Murphy v Mimram

[2008] NSWSC 679

CITATION:	Murphy v Mimram [2008] NSWSC 679
HEARING DATE(S):	17 and 18 June 2008
JUDGMENT DATE :	4 July 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
DECISION:	Order for adjustment in favour of the plaintiff.
CATCHWORDS:	DE FACTO RELATIONSHIPS – Section 20 Property (Relationships) Act 1984 – claim for adjustment of property interests – real estate only joint asset – contributions as homemaker where both parties worked and children of household children of one party only
LEGISLATION CITED:	Property (Relationships) Act 1984
CATEGORY:	Principal judgment
CASES CITED:	Howlett v Neilson [2005] NSWCA 149
PARTIES:	Philip Gregory Murphy (Plaintiff/Cross Defendant) Susan Leslie Mimram (Defendant/Cross-Claimant)
FILE NUMBER(S):	SC 2996 of 2007
COUNSEL:	M B Evans (Plaintiff/Cross Defendant) G Gould (Defendant/Cross Claimant)
SOLICITORS:	O'Brien Lawyers (Plaintiff/Cross Defendant) Briggs and Associates (Defendant/Cross Claimant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
SYDNEY REGISTRY

Windeyer J

FRIDAY 4 JULY 2008.

2996/07 Philip Gregory Murphy v Susan Leslie Mimram

JUDGMENT

1 This is a claim and cross claim under section 20 of the Property (Relationships) Act 1984 (the Act).

2 The plaintiff, Philip Gregory Murphy (Philip) was born on 28 March 1959 and is now aged 49 years. The defendant, Susan Leslie Mimram (Susan) was born on 30 September 1952 and is now aged 55 years.

3 Philip and Susan lived in a de facto relationship from about June 1989 until 20 November 2006. They had no children together. At the commencement of co-habitation, Susan had two children from a previous relationship living with her, Gabrielle Mimram born 28 June 1982 and Sacha Mimram born 11 May 1984, aged 7 and 5 respectively. Philip, Susan and her children Gabrielle and Sacha lived together until Gabrielle moved out in or around June 2003 and Sacha moved out in or around October 2006.

4 In claims for adjustment of property interests under section 20 of the Property (Relationships) Act 1984 it is necessary to establish the assets of the parties at the commencement of the relationship; the assets acquired during the relationship and by whom; the assets of the parties at the end of the relationship; and contributions of each party to the acquisition, improvement and conservation of the separate or joint property. The third step is sometimes said to be the first: Howlett v Neilson [2005] NSWCA 149, but all are necessary.

Assets at Commencement of the Relationship

5 There was substantial agreement between the parties as to the assets owned by each party at the commencement of the relationship in June 1989.

6 Philip was the sole registered proprietor of a property at 39 Allen Street, Leichhardt (the Leichhardt property). He had purchased the property on 22 January 1988 for a consideration of $122,000. He paid the deposit of $32,000 from his own money and borrowed the balance of the purchase moneys amounting to $90,000 from the Australia and New Zealand Banking Group Limited (ANZ Bank). The loan was subject to an interest rate of 6%, which was lower than the prevailing market interest rate, because Philip received a discounted home loan as a staff benefit for working for the ANZ Bank.

7 The value of the Leichhardt property at the commencement of the relationship is not agreed. It was purchased on 22 January 1988 for $122,000 and sold in or about November 1993 for $268,500. Susan acknowledged in cross-examination that by June 1989, when the relationship commenced, Philip had already completed the major structural renovations such as demolition of existing walls and construction of a new kitchen, family room, bathroom and laundry. Susan assisted Philip in completing minor work such as internal painting, carpeting and decoration. As I will explain the parties agreed in September 1991 on a value of $230,000. On that basis I find the value at the commencement of the relationship to be about $200,000.

8 Philip owned furniture and effects which he estimated were worth approximately $5,000. I accept that figure. It is supported by Susan’s evidence of the items of furniture.

9 There is dispute as to whether Philip owned a motor vehicle. He said that he owned a 1981 Toyota Corona motor vehicle worth approximately $6,000. Susan said that at the commencement of the relationship Philip owned no motor vehicle and that she lent Philip $2,000 to help him purchase the 1981 Toyota Corona. There was no cross-examination of either party on this matter. In a long relationship such as this I consider it can be disregarded.

