Lindrum and Niles

FAMILY COURT OF AUSTRALIA

LINDRUM & NILES

[2017] FamCA 252

FAMILY LAW – DE FACTO RELATIONSHIP – where relationship conceded but the respondent maintains it is not just and equitable to alter his interests – consideration of how non-financial expectations justifies a departure from the parties’ respective legal ownership of assets – where the contributions are modest by the applicant but s 90SF(3) justifies an adjustment.

Family Law Act 1975 (Cth)
Superannuation Industry (Supervision) Act 1993 (Cth)

Stanford v Stanford [2012] HCA 52, (2012) 247 CLR 108

APPLICANT:

Ms Lindrum

RESPONDENT:

Mr Niles

FILE NUMBER:

MLC

1177

2016

DATE DELIVERED:

27 April 2017

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

20, 21, 22, 23 March 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Smallwood

SOLICITOR FOR THE APPLICANT:

Roger O'Halloran & Co

COUNSEL FOR THE RESPONDENT:

Mr Matta

SOLICITOR FOR THE RESPONDENT:

Sayer Jones

Orders

That by 4.00pm on 31 May 2017, the respondent pay to the applicant $270,000.
That to the extent necessary, and pursuant to s 80(1)(k) of the Family Law Act 1975 (Cth), the respondent forthwith upon request do all things required to assist the applicant to roll out her interest in the Niles Superannuation Fund and contemporaneously therewith, the applicant execute all such documents required of her by the respondent to:
(a) Resign as a member of the said fund; and
(b) Resign as a director of B Pty Ltd.
Save as to issues of costs, the application filed on 17 February 2017 and the response thereto filed 15 April 2016 are otherwise dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lindrum & Niles has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 1177 of 2016

Ms Lindrum

Applicant

And

Mr Niles

Respondent

REASONS FOR JUDGMENT

It is not controversial that Ms Lindrum (“the applicant”) and Mr Niles (“the respondent”) lived together in a de facto relationship from early 2005 until 2014. The precise dates are largely irrelevant. It is however controversial whether it is just and equitable to make an order under s 90SM(3) of the Family Law Act 1975 (Cth) (“the Act”).
Much of the argument here flows from the words of the High Court of Australia in Stanford v Stanford [2012] HCA 52, (2012) 247 CLR 108.
In Stanford, at [39] the High Court was dealing with a case involving the breakdown of a marriage but importantly, the plurality said that the fact of the breakdown did not bring as an automatic consequence, an entitlement to the alteration of existing legal and equitable interests in property. In other words, the relationship itself does not create interest in property. The same logic can, and must, be applied in respect of parties to a de facto relationship.
The High Court said:
41.Adherence to these fundamental propositions in exercising the power in s 79 gives due recognition to "the need to preserve and protect the institution of marriage" identified in s 43(1)(a) as a principle to be applied by courts in exercising jurisdiction under the Act. If the parties have made a financial agreement about the property of one or both of the parties that is binding under Pt VIIIA of the Act, then, subject to that Part, a court cannot[29] make a property settlement order under s 79. But if the parties to a marriage have expressly considered, but not put in writing in a way that complies with Pt VIIIA, how their property interests should be arranged between them during the continuance of their marriage, the application of these principles accommodates that fact. And if the parties to a marriage have not expressly considered whether or to what extent there is or should be some different arrangement of their property interests in their individual or commonly held assets while the marriage continues, the application of these principles again accommodates that fact. These principles do so by recognising the force of the stated and unstated assumptions between the parties to a marriage that the arrangement of property interests, whatever they are, is sufficient for the purposes of that husband and wife during the continuance of their marriage. The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
43.By contrast, the bare fact of separation, when involuntary, does not show that it is just and equitable to make a property settlement order. It does not permit a court to disregard the rights and interests of the parties in their respective property and to make whatever order may seem to it to be fair and just.
Each of the applicant and the respondent has property. There is no joint property. The respondent does not seek to alter any property of the applicant in his favour. The applicant has an entirely different view about the property of the respondent. She seeks orders.
As a result of Stanford, the court must have a principled reason to interfere with the legal interests of the respondent.
The focus of this case was on whether or not there is a legitimate basis to alter the assumptions of the parties about their property during their relationship. The legal interests they created were very clear. Their assumptions about those entitlements was very different.
Unfortunately, the inquiry has to examine the characteristics of their relationship and importantly, some of the unstated things that underpinned it. There is no doubt that the cessation of their relationship brought an end to the assumptions at least of the applicant and in particular, her use of the respondent’s real and personal property which she had anticipated would be hers to share for the rest of her days. Her focus in doing what she did in the relationship, that is, her contribution to it, was on the assumption that if not hers at law, at least she had the right to use the property of the respondent as if it was hers.
Whilst the respondent saw the respective property entitlements as their own, I find he too assumed, at least for some years and on an unstated basis, that the applicant was to have the use of his property as if it was her own. The assumptions of both parties undoubtedly altered as a result of the ending of their relationship. In the case of the applicant, she has lost the right to treat assets as if she had their uninterrupted use at a time when she anticipated there would be no change throughout retirement. For the respondent, he has the ownership as well as the use of the property and is content that he has not lost the access to his property and now does not have to share its use. The question is whether that is a fair situation having regard to what each party did to create those expectations and assumptions. For the reasons that follow, it is just and equitable to make a property adjustment order within the meaning of s 90SM(3) of the Act. The extent of that adjustment is an entirely different question.

