Preiss v Stewart

[2005] NSWSC 389

CITATION:	Preiss v Stewart [2005] NSWSC 389
HEARING DATE(S):	21 and 22 April 2005
JUDGMENT DATE :	13 May 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Master Macready at 1
DECISION:	See para 58

CATCHWORDS:	Family law - application under Property (Relationships) Act 1984 for adjustment of parties property interests - orders for adjustment.
LEGISLATION CITED:	Property (Relationships) Act 1984
CASES CITED:	Norbis v Norbis (1985-1986) 161 CLR 513
PARTIES:	Kenneth Preiss v Susan Stewart
FILE NUMBER(S):	SC 2907/2003
COUNSEL:	Mr M. Evans for plaintiff Ms A. Rees for defendant
SOLICITORS:	Swaab Attorneys for plaintiff dimocks family lawyers for defendant

LOWER COURT JURISDICTION:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Master Macready

Friday 13 May 2005

2907/03 Kenneth Preiss v Susan Stewart

JUDGMENT

1 Master : This is an application for adjustment of the parties property interests under the Property (Relationships) Act 1984. The parties lived together in an admitted de facto relationship between January 1993 and September 2002. The plaintiff suggests that the relationship commenced in December 1992 but given that he was then living in Melbourne and the defendant in Sydney it is probably likely that it was in January 1993. However nothing turns on this fact. There were no children of the relationship and although the plaintiff had children from his prior marriage they only spent a short time living with the parties.

History of the relationship

2 The defendant was born on 12 December 1945 and is now aged 49 years. The Plaintiff was born on 6 October 1951 and is now aged 45 years.

3 As I have mentioned it was in January 1993 that there was the commencement of co-habitation. The parties resided in the defendant’s property at Chelmsford Street, Camperdown. The plaintiff made no contribution to the defendant’s mortgage over the property and had the use of the defendant’s car.

4 On 22 June 1994 the defendant purchased an investment property at 50 Alfred Street Annandale in her sole name for $225,000. She borrowed $235,000, secured over both her properties.

5 In July 1994 the parties contributed to renovations of Alfred Street. The plaintiff deposited $4,700 and the defendant deposited $5,298 into a separate account, which they had opened for the purposes of managing the Alfred Street property. The house was then let.

6 On 7 September 1994 the parties entered into a partnership agreement to contribute one half each of the outgoings on Alfred Street.

7 On 13 April 1995 the parties purchased as their new home 94 Albion Street, Annandale, in equal shares as tenants in common, for $360,000. $384,678 was borrowed from the Advance Bank, secured over Albion Street and Chelmsford Street Camperdown. The additional funds were to allow some renovations before they moved into occupation.

8 In June 1995 Chelmsford Street Camperdown was sold. The defendant paid the net proceeds of $186,215 off the mortgage over Albion Street, leaving a balance of $200,938.

9 It was on 14 May 1997 that the plaintiff stoped contributing to the costs of Alfred Street and thereafter the Plaintiff was, so she suggests, solely responsible for the difference between the rent and the outgoings, including the mortgage repayments.

10 During the year 2000 the parties borrowed another $100,000 and carried out renovations to the Albion Street property. This increased the mortgage over the property to about $300,000.

11 In September 2001 the plaintiff travelled to the USA where he remained for 12 months. The defendant visited him three times in America for short periods. The plaintiff made two trips back to Australia, one in December and the other for his daughters wedding in March 2002. The plaintiff contributed funds to the expenses of Albion Street but not to Alfred Street while he was away. The defendant says that the plaintiff’s contribution was not sufficient to cover his share of the outgoings and his credit card payments. The plaintiff withdrew funds from the joint account before departure.

12 In September 2002 the parties separated. The defendant remained in the Albion Street property and continued to pay all of the outgoings thereafter, including the Plaintiff’s share of the mortgage payments. On 30 September 2002 the balance of the mortgage was $275,097.

13 On 25 March 2004 Alfred Street was sold. The net proceeds of sale $420,428.35 were by agreement between the parties divided between them without prejudice to the parties right to bring into account on the hearing of the proceedings any necessary adjustment that the court found appropriate. The plaintiff was paid the sum of $209,684.40 and the defendant was paid the sum of $210,743.95.

