Sandra Leigh Strachan v Rodney Blanch

[2006] NSWDC 52

CITATION:	Sandra Leigh Strachan v Rodney Blanch [2006] NSWDC 52
HEARING DATE(S):	07/04/06; 10/04/06
JUDGMENT DATE:	8 September 2006
JUDGMENT OF:	Phegan DCJ
DECISION:	1.That the plaintiff transfer to the defendant the whole of her right title and interest to the property at 39 Rudgley Road, Caniaba NSW, being Lot 57 DP841591, provided that; (a)the defendant has refinanced the mortgage to the ANZ Bank registered over the title to that property into his sole name; (b)the defendant has paid to the plaintiff the sum of $95,000; 2.That the defendant transfer to the plaintiff his right title and interest to the Toyota Land Cruiser motor vehicle in the possession of the plaintiff; 3.Subject to these Orders that the parties be declared to have the sole right, title and interest to; (a)any monies, shares, debentures, superannuation and other property in their sole respective names; (b)any furniture, furnishings, chattels and other property in their sole respective possession; 4.If payment of the sum of $95,000 is not made to the plaintiff by the defendant in accordance with Order 1 within 60 days of judgment the property at 39 Rudgley Road, Caniaba be sold and the proceeds of sale be apportioned as follows; (i)All monies owing to the ANZ Bank of Australia in respect to the mortgage be discharged; (ii) All costs associated with the sale including agent’s commission be paid; (iii) All rates and arrears of rates be paid; (iv) Payment to the plaintiff in the sum of $95,000; 5. Defendant to pay plaintiff's costs on the ordinary basis
CATCHWORDS:	De facto relationship - division of property - increase in market value of asset
LEGISLATION CITED:	Property Relationships Act 1984
CASES CITED:	Jones v Grech [2001] NSWCA 208 Van Zonneveld v Seaton [2004] NSWSC 1223 Howlett v Neilson [2005] NSWCA 149 Burgess v King [2005] NSWCA 396 Chanter v Catts [2005] NSWCA 411 Kardos v Sarbutt [2006] NSWCA 11 Constable v Bell [2006] NSWSC 45
FILE NUMBER(S):	48/05
COUNSEL:	J Priestley - Plaintiff M Cleary - Defendant
SOLICITORS:	Trenches Christopher Hughes & Associates

- 1 -

JUDGMENT

1 HIS HONOUR: This is a matter in which the plaintiff, Sandra Strachan, seeks relief under the Property Relationships Act 1984 for adjustment of property under s 20. The matter was heard in the District Court at Lismore on 7 and 10 April 2006. Following written submissions, this judgment is delivered in the District Court at Sydney.

the relationship

2 The plaintiff was born on 11 November 1964 and is now forty two years of age. The defendant was born in that same year, on 14 January, which makes him now forty three years of age. At the time the relationship started in October 1987 the plaintiff was employed with the Brisbane City Council in a job which she had commenced in October 1980. The defendant, although in some form of employment at the time, had been discharged from the Army on a pension in 1984, and his work history from that time, up until the time of the hearing, has been somewhat disjointed and uneven. I will have more to say in due course, for obvious reasons, about his work history so far as his contribution to the relationship is concerned.

3 When the relationship commenced the parties were living in Brisbane. The plaintiff had assets which included a Holden Gemini motor vehicle, some furniture and personal effects, and the defendant owned both a motorbike and a van. The arrangement between the parties at that time was that they contributed equally to the general household expenses and to the payment of rent for the premises in which they were living. It was the defendant’s evidence that he had, at least for some time, maintained full time employment at Copper Art as a warehouse manager in Brisbane. But by 1988 he ceased to work full time, that is within twelve months of the commencement of the relationship, and until at least 1992, even on his own evidence, he worked no more than three days a week.

4 In 1990 the defendant received by way of a compensation payment the sum of $82,000 and used $72,000 of that to purchase a property in his name at Mitchelton in Brisbane, for a total purchase price of $97,000. He bought a motorbike for a further $5000 and in order to finance the balance of the purchase monies a mortgage with the Commonwealth Bank for $30,000 was taken out. The parties lived in the house and the arrangement was that the plaintiff paid all of the day to day household expenses and the defendant made the mortgage payments.

5 The plaintiff’s evidence was that it was characteristic of the relationship that she did the bulk of the household chores. The defendant’s evidence was that all of those tasks were equally shared. According to the defendant he made some improvements to the Mitchelton property during the time he owned it but the plaintiff’s evidence was that she made a disproportionate contribution to the overall costs of household expenses and indirect material contribution to the household.

6 In 1991 the defendant, with a friend by the name of Andrew Page, bought a property in Lismore for investment purposes and within approximately twelve months the property was sold at a profit of approximately $10,000. This is the first of a number of amounts of money which the defendant received from one source or another during the course of the relationship, which were, on the evidence, inadequately accounted for, and became, along with the general question of the overall contribution to the household, a matter of dispute between the parties.