Background

The applicant is 67 years of age and retired. She has two sources of income. The first is rental from real properties that have long term tenants. The second is from her member account within the self-managed superannuation fund set up by the respondent. She lives comfortably.
The respondent is 72 years of age. He retired in 2010 but continues to work casually as a consultant. His income is greater than that of the applicant but it comes predominantly from his member account in the self-managed superannuation fund.
At the time that the parties commenced to live together, both were health professionals. They met in 2004 but their relationship could not have then immediately been described as akin to a couple living together on a genuine domestic basis (s 4AA of the Act). In late 2004, after a break from having much to do with each other, the parties resumed their relationship. They commenced living together in about January 2005.
At the time that the parties moved in to live together, the respondent owned the property at C Street, Suburb D. The respondent had purchased that property in 1996 and between that time and when the applicant moved in to live with him, substantial renovations were undertaken.
There was some dispute about the involvement of a builder Mr E but his evidence was unchallenged. He said that he was employed at C Street in about 2004. In addition to renovating, he also built a room on the back of the house. He recalled meeting the applicant and speaking with her infrequently whereas he spoke almost daily to the respondent.
Not long after the parties commenced to live together, Mr E finished working for the respondent. From the perspective of Mr E, the work he had been contracted to do had been “relatively finished” and the minor work that was to be concluded, concerned items that the respondent was to attend to himself.
It as the applicant’s evidence that between April 2004 and October 2007 she worked on C Street renovating the property. That could not have been a constant task because I find that during a substantial portion of 2004, the parties did not have any form of relationship. I accept the evidence of Mr E that he saw the applicant infrequently up until he left the property in early 2005.
The applicant said that she worked on weekends and at times during the week, considered plans and materials, sourced and obtained quotes and selected tiles, floor coverings, light fittings, kitchen sinks and ovens. She said that after the builder was “dismissed”, she and the respondent completed the first stage of the works themselves. I find that that is an embellishment bearing in mind the evidence of Mr E that the work was mostly finished.
Up until the time that the parties commenced living together in 2005, the applicant had a property in Suburb F and the evidence of the respondent, which I accept, was that each visited the other’s home.
In a curious piece of drafting, the applicant attached to her affidavit “a description of the renovation works undertaken” by her. That meant that the court and the respondent had to go to the applicant’s list of renovations that she saw she had undertaken.
Some of these items were undertaken in 2004 during the phase when the parties were romantically inclined and visiting each other’s homes. I accept the respondent’s version that they had just met each other and each had an interest in renovating homes. Whereas the applicant described herself as preparing a pine flooring for sanding and sealing, the respondent denied that and indicated that he had already lifted the floor boards to fit a heating system underneath.
The applicant described the builder (Mr E) as visiting the site but Mr E indicated that prior to the termination of his contract, the applicant was infrequently there.
The respondent had been renovating the property for some time prior to meeting the applicant and whilst readily acknowledging that there were a variety of things that the applicant undertook, much of it is either an exaggeration or an embellishment of the tasks that she no doubt did when she visited the respondent.
For example, the applicant said that when the builder indicated that he was commencing work next to the master bedroom, both she and the respondent worked to “clear” this room and she sorted, packed, boxed and labelled the entire contents of the room over a weekend. The respondent’s view was that there was little in his bedroom that required that sort of engagement.
In so far as the applicant indicated that she made background inquiries in relation to the acquisition of items, the respondent denied that she did but indicated that when he went, she sometimes accompanied him. One such example was the kitchen itself. I accept the respondent’s evidence that it was put into the house at the time that the applicant was moving in. The applicant asserted that she spent hours with the kitchen cabinet maker but the respondent denied that on the basis that the layout of the kitchen had been planned before the parties had met and the design had also been then drawn. He conceded that he had conferred with the applicant as to whether she would like what he had done in terms of finishes but denied that there was any discussion between the kitchen cabinet maker and the applicant. The certainty with which the respondent gave his evidence particularly as to the timing of things, is more plausible than the evidence of the applicant who I find has embellished her contributions.
After the builder ceased work, some tasks were still undertaken and there is no doubt that the applicant assisted. I am satisfied that the bulk of the work was completed at least on the extension, and the kitchen and family room were renovated and concluded at or around the time that the cohabitation of the parties commenced.