10 At the commencement of the relationship Susan had the following assets:

(a) a property at 19 Durham Street, St Lucia, Queensland. This property had been purchased on 15 December 1988 for a purchase price of $85,000. She paid $55,000 from her own money and borrowed the balance of the purchase price amounting to $35,000 on mortgage from the Advance Bank;

(b) furniture and effects which included a refrigerator, washing machine, queen bed, two single beds, dining chairs, coffee table, vacuum cleaner, china and cutlery;

(c) a 1976 Honda Civic motor vehicle purchased five months prior to the commencement of the relationship for approximately $3,000;

(d) money received from the estate of her late aunt Winifred Lenora Henderson in the sum of NZ$18,309 and 209 shares in Fernz Corporation valued at $2000. Of these monies, Susan said that $7500 was used to purchase furniture for herself and Philip, $5000 paid towards the mortgage on her Queensland property and $5000 deposited in the Advance Bank. I accept that.

11 Both parties had some superannuation entitlements when the relationship commenced but the figures were not in evidence.

1989 – 1993: the Leichhardt Property

12 At the commencement of the relationship in June 1989 Philip was employed as a project manager with the ANZ Bank. At the time, he was earning approximately $35,000 gross per annum including superannuation and was also eligible for staff benefits including a reduced rate home loan with the ANZ Bank. Susan was working as a drafting tracer with Linde Australia. At the time, she was earning approximately $28,000 gross per annum including superannuation.

13 In June 1989 Susan lived with her two children in a rented apartment at 9/3 Barton Road, Artarmon (the Artarmon property). Philip moved into the Artarmon property and the couple resided there for approximately six months. During this period, all household expenses were paid by Susan with Philip making a contribution of one third for food, electricity and telephone expenses.

14 While residing at Artarmon, Philip continued the renovations he had commenced since purchasing the Leichhardt property in January 1988 and in early 1990 Philip, Susan and her two children moved into the Leichhardt property.

15 On 20 September 1991 the parties signed a memorandum of agreement (the 60/40 agreement). This recited that the mortgage debt to the bank was $90,000, the agreed value of the Leichhardt property was $230,000 and that Susan wished to become a co-owner. It then provided that Susan would become:

[a] co-owner to the extent of a 40% continuing interest on payment of:

a. $55,000 to Philip;
b. $606 per month as 40% of the mortgage payments;
c. 40% of all outgoings including rates, insurances, repairs, maintenance and improvements.

The $55,000 was paid from the proceeds of sale of the Queensland property.

16 It is significant to note the way in which Philip used the $55,000 he received from Susan under the 60/40 agreement. He applied $40,000 of it towards repaying the ANZ Bank mortgage. In doing this, Susan’s 40% equity in the Leichhardt property increased in value, through the reduction in the mortgage, without her making any contribution. In other words, 40% of the $40,000 namely $16,000 should be recognised as being a mortgage payment owed by Susan under the 60/40 agreement but paid by Philip. In cross-examination Susan said that she used some of the remaining funds to purchase carpet for the Leichhardt property.

17 In March 1992 Philip ceased employment with the ANZ Bank and the employee benefit of the reduced rate ANZ Bank home loan ceased. The $48,000 still owing on the mortgage to the ANZ Bank was refinanced by a loan from Philip’s parents at an interest rate 1% below the prevailing home loan rate. In evidence are the relevant pages of the loan ledger book kept by Philip’s father, and after his death by Philip, showing the monthly payments made by Philip and Susan and the interest and principal still outstanding on the loan. Philip contends that the advantage obtained from the low interest mortgage with the bank should be taken into account as a contribution by him. No figure was placed on it and it could only be regarded in some general way as something to be taken into account on a global adjustment.

18 In accordance with the 60/40 agreement, the monthly payments due on the ANZ mortgage and later the loan to Philip’s parents were paid 60% by Philip and 40% by Susan.

19 In or about November 1993 the Leichhardt property was sold for the sum of $268,500. On September 20 1993 the loan ledger book shows that the loan from Philip’s parents then stood at $21,721.