7 In 1992, the Mitchelton house was sold and it yielded nett proceeds of approximately $90,000. Part of that money, $60,000, was spent on the purchase of a block of land in Rudgley Road, Caniaba, not far from the city of Lismore. The parties agreed that this land would become the location of their home in the future and the plaintiff, as part of their plans, gave up her job at the Brisbane City Council, which she had held for some twelve years by that time. When the parties moved from Brisbane to Lismore they stayed for a short time with Gary Page, another member of the Page family who were close friends of the defendant, but after about three months at Gary Page’s house they moved into a shed which had been erected by way of temporary premises on the land at Caniaba. With regard to the balance of the purchase monies obtained on the sale of the Mitchelton property, it was the defendant’s evidence that, out of approximately $30,000, he used $10,000 to buy a Ford Fairmont motor vehicle, a further $4500 was spent on work associated with cutting out the site for the shed and building a roadway access and clearing trees in the area where the shed was erected.

8 According to the plaintiff, when she gave up her job at the Brisbane City Council she received a redundancy payment of some $21,000, of which approximately $15,000 was made available for construction costs on the Caniaba land. There is some inconsistency in the evidence, which in the final result I do not regard as of any great consequence, as to precisely how that $15,000 was used. It was originally the plaintiff’s evidence that the money was paid towards the cost of the house which was eventually erected on the premises. It was the defendant’s evidence that it was used to pay for the shed. Irrespective of which of those two installations the money was devoted to, there is no dispute between the parties that a sum of that order was contributed by the plaintiff towards the improvement of the Caniaba property.

9 In September 1992 the parties moved into the shed which had been erected on the property, and, according to the plaintiff, until she found employment in Lismore she devoted all of her time to home duties, to assisting the defendant in working on the property, and in the conduct of a business which was established by the defendant under the name of North Coast House Recycling, which was operated from the property at Caniaba.

10 In July 1993 the plaintiff commenced work at Lismore City Council in a position similar to that which she had held with the Brisbane City Council. It was a full time job and she continued in that position for some years. At the same time the defendant continued working in the business which he had established but which proved to be non-profitable and ultimately failed.

11 In 1994 the defendant’s mother made a loan to the defendant of $18,000 which was ultimately repaid in full some three years later, according to the plaintiff. According to the defendant the payment was made by way of a gift, although he did work off part of the money in kind for various jobs for his mother. This, along with the $10,000 profit made from the brief investment in the Lismore property with Mr Andrew Page, is another sum of money which was paid to the defendant and on his evidence not repaid, the fate of which remains unclear. However, there is some evidence to support the conclusion that in this instance the money was, at least in part, devoted to the purchase of a backhoe which the defendant then used for the purpose of contracting work. This venture does seem to have generated some income, although the precise extent was never established, in contrast to the failure of the house recycling business which he had started some time before.

12 In September 1994 the parties took out a loan with the ANZ Bank in the sum of $98,000 for the purpose of establishing a house on the property. The house was ready- built and was transported to the Caniaba property, re-established there and renovated.

13 Another area of contention between the parties is the amount of time devoted to the process of installation and renovation by the defendant himself. In his affidavit which he swore on 11 January 2006, the defendant described in some considerable detail the work which he undertook from the time the house was installed on the property in 1994 and for some years after that. There was a particularly concentrated effort put into the work around the time of the birth of the parties’ first child, Taylah, in August 1995.

14 At about that time the parties borrowed a further $10,000. The purchase of the Caniaba land was in the joint names of the parties and therefore the money which was raised both by way of the original loan and the top up of $10,000 was borrowed in their joint names. According to the plaintiff, the purpose of the $10,000 was to enable the defendant to get out of the unprofitable house recycling business. The defendant claimed that the money was used to reduce the overdraft on the defendant’s bank account. I do not see any real conflict between those two different versions because, on either account, the defendant was in debt as a consequence of his failure to make any success of the house recycling business and the purpose of the $10,000 was to make that debt good.

15 What is not in dispute is that for some time, and particularly during a period which, depending on whose version is accepted, varied from two to six months, the defendant devoted all of his time to work on the house in anticipation of the birth of their first child. I do not propose, because there is no evidence to support the specific amounts of expenditure involved, to record the extensive detail which is provided in the defendant’s affidavit of all of the work which was undertaken. I accept, however, that it was substantial and included such items as renovation of the bathroom and kitchen, a substantial amount of carpentry work involving installation of windows and doors and other associated work. The defendant lists a number of specific items which were purchased or services paid for from the monies advanced by the ANZ Bank by way of mortgage. Those included water tanks, electricity connection, re-wiring, installation of a septic tank and the cost of various other building materials.

16 After the birth of Taylah in August 1995 the plaintiff remained off work until January 1996 at which time she returned to full time employment and Taylah was placed in the care of a person by the name of Amie Walker for between three to five days a week. There is again a point of difference between the parties as to the extent to which the defendant contributed to the care of their daughter once the plaintiff returned to work. According to the defendant it was substantial and occupied a significant part of the working week. According to the plaintiff it was minimal and only occurred during those days when Taylah could not be placed in Ms Walker’s care.

17 There is evidence that in 1997 proceeds of a Prudential insurance policy of some $14,000 was paid to the defendant but the parties are in dispute as to how that money was used. According to the plaintiff it was used to repay the defendant’s mother for the “loan” of $18,000.