Assets at the commencement of the relationship

The respondent had been practicing as a health professional for 30 years by the time the relationship commenced. He had obviously been successful because he had acquired four real properties. One was the property at C Street, the second was a farm at G Town, a fourth was the premises from which he practised professionally and the third was an investment property.
In the course of his working years, the respondent incorporated a company B Pty Ltd which acted as the trustee for a family trust. That company purchased the building in H Street for the business. The respondent had moved from that property to a consulting suite leaving H Street vacant. During the course of that vacancy, a water leak damaged the carpet adjacent to the toilet. The applicant maintained that when she met the respondent, the H Street property was in a state of disrepair from flood damage. That was implausible because it was her evidence that the relationship began in January 2004 yet all of the insurance documents show that the damage occurred in August 2004 and the claim for insurance was not made until October 2004. Time dims memories but this was an emphatic statement by the applicant that over a period of three months in late 2004 and early 2005 for an average of 15 to 20 hours per week, she organised significant renovations to the H Street property. Whilst some of the items that she undertook were indeed done, her accuracy is questionable. Whereas she described organising a carpenter to “repair” a rear ramp, the respondent’s evidence was that a friend of his whom he named, built the disabled ramp at the rear of the building.
It would appear that at the time that the relationship commenced in 2005, the applicant began working for the respondent. It is hardly surprising therefore some of the items she described as improving the H Street property were undertaken during her early days as an employee. The respondent brought the applicant into his self-managed superannuation fund and she rolled $33,352 her own superannuation into that fund. That occurred very early in 2005. Whilst the respondent indicated that that was done for the purposes of maximising the benefits for the applicant, I find it was more likely done because they were intending a relationship together. That conclusion can be drawn from the fact that in April 2005, both parties had a meeting with the respondent’s solicitor Mr I. It seems that the instigator of the appointment was the applicant herself. Her evidence was that the idea was to form “a baseline” before the parties married and that each would keep what they had but after that, anything that was accumulated jointly was to be treated as mutual property.
Mr I was a witness in the proceedings and on behalf of the respondent filed an affidavit on 6 March 2017 but his evidence was not challenged nor was he required for cross-examination. He said that it was his opinion that when he met the parties on 12 April 2005, they both wished to protect their respective assets from any claims that might have been made by the other should there have been a breakdown of their domestic relationship. That statement was challenged by counsel for the applicant as of little weight because it was simply his impression of why the parties were meeting him. In my view it matters little because there is no doubt that both parties agreed that they would each retain what they owned when the relationship began. That can be seen in two things. First, there was a subsequent house purchase yet the applicant was not made an owner. Secondly, the ownership of all of the other property (save for what I mention about superannuation) remained where it had always been. It was not suggested by the applicant that she was an owner during the relationship.
When the relationship began, the applicant owned two properties at J Town. They were negatively geared investments and there was agreement as to their value at that time. Each had a mortgage and that position continues although the mortgages have now been consolidated. Those properties have provided rent to the applicant throughout the relationship and it was the respondent’s evidence that he did not know what had happened to it. That must be correct. In other words, the applicant kept her income basically for her own use.
According to the evidence of the applicant, her income was used to pay expenses, land tax, maintenance and the mortgage. When asked whether the respondent was aware of what she was doing with her money, the applicant’s response was that she could not remember telling him about those things. The applicant’s income tax returns were prepared by a bookkeeper and both parties used the same accountant. The applicant seemed to know little about her taxation affairs but no evidence was called to indicate how the negative gearing arrangement worked or whether any funds were required from the respondent to top up any shortfall as a result of the rent she received and the income she took from her employment at the respondent’s business.

