L v C
[2011] SADC 88
•24 June 2011
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
L v C
[2011] SADC 88
Judgment of Her Honour Judge Cole
24 June 2011
FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS - ADJUSTMENT OF PROPERTY INTERESTS - RELEVANT CONSIDERATIONS
Property division - question of when de facto relationship began - consideration of contributions of parties - approximately equal division appropriate.
De Facto Relationships Act 1996; Domestic Partners property Act 1996, referred to.
Karpathiou v Clemente [2008] SASC 316; D v McA Supreme Court of New South Wales (Equity Division) 27 June 1986 (unreported); Hogg v Roberts (2003) 87 SASR 248; Parker v Parker (1993) 16 Fam LR 863; Arnold v Dalton (2002) 84 SASR 482, considered.
L v C
[2011] SADC 88
This is an application pursuant to s 9 of the De Facto Relationships Act 1996, brought by Ms L against Mr C for orders for the division of property. The De Facto Relationships Act 1996 is applicable, rather than the Domestic Partners Property Act 1996 because the de facto relationship between Ms L and Mr C ended on 28 February 2007, prior to the commencement of the Domestic Partners Property Act 1996 on 1 June 2007[1].
[1] Karpathiou v Clemente [2008] SASC 316 at paragraph 4 per Gray J
At the hearing of the matter, Mr Churches appeared as counsel for Ms L. Mr C represented himself. Mr M, a valuer, Ms L, her father, Mr L, Ms Wi and Ms I gave evidence in Ms L’s case, and Mr C, Mr E, a valuer, and Mr Wa, a valuer, gave evidence in Mr C’s case. A considerable volume of documentary evidence was tendered in both cases.
The De Facto Relationship
The De Facto Relationships Act 1996 (“the Act”), in s 3, defines de facto relationship in the following way:
de facto relationship means the relationship between a man and a woman, who although not legally married to each other, live together on a genuine domestic basis as husband and wife
It is common ground that Ms L and Mr C were in a de facto relationship which ended on 28 February 2007. Ms L and Mr C have two children, the first born in March 2003 and the second born in June 2005. There is, however, a dispute about when that de facto relationship began. Ms L says that it began in March of 1998. Mr C says that it began in December of 2000.
Ms L gave evidence that she met Mr C late in 1995 at a Bachelor & Spinster Ball at Glendambo. At that time, Ms L was a teacher, employed by the Department of Education at the Raukkan Aboriginal School, and was living in Narrung, in teacher housing. Mr C was living in Adelaide and practising his trade as a boilermaker. It was Ms L’s evidence that her relationship with Mr C developed through 1996 and 1997, so that although she continued to live in Narrung and he continued to live in Adelaide, one or other of them would travel so that they would be together most weekends. Ms L said that in late 1997 or early 1998, Mr C ceased to live in Adelaide and went to Orroroo to live with his mother for a short time whilst he was building a chaser bin. Ms L said that when Mr C had finished building the chaser bin, he moved in with her at Narrung. Ms L thought that this occurred in about March of 1998. A series of photographs of the house property in Narrung in 1998 was tendered. They showed that vehicles and equipment used by Mr C for his work were present on the property. Ms L gave evidence that, during 1998, Mr C was making troughs at the house property at Narrung, for sale at clearing sales. He was also making gates for pig sties. Towards the end of 1998, Mr C obtained work in some of the local dairies building “rotary dairies”. Ms L said that Mr C brought a bed, a washing machine and a freezer to Narrung when he came to live with her in late 1997 or early 1998. He also brought, for use in his work, a truck, a set of rollers, folders, a large metal cupboard containing power tools, two large boxes containing hand tools, a welder and a bender for pipes. He also had a Honda Civic motor vehicle. Mr L, who is Ms L’s father, and Ms Wi, who is a friend and colleague of Ms L’s, both gave evidence that they understood that Mr C had moved in with Ms L in Narrung in 1998. Both Mr L and Ms Wi made observations throughout much of 1998 which led them to believe that Mr C was living and working at the Narrung house. Ms L gave evidence that she washed both her and Mr C’s clothes during this period. In cross examination by Mr C, Ms L said that during the time at Narrung, there was no joint bank account, and Ms L tended to pay for all of the living expenses. Mr C did not contradict that statement.
It was Ms L’s evidence that, in January of 1999, Ms L and Mr C moved to a rented house in Moonta East together, because Ms L had been transferred to the Wallaroo Primary School. Ms L said that Mr C’s furniture was moved by the Department of Education, with hers. Ms L said that Mr C loaded his truck with his machinery and tools, and took them to her parents’ farming property at Curramulka. The arrangement was that Mr C would work in a shed on her parents’ property and stay sometimes in her parents’ house and sometimes at the house at Moonta East. Ms L said that she and Mr C were at that time unable to find a property to purchase in the Copper Coast area, which would be suitable for Mr C to work from. Her parents’ property is a 50 minute drive from Moonta East. It was Ms L’s evidence that Mr C would generally sleep in her parents’ house during the week and come to the Moonta East house to sleep on the weekends. From time to time he would come to Moonta East mid-week. During the holidays, she said, she and Mr C would be together either at her parents’ property or at Moonta East. At this time, Mr C was making front end loaders for tractors at her parents’ property. This living arrangement continued until December of 2000. Ms I, a friend of the L family, gave evidence. She said that she was teaching in Kadina during school term 2 or 3 in 2000 but living 80 kms from Kadina. Ms I gave evidence that she frequently stayed at the Moonta East house from Monday to Thursday night in either term 2 or term 3 of 2000. Ms I said that it was her understanding throughout 2000 that Ms L and Mr C were a couple, living together at the Moonta East house, though she was aware that Mr C was working from Ms L’s parents’ property and often stayed there. Ms L gave evidence that she paid the rent of about $140 per week for the Moonta East house. It was clear from Ms L’s evidence and Ms I’s evidence that Ms L did most of the household chores at Moonta East, sometimes with Ms I’s assistance. Mr C did not pay rent or board to Ms L’s parents, but he assisted with repairs and other work on the property and occasionally contributed a small amount of cash. Mr C carted the grain harvested in 2000 for Mr L, but he charged Mr L for that.
