Perre v Ogulev - [2009] SADC 85

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PERRE v OGULEV
[2009] SADC 85
Judgment of Her Honour Judge McIntyre
14 August 2009
FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS - ADJUSTMENT OF PROPERTY INTERESTS
Property division - application out of time - extension granted. Identification of property to be divided.
Trusts - whether one party held property on trust for the other.
Consideration of contributions by parties - financial and non-financial contributions - valuation of parties Cafe business - time at which division of property should take place.
Held: Property not held on trust. Sole property to be divided is the parties' former Cafe business. Property should be divided 50/50 adjusted for interest in favour of the plaintiff. Plaintiff awarded $22,000 inclusive of interest.
Domestic Partners Property Act 1996 s.9(2), s.9(3), s.11, referred to.
Bahr v Nicolay INo 2) (1998) 164 CLR 604; Allen v Snyder [1977] 2 NSWLR 685; Maschinski v Dodds (1985) 160 CLR 683 at 615-616; Hepworth v Hepworth (1963) 110 CLR 309 at 318; Chan v Zacharia (1984) 154 CLR 178 at 198-199; Hogg v Roberts [2003] SASC 410, considered.

PERRE v OGULEV
[2009] SADC 85
Application for division of property

Ms Perre and Mr Ogulev lived together in a domestic relationship from February 2002 until July 2004. There was, on Ms Perre’s version, a brief attempt at reconciliation in December 2004 and January 2005. There is one child of the relationship, a son Mikhail.
Ms Perre applied to the Adelaide Magistrates Court for division of property under the Domestic Partners Property Act 1996 (“the Act”) on 12 December 2005. She also seeks an extension of time within which to bring her application. I have power to extend that time limit and I do so. I shall say why later.
The proceedings were transferred to this Court on 5 November 2008 following an application by Ms Perre. Both parties were unrepresented.
In my view, Ms Perre is entitled to recover from Mr Ogulev the sum of $22,000.00. I set out my reasons for coming to that conclusion beginning with a brief history of the parties’ relationship.
The relationship of the parties
The parties met in the year 2001. They began living together in a rental property in about February 2002. Neither party had substantial assets. Ms Perre was working full time as a teacher. Mr Ogulev was working in the construction industry on a casual, but full time, basis. They did not enter into a domestic partnership agreement under the Act. Their son was born on 1 December 2002.
In early 2002, the parties decided to establish a café business, Taldy Kurgan, in the Adelaide Central Market. That business commenced operation in June 2002. There is some dispute as to the cost of setting up the business and the quantum of their respective contributions. There was no written partnership agreement. It is however common ground that business returns filed with the Australian Taxation Office indicated that the profits of the business were distributed 50/50 between them until 30 June 2005. Ms Perre disputes that she received the whole of the profits attributed to her in the business return for the financial year ended 30 June 2005. This forms part of her claim and I will return to this issue later.
There was no formal dissolution of the partnership. The date on which Ms Perre ceased working in the business is contentious. Both parties agree however that Ms Perre removed her name from the business name registration in June 2005 and that Mr Ogulev continued to operate the café business as a sole trader from 1 July 2005 until he sold it in June 2007.
Extension of time
Applications for division of property under the Act may only be made if the criteria in section 9(2) are met and must be made within one year after the end of the domestic relationship.[1] It is uncontentious that the criteria set out in section 9(2) are satisfied but Ms Perre seeks an extension of the time limit. Both parties agree that they ceased living together in July 2004. Ms Perre gave evidence that there was a brief attempt at reconciliation by way of a holiday in Victoria in December 2004 to January 2005.[2] The precise dates are not clear from her evidence but, if I accept that there was such a period of reconciliation and it formed part of the domestic relationship, then arguably it is not necessary for me to grant an extension of time. Mr Ogulev agrees that there was a holiday but disputes that this was an attempt at reconciliation. He says that he went in order to see his son who resides with Ms Perre. He says that they did not live in a domestic relationship after their separation in July 2004.[3]
[1] Section 9(3)
[2] Transcript p20
[3] Transcript p107
It is my view that even if there was an attempt at reconciliation during this period it cannot be said to amount to a resumption of a domestic relationship. Accordingly Ms Perre’s application is some 5- 6 months out of time.