18 The financial arrangements which were in place at that time between the parties is described in the plaintiff’s affidavit sworn on 5 September 2005 and I here read from paragraph 17 of that affidavit;

“Any money I earned during the relationship was paid into a joint bank account and utilised for family purposes. My wage paid all utilities, half the mortgage on the Caniaba property as well as purchasing necessary day to day items including all food for the family and clothing for the children. Any monies in the joint account were used to renovate the Caniaba property. During the course of the relationship any money the defendant earned either through the business, North Coast House Recycling or through his work as a back hoe contractor, was paid into his own personal bank account. The defendant would transfer half the mortgage amount each fortnight into the joint account and would utilise the joint account for his purchases.”

19 There is no real dispute about what might be described as the structure of the financial arrangements between the parties as described in that paragraph from the plaintiff’s affidavit. What the defendant disputes is the suggestion that he made no material contribution to the day to day expenses which he claimed came from his sources of income identified in the plaintiff’s affidavit. He similarly disputes the plaintiff’s claim that she attended to all of the household chores and to the primary care of their first child, and their second child who was born in May 1999. The defendant claims that he played a significant role in the care of both children and that he did make a substantial contribution to the day to day household chores over and above the work which he undertook by way of continuing renovation of the house itself, which, it is not disputed, remained incomplete at the time of these proceedings.

20 Some time before the birth of the second child, Denva, on 20 May 1999, the defendant received a sum of $8000 by way of victim’s compensation. As with the other capital payments which the defendant received from time to time, his evidence is that the money went to the general cost of the maintenance of the household, but again, he is unable to substantiate that claim with any evidence of exactly where the money went. The plaintiff’s evidence is that she did not see the benefit in any direct sense of any of these monies received by the defendant.

21 According to the defendant his capacity to undertake work, and in particular the contract work using the backhoe which he had purchased with the money supplied by his mother, gradually diminished to the point where he was unable to work. That claim is not supported by any medical evidence and it was submitted by counsel for the plaintiff that the defendant should not be believed in that regard. However, what must be said is that, on the defendant’s own evidence, the amount of work undertaken by the defendant did decline over time, and that therefore his capacity to contribute in any financial sense to the relationship was minimal, with the possible exception of the various sums of money which he received from time to time from different sources by way of payments, unconnected with any work undertaken by him.

22 What is not in dispute is that the plaintiff returned to work in November 1999. The children were either looked after by Ms Walker, to whom I referred earlier, or were placed in a day care centre known as Koala Daycare. The extent to which the children were cared for by persons other than the defendant is corroborated by letters attached to the plaintiff’s affidavit from both Ms Walker and the day care centre. In this respect I am inclined to accept, at least in general terms, the plaintiff’s evidence that while the defendant did accept responsibility for the children at times when they were not in day care, such occasions were the exception rather than the rule, that the plaintiff bore the responsibility for the primary care of both children at all times when she was not at work and that the times when she was at work and the children were not in the care of either Ms Walker or the day care centre was a relatively modest proportion of time over any particular week.

23 It is not disputed that the relationship came to an end after some twelve and a half years in April 2003 when the plaintiff moved out of the house on the Caniaba property and moved with the children into the shed, which the parties had first occupied before the house was relocated and rebuilt on the land. The defendant remained in the house and for some time both continued to share the mortgage payments equally.

24 However, in February 2005 the plaintiff left the shed with the children and found rented premises where she paid rent of $420 per fortnight. The defendant continued to live in the house but at that time assumed responsibility for the mortgage payments. There is evidence that, for some time, although the defendant sought to minimise the significance of this, he rented the house out to at least one, if not two, tenants. What is not in dispute is that the house was rentable and, given the fact that the plaintiff was able to live with the children in the shed for some period of time, it can also be reasonably concluded that there would have been nothing to prevent the defendant from moving into the shed, once they left, and treating the house as a rentable property as a means of offsetting the mortgage payments, if not more.

25 The question of the care and custody of the children remained a matter of dispute between the parties in Family Court proceedings. In February 2005, that is at the time the plaintiff finally left the Caniaba property, there were Family Court orders that the children continue to reside with the plaintiff but that the defendant have contact with the children each alternate week from Friday until Tuesday and overnight on Tuesday on alternate weeks. The overall effect of this order was that the children spent nine nights out of fourteen in every two week period with the plaintiff. Since August 2005 the defendant has paid child support of $70.

26 The evidence to which I have had occasion to refer so far is taken from the principal affidavits of the plaintiff and defendant, together with oral evidence from both parties. There were also affidavits sworn by Jason Fredericks dated 16 February 2006 and Jason Bulltitude dated 27 February 2006, both friends of the defendant, who gave evidence of the work which they had contributed by way of assisting the defendant in various improvements to the house at the Caniaba property.