In January of 2000, Mr C and Ms L purchased a parcel of vacant land at Kadina (“the Moonta Road property”) in Ms L’s name. They entered into a contract with Distinctive Homes for the construction of a house on the land. They opened a joint bank account with Bank SA for purposes associated with the building of this house. The house was built during 2000. Mr C and Ms L moved in to that house in December of 2000. They lived in that house for the balance of the duration of the relationship.
Mr C argued that his de facto relationship with Ms L did not begin until they moved into the newly built house on the Moonta Road property in December 2000. He said that, prior to that time, they were simply boyfriend and girlfriend. Mr C conceded in cross examination that he lived at Narrung with Ms L for nine months from March 1998, whilst carrying on his trade from the Narrung house. Mr C agreed that he and Ms L shared a bedroom at Narrung. In cross examination, Mr C also, eventually, conceded that he and Ms L became engaged in about January 1997, and that he gave Ms L an engagement ring and announced the engagement in The Advertiser Newspaper of 4 January 1997. Absurdly, Mr C was initially evasive about the date of the engagement, saying that it was in 1999. Mr C initially claimed not to recall telling his mother about his engagement, and also claimed not to understand that an engagement implies a promise to marry. Mr C’s evidence on this topic did him no credit. Mr C did not adduce any evidence to refute the evidence given in Ms L’s case about the living arrangements for the period from March 1998 until December of 2000. Mr C’s argument that his de facto relationship with Ms L did not begin until December 2000 seemed to rest upon the following: that they did not have a joint bank account until 2000, that Mr C did not include a spouse on his tax return until 2001 and that Ms L did not include a spouse on her tax return until 2004.
The approach to determining whether a de facto relationship exists was discussed in Karpathiou v Clemente [2] by Gray J, with whom Sulan J and David J agreed. At paragraph 12, Gray J said:
The starting point for determining whether a de facto relationship exists are the terms of the 1996 legislation. …Picking up from the definition, an important inquiry is whether there was a relationship between a man and a woman in which they lived together on a genuine domestic basis as husband and wife.
[2] [2008] SASC 316
Reference was made to a decision of Powell J in D v McA[3], in which Powell J said, in relation to the question of whether a de facto relationship exists:
[3] Supreme Court of New South Wales (Equity Division) 27 June 1986 (unreported)
… it seems to me that each case would involve the court making a value judgment having regard to a variety of factors relating to the particular relationship, those factors including, but not being limited to, the following:
1. the duration of the relationship;
2. the nature and extent of common residence;
3. whether or not a sexual relationship existed;
4. the degree of financial inter-dependence, and any arrangements for support, between or by the parties;
5. the ownership, use and acquisition of property;
6. the procreation of children;
7. the care and support of children;
8. the performance of household duties;
9. the degree of mutual commitment and mutual support;
10. the reputation and “public” aspects of the relationship
Powell J warned against using these factors as a set of rules. The question of whether a de facto relationship exists is to be assessed comprehensively.
In this matter, the parties agree, and it is beyond doubt on the facts, that they were in a de facto relationship from December 2000 to the end of February 2007. The question is whether that relationship began in March 1998, when Mr C moved in to the teacher housing Ms L was occupying in Narrung, or whether it began in December 2000 when they moved in to the new house on the Moonta Road property.
I find that Mr C moved from Adelaide to Narrung, into the house being occupied by Ms L, in March 1998, and that Mr C and Ms L lived together in that house until January 1999. Having regard to the domestic arrangements with respect to household duties, sleeping arrangements and the reputation and public aspects of the relationship, their relationship during that time closely resembled a traditional marriage. Ms L paid most of the living expenses, and Mr C conducted his business from the home premises. The parties did not have a joint bank account at this stage, and their tax returns did not acknowledge the existence of a “spouse”, but these are relatively minor matters when set against the living arrangements.
The question, then, is whether the nature of the relationship changed when Ms L was transferred to teach at the Wallaroo Primary School. In my opinion, it did not. The arrangements made by Ms L and Mr C to accommodate Ms L’s transfer were the kind of arrangements a married couple might make. It was Ms L’s parents who made provision for the on-going conduct of Mr C’s business. It was a family arrangement, not a rental situation. Mr C and Ms L continued to be an exclusive couple in the eyes of family and friends. Mr C and Ms L were together whenever their work permitted, either at the house at Moonta East, or at Ms L’s parents’ farm.
I find that a de facto relationship between Mr C and Ms L, within the meaning of the Act, commenced in March 1998 and continued without interruption until it concluded at the end of February 2007.
Division of Property
Ms L has applied for the division of property pursuant to s 9 of the Act. The Act provides, in s 10, 11 and 12:
10—Power to make orders for division of property
(1) On an application for the division of property, the court may make orders it considers necessary to divide the property of either or both the de facto partners between them in a way that is just and equitable.
(2) For example, the court may make orders for—
(a)the transfer of property from one de facto partner to the other; or
(b)the sale of property and the division of the net proceeds between the de facto partners in proportions decided by the court; or
(c)the payment by one de facto partner of a lump sum to the other.