Since their separation the parties have engaged in litigation over custody and access issues relating to their son, child support issues and property matters. Ms Perre says that she did not have the financial resources to pursue the issue of property settlement and was not aware of the Act until informed of it by a solicitor she had engaged in relation to custody issues. It is common ground that she had been attempting to negotiate a settlement of property issues with Mr Ogulev. Mr Ogulev was aware that Ms Perre was asserting an interest in the business. Indeed he conceded in his evidence before me that she was entitled to some payment for her interest indicating that they had reached an agreement in about December 2005 that her share of the business was worth $11,000. He says that he paid Ms Perre $4,000 on 17 December 2005 but did not pay her the balance until about October 2007 following the sale of the business. This is well after these proceedings were issued.[4] There appears to be no real prejudice to Mr Ogulev in granting an extension of the period of limitation and I consider that an extension is necessary to avoid serious injustice to Ms Perre. In view of this, I exercise my power to extend the time limit to enable Ms Perre to bring her application.
[4] Exhibit D3; Transcript pp 103-4
The property identified
The property that is the subject of the application comprises two businesses and three house properties. The businesses are: –
Taldy Kurgan, at the Adelaide Central Market (“the café business”); and
A charter boat business in Brisbane.
The house properties are:
15 De Gacher Street, Nairne;
90 Agnes Street, Ottoway; and
69 Margaret Terrace, Rosewater.
It is uncontentious, and I find, that the café business was the property of both during their relationship and therefore properly the subject of an application for division under the Act.
Mr Ogulev purchased the three house properties and the charter boat business following the separation. A preliminary issue is therefore whether Ms Perre has any claim under the Act, or otherwise, in respect of those assets (“the disputed property”).
The basis of her claim is set out in paragraphs 15-22 of her statement of claim. Ms Perre asserts, in effect, that Mr Ogulev breached a fiduciary duty to her in respect of the profits of the business. Specifically she says that he misappropriated profits in order to purchase the disputed property. Her particulars of claim state that:
4. The plaintiff claims that in the events that have occurred that it be declared that as a result of unjust enrichment and as a result of an express resulting or implied or constructive trust the defendant holds a proportion of his interest in his properties in trust for the plaintiff.[5]
[5] Statment of Claim, Part 2: 4
Was there a Trust?
Mr Ogulev gave evidence concerning his purchase of the disputed property. He purchased the Nairne property in September 2005 for a purchase price of $165,000. He obtained a first homeowner’s grant in the sum of $7,000 and a mortgage of $156,700. Mr Ogulev says that his parents provided the balance of the purchase price. He lived in the Nairne property until his relocation to Queensland. He paid the fortnightly mortgage repayments, which he says were cheaper than his rental, from income derived from the café business.[6]
[6] Exhibits P14 & P27
He purchased the Ottoway property in June 2006 for a purchase price of $205,000. He had a mortgage of $185,436.93. He says that his parents again provided the balance. The mortgage payments were paid by a combination of rental return on the premises and income from the business.[7]
[7] Exhibits P15 & P28
He purchased the Rosewater property in January 2007 for $230,000. He obtained a mortgage of $207,000. He says that his parents again paid the difference. The mortgage repayments were covered by a combination of the rental return from the property and income from the business.[8]
[8] Exhibits P16 & P29
Mr Ogulev says he purchased the charter boat business using the proceeds obtained from the sale of the café business. He purchased that business in July 2007. The total purchase price was $120,000. He borrowed $80,000 from the bank and he made up the balance from the sale of the café business.[9]
[9] Transcript pp181-182, Exhibit P3
Except in one respect this evidence was uncontentious and was supported by the various documents tendered.[10] The area of dispute was the funding of the purchase price of the three house properties. Specifically whether Mr Ogulev’s parents paid the difference between the loan and the purchase price or whether, as Ms Perre contended, the difference was funded by misappropriated partnership funds.
