Matthews v Hobbs
[2006] SADC 34
•27 March 2006
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MATTHEWS v HOBBS
Judgment of His Honour Judge Lee
27 March 2006
FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS - ADJUSTMENT OF PROPERTY INTERESTS - SEPARATION AGREEMENTS
Application for division of property pursuant to De Facto Relationships Act 1996 – parties in de facto relationship for nearly 14 years – both made financial and non-financial contributions – after end of relationship, parties entered into agreements with respect to jointly owned real estate subject to mortgage, whereunder defendant received transfer of plaintiff’s interest and undertook whole of liability under mortgage – whether, as cohabitation agreements in terms of Act, agreements should be set aside to avoid injustice to plaintiff – plaintiff’s application made more than three years after end of relationship – whether one year period of limitation should be extended – application dismissed.
De Facto Relationships Act 1996 ss 3, 5, 8(1), 8(2), 9(3) & 11(1); District Court Act 1991 s 34, referred to.
MATTHEWS v HOBBS
[2006] SADC 34
This is an application for the division of property pursuant to the De Facto Relationships Act 1996. The parties to the action were in a de facto relationship between 10 August 1987 and 5 May 2001.
The application is in the following terms:
I Michele Matthews am seeking for the Court to order David Hobbs to pay me the sum of $35,000 (thirty-five thousand dollars) being my fair share of jointly acquired assets between the years of 1987 and 2001 during our defacto relationship. The properties being lots 33, 34 + 35 in the township of Bowmans. The properties being two dwellings and one vacant block estimated at around a total value of $180,000. The dwelling at 174 March St was in my name as being the purchaser in 1987 before our relationship. The second and third lots being purchased jointly many years later.
At the time of the relationship ending we also had joint assets other than real estate being contents, vehicles, shed contents etc of a value around $70,000.
The reason for my application to the Court is that after many attempts to reconcile the situation with David of the giving of all items promised he has continually avoided and even threatened me and made it quite clear there would be nothing forthcoming. I was forced into signing documentation signing everything over to him and he promised me I would get half the contents. I believed at the time that it was my only option as he threatened to destroy everything and take our daughter Hayley to Queensland.
The application was lodged in the Magistrates Court on 15 July 2004, more than three years after the end of the relationship, and later transferred to this Court. Section 9(3) of the Act provides:
An application for the division of property must be made within one year after the end of the de facto relationship unless the court, after considering the interests of both de facto partners, is satisfied that extension of this period of limitation is necessary to avoid serious injustice to the applicant.
The question whether the one year period of limitation should be extended to avoid serious injustice to the plaintiff requires an examination of the merits of the application.
There are two children of the relationship, namely daughters Hayley, born in 1989, and Renae, born in 1991. The plaintiff also has a son Stephen from an earlier relationship, born in 1984.
The main property of the relationship consisted of adjoining properties at Bowmans in the mid-north of the State, as follows:
1. A maisonette style residence at 174 March Street, Bowmans, formerly lot 35 in the Hundred of Bowmans. There is a galvanised iron shed at the rear. This lot was purchased by the plaintiff in her sole name in July 1987, which was shortly prior to the commencement of the relationship. The purchase price was $24,500. A first home owner’s grant of $5,000 was applied in stages to the purchase, and the balance was borrowed under mortgage from the State Bank of South Australia. Settlement was on or about 21 July 1987. The plaintiff then moved in with her then three year old son. She brought a number of household items with her. The defendant moved in on 10 August 1987. The parties lived in the residence during the 14 years of the relationship. Lot 32 adjoins.
2. A vacant block at 174 March Street, Bowmans, formerly lot 34 in the Hundred of Bowmans. This lot was purchased in the name of the plaintiff in December 1993 from joint finances. The purchase price was $1,500. The lot adjoins the rear of lot 35. The lot was later consolidated with lot 35 in the joint names of the parties.
3. A maisonette style residence at 173 March Street, Bowmans, formerly lot 32 in the Township of Bowmans. This lot was purchased in the joint names of the parties in November 1998 from joint finances. The purchase price was $24,500. The residence was renovated by the parties and then let to tenants in 2000. Lot 35 adjoins.