11—Matters for consideration by the court
(1) In deciding whether to make an order for the division of property under this Part, and if so the terms of the order, the court—
(a)must consider the financial and non-financial contributions made directly or indirectly by or on behalf of the de facto partners to—
(i)the acquisition, conservation or improvement of property of either or both partners; or
(ii)the financial resources of either or both partners; and
(b)must consider the contributions (including homemaking or parenting contributions) made by either of the de facto partners to the other partner or to children of the partners or either of them; and
(c)must have regard to the terms of any relevant cohabitation agreement; and
(d)may have regard to other relevant matters.
(2) If a relevant cohabitation agreement—
(a)is a certificated agreement; and
(b)provides for the exclusion of the court's power to set aside or vary the agreement,
an order for the division of property under this Part must be consistent with the terms of the agreement.
12—Duty of court to resolve all outstanding questions
In proceedings under this Part, the court must (as far as practicable) finally resolve questions about the division of property between the de facto partners and avoid further proceedings between them.
An appropriate process of reasoning when undertaking the task of dividing property in the wake of the ending of a de facto relationship was described in Hogg v Roberts[4] by Doyle CJ, with whom Perry J and Gray J agreed:
[4] (2003) 87 SASR 248
My understanding of the Act is that the requirement to make an order that is “just and equitable” does not give rise to a general and unfettered discretion. First of all, the court is dividing property, not settling all outstanding financial issues as between the partners. Secondly, s 11 (1) indicates that the contributions referred to in that provision are important considerations in deciding what is just and equitable. The initial and primary focus must be on the property in question, contributions to that property, contributions to financial resources and then contributions by one party to the other and to the children.
However, the obligation under s 11 (1)(d) to have regard “to other relevant matters” means the contributions are not the only matter for consideration. It is to be noted that the court must have regard to “relevant matters”. I think that must mean matters relevant to a just and equitable division of property. The provision is not as wide as, for example, a direction to have regard to such matters as the court thinks fit.
Bearing that in mind, I consider that it is not the role of the court to use the division of property to remedy any justified grievances that one party may have against the other, or to compensate one party for disappointed or unfulfilled expectations. The focus appears to me to be on a just and equitable distribution of property, after considering primarily contributions of the kind identified by s 11 (1) of the Act. The task of the court is a narrower one than the task of the court under s 79 of the Family Law Act 1975 (Cth). The relevant considerations are more narrowly confined. Matters that are likely to be relevant are the length of the relationship and the immediate needs of the parties. I say “immediate needs” because the court’s focus is on the division of property. In deciding what is “just and equitable”, the needs of the parties at that time will be relevant. However, the court is not dividing property with a view to providing, for example, for the continuing maintenance of the parties, or taking into account their future financial prospects.
Other matters may be relevant. It would be dangerous to try to draw a line here in the abstract. I go no further than to say that the focus is on the just and equitable division of property, and not on an order that is fair having regard to all the circumstances surrounding, and everything that happened during, a relationship.
I agree with the observations made in decisions in other states that the court is not concerned with attributing fault for the breakdown of the relationship; that contributions as home maker and parent are not to be treated as inferior to material or financial contributions, they are to be taken into account in a substantial way; that contributions of a non-material kind are to be assessed in a broad way, rather than by reference to the rate of remuneration payable to commercial providers of such services, and that there is no reason to approach the matter on the basis of an assumption that an equal division is appropriate, unless there is good reason to depart from that position. I draw those propositions from the reasons of Gleeson CJ and McLelland CJ in Equity in Evans v Marmont (1997) 42 NSWLR 70 at 74. Although the legislation under consideration there was relevantly different, I consider that these basic principles apply to the Act.
In Parker v Parker (1993) 16 Fam LR 863 Young J suggested a four stage approach which will often be helpful. The four stages he suggested (at 870) are:
“(i)to identify and value the assets of the parties;
(ii)to determine whether any, and if so what contributions of type A or type B had been made by each partner;
(iii)to determine whether in the circumstances the contributions of the applicant had already been sufficiently recognised and compensated for;
(iv)to make the appropriate adjustment.”
Once again, he was concerned with different legislation, but the process he suggested is likely to prove helpful under the Act. However, I emphasise that this is simply one approach. In some cases a broader approach will work better. There is no need to take what might be called a narrow approach involving a careful tracking of income and expenditure, contributions made and benefits received. The legislation requires a reasonably broad and practical approach.
Between stages (iii) and (iv) it will be necessary to consider whether there are “other relevant matters” to be considered. It will also be necessary to bear in mind that the object is to divide property in a “way that is just and equitable”. As I have said, I do not treat that expression as opening up all aspects of the relationship, but it appears to me that the matters identified in s 11 (1) of the Act do not alone dictate the order to be made under s 10 (1). They are matters to be considered, they are important, but they will not necessarily be decisive.
What I have just said does not provide any solutions. Difficult questions will arise along the way. I have done no more than identify what seems to be the appropriate process of reasoning.
I will set out my analysis of the evidence in this case in accordance with that process. The evidence was largely uncontested.
Identification and Valuation of the Assets
The Moonta Road Property
Section 1799, Hundred of Wallaroo, Kadina (“the Moonta Road property”) was purchased in Ms L’s name in January 2000. It is 6.37 hectares in area, and is 2.4 kms south west of the centre of Kadina. As previously described, Mr C and Ms L arranged for a house to be built by Distinctive Homes on the Moonta Road property during 2000, and Mr C and Ms L moved in to that house in December 2000. Subsequently, various other improvements were made to the Moonta Road property, and I will say more about that below when I consider the contributions made by each party.