Property of the parties at the commencement of the relationship

14 At the commencement of co-habitation the plaintiff said that he had the following assets:

1. Proceeds of sale of his former matrimonial property, which he estimated at $40,000. He had no records to substantiate this figure. He received $40,000 early in 1992 and was overseas studying in the USA for four months thereafter. In this time he did not have an income. By the time he and the defendant commenced co-habitation at the end of the year it is unlikely, bearing in mind his then debts, that much of this sum remained

2. Furniture and personal effects, which he estimated at $3000,

3. 36 paintings prints and photographs which had been purchased for approximately $12,000

4. An executive recruitment business called Preiss Consulting Group. This is not particularly relevant as the plaintiff closed it down when he moved to Sydney to commence co-habitation with the defendant.

5. Superannuation entitlements with T & G of approximately $7,000.

15 At the commencement of the relationship the plaintiff had the following liabilities:

1. A bank loan from the State of Victoria $5,000

2. Overdraft with the State Bank of Victoria $2000.

16 At the commencement of co-habitation the defendant had the following property and financial resources:

1. Equity in the property situated at 10 Chelmsford Street, Camperdown of approximately $206,000;
2. A 25% interest in a property situated at Coochie Mudlo Island, off Brisbane, in the State of Queensland worth approximately $20,000;
3. Furniture and contents at the Camperdown property including antique furniture worth approximately $20,000;
4. Jewellery;
5. A 1987 Ford Laser motor vehicle worth approximately $6,000; and
6. Superannuation entitlements with the Qantas Staff Superannuation Fund. Her member statement dated 30 June 1994 indicated contributions to that point were in the sum of $122,611-53.

17 At the commencement of cohabitation the defendant had the following liabilities:

1. A mortgage to the St George Banking Corporation, secured over the Camperdown property; $39,000
2. A business loan with the Commonwealth Bank in relation to a company owned with her former husband, which went into liquidation in 1991 of approximately $13,265.75.

Property of the parties at the conclusion of the relationship

18 At the conclusion of the relationship the parties retained various items of personalty, furniture and other goods. Having regard to the arrangements which they made they do not ask the court to make any orders in relation to these items or take into account the value of those in the adjustment process. The defendant still owned her share of a property in Queensland. In these circumstances the only relevant other assets apart from superannuation were the two properties.

19 Albion Street had an estimated value of $1,020,000 and was in the parties’ joint names. Alfred Street had an estimated value of $650,000 and was in the name of the defendant.

20 The plaintiff’s superannuation entitlement with Uni Super at 31 December 2002 amounted to $188,622. The defendant's superannuation entitlements at the conclusion of the relationship approximated $300,000.

The present asset pool

21 Alfred Street has been sold and the proceeds distributed as I have earlier recounted. The extent of those distributions is to be taken into account in the adjustment process. The parties agree that Albion Street has a value at the date of the hearing of $1,010,000 and is subject to a mortgage of $300,000.

Financial contributions

22 Both parties worked for substantial parts of the relationship. The plaintiff’s gross taxable income for the financial years ended 30 June from 1993 to 2001, in Australian dollars was as follows:

(i)	1993	$18,210
(ii)	1994	$40,981
(iii)	1995	Not known – records missing
(iv)	1996	$48,902
(v)	1997	$54,302
(vi)	1998	$59,916
(vii)	1999	$60,747
(viii)	2000	$63,171
(ix)	2001	$72,886
(x)	2002	No evidence
(xi)	2003	No evidence

23 The total of those amounts is the sum of $419,115. While the plaintiff may have earned income in the 2002 tax year his income from September 2001 until September 2002 was retained by him in the USA and not contributed to the relationship except for specific sums remitted back to Australia.

24 The defendant’s gross taxable income for each of the financial years ended 30 June during the course of the relationship, in Australian dollars, was as follows:

(i)	1993	$64,844
(ii)	1994	$60,747
(iii)	1995	$74,696
(iv)	1996	$67,139
(v)	1997	$70,995
(vi)	1998	$74,907
(vii)	1999	$79,356
(viii)	2000	$82,859
(ix)	2001	$84,912
(x)	2002	$93,704
(xi)	2003	$95,755

25 The total of these amounts is $849,914. It should however be borne in mind that both parties kept separate private accounts and their salaries were paid into those accounts. There was thus never any complete pooling of accounts. Obviously at times monies paid from their private accounts were used to the benefit of the two of them. There were specific accounts set up to cover the costs and expenses of each of the properties acquired in the course of the relationship and I refer to this later in this judgement. In these circumstances it is probably inappropriate to regard the total income of the parties as one pool.

Non financial contributions

26 Between January and August 2002, the plaintiff’s daughter, Megan Preiss, resided at the Albion Street property. She did not commence work until July 2002. There is no particular evidence of any parenting contributions for her, which is not surprising given her age. The same applies to the plaintiff’s son who may have stayed with the parties for a time. The question of homemaker contributions seems to be treated by the parties as being equal. The main non-financial contributions were those relating to the improvement and repair of the properties.