I will hereafter identify the properties by their lot numbers.
In 1994, the mortgage to the State Bank over lot 35 was extended to lot 34. The value of the mortgage then was in the order of $21,000 to $22,000. When the loans were transferred to Australian Central Credit Union in 1998, and the mortgage was extended to lot 32, the value of the mortgage, according to the plaintiff, was in the order of $47,000.
Although the plaintiff was not working at the commencement of the relationship, from December 1987 she engaged in casual work from time to time. She also received Centrelink payments.
The defendant was mainly unemployed and in receipt of Centrelink payments during the first six or so years of the relationship. Then, during the remaining eight or so years, he worked in various seasonal and other jobs. In 1995, the defendant became ill with Crohn’s disease, and for twelve months was in and out of hospital. The plaintiff was his carer in that period.
According to Australian Tax Office records (exhibits P53 and D18), the income of the parties at various times was as follows:
Financial year ending Plaintiff Defendant
30.6.1989 $5,363
30.6.1994 $13,288
30.6.1995 $7,557 $8,574
30.6.1996 $7,425 $9,411
30.6.1997 $8,087 $6,690
30.6.1998 $6,299 $13,497
30.6.1999 $2,070 $25,112
30.6.2000 $7,974 $10,854
30.6.2001 $5,058 $20,658
Throughout the whole of the relationship, the earnings of each of the parties, and the Centrelink payments that were attributable to both, were applied to household and living expenses and to payments of mortgage interest. The repository for all or most of those earnings and payments was an account with the State Bank in the plaintiff’s name from 1987 to 1998, and an account with Australian Central Credit Union in joint names from 1998 to 2001. After tenants moved in to lot 32 in 2000, the rental payments were applied to interest payments under the mortgage. The plaintiff’s evidence was that rental payments covered approximately 80% of the mortgage interest, and the balance of approximately 20% was met from joint finances. The plaintiff managed the accounts and paid the bills.
The relationship concluded in May 2001 with the plaintiff leaving lot 35 with the three children to live in Kapunda. She selected items of furniture that she wanted to take with her, and the defendant used a trailer to drive those items to Kapunda. The defendant continued to live at lot 35. The elder daughter, Hayley, returned to him after about a week. With the exception of a freezer, the division of personal property, and issues of custody and access with respect to the children, were resolved at that time.
The parties owed credit card and other debts at the time of separation. Within a week, the defendant sold his Torana drag car for $7,000. Although the proceeds were applied in payment of the debts, an amount, which the plaintiff put at $2,200, remained outstanding. The value of the mortgage, according to the plaintiff, was still in the order of $47,000. Lot 32 remained tenanted until 2004.
Later in 2001, the parties signed a letter of instructions to a property conveyancer, Devin Baum (exhibit P9). The letter, which is undated, instructed Mr Baum to prepare a memorandum of transfer of the plaintiff’s interests in lots 32, 34 and 35 to the defendant. Clause 2 of the letter deals with the topic of consideration:
That the Consideration for the interests in the above properties to be paid to the Transferor by the Transferee upon settlement is for the Transferee to take over and be responsible for all loan monies presently due and payable to Australian Central Credit Union and for all and any outstanding rates and taxes, and the further indemnify the Transferor from any claims made against her arising from her ownership of the properties.
Clause 4 deals with the topics of legal advice and duress:
That we have been advised by Devin W Baum to individually seek legal advice from our individual solicitors in terms of any Family Law Matters. We understand that in seeking legal advice we may be advised that the manner in which we are herein instructing you to deal with this property may not be in the full or best interest financially or otherwise of either of us.
In respect of this matter we are individually satisfied with our decision and have not been unduly or forceably influenced by the other party. We therefore indemnify Devin W Baum against any future claim being made by either of us for any loss financially or otherwise as a result of this decision and these instructions to Devin W Baum.
On 6 December 2001, the parties signed an agreement prepared by Mr Baum (exhibit D27). The relevant clauses are as follows:
1. In consideration of this Agreement Michele shall transfer all her interests in the three above Certificates of Title to David without the payment of any monetary consideration from David to Michele.