[10] Exhibits P14, P15, P16, P18, P27, P28, P29 P32 & P33
On any view of the evidence, the circumstances do not establish an express trust. Mr Ogulev has not expressly declared himself a trustee of the disputed property, he has not transferred the disputed property to another person as trustee, nor am I able to infer such an intention on the part of Mr Ogulev.[11] The facts further do not support a resulting or implied trust.[12] The question is whether the Court should impose a constructive trust because it would be inequitable for Mr Ogulev to assert ownership of the disputed property or otherwise not account to Ms Perre for the disputed property.
[11] Bahr v Nicolay (No 2) (1988) 164 CLR 604
[12] Allen v Snyder [1977] 2 NSWLR 685
A constructive trust is a trust imposed by operation of law, regardless of the intentions of the parties concerned, as a remedial device whenever equity considers it unconscionable for the party holding title to the property in question to deny the property rights of the person claiming an entitlement. It is not however enough to establish that justice and good conscience require the imposition of a constructive trust. Rather a claimant must establish that it is required under established equitable principles or that the remedy can be extended by proper legal analogy.[13] In other words a constructive trust is not to be ordered simply to satisfy “rough justice’ or notions of fairness and justice. There must be a proper basis for equitable intervention.[14]
[13] Muschinski v Dodds (1985) 160 CLR 583 at pp 615-616
[14] Muschinski at 615; Hepworth v Hepworth (1963) 110 CLR 309 at p 318
Ms Perre’s statement of claim raises the concept of unjust enrichment as a basis for the remedy. This doctrine does not apply as a general principle in Australia.[15] However the factual basis that she pleads asserts, in effect, that Mr Ogulev breached his fiduciary obligations to her as a partner by misappropriation of profits of the café business.[16]
[15] Muschinski, see note 2 above
[16] Amended Statement of Claim dated 18/11/08, paras 15, 18-22
There is no question that Mr Ogulev owed a fiduciary duty to Ms Perre to properly account to her for the profits of the business.[17] The question is whether Ms Perre has established her allegation that he misappropriated the profits on the balance of probabilities. In my view this assertion, if established, would be sufficient to found the basis for a constructive trust in that it could be said that it would be unconscionable of Mr Ogulev to maintain ownership of some or all of the disputed property in circumstances where he paid for them by way of misappropriated profits. Equitable intervention in these circumstances is premised upon unconscionable conduct.[18]
[17] Chan v Zacharia (1984) 154 CLR 178 at p 198-9, Deane J
[18] Muschinski see note 12 above
Ms Perre has raised a number of concerns with the record keeping of the café business. In particular she says that Mr Ogulev had sole responsibility for banking the takings throughout the duration of the café business. She claimed that he consistently banked only a fraction of the takings in the business bank account.[19] She also contended that once she stopped taking an active part in the café business Mr Ogulev had a free hand to run the business as he pleased. She raised concerns about the lack of documentation in the business accountant’s records concerning the sales income. Specifically she complained that that the accountant was not provided with source documentation such as cash register receipt rolls.[20] She does not consider that the business returns of the partnership are an accurate reflection of the true sales figures. She further refers to the fact that the cost of sales remains essentially the same over the entire history of the business, whereas the sales figures show a dramatic rise in sales over the course of the business and, particularly, in the year 2007. She says that this demonstrates that the 2007 figures are a more accurate reflection of sales over the course of the business than what is contained in the business returns for the preceding financial years.
[19] Statement of Claim, para 22, transcript pp 60-61
[20] Transcript pp 61, 201
Mr Ogulev denies these allegations. The business was a cash business. That is, the customers all paid in cash. He generally banked the takings once each week but kept some money to cover expenses. The business was located at the Adelaide Central Market. He needed to purchase provisions such as milk, fruit, vegetables and flour for the café business on a regular basis. He required cash in order to do this.[21] He says he kept a daily record of the takings and expenses that he then used in order to compile monthly totals of takings and expenditure. He provided these monthly totals to the business accountant. A copy of those monthly totals was extracted from the accountant’s records and identified by him.[22] He did not provide the cash register rolls to the accountant nor did he provide the expenditure receipts. Rather he provided the summary document.