27 The plaintiff suggested that he spent some $4000 on improvements to the Camperdown property when he moved in. He could only identify payments of $168.53. It seems that major renovations were done by the defendant before the parties commenced co-habitation. Clearly the plaintiff did some work such as liaising with the council regarding an illegal walkway and rectifying that matter. He also repaired the front fence and did some painting.

28 After Alfred Street was acquired the parties carried out renovations prior to it being left. Both were on holidays and worked together to get the property ready for tenants. The plaintiff paid into the offset account for the purposes of renovations the sum of $4763.70 and the defendant deposited a sum of $5,298 into the same account. The plaintiff suggested that over the period from acquisition of Alfred Street until separation that he spent approximately $14,000 on various improvements to the properties. Although he had a substantial number of documents available, when challenged, he could only substantiate payments in respect of all properties totalling the sum of $1703. I accept that he expended these funds. Bearing in mind that Alfred Street was tenanted from 1994 to December 2003 in my view the contributions to the renovation of Alfred Street appear to be equal.

29 After the move into Albion Street the parties did some renovation work. The plaintiff says that he did work such as stripping the kitchen floor coverings and preparation for the installation of a new kitchen. He also did painting and plastering in a number of rooms he and his son used in the house. There was the new kitchen installed soon after acquisition and the plaintiff claims he spent $35,000 of his own money on this matter. The plaintiff had a source for these funds, namely an inheritance he received the year before. The additional funds borrowed on purchase of $25,000 were used as to $18,000 for stamp duty and some legal expenses. In these circumstances I accept the plaintiff’s claim that he paid $35,000 for the kitchen. As I have set out in the chronology the parties borrowed a further $100,000 in the year 2000 to carry out further substantial improvements and these funds were raised by increasing the existing mortgage on the property.

30 One thus has joint contributions in money terms of $100,000 and on the plaintiff’s part an additional amount of $35,000.

Consideration of the applications

31 In Norbis v Norbis (1985-1986 ) 161 CLR 513 at 523 the High Court said the following:-

"Although it is natural to assess financial contributions under s79 (4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as homemaker and parent either by reference to the whole of the parties' property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an "asset-by-asset" basis. Which of the two approaches is the more convenient will depend on the circumstances of the particular case. However, there is much to be said for the view that in most cases the global approach is the more convenient. It follows that the Full Court is quite entitled to prescribe that approach as a guideline in order to promote uniformity of approach within the Court. In saying this we are not to be understood as denying the legitimacy of the trial judge's ascertainment in the first instance of the financial contributions of the parties by reference to particular assets. It is difficult to conceive how the trial judge in many cases could otherwise take account of such contributions as he is required to by s.79 (4)(a) of the Act . In this respect we agree with the comment of Nygh J. in G and G that, although mathematical precision is certainly not required, there is ordinarily a need to know the circumstances in which assets were acquired and the general extent of each party's contribution to them."

32 As I have recounted the parties are agreed that they did not wish an adjustment to be made in respect of items of personalty. They take a similar approach in respect of superannuation and it is plain that each party contributed to their own superannuation and not to the superannuation of the other party. In these circumstances both these matters can be put to one side. The defendant owned her share in the Queensland property throughout the relationship and there were no contributions to that property other than the payment of outgoings identified in the evidence. This property can also be put to one side.

33 The question still arises as to whether it is appropriate to take an asset-by-asset approach to the remaining two properties or whether they should be considered globally.

34 The parties themselves treated the Alfred Street property as a separate investment property, which had been purchased for their joint benefit. They opened a separate bank account for Alfred Street. It was an offset account and was referred to in these terms in the evidence. They went to the extent of having a separate partnership agreement in respect of the property. The articles of partnership are dated 7 September 1994 and provide that the property should be purchased in the name of the defendant solely who would borrow funds for the purchase and pay all associated legal and other expenses of the purchase. It provided for the plaintiff to indemnify the defendant and he covenanted to contribute one half of the monthly payments due under the mortgage. The agreement provided for each party to share in the profits (if any) and contribute to losses (if any) equally. It anticipated an eventual sale of the property and did not provide for the ownership of the property except that it was the defendant who was to purchase it in her name.

35 The property was purchased with wholly borrowed funds and thus the contributions to the mortgage are very relevant. Given the separate treatment of the property by the parties it is convenient to deal with this property as a separate asset.

