Jones v Martin

[2000] NSWSC 1112

CITATION:	JONES v MARTIN [2000] NSWSC 1112
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 1224/2000
HEARING DATE(S):	07/11/2000 and 08/11/2000
JUDGMENT DATE:	13 December 2000
PARTIES :	Ann Melody Jones v Patrick John Martin
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr G. Rich for plaintiff Mr J. Wilson for defendant
SOLICITORS:	Penninsula Law for plaintiff T.H. Drake for defendant
CATCHWORDS:	Family Law. Application under Property Relationships Act for adjustment of parties' interests in property. Orders made. No matter of principle.
CASES CITED:	Calverley v Green 155 CLR 242; Green v Robinson (1995) 36 NSWLR 96; Black v Black (1991) 15 Fam LR 109
DECISION:	Para 34

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

Wednesday 13 December 2000

1224/2000 ANN MELODY JONES v PATRICK JOHN MARTIN

JUDGMENT 1 MASTER: This is an application under s 20 of the Property Relationships Act seeking adjustment of the parties’ interests. The parties were in a defacto relationship for the period from May 1996 until 22 June 1999. There were no children of the relationship although the plaintiff had two children by a former marriage who lived with the parties during the period of their relationship. 2 The plaintiff was born on 18 September 1957. She had two children, Leanne born on 10 July 1984 and Vanessa born on 15 November 1986. She entered into a property settlement in 1991 as a result of which she purchased a property at 7 Dorothy Avenue, Woy Woy using the property settlement proceeds and a mortgage. Her marriage was dissolved in 1992. She had met the defendant after she had separated from her husband in 1990. The plaintiff and the defendant started going out together over the ensuing years. In 1996 the plaintiff and the defendant agreed to buy a house together and to live together in that house. The arrangement was that the plaintiff would sell her house and the defendant would sell his house which was located at 690 Pacific Highway, Narara. The plaintiff sold her house in Woy Woy in May 1996 for $146,000 and after discharging the mortgage she was left with $97,000. The two of them purchased 14 Rawson Road, Woy Woy on 2 May 1990. The property was purchased as tenants in common for the sum of $275,000. However, the defendant did not sell his property as, according to him, the market had dropped. Instead he extended a mortgage that already existed over his house to provide funds for the deposit on the new property. 3 Both parties were in employment. The defendant operated his own business as a concrete pumper and the plaintiff was engaged in the Home Care services as a field officer doing cleaning and personal home care. From time to time the plaintiff assisted the defendant by working in his business. In March 1998 she sustained an injury to her back during her employment with Home Care Services. She ceased that work and received workers’ compensation payments in respect of that injury. 4 In September 1998 the plaintiff and the defendant began carrying out improvements to the property. It seems that the property was an old and run down property on the waterfront purchased with a view to it being improved in the future. These improvements were carried out through until early 1999. In February 1999 the defendant sold his property at Narara for $112,500 from which he received after the discharge of mortgages, some $25,000. Those sums do not seem to have been used to contribute to the joint assets. 5 It is useful to note the parties’ property at the commencement and the conclusion of the relationship. At the commencement the plaintiff had her interest in 7 Dorothy Avenue, Woy Woy worth approximately $97,000. She had some furniture. 6 The defendant for his part had the following:-

Plant and business equipment $30,000

690 Pacific Highway, Narara $110,000
Superannuation 12,390
Furniture 10,000

7   He had debts being a personal loan for a truck of $12,274 and a mortgage over Narara for $46,000. 8   At the conclusion of the relationship the plaintiff had an interest in property at:-

14 Rawson Road, Woy Woy, $ Unknown
Superannuation $3,215.39

9   The defendant had the following property:-

Pump and plant equipment $20,000
Superannuation $38,946
Furniture $10,000
Ski Boat $ 8,000
Interest in property 14 Rawson Road $ Unknown