In so far as any clear picture emerges from both the financial and non-financial relationships of the parties in the early part of their relationship, there is no doubt that the respondent’s income was substantial and the applicant’s, modest.
There is also no doubt that in the early part of the relationship, the applicant was more than just an employee of the business. She undertook a variety of tasks including working on occasional Saturdays and accompanied the respondent to social functions and conferences. One specific example which both parties focused upon was an overseas program in which the respondent was very much involved for a number of years. The focus was really on the fact that as a consequence of the overseas engagement, a fund was set up to bring health professionals from that country to Australia for training. Ironically, both parties took credit for that program. The applicant maintained that she promoted the respondent’s expertise but she did the groundwork including advising the respondent’s Australian patients that 10 per cent of what they paid to the respondent in professional fees would be donated towards that program. This piece of evidence was perplexing. On any view, the patients wanted the services of the respondent anyway. Whether out of some community conscious, or for tax purposes, the respondent contributed 10 per cent of patients’ fees towards the running of the overseas program in which he was operating. The role of the applicant in that program must be seen as an administrative one which was part of her normal duties as an employee but she also did the publicity and promotion for the respondent. It is difficult to make any qualitative assessment of the applicant’s specific contribution in relation to that. Indeed, as I will later mention, the assessment of contributions is an holistic approach rather than a pernickety isolation of specific instances. But to the extent that I can assess this piece of evidence, the major contribution must be seen as coming from the respondent by virtue of his agreement to allocate 10 per cent of his fee (and he indicated that he contributed more than that from his own resources). I find in the circumstances that the highlighting of this piece of evidence by the applicant is of little consequence even in an holistic assessment of the parties’ respective contributions to which I shall turn later.
Outside of the C Street building, some landscape gardening was undertaken. An employee was engaged to do this but the parties helped. The applicant who is a keen gardener, assisted in selecting and planting and internally, when the respondent needed help with activities that he was undertaking, she assisted him.
In terms of the non-financial contributions otherwise, there is no doubt that the applicant cooked and cleaned when she moved in to live with the respondent. To the extent that the evidence permits a finding that the applicant treated C Street as her own, I so find. But to the extent that that is a contribution of any significance, some adjustment has to be made for the fact that it was the respondent’s property and he paid for all of the costs associated with its renovation including the items that the applicant observed were her choice. She had the benefit of that accommodation. All of the expenses seem to have been paid by the respondent. He had a bank account facility for which the applicant had a card but she did not dispute that it was the respondent’s money that funded and underpinned the card.
In April 2007, the respondent purchased K Street, Suburb L for $2.6 million. He was the sole proprietor. That position remains now.
I have already mentioned the J Town properties that were owned by the applicant before 2005 and which on the evidence, I find were largely self-supporting.
Some refurbishments were undertaken to one of the units and the unchallenged evidence of the respondent was that he assisted after the retirement to which I turn in a moment. At paragraph [35] of his affidavit, the respondent set out his various activities over a space of three months. Like the non-financial contributions of the applicant in respect of the respondent’s properties, this too has to be taken into account as an indication that the parties were in a committed relationship and working for their mutual benefit. It was never suggested that the respondent gained some propriety interest as a result of his efforts in respect of J Town and as the work that I have just mentioned was done after he retired from professional life, I find it is indicative of the fact that the parties thought they had a long term relationship and they were working for their mutual benefits including assisting each other in respect of property owned exclusively by the other.
To acquire K Street, the respondent obtained bridging finance and used the H Street property as security for a line of credit. C Street was then sold but that was after the acquisition of K Street. A balancing of the purchase and sale costs left a shortfall of about $300,000 which the respondent contributed from his personal savings. That was not challenged by the applicant.
The parties then moved into K Street and some gardening was undertaken which again, was a specific passion of the applicant. There was some discussion in cross-examination of the respondent about whether there was consultation between the applicant and he over the purchase of K Street. It was next door to his professional rooms and he told the applicant to go and have a look at it and rather quaintly, he asked whether she could live in it and she replied that she could. There is no doubt that at that time, the parties discussed this being their future home. Herein lies the first example of a consultative process under which assumptions were justifiably drawn by the applicant that this was to be her future home and there was no suggestion of anything to the contrary by the respondent.
From a non-financial point of view, the respondent conceded that he had ended up with a nice garden which had been of particular interest of the applicant. The applicant undertook all of the domestic duties and in particular, the cooking. Utilities on the other hand were all paid from income that he generated. To the extent that it is seen as a non-financial contribution by the applicant, she assisted in the banking of the business monies and organised a variety of work activities. She covered the respondent by a private health insurance funding from her own resources.
In between 2006 and 2010, substantial contributions were made by the respondent into the member accounts of the applicant in his self-managed superannuation fund to which she had already contributed. Those contributions were controversial but in my view, they simply reflect a retirement plan from which both were to benefit. The respondent denied that there was any strategic plan but it was his evidence that because the applicant was a member of the fund, she had to be a director of the corporate trustee. That is consistent with the Superannuation Industry (Supervision) Act 1993 (Cth). That was all undertaken in June 2007. Initially, the respondent said that his daughter had been a member although he was unclear about when. A decision was made to change that situation and replace her with the applicant. He explained that decision as one of expedience because various documents had to be signed and as both were a couple, it was convenient. In my view, that explanation is too simple. To the world at large and the relevant regulatory authorities, not to mention the parties’ accountant, the applicant was placed in a position of importance as a director of the corporate trustee. Decisions had to be made about investments and then there were the statutory meetings. The parties cannot have it both ways by indicating that they simply followed accountants’ advice but nothing really happened. This was a conscious decision designed to maximise the benefits for their respective futures as a couple even though each had a distinct member account. They were to jointly benefit from the decisions they made as trustees because those decisions affected their long-term futures. That ultimately came to fruition when they retired. Even so, the source of those funds was overwhelmingly from the respondent’s efforts as a professional.