1993 – 2005: The Killara Property

20 After sale of the Leichhardt home in November 1993 Philip and Susan purchased as joint tenants a property at 76 Fiddens Wharf Road, Killara (the Killara property) for a purchase price of $315,000. The purchase price was funded by the proceeds from sale of the Leichhardt property and also by increases on the existing loan from Philip’s parents of $31,000 on 22 September 2003 for the deposit, $9,667 on 22 October 2003 for the stamp duty and $38,000 for settlement. In total, Philip and Susan’s loan with Philip’s parents stood at $100,000 on 27 October 2007.

21 Throughout the period the couple resided at the Killara property, from November 1993 until its sale in November 2005, Susan continued to contribute 40% of the principal and interest on their loan with Philip’s parents and, at least for some years, other expenses of the Killara property such as council rates, water rates, insurance, maintenance and repairs.

22 Counsel for the plaintiff submitted that by continuing to conduct their affairs in a manner consistent with the 60/40 agreement, Philip and Susan understood that the 60/40 agreement would continue in relation to the ownership of the beneficial interest in Killara property. Counsel for the defendant argued that by this stage, consistent with the fact legal title was held as joint tenants, the relationship was better characterised as a joint enterprise.

23 In relation to the renovations and improvements to the Killara property, both parties have produced itemised lists of the work they claim to have solely undertaken and paid for, at times claiming the same piece of work. It seems that Susan removed ivy from the side of the house, while Philip installed doorframes and architraves. Susan used her skills to draft plans and detailed designs, while Philip used his skills as a tradesman. I find that they both paid for improvements and contributed their labour towards maintaining and making improvements to the Killara property. Philip paid more than Susan. He had a higher income.

Household Expenses

24 In general 60/40 was also used as the basis on which other household outgoings for rates and services were shared between Susan and Philip from 1993 until 1995.

25 Philip claims that in 1995 when Susan’s children commenced Killara High School he commenced paying all the outgoings of the property (including the mortgage) and household expenses. This was to enable Susan’s money to be spent on the children’s expenses which were becoming quite significant. In cross-examination, Susan denied that this was the case and said that she had continued to pay Philip, by cash or cheque, her share of household expenses. In evidence is a schedule prepared by Philip showing the various household expenses he paid and supported by extensive ANZ Visa Gold and American Express Statements. Susan says she usually repaid Philip in cash, making it very difficult to ascertain whether payments for her 40% share were ever made. . I find that Susan contributed less than 40% of the household expenses from 1995 but I cannot find actual figures.

Financial Contributions

26 Both Philip and Susan were employed on a full time basis throughout their 17 year relationship. Philip claims there was a brief period from June 2000 to February 2001 during which Susan did only casual work. Susan said in cross-examination that she had been working from home as a sub-contractor for Kevin R Shearer Services Pty Ltd, generating drawings of light power and data schematics for Woolworths. This was supported by the affidavit evidence of Elizabeth Ann Smogurzenski who said that between March 2000 and November 2000 she worked with Susan from the Killara property. Susan’s income tax returns for the period from 1997 to 2005 are in evidence. They show only a slight drop in taxable income over the 2000 and 2001 tax years, which is consistent with Susan’s account that she was self-employed over this period. I accept that both Philip and Susan worked on a full time basis, or close to that, for the duration of their relationship.

27 Nonetheless, it should be noted that Philip’s financial contributions to the relationship throughout the duration of the relationship was significantly greater than Susan’s. His income enabled this. As at September 2007, Philip was employed as a senior project manager for Woolworths Limited earning a package worth $173,000 in total. At 22 October 2007, Susan was employed as a graphic designed for Worley Parson and was earning a gross income of $78,000 plus superannuation working four days per week. The fact that neither party had any substantial savings or separate investments when the relationship ended indicates their earnings were for the most part used for the benefit of the household and as I have said that Philip contributed more.

28 In addition to her salary, in 1995 Susan received the sum of $30,000 as a bequest from the estate of the late Clarissa Lee Logan. These funds were used to reduce the loan to Philip’s parents, $20,000 in April 1995 and $10,000 in August 1995. In 60/40 terms this was a benefit to Philip of $18,000.