10   At the conclusion of the relationship the plaintiff moved out of the home. She obtained an Apprehended Violence Order against the defendant because of some violence that had occurred in the latter stages of the relationship. The defendant remained in occupation of the property and he continued to pay the mortgage instalments of $350 per week and to meet the outgoings on the property. There is evidence before me, and the parties are agreed, that the current value of the property is $520,000. The current rental value appears to be between $290 and $300. There is presently a mortgage on the property. At 21 January 2000 the mortgage debt was $124,160.81 and at 20 April the mortgage was $122,211. One could thus expect after allowing some $18,000 for expenses on sale that the parties’ interest in the property would be $380,000. The only other property which the parties have acquired during the relationship is, first, some furniture which they have shared after the conclusion of the relationship. Secondly a boat purchased for $8,000 by the defendant and thirdly a further runabout boat purchased for $3,100. These boats have been retained by the defendant.

Financial Contributions

11 I turn to the financial contributions of the parties to the relationship, first in respect of the house, 14 Rawson Road, Woy Woy. The purchase price was $275,000. The plaintiff had contributed $97,000 in cash. The defendant borrowed on his existing property additional funds and paid the deposit of $27,500. He also paid legal costs of $1,315 and the stamp duty of $8,100. In order to pay the stamp duty the defendant took out a personal loan which he repaid during the period of the relationship. The balance of the purchase money was borrowed from the Westpac Bank, the initial amount of the loan being $150,000. If one factors in at the commencement the costs and stamp duty as part of the purchase price one has the plaintiff contributing 72% to the property and the defendant 28%. This approach as advanced by the plaintiff treats the mortgage liabilities of both parties as a neutral liability. It is hard to see that it is a neutral liability as both parties have undertaken an obligation to meet the liability under the mortgage. If one were to look at the matter in terms of the parties then equal ownership following the principles in Calverley v Green 155 CLR 242 one would also add in the liability assumed by each party under the mortgage. See generally the comments in the Chief Justice’s judgment at page 251.3, at 252.8, that of Justices Mason and Brennan at 257 and Mr Justice Deane at 267.8. The mortgage was, as I have indicated, $150,000. There were also establishment fees of $1,070. Including one half of the mortgage and establishment fees one finds that the plaintiff’s contribution is $173,339.60 and that of the defendant $112,450. The total purchase price is thus $285,789. The percentage of the plaintiff’s interest was 60.65 and that of the defendant 39.35. 12 The next area to deal with is the question of improvements to the property. Exhibit 5 is a list of improvements in respect of which receipts or documentary evidence were available which the defendant says he paid. The plaintiff made it clear in her evidence that she contributed to these in that at times she would give cash monies to the defendant to help him meet these payments. That contribution of the plaintiff can be considered later in terms of the overall contribution of the parties to the relevant properties in question based upon their earnings. The amount claimed by the defendant in this exhibit, excluding an amount of $250 and $75, which appear to be in error comes to $56,622. 13 There was substantial criticism of that claim because there were three items where it is clear that the defendant did not pay cash for the work done but in fact traded his own labour for the provision of those services in refurbishing the home belong to him and the plaintiff under a barter arrangement. The first amount concerned was for GS & AM Uptin for $24,529. This seems to have covered a substantial amount of internal works such as renovation to the kitchen and the like. The second was Gribbles for landscaping amounting to $3,800 and the third C & J Creative Concreting for labour and concrete for a pool surround amounting $1,200. In respect of these amounts the plaintiff herself did not assert that work of this nature was not done. The work seems to have been done and she herself has no knowledge of whether or not it was an appropriate amount. The system under which the work was done is one which is perhaps not unusual and probably fairly common where one contractor will do work for another in exchange for the other’s services in due course. Given that the relevant contractors were prepared to put their claims in writing it seems to me that there is a real probability that their claims are probably approximately correct. In particular, the largest one, Uptins, goes into a substantial amount of detail in setting out the amount of work done. Although the defendant was not a very satisfactory witness in some respects I am prepared to accept this evidence that he has done work in exchange for these amounts. He should be credited with the value of the work which is referred to in the documents. The defendant suggests that because this amount was an improvement to the property that it should be used to increase his share the proportionate ownership. This would involve his proportion reflecting an increase in value to the extent of the improvements. 