2. David shall have the existing Mortgages discharged to discharge Michele from any liability under those Mortgages and shall take over and be responsible for all monies due and payable to Australian Central Credit Union under the Mortgages.
3. David shall be responsible and liable for all existing and future rates and taxes due and payable in respect of the properties.
4. David shall pay all costs and fees for the Discharge of the Mortgages and the Transfer of the interests in the land from Michele to David.
5. David and Michele agree on the following values for the land which are the Valuer-General values for the properties.
a) Allotment 34 – Vacant land – Value $500.00
b) Allotment 35 – Matrimonial home – Value 34,500.00
c) Allotment 32 – House – Value $27,000.00
On 7 December 2001, the parties signed a State Taxation Office statutory declaration with respect to stamp duty (exhibit D29).
The memorandum of transfer was signed by the parties on 13 December 2001 (exhibit D26).
On 24 January 2002, Mr Baum wrote to the plaintiff stating that his qualifications and fees did not include “acting as an arbitrator for a dispute between the two of you” (exhibit P10). Mr Baum then went on to say that his intention was to lodge the memorandum of transfer for registration at the Lands Titles Office on 8 February 2002.
On 27 January 2002, the parties signed a further agreement prepared by Mr Baum (exhibit P11). A proviso refers to the absence of any monetary consideration in an agreement dated 7 December 2001, and states that the parties wished to amend their original agreement. Clause 1, as typed, reads:
David acknowledges that he will pay to Michele the amount of Two Thousand Dollars ($2,000.00) being the agreed additional consideration for her interests in the land at Bowmans.
Clause 1 was amended in biro. The amount of $1,500 was substituted as the amount in brackets, and the following words were added:
$1500 accepted as full payment 27/01/02.
The defendant paid $1,500 cash to the plaintiff at that time. Notwithstanding the plaintiff’s unwillingness to concede the point, I am satisfied that the defendant also gave her a cheque for $1,000 on or about 11 January 2002 (exhibits D40 and D46).
The agreements dated 6 December 2001 and 27 January 2002 were cohabitation agreements in terms of Part 2 of the Act. The relevant sections are as follows:
3—Definitions
In this Act—
….
de facto partner means a person who lives in a de facto relationship and includes—
(a) a person who is about to enter a de facto relationship; and
(b) a person who has lived in a de facto relationship;
….
5—Cohabitation agreements
(1) De facto partners may make an agreement (a cohabitation agreement) about—
(a) the division of property on the termination of the de facto relationship; or
(b) other financial matters related to the de facto relationship.
(2) A cohabitation agreement must be—
(a) in writing; and
(b) signed by the de facto partners.
….
8—Power to set aside or vary cohabitation agreement
(1)If a court is satisfied that the enforcement of a cohabitation agreement would result in serious injustice, the court may set aside or vary the agreement to avoid the injustice.
(2)A court may exercise its powers under this section—
(a) on the court's own initiative; or
(b) on the application of either de facto partner.
….
The properties have been valued by Mr J W Cottle, a certified practising valuer. Mr Cottle was appointed by the Court, pursuant to s 34 of the District Court Act, for that purpose. His valuations, as set forth in his two reports of 8 February 2006 (exhibits C32 and C33), are:
As at May 2001 lots 35 & 34 45,000
lot 32 30,000
75,000As at January 2006 lots 35 & 34 72,000
lot 32 42,000
114,000For reasons which follow, I am not satisfied that the cohabitation agreements should be set aside.
The property values which were adopted for the purposes of the first agreement of 6 December 2001 were the values specified in council rate notices at the time (exhibit D28). The values of $35,000 for lots 34 and 35 and $27,000 for lot 32 can be compared with Mr Cottle’s valuations as at May 2001 of $45,000 for lots 34 and 35 and $30,000 for lot 32. Overall the difference is only $13,000.