27 There were a number of documents in evidence, including various financial documents, but most importantly, a valuation of the Caniaba property dated 25 July 2005 which was prepared for both parties and therefore was accepted as an agreed valuation for the purpose of these proceedings. However, the defendant did seek, in the course of his oral evidence in cross-examination, to retreat from that valuation on the basis that he considered it to be somewhat inflated. However, notwithstanding that evidence I have accepted the valuation as a definitive valuation for the purpose of calculating the appropriate adjustments which need to be made under the Act. The valuation became Exhibit A. It was prepared by a Mr Burnie Hunt, a qualified valuer, from the firm Tsickleas Andrews Property Solutions.

the application of s 20

28 In the plaintiff’s Statement of Claim she seeks orders to the effect that the property at Caniaba should be sold. Subject to the deduction of the monies outstanding on the mortgage which has been agreed at $95,000 for the purpose of these proceedings and any other expenses associated with the sale, the balance of proceeds should be divided equally between the parties. In addition to that any property currently in the possession of either party should remain exclusively the property of that party.

29 The defendant disputes the plaintiff’s entitlement to fifty per cent of the nett proceeds. The position taken by the defendant I will explain at a later stage of the judgment.

30 Although, inevitably, facts will play a significant part, this case is one whose outcome will also depend on how recent decisions on s 20 of the Act, in which both parties find support, are applied. It is necessary, in those circumstances, to consider those decisions in some detail. Section 20, which appears under the heading Application for Adjustment, provides as follows:

“(1) On an application by a de facto partner for an order under this part to adjust interests with respect to the property of the de facto partners or either of them a Court may make such order adjusting the interests of the partners in the property as to it seems just and equitable having regard to:

(a) the financial and non-financial contributions made directly or indirectly or on behalf of the de facto partners to the acquisition, conservation or improvement of any of the property of the partners or either of them or to the financial resources of the partners or either of them, and

(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the de facto partners to the welfare of the other de facto partner or to the welfare of the family constituted by the partners and one or more of the following, namely:

(i) a child of the partner,

31 In Jones v Grech [2001] NSWCA 208, a number of general principles are outlined by the Court of Appeal, directed to the proper application of s 20. Reliance was also placed on Van Zonneveld v Seaton [2004] NSWSC 1223, a decision of Campbell J in the Equity Division of the Supreme Court, which was concerned particularly with the subject of the contribution to renovation of a premises in which the parties to the relationship lived. With the exception of that aspect of the case, it has very little relevance to the case before me.

32 Reference was also made to the decision in Chanter v Catts [2005] NSWCA 411, a case which gave some particular attention to the way in which superannuation should be treated. I have made no reference in my account of the history of the relationship the fact that both parties did have superannuation rights, although that became an issue in the final assessment. The facts of Chanter v Catts in that regard were the reverse of the facts in this case. The plaintiff, because of her lengthy history of full time employment, did have a quite substantial superannuation entitlement at the end of the relationship whereas the defendant’s was of minimal value. The situation in Chanter v Catts was the reverse in the sense that it was the male partner who had the more valuable superannuation compared to the female and in those circumstances, therefore, what is said in Chanter v Catts does have to be approached with some caution. However, for reasons I will explain in due course, in the final result I am not satisfied that the superannuation rights of either party should play any direct role in the orders that should be made.

33 The three authorities which were most relevant to the principal point at issue between the parties, if superannuation is put to one side, were those in Howlett v Neilson [2005] NSWCA 149, Burgess v King [2005] NSWCA 396 and Kardos v Sarbutt [2006] NSWCA 11. The principal point at issue, at the risk of over-simplification, is the extent to which either party should benefit from the significant increase in the value of the Caniaba property resulting from the ordinary process of asset value inflation, as distinct from the actual work put into the property by one or other of the parties or the financial contribution made to the purchase of the property and mortgage repayments.

34 In Howlett v Neilson the parties had been in a seventeen year long relationship, they had one child and the contribution to the relationship at its inception was assessed as $110,000 on the part of Mr Howlett and $2000 on the part of Ms Neilson. The $110,000 contribution to the relationship on the part of Mr Howlett was made up of a house worth $63,500, which was subject to a mortgage of $12,000, savings of $12,000, some personal property and a redundancy payment which had been received some time before by Mr Howlett. The more modest amount of $2000 contributed by Ms Neilson was made up of savings and a few household items. Ms Neilson remained in employment until the child of the relationship was born and returned to work about a year later, a pattern not unlike the history in this case, except that in this case the plaintiff returned to work within a shorter period of time.

35 Mr Howlett was employed for the first three years of the relationship and he then started his own business in which he was assisted by Ms Neilson. The house which had existed on the property in which both took up their relationship and which had been owned prior to that by Mr Howlett was demolished and replaced by a new house. At the date of separation the value of the property was $130,000 and some time later the house was actually sold for the sum of $290,000 underlining the quite rapid increase by way of capital appreciation. The total assets of both parties were assessed at $320,000 and the balance available for distribution between the parties was some $208,000, after their initial contributions were taken out. The appropriate division of the balance was, on the evidence of the respective contributions from the parties to the relationship, fifty per cent each, with the result that the sum of $208,000 was divided equally, subject to some further minor adjustments which have no particular relevance to this case. The leading judgment in the Court of Appeal in that case was delivered by Hodgson JA who also delivered the leading judgment in the second of the three cases to which I referred, namely Burgess v King.