Non-financial contributions

29 As to non-financial contributions such as household cleaning, meal preparation, washing and ironing at least until 2000, grocery shopping and the like, Susan said that she solely undertook these day-to-day chores. Philip said that he assisted with the shopping and maintenance of the garden areas of the property. Conflicting evidence as to who did the shopping, the cleaning, the lawn mowing and the pool cleaning can be disregarded. These are parts of the everyday life of couples living together. As the defendant did nearly all the cooking it is apparent she contributed more to the domestic affairs than the plaintiff. On the other hand his training enabled him to do more handyman work around the house which he did.

30 It must also be remembered that since the parties both worked on a full time basis throughout the relationship, this impacts upon their capacity for non-financial contributions. I accept that most of the ordinary household work was done by Susan but it must be remembered she was going this for her children as well and it is accepted Philip did his own washing and ironing from 2000.

Parenting

31 Susan’s claim was that Philip did not take up the role of surrogate parent and that she was solely responsible for the parenting of her two children, Sacha and Gabrielle. This claim cannot be sustained on the evidence, and indeed was not maintained by Susan who in cross-examination eventually acknowledged that Philip had made “a minor contribution”. I accept that Susan had the primary care for the children, but find that Philip did contribute towards their care and wellbeing as a surrogate parent. My reasons for finding this are set out in the next paragraph.

32 First, contrary to her affidavit evidence, Susan in cross-examination admitted that Philip had paid for most of the expenses for annual family holidays involving Philip, Susan and the two children which included a number of interstate holidays. Second, cards from Sacha and Gabrielle given to Philip on special occasions such as Birthday, Christmas and Father’s Day are in evidence. Although less significance may be imported to cards written by children at a young age, more recent cards written when the children were in their late teenage years clearly indicate that the children held Philip in high regard and were grateful for the many things he had done for them. Third, it was agreed that Philip had purchased a motor vehicle for each of the children and received only a nominal payment from them. He did drive the children to some school and sporting events. His contribution was more than “minor”.

2005-2006: the Cammeray Properties

33 On 17 November 2005 the Killara property was sold for $950,000. At this time the amount outstanding on the loan with Philip’s mother, his father having died, was $64,482.

34 To coincide with the sale of Killara the parties purchased as joint tenants 1/102 Cammeray Road, Cammeray (Unit 1 Cammeray) and 2/102 Cammeray Road, Cammeray (Unit 2 Cammeray). The purchase price of each of the units was $677,500. Stamp duty and legal costs brought the total cost of acquisition to $1,410,850. This was funded by the proceeds of sale from the Killara property, less $170,000 which had been retained for planned improvements to the Cammeray properties, and by way of a $542,000 mortgage loan from the Commonwealth Bank of Australia secured on Unit 2. In addition, Philip contributed $123,600 from the sale of some of his Woolworth’s shares acquired through a staff share option scheme, which was used to pay for the deposit, stamp duty and legal costs. The amount retained for improvements was not spent on this but was applied to reduce the mortgage debt. The parties lived in Unit 1 and Unit 2 was leased. It seems the rent was applied towards mortgage interest with the balance being paid in the 60/40 proportions up to separation and the other outgoings were paid on the same basis. This appears at transcript 49/25.

35 In November 2006 the parties separated and later the joint tenancy of the Cammeray properties was severed. After separation Susan continued to reside in Unit 1 Cammeray. Unit 2 Cammeray remained leased. Philip lived elsewhere in rented accommodation until 10 March 2007 when the lease expired and he moved into Unit 2 Cammeray. Thus for some months Philip was paying rent while Susan lived rent free.

36 There have been conflicting accounts presented by Philip and Susan as to who has been paying the mortgage payments on the loan with the Commonwealth Bank of Australia (CBA) and other outgoings related to the Cammeray properties since separation. Shortly after separation, Susan said Philip withdrew $7,900 from their joint Credit Union Australia account without providing Susan with a reason and Susan withdrew $2,900 from this account and discontinued paying the CBA mortgage. The evidence is not sufficient for a final determination on this. Both parties contributed to that account but Philip contributed more than Susan. The mortgage payments were offset by rent from November 2006 to March 2007 when Philip moved back to the unit which had been leased. The payments made by Philip were about $6,000 so that even if the $5,000 difference between the $7,900 and the $2,900 was attributed to the account in the approximate ratio of 60/40, the payments made by Philip above his share were in the order of $1,000. After his return he has made all the mortgage payments of about $34,500. In addition the plaintiff paid has paid $4,353 for land tax and $7,300 for plumbing work. In relation to other outgoings on the Cammeray properties after separation, I find that Philip paid for those on Unit 2 Cammeray and Susan for those on Unit 1 Cammeray, with the exception of one water rate bill for Unit 1 that Philip paid, but which can be disregarded.