14 The evidence would perhaps not support the underlying assumption that the improvements produced a corresponding increase in the value of the property. One notes from the valuation as at August 2000 that the land value was $380,000 and the depreciated value of the improvements was $140,870. As the property was purchased for $275,000 in May 1996 there clearly has been a substantial increase in the land value. In addition in September 1998 the defendant in his application to the bank for funding to commence the improvements, put the value of the house at $510,000. This figure, although not a valuation figure, merely a suggestion of the defendant’s at the time, would suggest that improvements that were made thereafter, which was in fact the majority of the improvements, over capitalised the property. Given this fact and the time difference between expenditure on improvements, namely, late 1998 to 1999 in contrast to the purchase of the property in 1996 would tend to indicate that a more appropriate method of approaching the adjustment of the parties’ interests might be to allow some allowance to the defendant for improvements and thereafter adjust the parties’ interests by reference to a percentage to reflect their initial ownership and accruing of the inflationary benefit. 15 The other major areas of financial contribution relates to the contributions to the household and repayment of the mortgage throughout the period of the relationship which was for a little over three years. The most accurate way to do this is to look at the income of the parties over the period and compare it after making allowance for external expenditure. 16 The plaintiff’s taxable income for the three relevant years in question was $37,652. In respect of that it seems undoubted that an amount of $5,200 being group certificates issued to her by the defendant from his business were not reflected in actual cash paid to her. Thus the amount of her wages was some $32,452. In addition, over the period she received by way of maintenance from her former husband for child support the sum of $20,038. This puts the total available income for the plaintiff at $59,490. 17 The defendant, for his part, had drawings during the three years from his business of $124,860. It will be recalled that he took out a loan of some $15,000 in September 1995 which was used as to $7,000 for payment for the pool, part of the extension and $8,000 to purchase a boat which he subsequently improved. After allowing for the barter amounts in the improvements and the above $7,000 the amount of the income of the parties the defendant claims he spent on the improvements was $20,093. That should be taken off as it will be dealt with elsewhere in the adjustment process. He thus has an available income of $104,761. Out of that he also paid back a personal loan for the stamp duty of $8,100 and a business loan of $12,390. This leaves a balance of some $84,277. These figures are not precise because there would have been interest on the personal loan and also on the other loan, $80,000 is an appropriate figure to adopt. One thus has a difference between the parties’ contributions of approximately $20,000 in favour of the defendant. 18 I do note that the defendant has kept the boat which was the subject of the loan for $8,000. As I would propose in the adjustment process to allow him to retain this then no account should be taken of this liability on his part. Similarly the defendant will retain his business which has continued to occupy him since the termination of the relationship. There was the sale of the defendant’s property which occurred towards the end of February 1999. That produced, as I have indicated in the chronology, a net benefit to the defendant of some $25,000. Those funds have been retained by the defendant and have not been used for the purposes of the relationship or the property which calls for adjustment. Most likely they have been retained by the defendant in his business. The funds were received well after the improvements were carried out and at a time approaching the breakdown of the relationship between the parties. 19 One of the things the defendant did say in his evidence was that he had a fund of cash kept at home under the bed which represented long term savings. This was not referred to in his affidavit evidence or applications to the bank for finance. It seemed to me to be a spur of the moment attempt to explain what might have appeared in cross examination to be a deficiency in funds to support his story. Be that as it may it seems to me that given the figures to which I have referred that it is inherently likely that the defendant had sufficient funds from his business to be able to make the additional expenditures in cash on the improvements that he claimed he made. 20 In summary, if one take into the adjustment process the differential in favour of the defendant of some $20,000 for contributions based upon the income of the parties, it is not relevant to determine whether any particular party made all the mortgage payments or paid all the telephone and electricity accounts. 21 It is thus necessary to look at the non-financial adjustments.