36 In Burgess v King the relationship had lasted for some thirteen years which closely approximates the period of the relationship in this case. However, unlike this case, both parties brought children from earlier relationships to the marriage, Mr Burgess having two children and Ms King three. There were no further children born during the course of the relationship. Mr Burgess applied the proceeds of real estate from his previous relationship to the purchase of a home unit which remained in his name and which he continued to treat as an investment, and placed the balance of the proceeds into his own bank account. He also had, at the commencement of the relationship, savings to the value of some $32,000 as well as a motor vehicle and some personal effects. Ms King at the time of the commencement of the relationship had a fifty per cent interest in her former matrimonial home, which was assessed at $120,000 less a $20,000 mortgage. She also owned a motor vehicle and some personal effects, including furniture. A year after the relationship commenced she purchased her former husband’s interest in the property for $50,000 and it appears that she also paid out some debts then owing on the property, using, in part, Mr Burgess’s savings of $32,000 together with a loan which both parties took out in their joint names. By the end of the relationship that property, which had continued to be the home of the parties during the relationship, was unencumbered. Renovations had been carried out during the course of the relationship on which Mr Burgess and his father had done a considerable amount of work, although Ms King on her part paid for some of the materials which she estimated on her evidence to have amounted to $24,000.

37 At the time of the hearing of the application under the Act the house was assessed at a value of $780,000. The unit which Mr Burgess continued to own was valued at $425,000, but unlike the house was the subject of a mortgage in the amount of $169,000. Mr Burgess sought a share of the capital appreciation in the house, which was approximately $420,000, that is, the value of $780,000 less the original cost of $240,000 and the sum of $120,000 which had been assessed as the value of the improvements which had been made. The evidence was that he had made a capital contribution in one form or another, including the $32,000 which he had made available to pay out debts on the property when it was put in Ms King’s name. The evidence was, and this was accepted by the Court of Appeal, that without his help it would never have been possible for Ms King to purchase the house outright.

38 At the original hearing Mr Burgess was awarded a sum of $65,000 to be paid by Ms King. This was calculated on the basis of an initial sum of $97,000 which was made up of the $57,000, together with various other contributions, including the work done on renovations less an amount which in part reflected the value of Ms King’s care of him. It is not necessary to explain in any more detail the somewhat complicated basis on which that sum of $65,000 was calculated. However, what is important about the decision is that, on appeal, it was held that the ultimate award in favour of Mr Burgess of $65,000 was inadequate and that more allowance should have been made for his contribution to the improvement in the value of the house, whether it was direct or indirect, and that a more appropriate outcome was a sum of $115,000 payable to Mr Burgess. In reaching that conclusion the Court acknowledged that there was some significance in the fact that the purchase would not have been possible without Mr Burgess’ initial contribution and that therefore his stake in the increasing value of the house was greater than the amount of the contribution itself. However, the overall result meant that Ms King still was left with a much more significant proportion of the total assets available at the time of the distribution of the property to the extent of some $300,000.

39 Kardos v Sarbutt was a case which in many respects involved facts quite different from those in the present case. There were certainly closer similarities in the facts of this case to those in both Howlett v Neilson and Burgess v King. However, the significance of Kardos v Sarbutt is that Brereton J, in a judgment with which the other members of the Court of Appeal agreed, explicitly addressed the degree to which the increase in the value of real property should, in appropriate cases, be insulated from the division of property on the basis of contributions to the relationship, and in that sense insulated from the direct effect of s 20, although it was clearly his Honour’s view that such an approach was still consistent with the overall requirement that the division of property, in all the circumstances, be just and equitable.

40 Despite the differences in the facts of that case compared to this one, it is necessary to say something briefly about them. Ms Kardos and Mr Sarbutt cohabited for something less than three years. There were no children and both came to the relationship with significant assets which at the time of the commencement of the relationship consisted mainly of real property which, in the case of Ms Kardos, was valued at some $290,000 and in the case of Mr Sarbutt, $240,000. By the time of separation their respective portfolios, had increased in value to $683,000 and $405,000 respectively. The arrangement during the relatively short relationship was that the parties lived in one of the properties, owned by Mr Sarbutt, while the other properties were rented out and all of the rent received and their respective incomes were pooled in a joint account from which they paid their living expenses and mortgage payments. There was a difference in the specific amounts which each were found to have contributed from their personal earnings, and from the rental from their respective properties, but this in turn needed to be offset against the fact that it was one of Mr Sarbutt’s properties that was made available for them both to occupy. It was found at the hearing that at the time of separation the joint assets, were valued in excess of $1,000,000 and the approach taken by the trial judge was based, if not explicitly, certainly in principle, on the approach which had been adopted by the Court of Appeal in Howlett v Neilson. From the pool of assets, each was paid out the value of their original contribution and the balance was divided equally between them.

41 Brereton J expressed the view that this was not a proper approach. He acknowledged that the Courts have consistently taken the view, adopted in Howlett v Neilson that the approach to s 20 was a holistic one. It was not, as he put it “a reductionist process analogous to the taking of partnership accounts by examining every alleged ‘contribution’.” However, he went on to say that mathematical calculations, while not determinative, are a guide and they were so used in cases such as Howlett v Neilson. He also acknowledged that, as demonstrated in Howlett v Neilson, a disproportionate contribution of assets at the commencement of the relationship can be, to use the term adopted by Brereton J, “eroded” over time and that in those circumstances the increase in the value of an asset, in particular a piece of real estate, is not necessarily to be divided at the end of the relationship in proportion to the contributions at the beginning.