36 There were of course other incidental expenses in respect of the purchase and I am satisfied that the defendant contributed the stamp duty and other minor costs including private conveyancing fees totalling $7,967. The plaintiff claimed that he had spent $5,000 on expenses but did not produce any details. It might be that he may have contributed to the conveyancing fees, which were slightly in excess of $1000.

37 As I have indicated earlier both parties worked on the preparation of the property prior to its being leased, as they were both on leave at the time.

38 The rent from the property was paid into the offset account however the rent received did not cover all the mortgage repayments. The Plaintiff and the defendant made additional contributions towards the mortgage to meet the full payments. Up until 14 May 1997 the defendant contributed $16,144 whereas the Plaintiff contributed $14,822. The Plaintiff ceased making contributions to the mortgage repayments from 14 May 1997. The defendant made all of the monthly mortgage repayments due to the Advance Bank in relation to the Alfred Street property after 14 June 1997 until its sale, which settled on 6 May 2004. However, the Plaintiff did pay the sum of $480 towards the mortgage on the Alfred Street property on or about 29 November 2002.

39 In 1996 the next-door neighbours to the Alfred Street property made an insurance claim on their insurance company for damage sustained to the Alfred Street property during renovations to their property. The damage included undermining the foundations of the parties Alfred Street property. The next-door neighbours’ insurers subsequently paid the parties the sum of $10,440. This sum was deposited into the set-off account. This amount makes the contributions to the account by the plaintiff $20,042 and the defendant $21,364 up until 14 May 1997.

40 There was the use of the offset account for a few personal expenses when cash flow was tight but there does not seem to be any large items identified which need to be taken into account. The defendant concedes however that the total of her personal drawings from the account were in the amount of $5,386.

41 The plaintiff’s analysis of the contributions to the joint account was not of great assistance due to the fact that he did not have available to him all the bank statements. On the defendant’s analysis the contributions up until May 1997 were approximately equal and thereafter the defendant made all contributions. This however has to take into account the $5,386 that the defendant withdrew for personal expenses. This is a little more than one year’s contribution by both parties to the differences between the expenses and rent of the property.

42 The plaintiff suggested that the appropriate adjustment was to allow the present distribution to remain with a minor adjustment of $4,787.85 for his assessment of the imbalance in contributions. The defendant's submissions were that a proper analysis of the contributions suggested that the plaintiff should receive something less than 20% of the proceeds.

43 It is to be noted that at the commencement, apart from miscellaneous purchase expenses, there was no contribution of equity by either party. The purchase however would not have been possible unless the defendant allowed her home to be security for the loan. No doubt if that security was not available the purchase could not go ahead. Some credit should be allowed to the defendant although it is difficult to quantify.

44 Both parties contributed to the work and met the costs associated with the renovations and maintenance matters in proportions that were approximately equal. During the period of nearly 3 years when the plaintiff contributed to the mortgage, the contributions slightly favour the defendant. Thereafter there was a period of seven years when the defendant solely maintained the property and she met the shortfall on the mortgage repayments. However she withdrew a year’s worth of contributions. Accordingly she should be the recipient of the capital gain over a period of 6 years. The property was purchased for $225,000 and the sale price was $620,000. The net proceeds of sale were $420,608.52. This is a substantial increase over the 10 years that the parties owned the property. Although the precise amount is not in evidence it would seem that the mortgage was reduced from $235,000 down to about $180,000, a reduction of $55,000.

45 Although one can achieve some mathematical precision in respect of the percentage contributions to the capital gain and the reduction in the mortgage the other adjustments, such as the defendant's contribution of security and the other miscellaneous matters to which I have referred, are more difficult to quantify. The appropriate proportions for adjustment of the net proceeds of sale, taking into account only the cash contributions, is to the plaintiff 25% and to the defendant 75%. Allowing for the security provided by the defendant which allowed this purchase to proceed the appropriate proportions are 20% and 80%.

46 I turn to a consideration of Albion Street, Annandale. The plaintiff's submissions were that the plaintiff should transfer his interest in the property to the defendant in return for the defendant paying to the plaintiff the sum of $262,442.50. This figure results from deducting from the present equity of $710,000 dollars the plaintiff’s contribution of $186,415 and dividing the resulting figure in half. In essence the submission was that the defendant should have returned her initial equity contribution without interest or any reflection of the capital gain over the period that would be attributable to her equity contribution. The defendant’s submission suggested that a consideration of all contributions to Albion Street and all other relevant contributions other than in relation to Alfred Street should lead to a result in which the plaintiff should receive 20% of the equity in Albion Street, namely, $142,000.

