Ireland v Pratley
[2013] NSWCA 445
•18 December 2013
Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Ireland v Pratley [2013] NSWCA 445 Hearing dates: 5 December 2013 Decision date: 18 December 2013 Before: Macfarlan JA at [1]
Ward JA at [2]
Sackville AJA at [3]Decision: 1. Appeal dismissed.
2. Cross-appeal dismissed.
3. The appellant pay the respondent's costs of the appeal.
4. The respondent/cross-appellant pay the appellant/cross-respondent's costs of the cross-appeal.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: FAMILY LAW - de facto relationships - adjustment of property interests - whether primary Judge addressed correct issues - whether primary Judge's discretion miscarried - whether primary Judge failed to provide adequate reasons - whether discretion in relation to costs miscarried Legislation Cited: Property (Relationships) Act 1984, ss 20, 47
Uniform Civil Procedure Rules 2005, r 42.1Cases Cited: Baker v Towle [2008] NSWCA 73; 39 Fam LR 323
Chanter v Catts [2005] NSWCA 411; 64 NSWLR 360
Separovich v Ferrao [2011] NSWCA 180Category: Principal judgment Parties: Benjamin Murray Ireland (Appellant/Cross-Respondent)
Juliet Pratley (Respondent/Cross-Appellant)Representation: Counsel:
M W Anderson (Appellant/Cross-Respondent)J S Gleeson SC (Respondent/Cross-Appellant)
Jo-Anna F S Moy Solicitor (Respondent/Cross-Appellant)
Solicitors:
Belinda Eyers and Associates (Appellant/ Cross-Respondent)
File Number(s): 2013/92845 Decision under appeal
- Jurisdiction:
- 9111
- Citation:
- Pratley v Ireland [2013] NSWSC 151
- Date of Decision:
- 2013-02-27 00:00:00
- Before:
- Macready AsJ
- File Number(s):
- 2010/265786
Judgment
MACFARLAN JA: I agree with Sackville AJA.
WARD JA: I agree with Sackville AJA.
SACKVILLE AJA: This is an appeal from orders made by an Associate Justice of the Supreme Court (Macready AsJ) in an application brought under the Property (Relationships) Act 1984 ("the Act").
The respondent ("Ms Pratley") and the appellant ("Mr Ireland") lived in a de facto relationship from about August 2003 until 1 January 2009. They have one child, born in October 2007.
The proceedings were commenced by Ms Pratley on 10 August 2010. By an amended statement of claim ("ASC") filed on 27 September 2011 she sought, relevantly, the following relief:
2 An Order pursuant to Section 20 of the Act that [Ms Pratley] receive the equivalent of 45% of the net equitable value of the total net property to be implemented as follows:
(a) A Declaration pursuant to section 56 of the Act that [Ms Pratley] be declared sole legal and equitable owner of all property, real and personal, and financial resources in her possession or control and to which she is otherwise entitled.
(b) That [Mr Ireland] within two months pay to [Ms Pratley] a sum of money equivalent to the difference between the value of the property in Order 1(a) and 45% of the net equitable value of the total net property ... of the parties or either of them, together with interest ....
The ASC referred to a document entitled "Domestic Relationships Deed" between the parties, which was executed on 29 June 2008 ("Deed"). The ASC pleaded that the Deed failed to comply with the provisions of s 47 of the Act, in that Ms Pratley was not furnished with a certificate from an independent solicitor advising her as to the effect of the Deed. The ASC did not identify the consequences said to flow from the non-compliance with s 47.
By a second cross-claim ("Cross-Claim"), Mr Ireland sought orders dismissing Ms Pratley's claim. In addition, he sought the following:
- a declaration, founded on the Deed, that Ms Pratley held half of her interest in a property at Rankin Drive, Bangalow ("Bangalow Property") on trust for him;
- an order that Ms Pratley pay him $87,149.50 plus interest;
- an order for the sale of the Bangalow Property and division of the net proceeds.
The proceedings were heard by the primary Judge over three hearing days and judgment was delivered on 27 February 2013, the date of his Honour's retirement: Pratley v Ireland [2013] NSWSC 151. The primary Judge made the following orders:
(1) By way of adjustment of the [parties'] interests, declare that the Bangalow Property in the name of [Ms Pratley] be held as to a three-quarter share for [Ms Pratley] and as to a one-quarter share for [Mr Ireland] as tenants in common.
(2) A declaration that each party is the sole legal and beneficial owner of all other property, real and personal, in his or her possession or control.