The house on the Moonta Road property has four bedrooms, two bathrooms, two toilets, a lounge, a kitchen/dining/family room and a laundry. It has a surrounding verandah. Other improvements on the land include a 12.2m x 24.2m x 4.9m workshop with 3 phase power, an iron triple garage, a Colorbond garden shed, a poly rainwater tank, and a Colorbond fence which separates the house from the balance of the land. There is a perimeter fence which is in poor condition. There is a landscaped garden around the house.
Three valuers provided reports and gave evidence in relation to the market value of both the Moonta Road property and another property, comprising two allotments, in New Town, Kadina, which will be discussed below.
Mr Wa and Mr E were instructed by Mr C, and gave evidence in his case. Mr Wa valued the Moonta Road property as at 19 March 2011 at $365,000. Mr E valued the Moonta Road property as at 20 October 2008, at $356,500. Mr E said, in evidence, that he would not expect that the current value of the Moonta Road property would vary by more than 5% from the 2008 value, having regard to the property market generally.
Mr M was instructed by Ms L, and gave evidence in her case. Mr M inspected the Moonta Road property on 28 July 2008, and gave a valuation of $425,000 at that date. Mr M provided a further valuation as at 8 September 2010 without undertaking a further inspection. Mr M’s valuation of the Moonta Road property as at 8 September 2010 was $475,000. Mr M attributed the difference between his 28 July 2008 valuation and his 8 September 2010 valuation, not to any significant changes in the property market in Kadina between the two dates, but, rather, to the prices paid for properties in a series of 6 comparable sales, two of which occurred in 2009, and four of which occurred in 2010. In other words, the change in Mr M’s valuation reflects a realisation by him that the 2008 valuation was too low rather than reflecting an assessment that the property market had risen to a significant extent between the dates of his valuations. Mr M used the comparable sales as a check method to his principal assessment, which was arrived at by the summative method of adding the value of the land to the value of the improvements. Mr M also had some regard to the valuation of the Moonta Road property by the Valuer-General, which was $415,000 as at 1 January 2009 and $425,000 as at 1 January 2010.
It seems to me that the most useful date for the valuation of the real estate involved in this matter is as close as possible to judgment. In the circumstances of this case, both parties should be equally subject to the benefit of a rise in the market, or the detriment of a decline in the market since the date of their separation.
I prefer the valuation evidence of Mr M to that of Mr Wa and Mr E in relation to the Moonta Road property. Mr E relied on a version of the summative method, and, because of the date of his valuation, did not have the benefit of the 2009 and 2010 sales. Mr Wa considered one of the sales mentioned by Mr M, but not the others. Mr Wa identified other sales in 2009 and 2010, but did not consider them to be comparable, so he relied entirely upon the summation method. Mr Wa did not consider the Valuer-General’s valuation to be in any way relevant. It seems to me that Mr M’s valuation is the most thorough investigation of the market value of the Moonta Road property. I note that Mr Wa and Mr E thought that the dwelling had a living area of 189m² and Mr M thought that it had a living area of 197m². I do not consider that the difference is significant, bearing in mind that all of the valuations are no more than an expert assessment of the likely market value of the property and are subject to a margin of variation.
The Olive Parade property
Mr L and Ms C are the registered proprietors, as joint tenants, in a parcel of land comprising two contiguous allotments in New Town, Kadina. One of the allotments fronts Olive Parade New Town and is a 1,200m² allotment which contains a symmetrical freestone cottage with a large brick veneer extension. The house has up to five bedrooms, and the extension contains a kitchen/family/dining area. Abutting that allotment to the rear is a vacant allotment of 977m² fronting Tucker Parade, New Town. I will refer to these allotments together as “the Olive Parade property”, which is the way they were referred to throughout much of the trial.
Mr Wa and Mr E each provided a valuation and gave evidence in relation to the Olive Parade property. Mr M gave evidence and provided two valuations in relation to the Olive Parade property; one as at 24 July 2008 and one as at 8 September 2010. Mr Wa used a valuation date of 19 March 2011 and valued the Olive Parade property at $363,000. Mr E used a valuation date of 29 October 2008, and valued the property at $362,000. Mr M valued the property at $350,000 as at 24 July 2008, and at $390,000 as at 8 September 2010. The Valuer General’s assessment of the value of the property as at 1 January 2009 was tendered. It was $320,000. The differences in valuation between the valuers are less significant in relation to the Olive Parade property than they are in relation to the Moonta Road property, especially when the difference in the valuation dates is taken into account. Once again, I prefer the approach of Mr M, who has undertaken a more thorough analysis of comparable sales as a check method to his summation valuation.
I will take the value of the Moonta Road property to be $475,000 and the value of the Olive Parade property to be $390,000.
Loan
The financial information presented to me was incomplete and disorganised, particularly in Mr C’s case. The situation was further complicated by the dealings that both parties had with their joint bank account subsequent to their separation. That joint bank account was a Bank SA “Portfolio Loan” Account (although the name changed from time to time). The negative balance of that account represents the amount owing at any given time on the loan secured against the Moonta Road property. It was Mr C’s evidence that the negative balance of that account as at 21 February 2007 (ie, the date of the statement nearest to the date that the parties separated) was $102,850. The negative balance increased subsequently because Mr C used the account for various purposes, including, but not limited to, expenses relating to the properties. In fact, Mr C also used that account in the operation of his various business activities and for his personal expenditure. Ms L made some use of the account, but strictly in relation to the properties. I will explore this aspect of the matter below, when dealing with the topic of contributions.