So confident was the respondent of the applicant in their coupledom that he also appointed her a director of the corporate entity involved in at least one of the business. The respondent said that this was all undertaken based on accountancy advice but he had conceded that the applicant was also a client of the accountant. Whether for accounting advice or not, in 2009, the profit and loss statement showed that the directors each took $100,000 and that was paid into the superannuation fund. At paragraph [82] of his affidavit, the respondent said that throughout the period from 2006 to 2014, the applicant was paid over $600,000 in superannuation contributions. That was clearly an incorrect description because as a director of the company just mentioned, she drew a director’s entitlement of $100,000 and paid that herself to the trustee of the fund. It was then recorded in her member account. Thus to the extent that the respondent was indicating he had made such a contribution, even if the sole source of the stream of income of the corporate entity was ultimately his professional fees, the recognition for taxation and other regulatory purposes in the profit and loss statement cannot be entirely ignored. The evidence is silent on the logistics of how the directors’ fees got into the relevant member accounts but logic dictates it was done on advice and to benefit them both.
Subsequently, because of a relaxation in taxation laws, the parties were able to make a substantial contribution to the fund. At paragraph [84] of his affidavit, the respondent said that the $400,000 remained in the self-managed superannuation fund. He said that it was a direct contribution made by him and that the applicant had made no contribution to this entitlement. He indicated that he did not intend to claim that back.
Despite what seems to have been an intention to maximise taxation benefits, the reality is that both parties benefited both during the time that the contributions were made and now. In respect of the period of the time that the contributions were made, the parties had more accessible income available to them albeit that it was almost entirely from the respondent. That benefit flows through to the applicant now because she still has a significant member account. The respondent does not seek to alter the legal and equitable interests of the applicant in any assets. That is clearly a benefit that the applicant has directly related to the contributions that the respondent made during the relationship but to which she also contributed in some way.
To the extent that an assessment of their respective contributions is necessary later in these reasons, there is no doubt that the respondent’s contribution was greater than that of the applicant. At this point however, I find that the exercise in setting up the fund trustee with the applicant as a director and using her member account for their respective benefits indicates that they were both planning to share the fruits of their relationship in the long term.
In 2010, a an offer was made for K Street and that precipitated the respondent’s retirement. Of necessity, that meant the end of his business and the end of the formal employment of the applicant. There was no suggestion in the evidence that the parties discussed the applicant finding some alternative employment and there was no necessity to do so because of their respective financial positions at that time as a result of their good planning in relation to the superannuation.
The parties attended upon their accountant who undertook some calculations that enabled each of them to receive a pension from the self-managed superannuation fund. The evidence is vague about how all this happened as there was no evidence from the parties’ accountant. Neither party was able to assist as to how the structure was created to enable them to have the pension that each now receives. The respondent was criticised for inaccurate evidence about monies taken from the account but in my view, it matters little. His evidence was that money from the fund is transferred into a joint account that was opened in 2010 and then paid to the applicant. Reference was made to $2000 but in my view, it matters little. There appears to be no dispute as to the quantum of capital in the member account and it seems that the parties, with the assistance of the accountant, worked out how much they each wanted to draw subsequent to retirement. In some periods there is a shortfall which has to be made up by a payment in from their respective resources and at other times, any excess somehow or other, remains in the account. All of this indicates a purposeful intention but it is unclear what each did once the pension began to roll in.
Throughout his evidence, the respondent maintained that both parties kept their finances and property ownership entirely separate from each other. In respect of the latter, he was quite correct. In respect of the former, that cannot be right having regard to the way in which the parties structured the superannuation arrangements.
In late 2012, the parties’ relationship was in difficulty and they commenced counselling. On the evidence of the respondent, I find that one of the bones of contention was that his son was living with the parties on a part-time basis. The counselling continued into February 2013.
There is a dispute between the parties as to what was intended in 2013 when the applicant acquired a property at M Town and set up a home for herself with white goods, furniture, electrical goods and personal possessions. It is again significant that the property was brought solely by the applicant without resorting to the respondent’s financial resources. It has not been suggested that the respondent’s resources were sought to enable the acquisition.
It was the applicant’s evidence that there was only one session of counselling with the respondent and that contrary to the respondent’s assertions, the difficulties were over his daughter rather than the son. She described the problem as managing complex family arrangements with which she was having “extreme” difficulty. She said that there were many children coming and going and she felt that she was not included in the decision making. She denied announcing that the relationship was at an end but in any event, the house that she acquired then leased was, according to her, set up for both. White goods were acquired but all of that was funded from the joint account, the preponderance of which had come from the self-managed superannuation fund because at that time, both parties had retired. That was the only source of earnings of the parties albeit that the contributions thereto were made by the respondent at a much higher level than the applicant. The applicant then purchased a home at N Street and let go the lease on the rented property. She said she spoke to the respondent about their future and he indicated that he was no longer interested in the relationship. That brought the relationship to an end.
The parties did intend to persist with the relationship for a short period of time as can be seen by the counselling. That too corroborates the fact that until that time, their committed relationship had some longevity and both thought it worthwhile having regard to what each had invested in it.
The ending of a relationship is determined by the state of mind of the parties. The parties’ physical separation means very little because each continued to draw from the same main source which was the self-managed superannuation fund. There was no suggestion from the respondent that he opposed the applicant setting up the alternative premises in which she lived but which he visited. The point of the ending of the relationship came when the discussion occurred between the parties and the respondent chose not to persist. The very fact that that discussion took place indicated that the applicant was keen to get a resolution about the permanence of the relationship.
Drawing all of those matters together, there is no doubt that the parties commenced their relationship on the basis that each was going to keep property separate from the other. I find that the discussion about the acquisition of K Street was intended as a home for both of them; the involvement by the respondent of the applicant in respect of the corporate entities was not just for formal regulatory purposes but rather, contemplation of the longevity of their relationship; the use to which the self-managed superannuation fund was put was for the long term benefit of them both; and their respective physical contributions towards the property of the other indicates that they saw value in the long term relationship notwithstanding their respective legal interests were kept very separate. All of those matters point to unstated assumptions about the continuance of the relationship and in the case of both, an agreement about the use of property rather than concern for ownership. The ending of the relationship ended the common hopes of both and the plans made for that long term relationship. The ending of the entitlement from the relationship justifies a court determining whether it is just and equitable having regard to the matters set out in s 90SM to alter their interests.