(3) [Ms Pratley] has the right to purchase [Mr Ireland's] one-quarter interest in the Bangalow Property by a payment of $152,500, such payment to be made within three months...
(4) In the event that [Ms Pratley] does not purchase [Mr Ireland's] interest within three months, the real estate be sold forthwith by private treaty [and the net proceeds paid as to one quarter to Mr Ireland and the balance to Ms Pratley].
...
(6) [Ms Pratley] pay three quarters of [Mr Ireland's] costs of the proceedings ... on the ordinary basis.
The aunt and uncle of Mr Ireland were joined to the proceedings. However, the proceedings against them were dismissed and no issue arises on the appeal concerning that order.
Mr Ireland's notice of appeal identifies five grounds, which can be summarised as follows:
(1) The primary Judge failed to consider whether the proposed adjustment of interests was just and equitable and erroneously determined that Ms Pratley was entitled to an adjustment of a one-quarter share in the Bangalow Property.
(2) The primary Judge's discretion miscarried because he erroneously found that Mr Ireland had superannuation entitlements at the date of separation and at the date of the hearing, whereas in fact he had no such entitlements.
(3) The primary Judge's discretion miscarried because he failed to have any proper regard to the financial and non-financial contributions of Mr Ireland to the resources and property of Ms Pratley and erroneously found that homemaker contributions favoured Ms Pratley when it had been conceded that the parties' contributions were more or less equal.
(4) The primary Judge failed to provide adequate reasons for his determination.
(5) The primary Judge's discretion in relation to costs miscarried and his Honour should have ordered that Ms Pratley pay the whole of Mr Ireland's costs.
The primary relief sought by Mr Ireland in his notice of appeal is an order setting aside the orders made by the primary Judge (other than those affecting the uncle and aunt) and, in lieu thereof, declaring that the Bangalow Property be held as to a half share for each of Mr Ireland and Ms Pratley as tenants in common. Mr Ireland also seeks consequential orders, including an order that Ms Pratley have the right to purchase his half interest in the Bangalow Property by paying $305,000 within thirty days of the orders.
By her notice of cross-appeal, Ms Pratley challenges the cost orders made by the primary Judge. She does so on the ground that his Honour failed to take into account that she had sought, in the ASC, an order that she receive 45 per cent of total net property, calculated without deducting a loan of $479,000 made to Mr Ireland by a family trust. Ms Pratley contends that the failure to take into account the loan caused his Honour's discretion to miscarry.
The Legislation
Section 20 of the Act, which is in Part 3, provides as follows:
(1) On an application by a party to a domestic relationship for an order under this 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 family constituted by the parties and one or more of the following, namely:
(i) a child of 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.
(2) A court may make an order under subsection (1) in respect of property whether or not it has declared the title or rights of a party to a domestic relationship in respect of the property.
Section 47(1) provides that where, on an application for an order under Part 3 of the Act, the court is satisfied that there is a domestic relationship agreement between the parties that satisfies certain conditions, the court is not, subject to certain exceptions, to make an order inconsistent with the terms of the agreement. One of the conditions is that each party, prior to signing, was furnished with a certificate attesting that a solicitor had provided independent advice: s 47(1)(d). If the conditions are not satisfied, the court hearing the application for an order under Part 3 of the Act may nonetheless have regard to the terms of the domestic relationship agreement: s 47(2).
Background
The following account is based on the findings of the primary Judge.
Mr Ireland was born in 1970 and Ms Pratley in 1966. In 2001, prior to the parties' relationship commencing, Ms Pratley purchased the Bangalow Property for $250,000, borrowing $212,000 for the purpose. Soon after the parties met, Mr Ireland purchased a unit at Bermagui ("Bermagui Property") for $177,000, also borrowing funds for the purpose. At this time, both Ms Pratley and Mr Ireland had relatively well-paying positions.
On 15 October 2003, Mr Ireland sustained a work-related disability.
In June 2007, Mr Ireland received an inheritance of $103,307 from a relative. In October that year, the parties' son was born. Prior to this, Mr Ireland relocated to Bangalow in order to renovate the Bangalow Property. These renovations continued for about six months and cost approximately $58,000. Both parties contributed equally to the cost of the renovations.
After the birth of their son, the family moved to Bangalow.
In February 2008, Mr Ireland received $47,864 from his superannuation fund, being $30,364 in respect of superannuation and $17,500 as an insurance payment for total and permanent disability ("TPD"). In May 2008, he received a further $470,234, comprising $33,734 as a superannuation pay-out and $436,500 as a payment for TPD.