[21] Transcript pp 133-134 & 139-141
[22] Exhibit P25
In relation to the increase in total sales, he agreed that they had increased. He said that it was normal for a business to improve as it became more established. Further he said that he had undertaken a marketing course and a barista course to improve his marketing and coffee-making skills. These two factors contributed to the improvement in the business sales.[23] He agreed that the cost of sales over the history of the business only increased slightly whereas the level of sales increased substantially. He said that this was a result of his good management.[24]
[23] Transcript pp 174-175
[24] Transcript pp 178-179
Ms Perre was sceptical that Mr Ogulev’s parents had assisted him with the purchase of the house properties due to the fact that Mr Ogluev’s father was on a disability support pension and his mother worked in casual employment. Mr Ogulev gave evidence that his parents had savings from their years of working together with an inheritance following the death of his grandmother.[25]
[25] Transcript pp 155-156
Neither party called any evidence to supplement their own evidence.
Ms Perre summarised her concerns in her final address as follows:
…I question whether Mr Ogulev acted properly in his conduct of the finances of the business, and there is a huge discrepancy between sales records and total funds banked. I am suspicious about how the rest of the money, taken in cash, was managed. I certainly did not see it.
There are misgivings about the declared income of the business which doesn’t match up with the cost of the sales figures. I don’t accept Mr Ogulev’s submissions that his parents funded the deposits for all three houses. They are dependent on a Government pension. The money, I believe, could only be derived from the successful business we built together.[26]
[26] Transcript p 202
Suspicions are not evidence. Opportunity does not prove that misappropriation took place. Mr Ogulev has given plausible and reasonable explanations for each of the concerns raised by Ms Perre. The financial records of the business are not without flaws however this is not unusual in a small business. I note that Ms Perre gave evidence that she maintained the financial records whilst she was working in the business. It does not appear from the accountant’s files that there was a substantial change in the manner in which the accounts were prepared and provided to the accountant following Ms Perre relinquishing this role. Notwithstanding the shortcomings identified by Ms Perre, there are records and accounts for each year of the business. These show no obvious discrepancies or omissions. Mr Ogulev did supply a monthly summary of takings, sales and expenditure to the accountant as he said. The records as a whole support Mr Ogulev’s evidence. I accept his evidence and I find that there is no breach of fiduciary duty established on the evidence.
Ms Perre also made note that Mr Ogulev had used proceeds of the business, on his own admission, to pay the mortgages on the three properties and to assist in the purchase of the charter business. It is clear, however, that he also had an entitlement to the profits of the business and at least part of the proceeds of the sale. He continued to work in the business, and to improve its profitability, following Ms Perre’s departure and, following the removal of her name from the partnership record at the Office of Consumer and Business Affairs. He was entitled to be remunerated for his efforts. I do not consider that his use of the profits and proceeds of sale amounts to a breach of his fiduciary obligations to Ms Perre. It was not unconscionable of him to deal with the proceeds in this way.
Accordingly, I find that there is no basis for the Court to impose a constructive trust in relation to disputed property.
Is there a claim under the Act?
The definition of “property” under the Act is widely drafted.[27] There is no temporal limit. That is, the Act does not explicitly state that property must have been purchased or obtained during the course of the domestic partnership. This enables a domestic partner to claim division of property in relation to property that one partner brought into the relationship if that partner can establish some contribution to the conservation or improvement of that property.[28] The difficult question is whether it also enables a domestic partner to claim division of property purchased after the domestic partnership has ended – particularly in circumstances where property has been purchased outside the 12-month time limit for the issue of proceedings under the Act.
[27] Section 3
[28] Section 11
In the circumstances however I need not resolve that issue as I find that Ms Perre has not made any contribution towards the acquisition, conservation or improvement of the disputed property. Mr Ogulev purchased it himself using his income from the business, commercial loans and assistance from his parents.

Ms Perre is however entitled to a share in the café business. Her rights to a share of the proceeds of that business do not depend upon the creation of a trust. She has this right under the Act.
The sale of the Café business
Mr Ogulev sold the business in June 2007 for $52,000. There is no expert valuation evidence in relation to the value of the business at any stage.