Non-financial adjustments

22   The first area of these is the work put into the renovations. The defendant estimated that he put about 40 and a half days of effort into the improvements on the property and gave details of the work. With some of these there is some doubt such as the erection of the bullnose verandah by contractors who worked on that and charged for it. It is also clear that the plaintiff assisted with some of these items. For instance with the painting she did the cutting in work while the defendant did the painting which required a roller. The plaintiff also claimed that she helped move materials which were taken down such as bathroom tiles and put them outside. It is hard on the amount of the evidence to come to a definitive conclusion on this aspect but this I am prepared to accept that both parties contributed. However, the defendant, in my view, probably is more likely to have contributed a much greater amount than the plaintiff to the renovation work.

Parenting contributions

23   The children of the plaintiff were part of the household and the defendant suggests that he contributed to their parenting. The value of this I would not have thought was substantial particularly as it appears the defendant refused to look after the children when the plaintiff went overseas on a holiday for two weeks. The plaintiff had to arrange for her friends to look after them. The opportunity for the defendant to do so was probably less likely given that the family as a whole did not go out on outings on a frequent basis. 24   In the result I am satisfied that the preponderance of the parenting responsibilities fell upon the plaintiff for the three years of the relationship. At the commencement of the relationship the children were 10 and 12 years old so there would have been a reasonably heavy burden on the plaintiff although she and the defendant worked.

Homemaking contributions

25   There was some not unusual disputes as to the extent of these contributions in the homemaking area. The plaintiff conceded that the defendant mowed the lawns and cleaned the pool but did little, if anything inside the house. I accept that the plaintiff did the majority of the cooking and household chores although she was assisted in this regard by her children who also joined in and did household chores such as vacuuming.

Emotional Support

26   The defendant claimed to have provided the plaintiff with emotional support during her injury but the evidence did not satisfy me that this was to any substantial extent.

Superannuation

27 The other area that needs to be considered in this matter is whether there has been any contributions to a party’s superannuation. The plaintiff obtained a very small amount of superannuation, no doubt reflecting her limited work while the defendant achieved an increase in his superannuation during the period of his employment of $26,556. 28 In Green v Robinson, (1995) 36 NSWLR 96 the Court, inter alia, dealt with the way superannuation should be dealt with. His Honour, the President, at p 103 of the judgment had the following to say in relation to superannuation:

"It is as erroneous to ascribe the superannuation payments to the separate and differentiated income of the parties as it is to ignore superannuation altogether. Despite equal pay legislation, and industrial decisions to the same end, it is well known that in Australia, female earnings are typically lower than male earnings. Inherent in the notion that each 'owns' the superannuation entitlements accumulated from his or her income, in an inescapable bias against vulnerable (usually female) members of a marriage or marriage-like relationship. This is a bias which the Act, far from condoning, forbids. By section 3(1), the Act requires, in relation to 'de facto partners or either of them', that the financial resources, which must be taken into account under section 20(1) of the Act, are to include entitlements under a superannuation scheme. This is therefore something which, in the exercise of the section 20(1) discretion, the Court must view as belonging not to Mr Robinson separately however he actually banks or notionally receives the contingent benefit, but to the financial resources of the parties which need to be adjusted, having regard to the contributions 'made directly or indirectly' by them. Conformably with the language of the Act and applicable jurisprudence which has developed in the Family Court on analogous problems, it is my view that Ms Green made an indirect contribution to Mr Robinson's superannuation entitlements. Just as he did to hers. The only difference is that his entitlement was more substantial. This was because of its longer duration and because of his higher base income.
I shall assume that the contributions to superannuation made before the relationship commenced to be disregarded. See Lipman v Lipman (1989) 13 FAM LR 1; DFC 95-068 (SCNSW). Both parties argued the case on this basis, although it is not without controversy and contrary opinions exist. See e.g. In The Marriage of Gill (1984) 9 FAM LR 969.
The funds must therefore be reduced pro rata for the contributions made before 1974. I agree generally in the approach of Cole JA to this adjustment. But, with respect, the error in his Honour's approach, is to require, in effect, proof by evidence of the direct or indirect contributions made by Ms Green to Mr Robinson's accumulating superannuation entitlements during the relationship. Such proof is not required in cases under the Family Law Act. In my view, the express mention of superannuation entitlements in section 3(1) of the De Facto Relationships Act, makes it plain that Parliament accepted that ordinarily, partners to such relationships would be making at least indirect, if not direct, contribution to the accumulation of the form of savings which superannuation constitutes. That, in my view, gave Ms Green, for the period of the relationship at least, such a stake in that aspect of the 'financial resources' of Mr Robinson, as must be reflected in a 'just and equitable order', designed to adjust the interests of the partners, as section 20(1) of the Act requires."