On 29 June 2008, the parties executed the Deed. The Deed provided as follows:
This is a Domestic Relationships Agreement made under Part IV of the Property Relationships Act 1984 the agreement relates to only one asset of the parties being the [Bangalow Property].
WHEREAS:
1. The parties have cohabitated from January 2002 to date and continuing.
2. The parties are desirous of reaching a binding domestic relationships agreement in the form of a Deed concerning the [Bangalow Property].
3. The property was purchased by [Ms] Pratley prior to the commencement of the relationship.
4. Both parties have made a long term commitment to each other.
5. The property was valued by a registered valuer as at April 2007 with a valuation of $465,000.00.
6. As at the date of this agreement approximately $212,000.00 is owing on the mortgage on the property.
7. [Mr] Ireland has contributed and intends to contribute by payment of mortgage, outgoings and towards the cost of renovations and extensions.
8. Both parties intend this agreement to be binding on each other in the event that the relationship between them breaks down irretrievably.
9. This agreement is intended to be binding on each other and full and final satisfaction of either party is claimed against the other with respect to the property only.
THIS DEED PROVIDES AS FOLLOWS:
1. That [Mr] Ireland will pay the sum of $232,500.00 to [Ms] Pratley by payment of the balance of the outstanding mortgage and the balance in cash to [Ms Pratley].
2. Upon the event referred to in paragraph 1 occurring, both parties agree that [Mr] Ireland has 50% share in the property such share is [sic] equitable share or is otherwise created pursuant to this Financial Agreement.
3. Upon the event referred to in paragraph 1 occurring, in the event that the relationship breaks down then [Mr] Ireland agrees to provide first option to [Ms] Pratley to purchase his interest in the property for one half of the property as agreed or failing agreement determined by a registered valuer ...
4. The parties further agree that in the event that the relationship ends and that either party considers that the relationship is at an end then [Mr] Ireland shall move out and grant exclusive occupancy of the property to [Ms] Pratley.
5. This agreement is in substitution of all rights either party has under Part III or V of the Property Relationships Act 1984 concerning the property.
As required by cl 1 of the Deed, Mr Ireland duly paid the sum of $232,500.
In October 2008, the parties commenced a second round of renovations to the Bangalow Property. The total cost was $138,522.78, of which Mr Ireland paid the greater share. His "excess" of contributions to the renovations formed the basis of his claim that Ms Pratley should be ordered to make a payment to him.
Mr Ireland moved out of the Bangalow Property on 1 June 2009, when the parties ended their relationship.
On 8 December 2009, Mr Ireland received a payment of $549,140 following resolution of his common law claim based on his work-related disability. He subsequently received additional payments on account of costs.
Mr Ireland subsequently sold the Bermagui Property for $240,000 and agreed to purchase a property at South Golden Beach for $495,625. Prior to settlement he made a gift of $479,000 to the Ireland Family Trust, which had been established on 30 July 2010. The Trust then lent back this sum to enable him to purchase the house. Although at one stage Ms Pratley sought an order setting aside the gift to the Trust, that claim is no longer pursued.
Primary Judgment
The primary Judge set out (at [20]) the three steps identified by Basten JA in Baker v Towle [2008] NSWCA 73; 31 Fam LR 323, at [43], ordinarily required when applying s 20 of the Act. The three steps are as follows:
(1) identification and valuation of the property of the parties;
(2) identification and valuation of the respective contributions of the parties, of the types referred to in s 20;
(3) determination of what if any order is just and equitable having regard to these contributions.
The primary Judge approached the matter by reference to the three steps identified by Basten JA.
Under the heading "Property of the parties" his Honour set out the property held by the parties at the commencement of their relationship as follows:
Asset
Value
Plaintiff
First defendant
Rankin Drive Bangalow
$260,000
$260,000
Hill Street Bermagui
$177,000
$177,000
Savings
$40,000
$38,000
$2,000
Toyota Corolla Seca
$10,000
$10,000
Holden utility
$25,000
$25,000
Total
$512,000
$308,000
$204,000
Less liabilities:
Mortgage
$371,300
$212,000
$159,300
Car lease
$21,000
$21,000
Total
$392,300
$212,000
$180,300
Net position
$119,700
$96,000
$23,700
Superannuation
$15,244
$15,000
$244
His Honour noted that, in accordance with s 47(2) of the Act, he was entitled to have regard to the terms of the Deed, notwithstanding that Ms Pratley had not received a certificate of independent legal advice as required by s 47(1)(d) of the Act. His Honour found that the effect of the Deed was that the Bangalow Property was thereafter held beneficially by Ms Pratley and Mr Ireland in equal shares.