Ms Perre disputes the appropriateness of the sale price. There is no suggestion that the sale was not a bona fide sale, rather Ms Perre asserts that Mr Ogulev should have engaged a business broker and obtained a better price. She described the sale price as a “bargain” price. She was not however able to advance any clear basis upon which this could be said to be the case other than the value of the lease. However, it was plain on the evidence that the lease on the Central Market shop was about to expire at the time of the sale. On Ms Perre’s evidence they entered into a three-year lease with a two-year option to renew in June 2002. This was due to expire in June 2007. Mr Ogulev gave evidence that, when he sold the business, the purchasers obtained a new lease direct with the Adelaide Central Market. He also pointed out that when he and Ms Perre set up the business they did not pay the previous tenant anything, rather they purchased some fixtures and fittings in the sum of approximately $2,000.
It appears therefore that the purchasers bought the property, plant and equipment together with the goodwill of the business. The 2007 partnership return disclosed that the assets of the business were valued at approximately $9,000.
In view of the evidence as a whole, I find that the sale price of $52,000 in June 2007 was an appropriate sale price.
The set up and operation of the Café business
It is clear from the evidence of both Ms Perre and Mr Ogulev that they regarded themselves as equal partners when they set up the Café business in 2002. Although there is no formal partnership agreement the business accounts demonstrated a 50/50 division of the profits. There was some dispute as to the amount of the initial investment contributed by the parties.
Ms Perre gave evidence that the initial cost of setting up the business was $15,594. She supplied a list of the initial expenditure.[29] She said that she contributed about $7,500 towards the initial set up costs and Mr Ogulev contributed the balance. In other words, they both paid approximately half the initial set up costs.[30] Ms Perre gave evidence that she took out a loan with Satisfac Credit Union in the sum of $10,000 to fund her contribution.[31]
[29]   Exhibit P4
[30]   Transcript pp 28-29
[31]   Transcript p 25 & Exhibit P5
Mr Ogulev agreed that they each paid half of the set up costs but disputed the amount. Mr Ogulev gave evidence that the initial set up costs were much more modest. They spent approximately $2,000 for fridges and fittings with the previous tenant of their market tenancy and $150 to $200 to purchase additional items.[32] Subsequent items were purchased out of the profits as they went. He tendered an affidavit of Ms Perre that annexed a proposed statement of claim that referred to both parties contributing $10,000 to the purchase of plant and equipment totalling approximately $32,400.00 the balance of which was said to have been purchased out of the profits of the business.[33] He then referred to the depreciation schedule in the partnership returns saying this did not support Ms Perre’s evidence about the initial set up costs. He further disputed that Ms Perre’s entire loan of $10,000 was used to fund the business. He pointed to Ms Perre’s bank statements showing the payment of the loan and indicated that the statements did not show a withdrawal of $7,500 or any significant withdrawal.[34]
[32] Transcript pp 105-106
[33] Exhibit D2
[34] Exhibit D1
Ms Perre said that she paid for the items required to set up the business over a period of time and accordingly there is not one specific withdrawal of half the set up costs. In cross-examination Ms Perre conceded that some of the items on her list of set up costs, such as the coffee machine, were not purchased initially but she maintained that the initial costs were in the order of $15,000.[35] Ms Perre did not accept that the depreciation schedule accurately represented the set up costs of the business. It contained items such as a chip warmer that had been returned and it did not contain items such as signage or the gelati fridge.[36]
[35] Transcript pp 79-80
[36] Transcript pp 84-85
It is difficult to resolve the issue of the difference in the set up costs given the differences between the parties’ evidence. The main objective evidence is that of the depreciation schedule in the partnership return. Ms Perre says that it is not accurate. I note however that she and Mr Ogulev both signed the returns for the first two years of operation of the business. The returns suggest that Mr Ogulev’s evidence understates the set up costs whilst Ms Perre has overstated the initial costs. The costs for plant and equipment and fixtures and fittings incurred in 2002, the first year of operation, are $8,383.89 according to the depreciation schedule. In addition Ms Perre’s list of costs included solicitor’s fees, business registration and insurance totalling $753.00. These are costs that I consider would have been incurred to set up the business. The financial statements for that year were not tendered and accordingly it is not possible for me to verify those amounts but I accept Ms Perre’s evidence on that topic. Accordingly, insofar as it is necessary to do so, I find that the set up costs of the business were in the order of $9,000 to $10,000.