47 The parties had to arrange bridging finance until the defendant could sell the Camperdown property and the cost of this was met by the defendant. The amount was $12,136. When one takes that, together with the net proceeds of sale of $186,215, and applies it to the borrowings at the time of purchase, namely $384,678, one comes up with a percentage contribution by the defendant of 51.5%.

48 The parties set up a special bank account to handle mortgage repayments and initially contributed to that equally. Both also worked on the renovations. It will be recalled that the plaintiff travelled to America in September 2001 where he remained in the last year of the relationship apart from visits. During this period the sum of $14,500 was paid to his benefit out of the joint account. He contributed his tax refund of $8500 and also transferred funds to the account totalling $11,668.28. This leaves a credit of $5,668.28. However the repayments of the mortgage were $1553 per month and the plaintiff’s share for this period was thus $9,324. Thus he did not cover his mortgage repayments for this period. The plaintiff made no contributions to rates insurance or other fixed outgoings when he was in the United States. Almost immediately after he returned the parties separated and the defendant has paid all outgoings and mortgage payments since that date. Since separation there were withdrawals by the defendant from the portfolio account of $15,000 as a defensive measure. She has paid this sum into her account and used it for meeting the mortgage and expenses since separation.

49 Naturally enough it is the defendant who has had the benefit of the occupation of the property since separation. There are a number of other contributions which have to be taken into account.

50 Both parties paid money for their share in the cost of the many holidays and overseas trips. However for them the holidays were substantially cheaper because the parties could obtain cheap airfares as a result of the defendant's Qantas benefits. There were approximately 19 trips which benefited from the concession. There is no evidence of the market value of the flights and accordingly the benefit cannot be quantified. The parties agree that the cost contributions to travel were made by them equally.

51 The plaintiff's car was purchased using $5,500 from the joint account and that sum was not reimbursed by the plaintiff. During the relationship the defendant included the plaintiff in her medical insurance at a cost of something in excess of $11,000. He was just one of the family members covered and accordingly a small part of the sum is a contribution notwithstanding that the plaintiff only availed himself of this cover on one occasion for some dental work.

52 It is to be noted that during 2000 there were further borrowings of $100,000 which were used to carry out substantial renovations to the property. After separation the parties used $8,954.03 from the joint account to pay for some further renovations to the kitchen, living room and dining room of the Alfred Street property. The parties, up until separation, and the defendant thereafter, have met the increased repayments on those additional borrowings and they are reflected in the present amount of $300,000 that is now owing on the property.

53 I have already noted earlier that the plaintiff did not contribute to the mortgage over the defendant's property at Camperdown in which the parties lived. He had the use of the defendant's car at this time. However he did contribute to household bills and some of the utilities.

54 Because the defendant contributed a substantial equity on the purchase of Albion Street she should be credited with capital gains relative to that share during the whole period. Both parties contributed to the borrowings in relation to the remaining one half share until December 2002. Thereafter the defendant met the payments but with the benefit of the $15,000 from the joint funds. Accordingly they should be credited with the increase to reflect these different contributions to the remaining half share of the increase.

55 The parties wish the defendant to retain the Albion Street property and make an appropriate adjustment in favour of the plaintiff. Although the calculations for the sharing of the capital gain can be made with moderate precision, allowances for other matters do not admit of such calculation. Examples are the benefit to the defendant of occupation of the property for 4 years since separation and the early receipt of $15,000 from the joint account. Other benefits for the plaintiff included his minimal contributions to the Camperdown property, shortfall in mortgage payments when in the USA, concession airfares, car and contribution to health insurance.

56 The parties, with borrowed funds and the defendant’s equity, maintained the ownership of the property and by the time of hearing there had been no reduction in the mortgage. They have a net equity of $710,000. One half of this, $355,000, is attributable to the defendant’s equity contribution. The remaining one half represented by the mortgage can be apportioned to the years contributed to by the parties equally (6 years) and to the four years contributed to by the defendant alone. This provides a proportion of 15% to the plaintiff and 85% to the defendant.

57 There are many assumptions in such a comparison, not the least of which is the extent to which the capital gain of $650,000 accrued in each of the years in question. To any such approximation must be applied all the other adjustments to which I have referred earlier in this judgment.

58 Taking all factors into account the appropriate share for the equity in Albion Street is for the plaintiff 20% and the defendant 80%. In these circumstances the plaintiff's appropriate share is as follows:

20% of Alfred Street proceeds $84,085

20% of the equity in Albion Street $142,000

Total $226,085

Less paid $209,694

Balance due by the defendant to the plaintiff $16,391

59 I direct parties to bring in short minutes and to argue costs.

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