The primary Judge also set out in tabular form the property held by the parties at the dates of separation and of the hearing. The tables are reproduced below:
At the date of separation:
Assets
Value
Plaintiff
First defendant
Rankin Drive Bangalow
$465,000
$232,500
$232,500
Hill Street Bermagui
$242,000
$242,000
Savings
$139,054
$85,000
$54,054
Holden Vehicle
$21,000
$21,000
Total
$867,054
$317,500
$546,554
Liabilities
nil
Superannuation
$0,000
$514,120
At the date of the hearing:
Asset
Value
Plaintiff
First defendant
Rankin Drive Bangalow
$610,000
$305,000
$305,000
Peter Street South Golden Beach
$495,000
$495,000
Savings
$80,000
$80,000
Furniture & household effects
$61,000
$5,000
$56,000
Motor vehicle
$31,000
$31,000
Total
$1,277,000
$390,000
$887,000
Liabilities:
Loan from Trust
$479,000
$479,000
Other loans
$82,000
$82,000
Credit cards
$20,000
$
$20,000
Total liabilities
$581,000
$
$581,000
Net position
$696,000
$390,000
$306,000
Superannuation
$154,794
$514,120
It was common ground that both tables incorrectly recorded Mr Ireland's superannuation entitlements as amounting to $514,120. That error, so it appears, came about because the tables were actually prepared by Ms Pratley's legal representatives and were incorporated into the judgment without alteration.
The nil figure attributed to Ms Pratley's superannuation at the date of separation was also incorrect. As his Honour subsequently found (at [35]), at the time of separation Ms Pratley's superannuation entitlements amounted to $90,000.
Under the heading "Financial Contributions" his Honour made the following findings:
- Mr Ireland made all contributions in respect of the Bermagui Property. The parties' joint contributions were centred on the Bangalow Property (at [27]).
- At the time of the Deed, both parties had contributed equally to the Bangalow Property (at [28]).
- Mr Ireland contributed $42,010 more that Ms Pratley contributed to the second round of renovations (at [28]).
- The renovations resulted in improvements to the Bangalow Property (at [29]).
- During the relationship, Ms Pratley derived a total taxable income of $645,105, while Mr Ireland's taxable income over the same period was about $423,000 (at [30]). His Honour proceeded on the basis that Ms Pratley's contributions from her salary amounted to $220,000 more than Mr Ireland's contributions from his earnings (at [73]).
- Between February and May 2008, Mr Ireland received the lump sum payments to which I have referred (at [18] above).
- At the time of separation, Ms Pratley had superannuation entitlements of $90,000 (at [35]).
- The sums which Mr Ireland received in respect of TPD prior to the separation were used by him to acquire his share in the Bangalow Property and to pay out the mortgage on the Bermagui Property (at [36]).
- After separation, Mr Ireland received a total of $676,768 in respect of the settlement of his common law claim (at [37]).
- The award of damages was substantially in respect of his loss of future income (at [38]). In these circumstances, his Honour considered that the post-separation payments were not to be taken into account, even though they were reflected in the parties' assets at the date of the hearing (at [39]).
- The primary Judge then considered and rejected (at [42]-[44]) a contention by Ms Pratley that Mr Ireland had not accounted for $345,000 of the total amounts he had received during their relationship. His Honour considered it unlikely that Mr Ireland was hiding a large sum of the money.
Under the heading "Non-financial contributions", the primary Judge recorded the parties' submissions and made these findings:
45 In relation to the homemaker contributions, [Ms Pratley's] submission is that contributions of this nature were more or less equal. [Mr Ireland] did the majority of the cooking with [Ms Pratley] assisting by peeling vegetables, making salads and cleaning up and [Ms Pratley] doing most of the cleaning of their accommodation. I accept this submission.
...
48 It should be noted that apart from a period of part-time work after the birth of [their child], [Ms Pratley] was in full-time employment for the period of the relationship whereas [Mr Ireland] was not working and in receipt of workers compensation payments after the workplace accident in October 2003. He thus had time available when he was fit enough to do some work.
...
53 On a number of occasions [Mr Ireland] was released into [Ms Pratley's] care after having tried to self-harm and [Mr Ireland] was also admitted to hospital for treatment and for anger management. ...