Whatever the set up costs were there appears little dispute that the parties contributed them on a 50/50 basis and I find accordingly.
Ms Perre has claimed for the interest and costs associated with her Satisfac loan. It is clear that this was not solely applied to the set up of the business given my findings about the costs associated with that process. Further it appears from the bank statements tendered[37] that Ms Perre’s account was in overdraft at the time of the loan and part of the loan went to pay off the overdraft. I do not consider therefore that Ms Perre is entitled to the interest and costs associated with the loan.
[37] Exhibit D1
I find that both parties worked to set up the business together. Ms Perre ceased working in the business shortly prior to the birth of the parties’ child in December 2002. She took some time out of the business to care for their son. She undertook all the domestic duties associated with the parties’ home. I consider that her home making and parenting contributions during the period she did not work in the business were significant and require recognition in the division of property.
Mr Ogulev said that Ms Perre returned to work in the business about 3 months or so after the birth of their son. That would place her return to working at the market at about March 2003.[38] Ms Perre said that she did not work in the business for a longer period apart from doing some “off market” work such as purchasing stock at Cash & Carry and Gaganis Brothers, which she did with Mr Ogulev. She said that she returned to the business working Saturday and Friday nights after approximately 10 months at home with their child. This would be about September 2003.
[38] Transcript pp 106-107
Ms Perre said that she worked in the business until September 2004. Mr Ogulev however said that she continued working in the business until February 2005.[39] The parties agree that they separated in July 2004. Ms Perre gave evidence that there was an incident in September 2004 involving Mr Ogulev assaulting her. Mr Ogulev admitted that there was an incident on 25 September 2004 following which he was charged with, and pleaded guilty to, assault.[40] Ms Perre said that as a result of that incident she did not feel safe to return to the business and she did not work in it after that date.
[39] Transcript p 108
[40] Transcript pp 141-144
I prefer Ms Perre’s evidence as to the dates on which she worked. She impressed me as having a better recollection of these issues than Mr Ogulev who appeared to be reconstructing the dates and in particular I accept Ms Perre when she says that she did not feel comfortable returning to the business after the incident in September 2004. Further, it would be unusual if Ms Perre was mistaken about these issues given it is in her interests to maximise her direct involvement in the business for the purpose of these proceedings.
Ms Perre says that she became concerned about the fact that she was registered as an owner of the business but had no involvement in the management of the business. She was concerned about liability issues and therefore took her name off the business register in July 2005. Mr Ogulev became a sole trader from 1 July 2005.[41] There was no formal dissolution of the partnership although Ms Perre had a Deed of Dissolution drawn up by a solicitor who was then acting for her. Mr Ogulev did not sign that document as he was not happy with the terms of dissolution.[42]
[41] Transcript p 48 Exhibit P12
[42] Transcript pp 48-49
Dissolution of the partnership
Ms Perre says she sought to be paid for her share of the business but that Mr Ogulev told her that he would not pay more then $11,000. He paid her $4,000 in about December 2005 and subsequently $7,000 in 2007 following a consent order of the Magistrates Court.[43]
[43] Transcript pp 49-50
Mr Ogulev says that they reached agreement in 2005 that Ms Perre’s share of the business was $11,000. He said this agreement was evidenced in a receipt that was written by Ms Perre on 17 December 2005.[44] That document reads as follows:
17/12/05. I have received a total of $4,000 from Alex Ogulev in payment for my share of the business Taldy Kurgan. Thanks Tania Perre. Alex still owing $7,000.
[44] Exhibit D3
Ms Perre denies that an agreement in the sum of $11,000 was reached and says that Mr Ogulev made her write the receipt in those terms by adding the words “Alex still owing $7,000”.[45]
[45] Transcript p 89
Mr Ogulev’s evidence as to how the figure of $11,000 was agreed was not clear. In evidence he said:
QCan you tell me something about the circumstances in which you say the agreement for $11,000 was reached.
AWell, I offer her how much – no, she said ‘You have to pay me off’. I said ‘How much we going to consider?’ She said ‘$11,000’ because it was like café yearly income that year.
