subsection (2) of section 18 vests the Court with a discretion to grant leave to a party to apply for an order outside the foregoing period of two years in circumstances

where the court is satisfied, having regard to such matters as it considers relevant, that greater hardship would be caused to the applicant if that leave were not granted than would be caused to the respondent if that leave were granted.

32 In consequence, the Plaintiff seeks an extension of time in respect to all but the last of the foregoing periods. Nevertheless, it was the primary submission of the Plaintiff that the parties were in only one de facto relationship, from the late 1970s until the early 2000s, that relationship being interrupted by periods whilst they were not living together.

33 Section 4(1) of the Act defines a de facto relationship as follows,

For the purposes of this Act, a de facto relationship is a relationship between two adult persons:
(a) who live together as a couple, and
(b) who are not married to one another or related by family.

34 Subsection (2) of the foregoing section provides,

In determining whether two persons are in a de facto relationship, all the circumstances of the relationship are to be taken into account, including such of the following matters as may be relevant in a particular case:

35 The matters then set forth include “(b) the nature and extent of common residence”.

36 Subsection (3) provides,

No finding in respect of any of the matters mentioned in subsection (2)(a) – (i), or in respect of any combination of them, is to be regarded as necessary for the existence of a de facto relationship, and a court determining whether such a relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.

37 It is apparent from the reference in subsection (2) to a common residence, that it is not in every case essential to a finding that parties were in a de facto relationship that they resided in a common residence. Nevertheless, it is essential to such a finding that they “live[d] together as a couple”.

38 Although during the periods whilst the parties to the present proceedings were not sharing a common residence they maintained contact and, at times, participated in sexual activities, nevertheless I am not satisfied upon the evidence that the parties were in a de facto relationship other than during the periods whilst they were residing together. It follows that there were six separate de facto relationships between the parties – not, as the Plaintiff contends, one single (but at times interrupted) de facto relationship.

39 Therefore, in those circumstances, if the Plaintiff is seeking the adjustment of interests of the parties in property, otherwise than in respect to the de facto relationship which obtained from December 2000 to April 2003, it will be necessary for the Plaintiff to establish that the discretion of the Court under section 18(2) of the Act is enlivened and should be exercised in her favour, in order to enable her to have leave to apply to the Court for an order in respect to one or more of the earlier relationships.

40 However, since the only relief which is now sought by the Plaintiff is in respect to the Eastlakes property, and since that property was acquired by the parties almost contemporaneously with the commencement of the final period of the relationship on 14 December 2000, and the parties resided in that property throughout that final period, it becomes unnecessary for me to consider the claim of the Plaintiff other than in respect to the final period of the relationship. It is not necessary for me to consider a separate claim of the Plaintiff in respect to each of the earlier periods of the relationship, or to consider whether, in respect to each of those earlier periods, the leave sought by the Plaintiff in prayer 1 of her present pleading should be granted.

41 It must be recognised that (apart from a holding deposit of $1,000 paid by her in cash) the Plaintiff made no financial contribution towards the acquisition of the Eastlakes property. The totality of the purchase price was provided by the ANZ Bank and the total responsibility for the provision of security in respect to the mortgage granted over that property was that of the Defendant. Whether or not the Plaintiff volunteered to allow her own property (the home unit at 11/58 High Street, Randwick) to be part of the mortgage security, in the circumstances outlined by her in her evidence (in which she said that the bank manager had told her that such security would not be necessary since the Defendant himself had sufficient security to finance the purchase) does not alter the fact that it was the Defendant who provided the totality of the security and that the Plaintiff provided neither cash advance (apart from the holding deposit of $1,000) nor security for the purchase of the property.

42 The mortgage payments throughout the period of the relationship were sourced from the joint account. The Plaintiff’s contribution towards those payments can be treated as being one half of the total amount of $71,331, that is, as being in an amount of $35,665.

43 As I have already observed, the Plaintiff, first as joint tenant, and more recently as tenant in common in equal shares with the Defendant, was legally entitled to a one half interest in the Eastlakes property, and is presently entitled to a one half share in the net proceeds of sale of that property. Unless the Court makes an order of the nature sought by the Defendant in prayer 2 of the claims for relief appended to his defence (that “the Plaintiff … transfer all her right title and interest in the property known as 21 Garden Street, Eastlakes to the Defendant”), the Plaintiff will be entitled upon settlement (expected to be in late May 2006) of the sale of that property for $645,000 to receive one half of the net proceeds of that sale. Since the mortgage debt presently outstanding upon that property is in an amount of $423,220, the net proceeds of sale will probably be a little over $200,000 (when estate agent’s commission and legal costs are taken into account). The Plaintiff will therefore be entitled to receive about $105,000 from those proceeds of sale.

44 The Defendant, however, seeks relief the practical effect whereof is that the Defendant would receive the entirety of the proceeds of sale of the Eastlakes property, whilst the Plaintiff would receive nothing.