54 [Mr Ireland] did not dispute that he became emotionally abusive towards [Ms Pratley] with the police being called on at least one occasion to subdue him. He did not dispute that [Ms Pratley] took time off work to care for him and that she used up her annual leave each year for four years and all her sick leave so that she could look after him.
55 [Mr Ireland] acknowledged the support [Ms Pratley] provided to him in attending conferences with him and his lawyers, arranging representation of Queens Counsel for him, attending assessments and examinations with him as arranged by his lawyers and the insurers' lawyers.
56 [Mr Ireland] did not dispute [Ms Pratley's] personal effort in contacting and liaising with the officers of [the superannuation fund] in regard to the early release of his superannuation benefits.
57 [Mr Ireland] did not dispute the evidence in [Ms Pratley's] case that she became affected by the changes in his behaviour after the accident in that she was constantly worried and anxious about him. In my view, the care and support which [Ms Pratley] gave [Mr Ireland] was substantial as he was seriously affected by the accident. When one has regard to the homemaking contribution of [Ms Pratley], her non-financial contributions far exceeded those of [Mr Ireland] and should be given appropriate weight in the adjustment process.
The primary Judge then considered the respective claims made by the parties. He recorded that Ms Pratley had reduced her claim and that she now sought orders that she receive sole ownership of the Bangalow Property and a payment of $45,000 from Mr Ireland. Mr Ireland sought to recover from Ms Pratley the excess of his renovation contributions which, in final submissions, he quantified at $54,022. Mr Ireland also sought an order that the Bangalow Property be sold and the proceeds divided equally between the parties.
The primary Judge considered at some length the authorities setting out the principles to be applied in an application under s 20 of the Act. His Honour then stated his conclusions as follows:
68 It can be seen that from a financial perspective the parties have both contributed to Bangalow and there has been no contribution by [Ms Pratley] to the Bermagui property, which was owned by [Mr Ireland] before the relationship and was sold by him after the relationship. [Mr Ireland] had met all the mortgage payments on this property up until the time he paid the mortgage off. ...
69 In respect of the Bangalow property, leaving aside the question of the 2008 renovations, the parties contributed equally to this in a financial sense. Their contributions both financial and otherwise were all focused on the Bangalow property. Accordingly it seems to me that the Bermagui property can be put aside and the focus will be on my assessment of the remaining assets of the parties in approaching the matter on a global basis.
70 [Ms Pratley] seeks to justify her claim in receiving the whole of the Bangalow property and $45,000 upon her non-financial contributions which included her support and help for [Mr Ireland] in the course of his illness throughout nearly all of the relationship.
71 On the financial side, there is the large difference in the parties' salaries. [Ms Pratley] brought to the relationship $220,000 more than [Mr Ireland] in this regard. There is no suggestion in this case that funds were spent on matters separate to their joint endeavours. There was also [Mr Ireland's] contribution of his inheritance of $103,378.90.
72 Given that I accept that Bangalow is owned equally this takes account of [Mr Ireland's] use of his funds received in 2008 of $232,500 to acquire the interest. He also used these funds to pay out the mortgage on Bermagui of $145,378 which I put to one side. The total of this is $377,878. In 2008 he received $518,098 and thus he also contributed about $140,220 of these funds to their joint endeavours and to the payment of mortgage instalments on Bermagui for 18 months when it was vacant of about $12,000. The amount for their joint endeavours is thus $128,220.
73 One thus has [Ms Pratley] on the salary side contributing $220,000 more, and [Mr Ireland] from his receipts contributing $230,000, with Bangalow owned equally.
74 Any further adjustment of this interest in the only relevant property will require a consideration of the non-financial contributions and the parties' superannuation resources. [Mr Ireland's] superannuation has been used by him in the [parties'] joint endeavours and [Ms Pratley] still retains her superannuation resource of $154,794.
75 Bangalow has lost value and is now worth $610,000. Bearing in mind all the relevant matters, it seems to me that an appropriate adjustment is for the Bangalow property to be held as to three-quarters for [Ms Pratley] and to one quarter for [Mr Ireland]. It may be that [Ms Pratley] would seek to buy [Mr Ireland's] one quarter interest and the orders should provide for this contingency.
Finally, the primary Judge dealt with costs. He said that the issue had to be resolved by reference to Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.1, which provides that costs follow the event unless it appears to the court that some other order should be made. It was therefore necessary to determine what constituted the relevant "event" (at [79]). This required an evaluation of the outcome of the proceedings, the positions adopted by the parties during negotiations and their relative success in the matter.