QWhich year
AIn 2004. It was like – because it was on the list of – depreciation list 11,000 as well, so from that point we just decide, both, $11,000 as well, so from that point we just decide, both, $11,000 and when I bring her $4,000 I thought to fix it somehow on paper. I ask her to write down. I didn’t dictate exactly what to write it down but she said she was under pressure. I completely deny that. I just ask her to put everything on paper and she did.[46]
[46] Transcript p 112
Later in evidence he said:
QHow do you say you value the business to arrive at that 11,000.
ABy that yearly profit.
QWhich yearly profit figure did you use.
AParticularly that one end of June 2005.
QBut the yearly profits were.
A33,000.
QYes $32/33,000.
AYes we split half of the $16,000, but we agreed to $11,000.
QAnd on what basis do you say you agreed to $11,000.
AOn the basis how much we spent on improvement, and on the basis of half of the income for 2005.[47]
[47] Transcript p 187
I do not consider that the parties reached an agreement that Ms Perre should be paid the sum of $11,000 for her share of the business. She denies it, the receipt document is equivocal and Mr Ogulev’s evidence is less than clear on this topic. In any event it is my view that an amount of $11,000 understates Ms Perre’s entitlement under the Act. Mr Ogulev is however entitled to credit for the sum of $11,000 paid to Ms Perre.
I find that Ms Perre is entitled to a 50% share of the value of the business. This was plainly the intention of the parties and was the way in which they conducted the business. Unusually Mr Ogulev says that Ms Perre’s direct contribution to the business was more substantial than Ms Perre. On balance I preferred Ms Perre’s evidence concerning the dates. Notwithstanding this however I consider Ms Perre’s contribution as a homemaker and her parenting contributions during the time the parties were in a domestic partnership represent a valuable indirect contribution to the partnership assets. Whilst the domestic partnership concluded in July 2004 the parties’ business relationship persisted in one form or another until July 2005 when Ms Perre took her name off the business records at the Office of Consumer & Business Affairs. I consider that this is an appropriate date at which to value Ms Perre’s entitlement. Unfortunately there is no valuation of the business in that year. The only indication of that value is the sale price obtained in July 2007 and some evidence from Mr Ogulev concerning the basis upon which he valued the business for the purpose of reaching an agreement with Ms Perre in late 2005. In effect he said that the value of the business was the net profits as at that the end of the 2005 financial year being $33,676. Mr Ogulev does not have any expertise in valuing businesses. It should also be noted that he only offered to pay Ms Perre $11,000 which is about 1/3^rd the value of the business on his valuation.
The business sold in June 2007 for $52,000. The profits of the business increased and presumably therefore the value of the business appreciated during the two years Mr Ogulev operated it as a sole trader. This would, I consider, be partly by effluxion of time and partly owing to the work undertaken by Mr Ogulev in improving and marketing the business. Ms Perre contributed nothing to the business during those two years.
There is one further issue. The partnership returns indicate that Ms Perre received the sum of $16,838 being her 50% share of the profits of the business for the financial year ending 30 June 2005. Ms Perre stated that she received an income from the business between July 1 and September 2004 in the vicinity of about $8,000.[48] She did not receive any other share of the profits. Ms Perre did not sign the business return for the financial year ended 30 June 2005 nor did she play any part in it’s preparation.
[48] Transcript p 43
Mr Ogulev contended that Ms Perre did receive $16,838. He said that Ms Perre came to the shop and used to take the money out of the cash register. There were no records kept of this and he identified no basis on which he could confirm that she received the amount stated in the partnership return.[49]
[49] Transcript p 186
I prefer Ms Perre’s evidence on this topic. I have found that she stopped working in the business following the incident in September 2004. Her opportunity to take money from the business as Mr Ogulev asserted was therefore limited to a period of 3 months. It would be surprising if she were able to take precisely half the profits of the full financial year in that limited period.
I consider that Ms Perre is entitled to the difference between the amount that she received, which I find was approximately $8,000, and the amount disclosed on the partnership return.