Tax
Mr C omitted to pay income tax from 2001 to 2007. By the end of 2007, Mr C had incurred a debt to the Australian Tax Office (“the ATO”) of $75,899.96. Mr C has, subsequent to 2007, now discharged all but $5,288 of this debt. He is paying the balance to the ATO at the rate of $354 per month. The ATO waived all penalties for non-payment. Mr C argued that he should be “repaid” the amount of his tax debt from the assets of the de facto relationship. I will deal with the question of how this debt should be accounted for in the division of property below.
Trust Fund
Mr C is a beneficiary of a family trust. The accounts of the trust show an allocation to him of $81,803. The accounting records tendered in evidence were not complete, but it seems that this amount was allocated to Mr C in 1988, and he has not drawn on it. It remains in his account in the trust records. Mr C was not clear about his entitlements in relation to that sum.
Ms L’s family also has a family trust, but she has never been allocated any benefit from it. It is her understanding that it is a matter between her brother and her parents which will not involve her at any time in the future.
Superannuation
At the date of separation, Ms L had a superannuation fund to the value of $68,459. Mr C had a superannuation account which was $5,481 in 2009, and his evidence was to the effect that he believed that it would have been near to that figure at the end of the relationship.
Furniture and Personal Effects
Both parties retained a share of the furniture and their personal effects at the end of the relationship. Ms L had her jewellery valued at $800.
Tools, Vehicles and Equipment
Mr C provided a valuation of various “tools, vehicles, equipment and sundry items” in his possession as at 2 May 2010. The total was $71,020. When giving evidence, Mr C said that many of the items in the valuation had been acquired subsequent to the separation some three years before, but he declined to say what percentage of the items was in his possession prior to the separation. Several of the items listed in the valuation did not have a value assigned to them, with the consequence that the valuation is an understatement of the value of the business. Mr C had a motor vehicle for his personal use which was not included in the valuation, the value of which was about $4,500.
Ms L had teaching materials at separation, but she explained that the information they contain is now available on the internet, and it seems to me that the value of those materials would be negligible. Ms L did not take a motor vehicle when she left, but several months after the separation, she purchased a motor vehicle, using a loan. Mr C subsequently provided Ms L with $10,000 from the joint bank account to discharge that loan.
The Contribution of Each Party
The Beginning of the De Facto Relationship
Ms L’s evidence about the assets which she brought into the relationship in March 1998 was straightforward and uncontested. She had $6,369 in an ANZ bank account, a 1994 Nissan Pulsar Q which she purchased in 1994 for about $20,000, and which she estimated would have been worth about $12,000 in 1998, a washing machine, a refrigerator, a bed, a filing cabinet, a table and chairs, a beanbag and some jewellery.
In March 1998, Mr C owned a 1979 Honda Civic worth about $1,500, a Ford flat top truck worth about $12,000 and a backhoe which he had inherited from his father, which he later sold for $17,875. He also had a bed, a washing machine, a freezer, and various tools of his trade, including rollers, folders, power tools, a welder and a bender. Mr C had a State Bank Account in March 1998. He produced a bank statement for 18 July 1996 to 17 January 1997, showing a balance of $3,636.60, and a further statement for 18 January 1997 to 17 July 1997, showing a balance of $32,618.72, but he claimed to be unable to find or obtain the statement for the relevant period. Mr C said in evidence that the substantial increase in the balance in his account in the first half of 1997 was accounted for by the sale of a vehicle, for which he received $20,000. The purchase and sale of vehicles is part of Mr C’s business, and I accept that the balance of his bank account fluctuated accordingly. Mr C also had the allocation of $81,803 in his account in the family trust from well prior to the beginning of the de facto relationship.
During the De Facto Relationship
Ms L worked full time as a primary school teacher for the Department of Education during the early years of the relationship. She took maternity leave for the whole of 2003 and the first child of the relationship was born in March 2003. In 2004, Ms L returned to work for three days per week, and worked on that basis for the entire year. In 2005, Ms L worked for two days a week for the first school term, and then took maternity leave again to have the second child of the relationship, who was born in June of 2005. Ms L returned to work again in term 2 of 2006, and worked for two days per week for the remainder of that year. Ms L’s taxable income through the relationship was as follows:
97/98 $38,141
98/99 $38,085
99/2000 $40,891
00/01 $44,851
01/02 $47,512
02/03 $38,738
03/04 $13,013
04/05 $31,172
05/06 $3,445
06/07 $37,617Ms L’s salary was paid into her ANZ bank account until 2000, when she and Mr C opened the joint bank account, following which her salary was paid into that account. As I have mentioned above, that account was opened as part of the financial arrangements for the purchase of the Moonta Road property, and the regular payments on the loans for the property purchases were made from that account. In February 2005, Ms L opened a bank account in her own name and had her salary paid into that account from that time onward. It was Ms L’s evidence, which I accept, that, throughout the relationship, her salary was used for household expenses. During the early years, Ms L paid all of the rent, outgoings and household expenses in relation to the house at Narrung in 1998 and in relation to the house at Moonta East in 1999 - 2000 (rent was about $140 per week). Ms L’s parents provided meals and lodging to Mr C when he was at their property in 1999, and Mr C provided assistance with various farming tasks in that period, and made occasional cash contributions.
Ms L performed the vast majority of the household tasks throughout the relationship, including cooking, washing and cleaning. When the children arrived, Ms L became and remained the primary caregiver, providing all meals, clothes washing, bathing, changing, comfort and general attendance. Ms L also contributed to garden maintenance at the Moonta Road property and played a relatively small part in the renovation of the Olive Parade property.