The primary Judge referred to the positions adopted by the parties in their respective pleadings. He continued:
84 ... [Ms Pratley] had a far higher starting point at the commencement of the proceedings. She maintained this throughout the hearing until final submissions after evidence. Her then claim was for her to have the whole of the Bangalow [Property] and $45,000. [Mr Ireland's] claim was to have half of Bangalow and $42,000. The parties were then almost the same distance apart from the result by the time of submissions.
85 This indicates [Ms Pratley] taking a far higher position than [Mr Ireland] from the result for almost all of the proceedings. In these circumstances, there should be an order for costs in [Mr Ireland's] favour. The amount of that order should reflect that [Mr Ireland] still maintained a higher claim than he ultimately obtained. It would be appropriate for [Ms Pratley] to pay three-quarters of [Mr Ireland's] costs on the ordinary basis.
Reasoning
Ground 1
Mr Anderson, who appeared for Mr Ireland, accepted that the correct approach to an application for adjustment of property interests made under s 20 of the Act is that stated by Basten JA in Baker v Towle, at [43]; see also Chanter v Catts [2005] NSWCA 411; 64 NSWLR 360, at [22] per Hodgson JA. Mr Anderson also accepted that Bryson JA in Chanter v Catts, although in dissent as to the result, correctly explained the nature of the discretion conferred by s 20. Bryson JA said this:
65 The discretion while wide is not unlimited; the perception of what is just and equitable relates to the contributions referred to in par (a) and par (b) and not to some other or wider view of just and equitable adjustment of interests in property. ...
66 What I understand to be established by the majority view in Evans v Marmont [(1997) 42 NSWLR 70] is to this effect:
(a) The factors referred to in par (a) and par (b) of s 21 are fundamental factors influencing the judgment of the Court.
(b) Considering contributions and nothing else cannot lead to any view on what is just and equitable in the circumstances.
(c) Factors other than contributions can have no independent bearing on what is just and equitable: they have only such relevance as they may have to the question: what is just and equitable having regard to the contributions of the parties?
(d) Factors other than contributions mentioned in s 20(1)(a) and s 20(1)(b) may be relevant to answer the question whether the contributions of one party have been sufficiently compensated.
(e) The financial circumstances of the parties are relevant to ascertain the property of the parties at the time of the hearing, to which any adjustments of interest are to be made.
(f) The needs and means of the parties have general relevance as subsidiary factors to the question of what is just and equitable having regard to the contributions of parties; but otherwise the needs and means of the parties have no relevance, and a disproportion in their assets is not a reason why it is just and equitable to make an adjustment.
(g) It would be unrealistic to attempt to evaluate contributions of the kinds referred to in s 20(1)(a) and s 20(1)(b) for the purpose of determining what is just and equitable having regard to those contributions in isolation from the nature and incidents of the relationship as a whole.
(h) Often it may be found that contributions of the kind referred to in s 20(1)(b) would involve shared activities or reciprocal benefits which do not give rise to any disproportionate burden which it would be just and equitable to satisfy by an adjustment of interests in property.
In his oral submissions, Mr Anderson referred the Court to observations of Beazley JA (with whom McColl and Macfarlan JJA agreed) in Separovich v Ferrao [2011] NSWCA 180:
[36] There are, as might be expected, a plethora of authorities as to how the court should approach an adjustment of property under s 20. It is sufficient for the purposes of this case to refer to the following. In Manns v Kennedy [2007] NSWCA 217, Campbell JA (Santow JA and Bryson AJA agreeing) observed, at [62], that under s 20, the court was required to make a holistic value judgment in the exercise of a discretionary power of a very general kind ...
[37] However, that "holistic value judgment" is the final step in the process of arriving at an order, being the just and equitable adjustment of property, having regard to the contributions identified in s 20. Before the court can make that final determination, it is necessary to identify and value the property in respect of which it is open to the court to make an adjustment and to identify and value the contributions that are being taken into account ...
[38] The authorities recognise that notwithstanding that the court exercises a wide discretion under s 20, a mathematical calculation of the contribution of the parties is of assistance in finding and testing conclusions as to what is just and equitable and in promoting transparency and consistency in decision-making ...