42 But he went on to say that what was done in Howlett v Neilson was not intended as a rule for universal application and he cited Burgess v King by way of illustration. His view of Burgess v King was that, by increasing the sum payable to Mr Burgess, the Court was giving effect to the proper weight to be given to what Brereton J described as the “time value of money”. Capital gain is not necessarily the product of contributions during the course of the relationship, as distinct from the product of the contribution at its commencement. I have to say with all due respect to his Honour, that I am not sure that Burgess v King is authority for that proposition. It is certainly true that the outcome did reflect an adjustment in that direction but my understanding of the judgment in Burgess v King, as I indicated earlier, is that the Court of Appeal was particularly concerned in that case to ensure that Mr Burgess was adequately compensated for the value of the work which he and his father had put into the house during the course of the relationship, thereby enhancing its value at the end of the relationship.

43 However, irrespective of precisely what was decided in Burgess v King, Brereton J in Kardos v Sarbutt itself was very clear in enunciating the importance of what I have described earlier as the “insulation” of what he called the “time value” of money from the value attributable to the respective contribution of the parties during the course of the relationship and that the time value of money is most accurately assessed at the beginning of the relationship, not at the end.

44 What is equally clear, however, when comparing that case with this, is that, unlike this case, the relationship was very short, there were no children, and therefore it was relatively easy to isolate the property interests and to treat them as acquiring a value independent of the contribution of the parties during the relationship, at least in a relative sense. I should add at this stage that it is not my intention to attempt to address in any detail the calculations which were actually used for the purpose of resolving the ultimate outcome in that case. However, the end result was to leave Mr Sarbutt with substantially less than had been awarded at the trial on the basis that the outcome should have been resolved primarily on the basis of the respective contribution of the parties at the commencement of the relationship.

45 The property contributed by Ms Kardos had, for reasons Brereton J held had no connection with the relationship itself, increased disproportionately to the property which had been contributed by Mr Sarbutt. The $290,000 contributed by Ms Kardos had increased to $680,000 whereas the increase in the case of Mr Sarbutt’s property had been from $250,000 to some $405,000. It was Brereton J’s view that, because there was nothing to suggest that the respective contributions generated during the course of the relationship had been sufficient to significantly interfere with the market progress of the properties, the adjustment in Mr Sarbutt’s favour in those circumstances should be substantially less than the fifty per cent awarded by the trial judge. The result was that instead of $100,000 Mr Sarbutt was entitled to only $30,000 by way of adjustment.

this case

46 The asset position of the parties at the date of separation and/or hearing, and in this case there is no evidence to suggest that there is any significance in differentiating between those two dates, is largely defined by the property at 39 Rudgley Road, Caniaba, which was valued by Mr Hunt on the following basis. The land value was assessed at $225,000 and the various improvements, which I will not break down, added to that value something in excess of $175,000 making a total valuation of $407,598. Most of the calculations made in the course of submissions accepted that that sum could be treated as a round figure of $400,000.

47 The other assets of the parties at the conclusion of the relationship were a Toyota Land Cruiser, which remains in the possession of the plaintiff, although I understand it is jointly owned, valued at $15,900, which I have rounded off for the purpose of the allocation of assets at $16,000, and various assets which remain in the possession of the defendant and were the subject of very considerable difference of opinion and not the subject of any agreed valuation. However, the cross-examination of the defendant yielded what I am prepared to accept is an appropriate valuation of those assets for the purpose of adjustment as follows; farm tools and equipment $10,000, contents of the house at Caniaba $3000 and motor vehicles to the value of $3000, making a total of $16,000 representing the assets currently in the possession of the defendant.

48 I made some brief reference earlier in the judgment to the question of superannuation, and I now confirm what I foreshadowed at that stage, namely, that the plaintiff’s superannuation is a substantial one, valued at $48,000 at the date of separation and increasing to $65,000 by the time of the hearing. The defendant’s, which is not the subject of any correspondingly precise evidence, was valued at approximately $3000, as I noted earlier, a very significant difference. I am satisfied that the proper approach to superannuation in this case is to allow it to lie where it falls.

49 This is not a case in which there is any need to attempt some adjustment of the kind undertaken in Chanter v Catts. There is no evidence to suggest any meaningful contribution of a relevant kind to the superannuation entitlement of the plaintiff by the defendant. It is a product of a long history of full time employment on the plaintiff’s part. It is in that sense very much a product of her own individual efforts and there is not sufficient evidence, in my view, of a substantial sacrifice of a financial kind made by the defendant for the purpose of making that superannuation entitlement possible. I therefore do not take superannuation into account in overall financial adjustment.

50 The other relevant figure on which there is agreement, as I also foreshadowed earlier, is the sum of $95,000 currently outstanding by way of mortgage on the Caniaba property. The difference between the parties is largely a product of different interpretations of the relevant authorities with regard to the increase in the value of the Caniaba property. The calculations which I am about to make, do not adopt the submissions of either party but rather reflect the general approach taken by each party and differences of approach reflected in the decisions, in particular, Howlett v Neilson and Kardos v Sarbutt.