The positions proposed by the parties

The applicant’s amended application was filed immediately prior to the final hearing. Relevantly, it sought two orders. First, that she be able to roll out her entitlement within the Niles Superannuation Fund. That was no controversial. The applicant’s interest was accepted to be $1.084 million. The second order was that the respondent pay the applicant “a lump sum equivalent to a 35 per cent share of the value of the net asset pool” (excluding her property in O Town).
Despite a discussion involving the applicant’s solicitor at the directions hearing about the need to plead with precision, the words of the proposed order do not amount to an order that permits certainty. The applicant (and her solicitor) knew what the assets of the respondent were, so precision in pleadings should not have been difficult. In essence, counsel for the applicant said her client was seeking cash of $2.567 million.
In her outline of case document, the applicant also added an order that she receive “the Console Table” and the “personal items as per list provided to the respondent”. That list was not in evidence nor was any attempt made to particularise the detail. Because of the unusual preparation of the applicant’s material, the court cannot draw assumptions as to who owned this property nor what (if any) value it has. I find it remarkable that notwithstanding the applicant and the respondent had been separated for more than three years, the vagueness about those details continued. I propose to dismiss that specific proposal based on the lack of any evidence.
For his part, the respondent simply sought that the applicant’s application for alteration of his interest in property be dismissed. Consistent with what the applicant sought in relation to her superannuation interest, he sought that she also relinquish any control over the fund. That too, was uncontroversial. Neither party seeks a splitting order under Part VIIIB of the Act. The power to make a “roll out” order does not fall within s 90MT but it may fall within s 90MS(1) although unlikely because of ss (2). There is no suggestion that either wants to alter the member account of the other and each accepts that those accounts reflect what their legal interests are. Section 80(1)(k) provides the necessary power.

The various assets and liabilities

The first step is to define the legal and equitable interests each party has in property and I propose to round off values.
The applicant has, and is the legal owner of, the following:
N Street, O Town  $750,000
Less mortgage  500,000      $250,000
Two units at J Town   $1,500,000
Less mortgage  207,000    $1,293,000
Bank funds  $55,000
Motor car  $27,000
Sub total       $1,625,000
The respondent has, and is either the legal owner of, or has control over, the ownership of the following:
K Street, Suburb L  $5,200,000
G Town property  $290,000
H Street  $800,000
Bank funds  $59,000
Vehicles  $42,000
Furniture  $50,000
Sub-total  $6,441,000

Superannuation

In the superannuation fund, the applicant’s member account is $1.084 million and the respondent’s is $5.7 million. As each is retired and could (but for the pension facility they have set up) accessed their accounts, I propose to treat these accounts as accessible funds.

The savings

The evidence does not permit me to find definitively what the respective bank balances were when the parties separated nor how those saved funds have been amassed. Having regard to the evidence, I find that the bulk of the respondent’s savings have come from either his earnings before retirement or his superannuation entitlements paid after retirement.
The applicant’s source of funds is less obvious. Her financial statement shows that her investment properties bring in about $1,070 per week out of which, her liabilities seem to be the mortgage on those properties and something towards rates and insurance. There is an excess that permits savings. Her lifestyle is such that otherwise, she receives $925 per week (described as “salary or wages” but which is presumably superannuation) upon which she asserts she pays no tax. Her home mortgage is a modest $322 per week and then there are the usual homeowner expenses.
The applicant described the total of “all other expenditure” as being $1440 per week but I have no evidence as to what that is. The financial statement was somewhat incomplete and despite the request from by the respondent’s solicitor as far back as June 2016 seeking an explanation for that expenditure, no response was forthcoming. I have therefore presumed the figure could not be justified. That is particularly so where the request arose after an examination of the applicant’s bank account and the expenditure shown there.

The estate loan

Although not shown in her list of assets and liabilities above, the applicant also claimed a loan was due to an estate. She had been paid her entitlement in advance and was uncertain as to whether that will have to be repaid. There is no clear evidence about whether there will be a challenge to her testamentary entitlement. At best, the applicant remains unsure whether she would have to pay it to other beneficiaries who I understand are her siblings. I am not prepared to guess; that liability will be ignored.

Legal fees

Both parties have either incurred or paid legal fees. Neither suggested any adjustment should be made because of pre-paid legal fees.