[39] The discretionary considerations that may influence and/or determine the ultimate order made depend upon the particular circumstances of the case. As Ipp JA observed in Bilous v Mudaliar [2006] NSWCA 38; 65 NSWLR 615 at [63]:
Determinations as to what orders should be made under s 20 are to be made solely on the grounds of the justice and equity of the case. The justice and equity of the case may derive from the fact that the party who owns the family home or other property was able to retain that property, while the market value increased, because "of joint efforts of wage earning, homemaking and parenting, and mutual support". In some instances the non-financial contributions of one party may result in property of the kind in question not having to be sold. In other instances, the non-financial contributions of one partner may allow the other to advance his or her career and earn a high income that enables the property in question to be maintained and retained. Thus, an increment in capital value may well result, indirectly, from "joint efforts of wage earning, homemaking and parenting, and mutual support.
The primary Judge quoted each of these passages in his judgment. Nonetheless, Mr Anderson submitted that his Honour had failed to give separate consideration to whether it was just and equitable to make an order varying the parties' respective interests in the Bangalow Property as settled by the terms of the Deed. Since his Honour had failed to identify why it was just and equitable that Mr Ireland should be deprived of a quarter interest (half of his own interest) in the Bangalow Property, he had committed an error of law.
This submission does less than justice to the primary Judge's reasoning. His Honour did not merely set out the three step process outlined by Basten JA in Baker v Towle; he used it as the framework for his judgment. His Honour identified, in order:
- the property held by the parties at the commencement of the relationship, the date of separation and the date of the hearing;
- the financial contributions made by the parties to the acquisition, conservation and improvement of their property;
- the parties' respective non-financial contributions to the welfare of the family; and
- whether any order should be made adjusting their respective interests in property, particularly the Bangalow Property.
The primary Judge made a careful mathematical calculation of the parties' respective financial contributions. He concluded that Ms Pratley's contributions from her salary exceeded those of Mr Ireland by about $220,000, but that this was offset by the fact that Mr Ireland had contributed about $230,000 more than Ms Pratley to the parties' joint assets from his capital (his inheritance of $103,378 and $128,220 paid out of the amounts he received in 2008: see at [72]). However, he also concluded that the care and support which Ms Pratley gave to Mr Ireland justified a finding (at [57]) that her non-financial contributions "far exceeded those of [Mr Ireland] and should be given appropriate weight in the adjustment process".
It is quite clear that the primary Judge gave consideration to whether the parties' existing interests in property should be varied. He found that Ms Pratley's disproportionate non-financial contributions to Mr Ireland's welfare justified the adjustment of interests in property that he ordered. It may be that not every decision-maker would have exercised the discretion conferred by s 20(1) of the Act in the same way, but that does not establish that his Honour erred.
The primary Judge did not make the error attributed to him in Ground 1 of the notice of appeal.
Ground 2
I have referred (at [29] above) to the error concerning Mr Ireland's superannuation entitlements in the tables reproduced in his Honour's judgment. As Mr Anderson conceded in oral argument, a reading of the judgment as a whole makes it plain that the primary Judge was well aware that by the time of the separation, Mr Ireland had withdrawn his superannuation entitlements: see at [74]. The error in the tables came about because his Honour incorporated the tables provided by Ms Pratley's legal representatives. The errors identified in Ground 2 were not material to the outcome.
Ground 3
The complaint that the primary Judge erroneously found that homemaker contributions favoured Ms Pratley rests on a misreading of the judgment. It is true, as Mr Anderson submitted, that his Honour found that the parties' homemaker contributions were approximately equal. His Honour distinguished, however, between homemaker contributions and other non-financial contributions, in particular Ms Pratley's role as Mr Ireland's carer, which his Honour detailed in the judgment, at [52]-[56].
Mr Anderson read the last sentence of [57] of the judgment as containing an internal contradiction. In context, however, it is clear enough that his Honour was intending to say that homemaker contributions were approximately equal (as he had previously found at [45]), but that there was a considerable disparity in other non-financial contributions. There was no internal contradiction.
In his oral submissions, Mr Anderson added an argument that was not covered by any ground of appeal and was not referred to in his written submissions. He contended that although the primary Judge referred to the Deed, he did not take it into account when deciding that it was just and equitable to alter the parties' interests in the Bangalow Property. Mr Anderson pointed out that the Deed had been entered into only six months before the relationship ended, at a time when Ms Pratley had already made most of her non-financial contributions to the relationship. Yet the Deed provided for the parties to have an equal share in the Bangalow Property.