45 It is unclear from the nature of the foregoing relief sought by the Defendant, and the manner in which that relief has been sought, whether the Defendant is seeking what is, in effect, a recognition that the Plaintiff holds her interest in the Eastlakes property upon a resulting trust for the Defendant (if such be possible), in consequence of the initial security for the purchase having been provided exclusively by the Defendant, or upon a constructive trust in favour of the Defendant arising from the circumstances in which that property was acquired (in accordance with the principles enunciated by the High Court of Australia in such cases as Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137), or whether the Defendant is seeking an order for adjustment of the interests of the parties in that property pursuant to section 20 of the Property (Relationships) Act. The further item of relief claimed by the Defendant, that he indemnify the Plaintiff with respect to the mortgage over the Eastlakes property and that within a specified period he refinance the mortgage (presumably in his name alone) is not entirely consistent with relief consequent upon a recognition of a resulting trust or a constructive trust. It seems to me more appropriate that I should regard the relief claimed by the Defendant as being relief sought pursuant to section 20 of the Act.

46 It was submitted on behalf of the Plaintiff that the Court should exercise caution in accepting uncritically the evidence of the Defendant when such evidence conflicted with that of the Plaintiff. A number of instances were relied upon by the Plaintiff in this criticism of the evidence of the Defendant. Those instances included the evidence of the Defendant concerning the circumstances in which Ms Delia Guerra moved into residence with him, concerning the acquisition of an Omega De Ville watch and concerning the assertion that the property situate at and known as 66A Washington Road, Bexley (in which the parties resided for a time in 1998-1999) was an isolated house. None of those matters was of any great significance in itself. However, the evidence given by the Defendant in regard to each of them was clearly inaccurate, if not deliberately misleading. Where the evidence of the parties was in conflict I prefer that of the Plaintiff to the evidence of the Defendant.

47 As to the respective contributions of the parties of the nature identified in section 20(1) of the Act, it is unnecessary for me to make finding in regard to each individual assertion and counter-assertion of the parties. In approaching a claim for the adjustment of interests of parties in property pursuant to section 20(1) of the Property (Relationships) Act, the Court should make a wholistic judgment, and should not attempt to evaluate the respective contributions of the parties as if it were undertaking a reductionist process analogous to the taking of partnership accounts (notoriously one of the most time consuming and expensive of litigious exercises). (See Davey v Lee (1990) 20 FamLR 688, which was cited with approval by Ipp JA (with whom Giles and McColl JJA agreed) in Bilous v Mudaliar [2006] NSWCA 38 (27 April 2006); see, also, Kardos v Sarbutt [2006] NSWCA 11 (14 February 2006).)

48 I am satisfied that the contributions of a non-financial nature and especially contributions as homemaker made by the Plaintiff were substantially in accordance with what was stated in her evidence and were greater than those of the Defendant. Nevertheless, it is quite apparent that the financial contributions of the Defendant during the last period of the relationship were significantly greater that those of the Plaintiff, especially since the Defendant secured the mortgage debt on the Eastlakes property by providing as further security his property at 12/58 High Street, Randwick and his property at 4/67-69 Queens Road, Hurstville. Further, if the amount of $35,665 be treated as the Plaintiff’s contribution towards the mortgage payments on the Eastlakes property, it will be seen that that figure is only about $10,000 less than the totality of her contributions to the joint account, and is considerably more than the net share of the Plaintiff in the joint account (when her withdrawals totalling $32,222 are taken into consideration). The Defendant paid into the joint account a total amount of $343,000 in the same period.

49 It seems to me, in all the circumstances, therefore, that it is appropriate that the Court should make an order adjusting the interests of the parties in the proceeds of sale of the Eastlakes property. As I have already observed, without the intervention of the Court each party will be entitled to a one half share in the net proceeds of sale of the Eastlakes property. I am satisfied, however, that the Defendant has established an entitlement to receive a greater share than that one half interest to which he is legally entitled. In my conclusion the Defendant has established an entitlement to a two-thirds interest in the Eastlakes property, and the Plaintiff to a one-third interest therein. That is, instead of each of the Plaintiff and the Defendant receiving approximately $105,000 from the net proceeds of sale, the Plaintiff will receive about $70,000 and the Defendant will receive about $140,000.

50 I have not heard any argument as to costs. In the light of my foregoing conclusion, it seems to me that the interests of justice will be adequately served if I make no order as to costs, to the intent that each party will bear her or his own costs of the proceedings. If, however, either party wishes to make an application for costs, an opportunity will be given to that party to do so. Accordingly, unless within seven days of the date hereof either party arranges with my Associate for the matter to be listed for argument as to costs, I make the following orders:

(1). I order that the net proceeds of sale of the property situate at and known as 21 Garden Street, Eastlakes (after discharge of the mortgage thereon and payment of the costs of sale and any associated costs and disbursements and any agent’s commission) be held by the parties in the following proportions:

the Plaintiff as to one-third;

the Defendant as to two-thirds.

(2). I make no order as to costs, to the intent that each party will bear her or his own costs of the proceedings.

(3). The exhibits may be returned.

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