Throughout the relationship, Mr C conducted a business which apparently involves a number of activities. Since 1999 (and possibly prior to that time) he has traded under a business name. Mr C described himself as a multi skilled tradesman, and his business activities include the purchase, refurbishment and sale of vehicles, including farming vehicles, and the making and repairing of farm and industry plant and machinery.
Mr C tendered in evidence extracts from copies of his tax returns for the financial years from 96/97 to 06/07. Those documents say that Mr C’s taxable income was as follows:
97/98 $14,545
98/99 $13,102
99/00 $4,942
00/01 $67,375
01/02 $51,618
02/03 $45,258
03/04 $36,046
04/05 $35,249
05/06 $50,661
06/07 $39,500Mr C gave evidence in some detail about the purchase and sale of various vehicles and equipment during the relationship. It was far from clear, but it seems that those transactions should be reflected in Mr C’s income, as stated in his tax return. Mr C admitted in evidence that he omitted to pay any tax from 2000 – 2007. This resulted in the Australian Taxation Office claiming, by notice dated 8 April 2008, the sum of $124,084.40 by way of unpaid tax and penalties. Mr C gave evidence that his mother negotiated the waiver of the penalties, so that Mr C’s resultant debt to the ATO became $75,899.96.
During the relationship, Mr C performed minimal household tasks. In relation to the children, on his own evidence, his involvement was limited to very occasionally getting up to them at night, and occasionally preparing an evening meal on a Thursday or Saturday.
The Moonta Road property was purchased in January 2000 for $33,000. Ms L became the registered proprietor. The couple opened the joint bank account at this time. The purchase price was paid in cash. I accept Mr C’s evidence that most, if not all, of the purchase price of $33,000 was provided from his income. This needs to be considered in the context that the relationship had then been in existence for several years, with contributions being made by both parties. The construction of the house on the Moonta Road property proceeded throughout 2000. I accept the evidence that Distinctive Homes was paid $115,000, partly financed by a loan of $80,000 secured by a mortgage over the Moonta Road property. That loan was quickly repaid. I accept the evidence that Mr C performed a great deal of work on the Moonta Road property, including the construction of a road within the property, the construction of a building pad for the house and the sheds, the connection of the water reticulation system to the pads, the digging and laying of electrical infrastructure to the building pads, the manufacture and erection of two sheds, the manufacture and erection of fencing, the installation of the plumbing and septic system, the installation of the rainwater tank and the manufacture and installation of a verandah around the house.
In about April of 2003, Mr L and Ms C purchased the Olive Parade property in their joint names. It was Ms L’s evidence that the purchase price was about $140,000, and that the couple took out a loan for about that amount with Bank SA. The loan was secured by the mortgage on the Moonta Road property. There were tenants in the Olive Parade property who moved out in about October of 2003. Renovation works were then performed on the property from October 2003 to January 2007. When those works were completed, the house was again tenanted, at a weekly rental of $220. At some stage subsequent to April 2003, the property was subdivided into the Olive Parade block which contained the house, and the rear vacant block which fronts Tucker Parade. At some time in recent years, the rent was increased to $250 per week.
Mr C renovated the Olive Parade property. He estimated that from time to time he would be engaged on the renovation project for three days per week. Mr C listed the following works performed by him on the Olive Parade property:
a. Removed overgrown garden and run down out buildings – approx. 20 semi loads of rubbish taken to the dump
b. Remove and strip interior of house
c. Design and construct large extension
d. Dig foundations for extension
e. Carried out all the plumbing work
f. Erecting extension
g. Installing new iron roof
h. Fitting aluminium windows and doors
i. Installing insulation in roof and walls
j. Gyprocking intervals
k. Plastering internals
k. Plastering inside walls
l. Fitting all architraves and cornices
m. Interior painting
n. Fitting floating floor boards through majority of house
o. Re-doing the outside stone work
p. Fitting new verandah
q. Landscaping
r. Outside paving
s. Painting of exterior
t. Installing rain water tank
u. Erecting all boundary fences.
Ms L assisted with the planting of the garden at the Olive Parade property, the installation of a watering system and the washing of the windows.
After Separation
I have described, above, the principal assets and liabilities accumulated during the de facto relationship. After separation, Mr C remained in the Moonta Road property and Ms L and the children moved to teacher housing. Mr C has not paid Ms L any rent in relation to the Moonta Road property.
For the 07/08 year, Mr C paid Ms L $100 per month by way of child support. He initially agreed to pay $650 per month, but that did not occur. That agreement was arrived at without the involvement of the Child Support Agency, so Ms L was unable to use the Agency’s collection system in relation to the money which was not paid pursuant to that agreement. At some stage during this period, Mr C put $2,000 into a new bank account for Ms L’s use, indicating that he would keep it at about that figure for her use in relation to the children. However, once Ms L had spent the $2,000 on childcare, no further sums were deposited. Several “shared care” plans were put into effect in relation to the children in 2007, until September, when Mr C went away for about a month. Subsequent to that, Mr C cared for the children for one day per week for a time, and the arrangement has varied from time to time since.
In 2009 Mr C paid Ms L $280 per month in child support for a while, then $268 per month, then $160 per month. In 2010, Mr C conducted his business in such a way that his income was very low, and Ms L paid him $197 per month for a time, whilst she cared for the children for four days each week and he had them for three. Very recently, Mr C has become liable to pay Ms L again (because he is once again earning a substantial income), and is liable to her for $197 per month. Ms L has activated the Child Support Agency debt collection service in relation to these amounts, and has recently received payment.