Using the Council rate valuations for the purposes of discussion, if the plaintiff had retained her one half interest in the properties and paid one half of the mortgage, the net benefit to her would have been $31,000 less $23,500, or $7,500. By taking the whole of the equity and paying the whole of the mortgage, the defendant was left with $62,000 less $47,000, or $15,000, from which he was required to pay all fees and costs. Even if the properties had been sold in 2001 at Mr Cottle’s valuations, and all debts, commission and costs paid from the proceeds, there still would have been very little to divide between the parties.
I do not accept that the plaintiff was forced by the defendant to sign the agreements, or that she was under duress to do so. I regard her evidence on that topic, and on some other topics as well, as a reconstruction. She handled the family finances throughout the whole of the relationship, and was at least as well informed as the defendant about the financial contributions that each made. She represented herself competently in the proceedings, and was actively assisted by her current partner, Mr Michael Hewitt, who sat with her at the bar table. She told me her relationship with Mr Hewitt commenced on 12 May 2001. So she was well into that relationship at the time the agreements were signed. I had the opportunity of observing the plaintiff and Mr Hewitt throughout the hearing. Although the defendant was represented by counsel, I had the opportunity of observing him when he was in the witness box. At least upon the basis of those observations, I do not think that the plaintiff would have been overborne by the defendant at any relevant time.
I do not overlook the plaintiff’s evidence, which I accept, that the defendant assaulted Mr Hewitt in August 2001, that he restrained her at the house in September 2001 during a heated argument after the plaintiff had returned Hayley from a period of access, and that on the occasion of other heated arguments he threatened to burn the lot and take Hayley to Queensland. Those events and threats should be seen in the context of mutual hostility in the aftermath of the break up. If the plaintiff had placed any significance upon them in relation to her decision to sign the agreements, I expect she would have mentioned them when she completed a form in June 2003 (exhibit D31) in response to the defendant’s application for a reduction in child support payments (exhibit P43). Instead, in clause 5 of that form, she said:
The payer had properties signed over to him as a gesture on my behalf as one child lives with him. It was on the understanding that all 3 of my children were to be sole beneficiaries which is now apparently not the case.
In the end, I consider that the plaintiff well understood the significance of the agreements, and that she signed them willingly and freely.
Section 11(1) of the Act provides:
(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.
It is clear that each party made contributions to the relationship that were both financial and non-financial. I have already dealt with their financial contributions. Most of the purchase price in the case of each of the lots was borrowed on mortgage, and both parties contributed to the pool from which the interest was paid. As for their non-financial contributions, the plaintiff did the housework and cooking and most of the parenting. The defendant, albeit with the assistance of the plaintiff from time to time, did gardening, construction, maintenance and landscaping work, and renovations to both houses.
As for the household items, I am satisfied that, when the relationship came to an end, the plaintiff made a willing and free choice about which items she would take and which items she would leave behind.
Generally with respect to the financial and non-financial contributions that the parties made throughout the 14 years of the relationship, I am unable to say that the contribution of one was greater than the contribution of the other.
I return to s 9(3) of the Act. As already appears, the plaintiff brought her application more than three years after the relationship had ended. She asserted in an affidavit of 5 October 2004, and again in her evidence before me, that she believed the time limit was five years. Even had that been her belief, there was another reason for her delay in my view. I refer to her perception in 2004, as stated in her application, that the real estate was worth about $180,000. In reality that was not so, given Mr Cottle’s valuation of the properties as at January 2006 at $114,000.
Since the relationship came to an end, the defendant has continued to reside at lot 35. He entered into another relationship in 2003, and a son of that relationship was born in August of that year. A further child was born in December 2005. As the result of additional borrowings, the amount owing on the mortgage was $84,000 in December 2005 (exhibit D42). As for the plaintiff, she remains in a relationship with Mr Hewitt, and is now the joint owner of three properties with him. So, since the agreements were signed in December 2001 and January 2002, the parties have got on with their separate lives in important respects.
After considering the interests of both parties, I am not satisfied that serious injustice has been caused to the plaintiff. There is no good reason why the plaintiff should have delayed her application for more than three years. I decline to extend the period of limitation beyond the one year imposed by the Act.
The application is dismissed.
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