Assets and liabilities when the parties commenced their relationship

When the relationship commenced, the respondent had already commenced the self-managed superannuation fund, owned H Street and G Town without encumbrance and had a substantial equity in the property that became K Street. I have already described them and the renovations, sale and then purchase of the current real property. The applicant’s contributions in respect of that series of transactions culminating in the purchase of the present property was towards the renovation but also her role within the respondent’s home. Those roles have to be offset by two things. First, the applicant had the benefit of the accommodation but secondly, the disparity of income heavily favoured the respondent who was paying the expenses.
When the relationship commenced, the applicant had her investment properties but they were also encumbered by mortgage. Her superannuation outside of the respondent’s self-managed superannuation fund was a modest $33,500 which she ultimately put into her member account in the self-managed superannuation fund.

The summaries of argument

As a starting point, the respective approaches of the parties as to how they saw their contributions is found in their summaries of argument.
Relevantly, the applicant said:
[2]During the relationship the parties worked together, the Respondent continuing with his [business], in which the Applicant worked as the [business] manager .... The work performed by the Applicant extended well beyond proscribed hours, to 60 or 70 hours a week. Her contribution greatly assisted the Respondent in the ongoing conduct of his business, and the generation of income therefrom.
[3]The applicant joined the respondent to volunteer work in (company) at the [Country P]. The parties’ involvement in that project assisted the professional advancement of the Respondent.
[4]The parties renovated [C Street, Suburb D] during the relationship. The Applicant had extensive previous experience with property renovation, and directly applied her experience to the renovation.
[5]Similarly the Applicant joined the Respondent in the work associated with the renovation of [H Street, Q Town] and significantly enhanced the garden areas at [K Street, Suburb L].
[6]The Applicant also assisted the development of rural real estate at [G Town], converting the hayshed into a habitable retreat.
[7]In addition to the contributions to the Respondent’s business, and real estate owned by him, the Applicant attended to the running of the homes the parties occupied from time to time.
From those assertions, the applicant concluded:
[8]The Applicant’s contributions over the years to the real estate held by the Respondent, or his corporate entities, significantly enhanced their value and salability (sic).
[9]The Applicant’s contribution to the Respondent’s business enabled the smooth and successful running of that business during the years of the relationship prior to the retirement of the Respondent.
The respondent said (inter alia):
[1a]The parties agreed throughout the relationship that their financial affairs would be kept separate. The parties acted on this agreement and in fact continue to hold their own property separately and to the exclusion of the other.
[1c]…the Respondent was remunerated for her work and earned between $60,000 to $95,000 per annum when working full-time. In addition, the Respondent made extensive contributions to the Applicant’s superannuation by paying her over $600,000 in cash payments throughout the relationship and an additional tranche of $400,000 in 2010.
[1d]During the relationship, the Respondent made the greater financial contributions. The Applicant was provided with rent-free accommodation. The Respondent paid the utilities or other expenses for the properties in which the parties lived during their relationship.
…
[1f]The Respondent made the greater non-financial contributions. His renovations to the properties owned by the Applicant (at [J Town]) involved substantial physical labour and skill as well as expenditure of funds.
[2]The parties’ homemaker contributions were relatively equal.
From those assertions, the respondent concluded that he would receive a significant adjustment for his contributions.

Other witnesses

In assessing the parties’ contributions, each relied upon a number of witnesses none of whom was required for cross-examination. Their evidence makes little difference here. For example, the evidence of Ms R, focussed on the applicant’s renovation talents but she also observed the home at C Street. Her vivid description does not sit comfortably with that of the builder and the respondent but in any event, I do not know how much of that evidence affects the value of the contribution of the applicant. Similarly, Ms R observed the applicant doing paperwork for the respondent’s business but the significance of that is hard to see. Presumably, the applicant saw her role as managing the respondent’s business and this was what she did. Whether she was appropriately remunerated or not, she enjoyed a much wider benefit than her salary provided.
Mr S is the applicant’s son but his relevant evidence was limited to observations about the gardening. There was no dispute that gardening was a passion of the applicant and one she enjoyed. I remain unconvinced that it means more than that the respondent allowed her to fulfil that passion. How it was paid for and whether it affected the value of the property, I am unable to say on the evidence.
The witnesses of the respondent were also not required for cross-examination. Most related to observations about the role of the applicant within the business. I consider the evidence of the applicant and the respondent much more enlightening because it covered a longer period and was better able to be tested.
The role of the applicant within the respondent’s business was hardly controversial but I find she did participate in some way. I find she was supportive of the respondent but that to the extent she did tasks outside of the expected role of a business manager, I am unable to say what difference they made. She travelled with the respondent and cared for him but offset against that is the benefits she received. That is largely uncontroversial because the respondent was the high earner and to him, the business came. The practice was largely the vehicle for the administration of his business.
Another witness of the respondent was Mr E who was the builder who deposed to the C Street renovation. It was to the respondent that he turned for decisions when they had to be made. His evidence put the evidence of the applicant in some context. I find her evidence does embellish (but not entirely) the tasks undertaken by her.
Thus, the important evidence comes from the applicant and the respondent. Notwithstanding at times each had a differing view as to what actually happened, I consider they were each reasonable historians. My concern about the applicant’s evidence was the extent to which she highlighted roles she fulfilled which were activities one would have expected in a relationship where each was enjoying what they were doing. Nothing about the applicant’s evidence actually shows more than she did things out of love for the respondent, fulfilled her passions and helped where she was needed.