37 On 24 April 2007 Philip’s mother, Mrs Mary Murphy, wrote a letter to both Philip and Susan calling in the loan of $58,688. On or about 12 May 2008 Philip repaid the loan of $62,311 to his mother. Although the ledger book was only kept until 2006 and there are no entries recorded in either 2007 or 2008, Philip’s evidence that $62,311 was the amount outstanding on the loan was not challenged by Susan. It is accepted between the parties that this was a liability owed by both parties but paid for by Philip.

Assets at Termination of the Relationship and at the present time

38 The evidence does not enable an accurate assessment of asset valuation of separate and joint assets at the date of separation. The assets were, however, generally identical with those at trial only the values differing. In some items there were increases such as superannuation and long service leave, but the parties approached the matter sensibly enough on the assets at the time of hearing. The only real rider on this is that the debt of $59,706 owed to the plaintiff’s parents at separation was a liability then, which has been discharged by the plaintiff, and needs to be taken into account.

Separate Assets of the Plaintiff :
Superannuation $256,472
Savage Centurion Motor boat $ 20,000
Shares (1569 Woolworths, 617 IAG) $ 43,000
Share options (3000 Woolworths) net value
Allowing for strike price and capital gains tax $ 20,000
Long Service Leave benefit (gross $29,574) net $ 17,744
Performance Bonus (gross $24,000)net $ 14,400
Savings (approx) $ 24,000
Total $ 395,616

The following three paragraphs explain some of these figures.

39 Philip gave notice of resignation to his employer, Woolworths Limited, on 6 June 2008 and will officially cease to be an employee of the company on 4 July 2008. It is not certain whether he will receive the performance bonus, although in cross-examination he said he believed he could receive it. Philip said that to be eligible under the conditions you must be employed at the time of payment, which he will not be, and so some negotiation with his employer will be required. Second, whether it will be paid and how much will be paid is contingent on the company’s performance and also his individual performance. In previous years, the performance bonus has been around $25,000 gross. He believed he had met performance standards. I proceed on the basis he will receive a bonus with a net value of $14,000.

40 In relation to Philip’s executive stock options with Woolworths, 3000 of these may be exercised in the period from 1 July 2008 to 30 December 2008 and I have brought these to account, as he will be employed at the commencement of the option period. Other options will lapse.

41 The defendant’s counsel adduced evidence of Qantas Frequent Flyer points which Philip had accumulated during the course of the relationship. I do not consider this an asset which can have a bearing on this case.

42 Separate Assets of the Defendant:

These are:
Superannuation $ 43,108
Savings $ 8,000
Total $ 51,108

43 Joint assets of the Plaintiff and Defendant:

Unit 1 Cammeray $ 720,000
Unit 2 Cammeray (subject to mortgage $370,000) $ 750,000
Honda Motor Vehicle paid for by the plaintiff $ 10,000
Less mortgage debt ($ 370,000)
Total (net) $1,110,000

The Cammeray values are agreed.

Claims

44 The plaintiff’s pleaded claim is for an order that he pay to the defendant $375,000 or such other sum as the court determines; that the defendant transfer to him her interest in the Cammeray properties; and that he indemnify the defendant against any liability under the mortgage and that otherwise there be no adjustments.

45 The submission of the plaintiff is that the court should address the question of property on an asset-by-asset basis.

46 The submission of the defendant, through her counsel, is that there should be a pooling of the assets of the parties, including the Cammeray properties, Philip’s superannuation, stock options, shares and performance bonus, which should be shared equally between the parties. The defendant’s desired outcome is that plaintiff would transfer title in Unit 1 Cammeray and the Honda motor vehicle to her. If this were to happen the figures would be as follows:

Plaintiff’s assets $ 395,616.00
Defendant’s assets 51,108.00
Joint assets $ 1,110,000.00

Total $1,586,724.00
One half $ 778,362.00

To achieve the result the defendant seeks she would take

Unit 1 $ 720,000.00
Her superannuation $ 43,108.00
The car $ 10,000.00 $ 787,708.00
And she would pay her savings of $8,000 to
The Plaintiff ($ 8,000.00)
$ 779,708.00

47 If that were to happen the plaintiff would get Unit 2 - $750,000, less mortgage $370,000 which is $380,000 plus total separate assets $395,616 plus $8,000. Total $783,116.