51 I will begin with a set of calculations adopting the general approach taken by the plaintiff, although as I have already said, this is not the precise approach which the plaintiff advocated in submissions. Beginning with an asset of $400,000 and reducing that by the sum of $95,000 owing on the mortgage, there is a net asset of $305,000. I will begin with evidence to which I have already referred and in particular the uncontested evidence of direct financial contributions made by both parties to the cost of the purchase of the Caniaba land and the erection of the dwelling and in particular the shed in which the parties initially lived. I am satisfied that a proper starting point would be: $65,000 on the part of the defendant, that is the $60,000 which was directly paid by the defendant towards the purchase of the land from the property which he owned in Brisbane, together with a further $5000 contributed by the defendant towards the preparation of the land for the construction of the shed and for access to it. On the plaintiff’s part there is the sum of $15,000 which according to the defendant was the plaintiff’s contribution to the cost of the actual purchase and construction of the shed. Those sums lead to a further reduction of any net asset value to which the parties are entitled reducing the sum of $305,000 to $225,000.

52 With regard to other assets, it happens to be convenient to leave them with the party currently in possession. The plaintiff therefore keeps the Land Cruiser worth almost $16,000 and the defendant keeps the property which is currently in his possession, other than the real estate, which is also worth approximately $16,000. There is no need for any adjustment with respect to those items of property with the exception of a transfer, should it prove to be necessary, of the defendant’s interest in the Land Cruiser in order to vest that property exclusively in the plaintiff. If, as the plaintiff would argue, the net pool of $225,000 interest in the real estate were divided equally, this would entitle the plaintiff to the sum of $112,500, which it is substantially the relief which the plaintiff has sought. It so happens, quite by coincidence, that $112,500 also represents one half of the current land value of the Caniaba property.

53 I will now, by way of comparison, calculate the outcome from the defendant’s point of view, relying as the defendant does, very much on the decision of Brereton J in Kardos v Sarbutt. It is possible to follow the breakdown of the asset pool to the same point of $225,000 representing the net asset pool to be divided appropriately between the parties. It would be consistent with the approach adopted by the defendant that that sum should be divided in the proportion sixty five parts to fifteen parts, which correlates with the respective contribution made to the property by each party at the commencement of the relationship. That proportion should not be disturbed and the defendant therefore should be entitled to take from that pool the sum of $183,000 and the plaintiff $42,000. On that analysis the plaintiff would be entitled to $42,000 assuming the defendant remains both in possession and becomes the sole owner of the Caniaba property. The defendant’s submissions, which reached the final figure by a different route support an even smaller payment, namely the sum of $31,500 which is partly explained by the failure to include in the calculations made on behalf of the defendant the $15,000 contributed by the plaintiff towards the cost of the purchase and erection of the shed, according to the defendant’s own evidence.

54 I should explain that the approach adopted mathematically by the defendant was to use as a starting point the value of the improvements made to the Caniaba land, namely $175,000, to deduct from that the interest which the plaintiff is to receive in the Land Cruiser and, without following through in precise detail, further reducing that amount by the $95,000 owing under the mortgage, producing ultimately a sum of $31,550, to which it is submitted the plaintiff is entitled. I am not satisfied that that is the most appropriate way of approaching the matter which I would prefer to approach along the lines that I have already suggested. But I am satisfied that, adopting the approach which I prefer, together with the defendant’s position that the defendant’s ultimate interest should reflect his original contribution to the cost of the Caniaba property, would lead to a result very close to that sought by the defendant.

55 The question is which of the two different solutions is appropriate in this case. I cannot accept that the approach taken in Kardos v Sarbutt is of relevance in this case. Brereton J himself, in paragraph 67 of his judgment, when referring to the process of erosion which is typically applied to a longstanding relationship such as the relationship in this case, said this:

“Significant factors affecting the application of the ‘erosion principle’ are the length of the relationship and, in particular, the extent to which there have been other or offsetting contributions which also have to be satisfied from the available pool”.

56 In this case, first of all, the relationship was one of some twelve and a half to thirteen years, not less than three years as in Kardos v Sarbutt. The distribution of assets is therefore much more affected by the erosion principle than the facts in Kardos v Sarbutt itself. Secondly, there are other “offsetting contributions”, to use Brereton J’s terminology, in this case which work in the plaintiff’s favour. The plaintiff’s contribution by way of salary to the relationship was substantially greater over time than the defendant’s. I have the benefit in this instance of calculations undertaken in the plaintiff’s submissions which I do not accept as absolutely accurate but certainly proved to be very helpful. What those figures demonstrate is that, based on the taxation records of the respective parties, they contributed, on the plaintiff’s part over a period of some eight and a half years, $25,600, and on the defendant’s part an equivalent of some $15,000, that is, roughly in the proportion five parts to three parts. The defendant sought to challenge those calculations on the basis that he had been the beneficiary of a substantial amount of payment by cash, not disclosed in his tax returns. I need say no more in that regard than that the defendant has to live with the consequences of his approach to his responsibility to pay income tax and in the absence of any concrete evidence, which was not available, I do not attach any weight to his evidence of undisclosed income.