Assessment

This was a relationship of nine years. After the cessation of the relationship, the applicant was able to acquire her home and has a comfortable income predominantly as a result of the contributions that were made to her member account in the self-managed superannuation fund. She has the use of her investment properties and she pays no tax.
The respondent contributed virtually all of the assets he currently has and indirectly to others. The major difference in values has come about because of market forces rather than renovation. Renovation has helped but the role the applicant played was modest in terms of helping the respondent. She chose things for the renovation and was supportive of his professional life. But so too, she benefited by having a reasonable income, an affluent lifestyle, a financially supportive partner and the use of his assets. She did not have to rely on her own support or her income as a wage-earner nor did she have to dispose of her assets for the purchase of a house. She enjoyed (and still enjoys) the benefit of a membership of the self-managed superannuation fund.
True it is that her role as a corporate entity director meant that the applicant was able to manage his financial affairs but it is hard to see exactly what benefit there was to him because he had to pay his tax otherwise. The applicant’s role within the corporate entity must be seen as modest because most of the decisions were made by the parties’ accountant. Neither party will have an opportunity to alter their respective financial positions by earning an income other than through their existing assets because of their current retirement. That however favours the respondent because his income currently exceeds his expenses. The same applies to the applicant but not as much as the respondent.
There can be no dispute that the respondent’s initial contributions were overwhelmingly in his favour. It is not possible (nor necessary) to assess with any particularity, a comparison of what each party came with as the relationship began. Percentages were used by the parties but the assets had not been formally valued as at that time. In any event, even without that, the impression I have is that the applicant had a small amount by comparison to that of the respondent.
Were it not for s 90SF of the Act, I would make no adjustment as between the parties simply on the basis that the respondent has enjoyed the fruits of his profession and the applicant has had the benefit of being with him and has enjoyed those benefits as the relationship continued. At the same time, she managed to maintain her own assets and gather the benefits of contributions made to the superannuation fund.

Section 90SF

An examination of the factors in s 90SF justifies an alteration to the respondent’s assets in favour of the applicant. In considering what order should be made, the court must take into account the matters in s 90SM(4). I have done that above but s 90SM(4)(e) requires the court to consider s 90SF(3). For that purpose, I make the following findings:
·    The applicant is 67 and the respondent is 72 and both enjoy good health;
·    The applicant has an income of about $2200 per week which includes her tax free super. Her expenses to earn that income are modest. Against that, the respondent has an income of $5500 per week out of which some tax is paid. His income position is greater than that of the applicant and always will be;
·    Each party can live easily within their means and neither has any obligations or commitments to any other person other than themselves. Each could alter their capital affairs comfortably should any financial problem arise;
·    Each party has a good standard of living. The applicant had the opportunity to explain her expenditure but did not do so. The request to explain how she needed to spend nearly all of her income remains unanswered. I have inferred she could not justify her assertion;
·    There are no creditors or other persons who have a claim on either party’s property;
· Section 90SF(3)(j) entitles a court to consider how the applicant contributed to the respondent’s financial positions and the length of the de facto relationship if her maintenance was under consideration. No such claim was made here;
·    The terms of any order must be considered. A payment to the applicant will either assist her debt reduction or her capital improvement but it will not affect her lifestyle. In the case of the respondent, there are a number of assets which are not critical to his financial welfare. There were no obvious taxation consequences raised in the event that any money had to be paid to the applicant. Any reduction in his capital will not affect his lifestyle.
The obvious financial disparity between the parties does justify some adjustment on the basis that the respondent had accepted the applicant as part of his life for nine years and anticipated she would share in his largesse. That is a factor in s 90SF(3)(r) that in this unusual case, I consider should be taken into account.

Conclusion as to the argument of the parties

Returning for a moment to the summaries of each of the parties, I reject the applicant’s case that her contribution greatly assisted the respondent in respect of his business and the generation of his income. I also reject that her involvement in the respondent’s volunteer work in the Country P advanced his professional career. It was his talent that enabled the relevant accolades and, her role was to assist in the operation of that professionalism and, no doubt as a consequence, she indirectly benefitted.
I also reject that the applicant’s role in respect of the various real properties was of any significant benefit to the respondent or that there has been an indirect contribution to value. I therefore reject the assertion of the applicant that her contributions “significantly enhanced” the value and saleability of the respondent’s real properties. I accept that her contributions in respect of the various renovations and the assistance provided to the respondent in the “running of the homes” did occur but those contributions were modest. Those matters combined with the matters in s 90SF(3) justify an adjustment in favour of the applicant so that she ultimately has about 20 per cent of all of the assets of the parties combined. She should therefore have assets of about $2.97 million. She has about $2.7 million including her superannuation member account. Accordingly, I find that the respondent should pay her a further $270,000 which in my view is a just and equitable outcome.

I certify that the preceding Ninety (90) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 27 April 2017.

Associate:

Date: 27 April 2017

[2017] FamCA 252

27 April 2017

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Injunction

Fiduciary Duty

Constructive Trust