The balance owing on the loan which Ms L and Mr C took out at the time of the purchase of Olive Parade was $102,850 on 21 February 2007. However, Mr C expended further amounts for various purposes from the joint bank account. In relation to the Moonta Road property, he paid $5244 for built-in cupboards, and $6600 for materials for the verandah. He paid $2000 for carpet for the Olive Parade property and $1726 for aluminium windows for the building addition. He also paid $2200 to V Rowe Machinery on account of machinery purchased for his business prior to separation, $7,500 to Ms L’s parents as payment for a backhoe he had purchased from them and $10,000 for Ms L’s car. The total of the cheques Mr C wrote from the Portfolio Loan account in the months subsequent to the separation to meet obligations undertaken whilst the relationship was current totalled $35,270. The loan consequently increased to $138,129. It has fluctuated between $130,000 and $142,000 ever since. Mr C gave evidence that he has no bank account other than the joint bank account, and he has continued to use that account for his business and living purposes.
The evidence was that the rent from the Olive Parade property has been paid into the joint bank account until very recently. At $220 per week since the time of separation, that amounts to a gross income from the Olive Parade property of $57,200, or $11,440 per year for the last five years. The true figure would be more than that, because the rent was increased to $250 at some unspecified time in the later years. Of course, during the same period, the loan secured by the mortgage over the Moonta Road property was serviced out of the joint account.
Mr C has lived in and worked from the Moonta Road property since the separation without any payment of rent. Ms L has had to fund alternative accommodation for herself and the children.
Ms L discovered, in about 2008, that Mr C had ceased to pay the water bills in relation to both the Moonta Road property (where he was living) and the Olive Parade property. Ms L’s evidence was that an accumulated account of slightly more than $1,600 had accrued. Ms L approached Mr C about this issue, but he was uncooperative, and she therefore undertook payment of the account, entering into an arrangement for fortnightly payments. She missed one payment because she went away for her work, and incurred court costs of about $200. The total account, then, became slightly more than $1800. Ms L has paid about half of that, and the balance is $970, which she is paying off at the rate of $100 fortnightly.
In 2008, Ms L discovered that Council rates had not been paid on either property. There was an accumulated debt of $3,000, which she paid from the joint bank account. Subsequently, rates totalling about $500 per quarter have been levied in respect of the two properties. Until August 2009, Ms L paid the rates partly from her own money and partly from the joint bank account, but, subsequent to that, she has found that there are no funds in the joint bank account, and she has paid the rates from her own income. It was Ms L’s uncontested evidence that Mr C has refused to leave money in the joint bank account to satisfy these bills, notwithstanding that the rent for Olive Parade is paid into that account. Mr C ensured that the negative balance of the account remained close to $140,000, which was the limit of the line of credit. Ms L has not used the joint bank account since 2009, even for purposes associated with the properties. This evidence was uncontested.
There were credit cards issued on the joint bank account. Ms L used hers occasionally subsequent to the separation and prior to March 2008, always ensuring that she immediately deposited sufficient cash into the joint bank account to cover the expenditure. She ceased to use the credit card on the joint bank account in March 2008. Mr C continued to use his card. Ms L sought to be removed as a party to the joint account, but Bank SA would not remove her without Mr C’s co-operation, which he declined to give. At some time subsequent to the separation, Mr C used $5,000 credit on the credit card attached to the joint bank account. He refused to pay it off. Ms L used the last $1,000 available to her from the joint bank account towards Mr C’s credit card debt, leaving a debt of $4,000. Ms L paid this off in instalments, using her salary, finishing in 2010.
Have the contributions of the applicant been sufficiently recognised and compensated for?
This question is taken from Parker v Parker[5], quoted with approval in Hogg v Roberts[6], above. I think it would be more appropriate in the contemporary context to ask the question whether the contributions of either party have been sufficiently recognised and compensated for.
[5] (1993) 16 Fam LR 863
[6] (2008) 87 SASR 248
In this matter, nothing has passed between the parties by way of a complete or partial settlement with respect to the property of the de facto relationship. The payment of $10,000 towards Ms L’s car did not represent a settlement, though it is a factor, along with many others, to be considered. It is clear that the situation with respect to the property described above is presently unresolved and needs to be resolved as between the parties.
The Division
My task in this matter is to divide the property of the de facto partners, Ms L and Mr C, in a way that is just and equitable[7]. In performing that task, I take into account the provisions of the Act, and s 11 in particular. I take into account the matters set out in Hogg v Roberts[8], quoted above.
[7] s 10 De Facto Relationship Act 1993
[8] (2003) 87 SASR 248
I bear in mind that I am not exercising an unfettered discretion; I am simply dividing property and not settling all outstanding financial issues between the parties[9]. In particular, I am not dealing with issues of assessing child support or maintenance[10]. Nor am I engaged in punishing bad behaviour or rewarding good behaviour. Although I have endeavoured to extract, from the evidence presented, as much information as possible about both the assets which exist and the extent of the contribution of each party, this is a matter in which a global approach is appropriate rather than an asset by asset approach. This is partly because of the deficiencies in the evidence presented, particularly in Mr C’s case. There were many such deficiencies, but one example is that Mr C omitted to provide adequate financial records of the period prior to 2000, seeming to believe that if he presented only the financial information relevant to that period of the relationship from 2000 onward, the Court would be compelled to consider 2000 as the beginning of the relationship[11]. It is also because of the complexity and artificiality of reducing the property and contribution aspects of a relationship to a mathematical calculation.