57 In addition to contributions from salary there is the evidence of the plaintiff, which I generally accept in preference to that of the defendant, that she was the principal homemaker and the primary carer of their two children, which continues to be the case up to the present time. The defendant’s failure to be able to corroborate his claims of contributions from sources other than his salary, namely the various payments to which I referred in the course of recounting the history of the relationship, cannot, in the circumstances, assist the defendant greatly, partly because of the plaintiff’s own evidence that she did not see the fruits of the alleged contributions which the defendant claims to have made.

58 As to the situation which has existed since separation, while I do not accept that it leads to any significance interference to the adjustments which might properly be made on the basis of the situation at the time of separation, they at least reinforce the plaintiff’s case that the balance of contribution, both direct and indirect, to the relationship falls squarely in her favour. She has had the primary responsibility for the children since separation, she was left to reside in a shed, while her partner enjoyed the comfort of the house in which they had lived up from separation until February 2005. From that time the defendant has continued to enjoy either the occupation or the rental income of that house while the plaintiff has had to pay a commercial rent. Nothing that has happened over that time could assist in any readjustment in the defendant’s favour. With regard to the disproportionate contribution by the plaintiff in a direct financial sense to the relationship as a consequence of her continued full time employment, with only brief interruptions at the time of the birth of their two children.

59 I am assisted by the result in the case of Constable v Bell [2006] NSWSC 45. which I did not refer to earlier, a decision of White J. This is a case which should, in general terms, adopt the approach taken in the decision in Howlett v Neilson rather than the approach taken in Kardos v Sarbutt. However, having said that, I am satisfied that, while much of the evidence does weigh in the plaintiff’s favour and, as a result of that, the starting point should be an equal division of the net pool of the principal asset available for apportionment between the parties, there was a significant contribution made by the defendant to the increase in the value of the property through his own labour which entitles the defendant to some adjustment against an initial fifty per cent division. I am satisfied that a just and equitable apportionment of the net sum of $225,000, reached in accordance with the calculations which I have already explained, would be $95,000 in the plaintiff’s favour and $130,000 in the defendant’s favour. This is, on the assumption which appears to have been adopted by the parties, that the defendant will continue, if he chooses to do so and can afford to do so, to live in the Caniaba property, subject to transfer of that property into his name. The plaintiff would in those circumstances be entitled to payment of the sum of $95,000. If the defendant is either unwilling or unable to make that payment, then the property must be sold and the plaintiff paid the sum of $95,000 from the net proceeds after payment of mortgage and other necessary payments associated with the sale have been made.

60 In assessing the sum of $95,000 as a just and equitable adjustment in the plaintiff’s favour, initially I have taken account of the fact that the defendant funded the purchase of the Caniaba land with limited assistance from the plaintiff (Burgess v King) and contributed substantially to the improvement of the property through his own labour (Van Zonneveld v Seaton), although he was indirectly assisted by the financial support of the plaintiff. Against that was the disproportionate contribution made by the plaintiff as breadwinner, homemaker and carer of the two children (Howlett v Nielson).

Orders

61 The orders which were sought in the Statement of Claim and in the plaintiff’s offer of compromise of 10 February 2006, assist in putting together the appropriate orders reflecting the decision which I have just reached. They are as follows:

1. That the plaintiff transfer to the defendant the whole of her right, title and interest to the property at 39 Rudgley Road, Caniaba, New South Wales, being lot 57 DP841591, provided that:


(a) the defendant has refinanced the mortgage to the ANZ Bank, refinanced over the title to that property into his sole name, and,

(b) that the defendant has paid to the plaintiff the sum of $95,000.

2. That the defendant transfer to the plaintiff his right, title and interest to the Toyota Land Cruiser, now in the possession of the plaintiff.
3. Subject to these orders the parties be declared to have the sole right, title and interest to,


(a) any monies, shares, debentures, superannuation and other property in their sole respective names,

(b) any furniture, furnishings, chattels and other property in their sole respective possession.

62 Those orders are taken from the offer of compromise, but do not adopt the sum of money which the plaintiff sought in that offer, which was, for the record $110,000.

63 I now turn to the Statement of Claim, because there the plaintiff sought orders which I would now make, in default of compliance with the orders which I have already made, that is, if the payment of the sum of $95,000 is not made by the defendant to the plaintiff within sixty days of this judgment, that the property at 39 Rudgley Road, Caniaba, be sold and that the proceeds of sale be apportioned as follows:

1. All monies owing to the ANZ Bank of Australia in respect of the mortgage be discharged.

2. All costs associated with the sale, including agent’s commission be paid.

3. All rates and arrears of rates be paid.

4. That the balance be divided by way of a payment to the plaintiff of the sum of $95,000, and the balance to the defendant.

5. That the orders already made with regard to property other than the Caniaba property, stand.

Costs

64 Having considered the pre-hearing history of the matter including offers of compromise by both parties, I am satisfied that with regard to costs the appropriate order is that the defendant pay the plaintiff’s costs on the ordinary basis.

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