Summary of findings
I consider both parties to be truthful albeit they may have been mistaken about certain aspects of their evidence. Both were mistaken as to the initial set up costs. Mr Ogulev was mistaken as to the dates on which Ms Perre worked in the business. There was however much common ground between them. I make the following findings of fact:
·Ms Perre and Mr Ogulev were equal partners in the café business and both contributed equally to the set up costs whatever those set up costs may have been.
·The initial costs were in the order of approximately $9,000 to $10,000.
·The parties remained in partnership until 30 June 2005 when Ms Perre removed her name from the Office of Consumer & Business Affairs register. Thereafter Mr Ogulev continued as a sole trader until he sold the business in July 2007.
·The sale price of $52,000.00 achieved in 2007 was an appropriate sale price.
·The business returns are an accurate reflection of the income, expenditure and profit of the business.
·Ms Perre did not receive the full distribution attributed to her in the business return for the financial year ended 30 June 2005 in that she only received approximately $8,000 of the $16,838 attributed to her.
·Mr Ogulev has paid Ms Perre the sum of $11,000 towards her share of the business but this does not satisfy her entitlement.
Division of property
My powers in respect of the division of property are to be found in Section 10(1) of the Act. In determining whether to make orders for division of property, I must have regard to the matters set out in section 11 of the Act.
I have considered the contributions made by the parties as required under section 11(1)(a) and (b). There was no domestic partnership agreement between the parties.
Some evidence was led about the financial resources of both parties. Mr Ogulev has the business and the assets outlined above albeit these are subject to mortgages. Ms Perre has no substantial assets but is employed full time as a school teacher. She has the primary care of the parties’ child. I received no evidence about any other relevant matters.
I must divide the property as best I can. In making this assessment I bear in mind the comments of the Supreme Court of South Australia in Hogg v Roberts[50] and in particular comments of His Honour the Chief Justice[51]
….I consider that it is not the role of the court to use the division of property to remedy any justified grievances that one party may have against the other, or to compensate one party for disappointed or unfulfilled expectations. The focus appears to me to be on a just and equitable distribution of property, after considering primarily contributions of the kind identified by s.11 (1) of the Act. The task of the court is a narrower one than the task of the court under s.79 of the Family Law Act 1975 (Cth). The relevant considerations are more narrowly confined. Matters that are likely to be relevant are the length of the relationship and the immediate needs of the parties. I say “immediate needs” because the court’s focus is on the division of property. In deciding what is “just and equitable”, the needs of the parties at that time will be relevant. However, the court is not dividing property with a view to providing, for example, for the continuing maintenance of the parties, or taking into account their future financial prospects.
Other maters may be relevant. It would be dangerous to try to draw a line here in the abstract. I go no further than to say that the focus is on the just and equitable division of property and not on an order that is fair having regard to all the circumstances surrounding, and everything that happened during, a relationship.
[50] [2003] SASC 410
[51] at page 250
Given the limitations of the evidence, I will take a broad and practical approach as suggested by the Full Court. Whilst Mr Ogulev’s valuation of the business on the basis of the net profits at 30 June 2005 has no expert imprimatur it is one objective measure and does have a practical appeal. It bears some relation to the price achieved for the business some two years later in that the net profits for the financial year ended 30 June 2007 were $51,626.99. Another way of looking at the valuation of the business is that the start up costs were about $9,000 to $10,000 and it sold some 5 years later for $52,000 which is an appreciation of approximately $10,000 per annum. In addition, had the parties sold the business in July 2005 there would still have been 2 years of the existing lease to run. This has some value over and above the value of the property, plant, equipment and goodwill.

Doing the best I can with the available evidence I assess the value of the business as at June 2005 to be $40,000. Ms Perre’s entitlement is $20,000. The sum of $8,500 should be added to account for the profits Ms Perre did not receive during that financial year. From this must be deducted the $11,000 already paid by Mr Ogulev. This makes a sum of $17,500. Ms Perre is also entitled to some payment for interest on that sum up to the time of trial. I allow the sum of $4,500 for interest.
I order that Ms Perre recover the sum of $22,000 inclusive of interest. I further discharge the injunction orders made in these proceedings in the Adelaide Magistrates Court on 4 August 2008.
I will hear the parties as to costs.