48 While this would effect an approximately equal division of assets it is not an adjustment possible or authorised under s20 of the Act. That is because it could not be said the defendant made a contribution to the acquisition conservation or improvement of those individual assets of the plaintiff nor that the defendant made such a contribution by way of homemaking for the plaintiff alone or for the family on the basis that the children were accepted as part of the household in which they lived. It must be accepted that they were the defendant’s children and she claimed that she had almost sole responsibility for them. In the same way it could not be said the plaintiff made a contribution to the separate assets of the defendant.

In addition to this, such an adjustment would fail to recognize significant financial contributions made by the plaintiff to the joint assets being the real estate. The parties proceeded on the basis of a 60/40 agreement, at least until separation. I will return to this.

49 I consider the parties should retain their separate assets. Each worked and each became entitled to benefits as a result of that work. This is not a case of one party staying at home doing all the work of a homemaker thus enabling the other to go to work and acquire assets such as superannuation benefits. To a large extent the parties kept their affairs separate. In general they contributed in agreed proportions to household expenses to the benefit of the defendant and her two children. No case for an amalgamation of assets with an equal distribution has been made out. If that results in an asset by asset approach I consider that the proper approach.

50 I turn to the real estate. While the parties purchased Killara and Cammeray as joint tenants, that does not determine the matter when making the determination under s20 of the Act. I regard the 60/40 agreement and the continuing conduct of financial arrangements on the basis of that agreement remained in force until separation, a matter of significance. So far as Cammeray was concerned that would appear to be just and equitable if additional contributions to the real estate properties had not been made.

51 The plaintiff made at least the following additional contributions.

(a) $ 40,000 – from the purchase price of the interest in Leichhardt
(b) $ 62,611 – to replay loan from parents;
(c) $123,600 – to pay deposit, stamp duty and legal costs on Cammeray;
(d) $ 1,000 – mortgage interest to end of lease;
(e) $ 34,500 – mortgage payments since resumption of residence;
(f) $ 11,653 – land tax and plumbing work
$273,364

52 On a 60/40 basis the defendant should have paid 40% of the figure, namely $109,346.

53 The credit side for the defendant is that she paid $30,000 towards repayment of the parents’ loan the benefit of the plaintiff being 60% namely $18,000, being a balance in favour of the plaintiff of $91,346.

54 The interest in Cammeray after allowing the mortgage debt is $1,100,000. 40% of that is $440,000. From that figure should be deducted $91,346 leaving a balance of $348,654.

55 In arriving at this figure I have disregarded two items the plaintiff relied upon as contributions to the value of the real estate, namely his being responsible for the receipt of low interest loans from the bank and from his parents, the value of which was not established, and amounts he spent on renovations to the Killara property. The first was an unquantified benefit and the latter is partly balanced by work the defendant did in maintaining and improving the house including the preparation of plans for the renovations.

56 Lastly, I consider the defendant is entitled to some adjustment to further recognize her homemaker contributions. But as I have said this has to be considered on the basis of both parties working, the fact that from 2000 on the plaintiff did his own washing and ironing, the handyman work of the plaintiff, the fact that the children were the defendant’s children, and the benefit that the children and the defendant derived from the plaintiff, his personal attention and his income. I consider, taking this into consideration, and making some allowance for the matters in the preceding paragraphs, the defendant should receive the sum of $400,000 from the Cammeray properties and that she should keep the car and her own assets. The plaintiff should receive the balance and indemnify the defendant against liability under the mortgage.

57 I will stand the matter over so that draft orders can be brought in to give effect to this judgment. If the defendants wishes to retain Unit 1 and is able to finance this then I would make orders to achieve that on the basis of its agreed value of $720,000. When the orders are brought in I will hear submissions on costs.

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