Ms Gleeson SC, who appeared on behalf of Ms Pratley, did not object to Mr Anderson raising the argument, but she pointed out that Mr Ireland made no submission to the primary Judge that the Deed should be given significant weight on the question of the adjustment of the parties interests' in property. She also pointed out that the Deed was concerned only with the parties' financial contributions to the acquisition, maintenance and improvement of the Bangalow Property. It did not purport to address the parties' non-financial contributions to the relationship or their respective claims to other property or to monetary payments.
Section 47(2) of the Act permitted the primary Judge to have regard to the terms of the Deed but did not oblige him to do so. In the absence of a submission that he should give the Deed particular weight and in view of the limited scope of the Deed, his Honour was not obliged to do more than he did. No error has been demonstrated in the way in which his Honour dealt with the Deed.
Ground 4
It follows from what I have said that the primary Judge gave adequate reasons for his decision. He explained the basis of the "holistic value judgment" he was required to make.
Costs
Neither party disputed that his Honour correctly stated the principles governing the award of costs in proceedings under s 20 of the Act. His Honour quoted from the judgment of Beazley JA in Baker v Towle, where her Honour considered the approach to determining the relevant "event" for the purposes of UCPR, r 42.1. The passage quoted by the primary Judge is as follows:
[22] ...on the approach adopted by the court on the leave application in [Vollmer v Davidson [2006] NSWCA 79], "the event" may be identified in a variety of ways in the one case. It would be odd and, indeed, unfortunate, if the identification of "the event" in one way resulted in an order for costs, on the basis of "costs follow the event" whereas a different, but equally appropriate identification of "the event" meant a different application of the rules. The oddness in there being different possible applications of the rule (in this respect I am not referring to the exercise of the discretion under the rule) depending on the identification of "the event" raises in my mind the question whether this is the correct approach. In most cases, the costs order will almost invariably depend upon the exercise of the discretion.
[23] The real question is what is the appropriate order for costs. An obvious starting point is the pleadings. However, the identification of the issues in the pleadings is likely to be only one of several considerations relevant to the costs order that ought to be made. The considerations may include whether any offers of settlement have been made and if so what those offers were. The discretionary considerations may also include the manner in which the proceedings are conducted. These are but two examples. There may be a whole range of relevant circumstances depending upon the particular case.
[24] ...I would therefore prefer to treat the identification of the issues that arise on the pleadings as part of the consideration of matters relevant to the court's discretion. In my opinion, that gives proper effect to r 42.1 and is consistent with the authorities...
[25] ...It will be apparent from what I have said, that where an order for adjustment is made, the costs order made will rarely, if ever, depend simply upon which party commenced proceedings. The question of costs needs to [be] assessed in accordance with the facts and circumstances in each case and as the analysis undertaken by the court in Vollmer indicates, no principles or general guidelines have emerged in cases under the Property (Relationships) Act.
Ms Gleeson submitted that the orders achieved a result that was more or less mid-way between the respective positions adopted by the parties in their final submissions and that his Honour had failed to take that outcome into account in ordering Ms Pratley to pay three-quarters of Mr Ireland's costs. But his Honour expressly recognised (at [84]) that, by the time of final submissions, the parties were almost the same distance apart from the result. His Honour took into account that Ms Pratley's starting point in the proceedings was far higher than that of Mr Ireland and that she maintained her position until final submissions. His Honour had in mind that Ms Pratley had unsuccessfully contended that Mr Ireland had not accounted for $345,000 in assets and had initially sought orders entitling her to 45 per cent of the "total net property" (presumably including the Bermagui Property). Ms Pratley's pleaded case also included a claim to set aside Mr Ireland's gift of $479,000 to the Ireland Family Trust, but she ultimately did not pursue that claim. His Honour no doubt took that unsuccessful claim into account in making the costs order.
In these circumstances, I see no error in the exercise of his Honour's discretion as to costs. The orders reflected the greater, but not complete success achieved by Mr Ireland in the litigation. It is true, as Ms Gleeson submitted, that a costs order in a case such as this may have serious consequences for a party, but that is a necessary consequence of the costs regime that is in place under the UCPR where parties engage in hard-fought litigation.
For similar reasons, Mr Ireland's appeal against the costs order must be dismissed.
Orders
I propose the following orders:
1. Appeal dismissed.
2. Cross-appeal dismissed.
3. The appellant pay the respondent's costs of the appeal.
4. The respondent/cross-appellant pay the appellant/cross-respondent's costs of the cross-appeal.
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Decision last updated: 07 January 2014
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