29   Powell J at 108 of his judgment referred to the need to establish that one of the parties had in some way contributed to the other's superannuation entitlements and that by reason of that contribution, it was "just and equitable" that some order based upon, or derived from, those entitlements should be made. Cole JA dealt with the matter at 118 of his judgment and inclined to the view that there was no evidence in the case to suggest that the appellant had made any contribution, direct or indirect, to the respondent's present superannuation entitlement, it being a deduction from his service pay. He held that a similar situation pertained to the appellant's superannuation.

30   It is not easy to reconcile the different views but it would appear from the comments of Powell J and Cole JA that there must be some factual matter which enables one to form the view that there had been a contribution to a spouse's superannuation entitlements. A common example of this would be a partner who stays at home to look after children thus enabling the other partner to go to work and earn a superannuation entitlement.

31   It is difficult to see how the plaintiff has in fact contributed to the defendant’s increase in superannuation. There was reference to the fact that she assisted him at work and, for instance, drove him to jobs because he could not drive. She suggested that this allowed him to earn income which was somewhat higher from which he was able to accumulate the superannuation. The evidence in this regard is sparse and I am not satisfied on the evidence before me that the plaintiff has contributed in a factual way towards the defendant’s increase in superannuation. Accordingly, I put the superannuation aside from the adjustment process.

32 If one looks at the matters that require consideration in the final adjustment process one has, of course, the initial contributions of 60.65% and 39.35% which I have identified and the amount of the improvements. The improvements were done at a time when the parties contemplated a continuing relationship and it is only now that it is appropriate to make some adjustment for this cash item. In these circumstances I would not see it appropriate to allow any interest component in respect of the adjustment of such a cash item and I would propose that the amount be deducted from the sale proceeds for the benefit of the defendant before applying a percentage approach to the adjustment required. 33 The parties are agreed that the house property will have to be sold and this, after costs and the discharge of the mortgage, is likely to produce a figure in the order of $380,000. 34 There is the predominance of expenditure in favour of the defendant by some $20,000 and one then has to take into account on the defendant’s part his greater contributions to the physical work on the renovations. There is also the homemaker and parenting contributions of the plaintiff which have to be recognised in a real and substantial way. See Black v Black (1991) 15 Fam LR 109. Although homemaker contributions are important in this case both parties worked and probably the greater component is that attributable to parenting the young teenage children. The defendant has had the benefit of occupation of the property since June 1999 which is worth $300 per week. He has also made repayments on the mortgage of $350 per week and, accordingly, should be credited with $3,500. Taking these matters into account it seems to me that the appropriate way to resolve the matter is to allow a deduction from the net sale price of the improvements in the sum of $56,622 and then apply proportions of 35 percent and 65 percent to the balance to determine the parties’ entitlement. The plaintiff is to be credited with the 65 percent and the defendant is to be credited with 35 percent plus the sum of $56,622. 35 I direct the parties to bring in short minutes to reflect these reasons. Subject to submissions, the defendant should pay the plaintiff’s costs.

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Last Modified: 12/14/2000