[9] Hogg v Roberts (2003) 87 SASR 248 at para 11
[10] Arnold v Dalton (2002) 84 SASR 482 at para 49
[11] see H v G [2005] SASC 344
It is appropriate to take into account contributions made by each party after their separation, especially having regard to the circumstances in this case, where there remained a joint bank account, a property earning rent, joint liability for debts and on going care obligations towards the children[12].
[12] see Arnold v Dalton (2002) 84 SASR 482 at para 50
It is clear law that contributions as a parent and homemaker are to be taken into account in a substantial way[13].
[13] Hogg v Roberts (2003) 87 SASR 248 at para 15
I have found that the de facto relationship between Mr C and Ms L began in March 1998 and ended in February 2007. It endured, then, for nine years. There were two children of the relationship, who were born in 2003 and 2005.
This is not a case where there was a significant imbalance between the wealth of the parties when the relationship began. Both parties began the relationship with very little. Essentially, they built the asset pool up together, although I acknowledge that Mr C brought into the relationship some of the tools which he subsequently used in his business.
The principal assets of the asset pool to be divided are the Moonta Road property, the Olive Parade property, the superannuation of both parties, the motor vehicles of both parties and Mr C’s business. The main liabilities are the loan secured by the mortgage over the Moonta Road property and Mr C’s income tax bill.
I have accepted the valuations of Mr M as at 8 September 2010 in relation to both properties. Mr M valued the Moonta Road property at $475,000 and the Olive Parade property at $390,000.
Ms L’s superannuation at separation was $68,459 and is now close to $70,000. Mr C’s superannuation at separation was $5,481 and no evidence was provided as to whether that has changed subsequently. Ms L has a car purchased for about $10,000 shortly after separation and Mr C has a car worth about $4,500.
Mr C did not provide a valuation of his business. He did, however, provide a valuation of his “tools, equipment and sundry items” as at 2 May 2010 of $71,020. Nine of the items listed, however, were not assigned a value, and no explanation was given for that. Some of them were substantial items, on the face of it. Mr C said that some of the items were acquired after separation, but he did not provide any evidence as to which. In any event, they were paid for out of the joint account, to which the rent from the Olive Parade property was contributing. I acknowledge, though, that Mr C should have the benefit of the income from his work subsequent to the separation, in the same way as Ms L has had the benefit of her salary. I also take into account that Mr C brought some of the equipment used in his business into the relationship, and also had some vehicles at the beginning of the relationship which he subsequently traded as part of his business.
As to the liabilities, I take into account that the loan secured by the mortgage over the Moonta Road property was $102,850 at separation, but was subsequently increased to nearly $140,000, mostly by Mr C. Some of the items paid for by the increase in that loan added to the value of the properties. Some of them added to the value of Mr C’s business.
I take into account the payment by Mr C of all but $5,288 of the tax debt of $75,899.96, and the arrangement he has entered into to pay the amount which remains outstanding.
The allocation of $81,803 to Mr C in his account in his family trust I take into account only to note that the allocation was made in 1988, and was unchanged throughout the de facto relationship, or subsequently. Mr C has not drawn down that allocation. I do not consider that it forms part of the asset pool to be divided.
In assessing the contribution of each party to the accumulation of the assets, I take into account the contributions of each before, during and after the relationship, by way of assets, income, improvements to the properties, care of the children and homemaking. These matters are described in detail above. Mr C, in his case, severely undervalued the contribution made by Ms L by way of care of the children and homemaking. He also overlooked the fact that her financial contribution in the early years of the relationship was greater than his. He overvalued his own contribution relative to hers, both because he has a higher regard for the skills he holds than the skills possessed by Ms L, and because his business involves transactions in large figures. Having said that, Mr C is clearly possessed of an impressive array of skills and the ability to conduct a successful business when he chooses to do so. On the evidence, I am confident that both parties have the capacity to provide for their needs in the future, and were, at the time of trial, engaged in doing so.
Having regard to all of the matters set out above, I determine that a roughly equal division of the net assets (once the liabilities are accounted for) is appropriate. I say “roughly” because of the need to take into account the position into which the allocation of the assets will place Mr C, in particular, for the future[14], and because of the many factors to take into account.
[14] s 10(1)(d)
Mr C, in his closing address, requested that any orders permit him to remain living and working at the Moonta Road property. I agree that this is desirable, and it did not seem to me that the plaintiff disagreed. I have assigned a value of $475,000 to the Moonta Road property. It would also obviously be preferable for Mr C to keep his business and for Ms L and Mr C each to keep their superannuation and their motor vehicles. Mr C’s business, vehicles and superannuation are worth slightly more than Ms L’s car and superannuation.
That leaves the Olive Parade property, the loan secured by the mortgage over the Moonta Road property and Mr C’s income tax debt. All but $5,288 of the $75,899.96 debt has been paid. Some of this must have been paid from Mr C’s income subsequent to separation, but I bear in mind that during those years Mr C has lived and worked rent free in the Moonta Road property and has had the benefit of both the rent from the Olive Parade property (albeit that some of that amount could be credited against the loan secured by the mortgage) and the payment by Ms L of most of the Council and water rates for both properties and Mr C’s credit card bill of $5,000. I will take the amount of the loan to be $140,000, and the value of the Olive Parade property to be $390,000. It seems to me that a just and equitable division would be achieved if Ms L were to take a transfer of Mr C’s interest in the Olive Parade property, and in turn then transfer her interest in the Moonta Road property to Mr C. The loan should be transferred wholly to Mr C, and Ms L should be released from all joint financial obligations, including the joint account. Ms L should pay to Mr C the sum of $20,000 when Mr C assumes responsibility for the loan.
I will hear the parties as to the precise terms of the orders.
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