SCOFIELD & SHAW - [2011] FMCAfam 1296

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SCOFIELD & SHAW

[2011] FMCAfam 1296

FAMILY LAW – De facto property settlement – consideration of the legal and equitable interests of the parties in their jointly owned home – discussion as to the principles involved in the taking of accounts in a partition suit – consideration as to whether the parties’ legal and equitable interests should be altered and the extent of any alteration.

Family Law Act 1975, ss.90SF, 90SL, 90SM

Rogers & Rogers (1980) FLC 90-874
Calverley v Green (1984) 155 CLR 242 (1984) FLC 91-565
Dennis v McDonald [1984] Fam 63
Foregeard v Shanahan (1994) 35 NSWLR 206
Brickwood v Young (1905) 2 CLR 387

Applicant:

MR SCOFIELD

Respondent:

MS SHAW

File Number:

CAC 1478 of 2010

Judgment of:

Brewster FM

Hearing date:

17 October 2011

Delivered at:

Canberra

Delivered on:

30 November 2011

REPRESENTATION

Counsel for the Applicant:

Self represented

Counsel for the Respondent:

Ms Tonkin

Solicitors for the Respondent:

Warren McKeon Dickson Lawyers

ORDERS

That within 45 days from the date of these orders the respondent pay the applicant $186,595 plus an amount of $1.28 a day for each day between the date of these orders and the date of payment.
That contemporaneously with this payment the applicant transfer to the respondent all his interest in the property situated at Property S in the State of New South Wales (“the property”).
That if the respondent is unable or unwilling to pay these monies the parties take all steps to sell the property and to divide the proceeds between them as follows:
(a)To the applicant 41% of the net proceeds of sale plus the sum of $10,295 plus an amount of $1.28 for each day between the date of these orders and the completion of the sale;
(b)The balance to the respondent.
That as against the other each party is entitled to the chattels in his or her possession and the choses in action in his or her name.

Notation

Pursuant to the slip rule, Order (1) has been amended, replacing the “applicant” with the “respondent” and the “respondent” with the “applicant”.

IT IS NOTED that publication of this judgment under the pseudonym Scofield & Shaw is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT CANBERRA

CAC 1478 of 2010

MR SCOFIELD

Applicant

And

MS SHAW

Respondent

REASONS FOR JUDGMENT

Introduction

This matter involves a dispute between the parties as to property division.
In this judgment I will use the term “common law” as shorthand for common law and equity.

Background

The applicant is aged 65 and the respondent 62. They met in April 2005. At the time they were both living in Queensland. They did not live together until they went on a trip to [B] in October 2006. This was not at the time envisaged to be a permanent relocation. It was primarily because the respondent’s mother who lived in the [B] area was ill. They returned to North Queensland in about March 2007 and commenced to live together in April of that year when the applicant moved into the respondent’s home.
The parties decided to move to the [B] area permanently and did so in August or September 2007. The respondent sold her home and the applicant realised his entitlements to a jointly owned property and also cashed in superannuation entitlements.
In November 2007 the parties jointly purchased a property at

Property S (“the property”). They bought the property as tenants in common in shares 63% to the respondent and 37 % to the applicant.
The parties separated on 5 April 2010 following an incident which led to the applicant being charged with assault and an apprehended violence application being made by the police on behalf of the respondent. They have not resumed cohabitation. The parties never married and, of course, there are no children of the relationship.

The Parties’ Applications

The applicant seeks an order that the property be sold and the proceeds divided equally between the parties. The respondent seeks an order that she be entitled to retain the property upon payment to the applicant of $160,000.

Discussion

Where parties have lived in a de facto relationship which has broken down and where that relationship meets certain criteria the court can make orders affecting their property. There is no dispute that the parties were in a de facto relationship which met the relevant criteria and that the relationship has broken down. Under section 90SL of the Family Law Act 1975 the court may declare the title or rights that a party has in respect of property. If the court makes such a declaration it may make consequential orders to give effect to the declaration including orders as to sale or partition. Effectively this mirrors the jurisdiction previously exercised by State Supreme Courts applying the rules of common law and applying the provisions of State partition legislation.
Section 90SM of the Act permits the court to make orders altering the interests of the parties in their property. Section 90SM(3) provides that the court must not make an order altering the interest of the parties in their property unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. In deciding if this criterion is established the court must consider contributions made by the parties to the acquisition, conservation or improvement of the property whether financial or non-financial and contributions made by the parties to the welfare of the family constituted by (in this case) the parties. The court must also take into account matters set out in section 90SF(3) of the Act. For the purposes of this case the court is, under this section, required to have regard to the age and state of health of the parties, their income, property and financial resources and their capacity for gainful employment. The court is also permitted to take into account any fact or circumstance which, in its opinion, the justice of the case requires to be taken into account.
In seeking an order that she pay the applicant $160,000 and retain the property the respondent is seeking an order that the property be divided in accordance with the legal entitlements the parties presently have in it. An amount of $160,000 represents 37% of the value of the property which has been valued at $430,000. She is effectively inviting me to proceed under section 90SL. As I shall explain in this judgment however should I take up her invitation the matter is a little more complicated than simply dividing the property 63%/37%.
In seeking an order for an equal division the applicant is, in effect, seeking that an order be made under section 90SM altering the present interests of the parties in the property. As I have explained I am enjoined not to make an order altering the interests of the parties in their property unless I am satisfied that, in all circumstances, it is just and equitable to make that order.
Surmounting the hurdle imposed by section 90SM(3) is not a given. In Rogers & Rogers (1980) FLC 90-874 the Full Court of the Family Court of Australia commented on the equivalent provision found in section 79 of the Act. That section deals with an alteration of property interests with respect to couples who have been married. Section 79(2) is in the same terms as section 90SM(3). The Full Court cited with approval a decision of Strauss J in Ferguson & Ferguson (1978) FLC 90-500 where his Honour said:
It seems to me that the main purpose of section 79(2) is to ensure that the court will not alter the property rights of the parties unless it is satisfied that cogent considerations of justice require it to do so, and that if the court decides that it is requisite to make any order under the section, the court must be satisfied that the alteration so ordered, will go no further than the justice of the matter demands.
I do not adopt the term “cogent” referred to in the above quote as that word does not appear in the legislation. Otherwise however I note and adopt what the Full Court said.
I propose to proceed in this matter by determining what an appropriate order would be if I were to proceed under section 90SL. Having made that determination I propose to consider whether it would be just and equitable to make an order under section 90SM altering the result that would follow from the application of section 90SL. If this is answered in the affirmative I shall then consider the extent to which the parties’ property interests should be altered.
As I have indicated the property is valued at $430,000. It is unencumbered. The respondent in a case outline estimated the values of the parties’ chattels and the applicant did not demur from this. She estimated his motor vehicle be valued at $2,600 and hers at $5,400. She estimated her contents to be valued at $3,500 and other chattels in her possession at $1,000 and the chattels in possession of the applicant at $300. She listed liabilities in the form of the applicant’s credit card of $9,500 and personal loan of hers of $11,060. A part of the credit card and the whole of the personal loan were incurred post separation and I would not be having regard to that part of the credit card debt or the personal loan were I to proceed under section 90SM.
The 63%/37% shares reflect the position that would have obtained whether the parties bought the property as joint tenants or as tenants in common in equal shares. The legal shares the parties took in the property reflected in the Certificate of Title of 63%/37% more or less equate to the equitable interests that, in the absence of other evidence, a court would apply. See Calverly v Green (1984) 155 CLR 242, (1984) FLC 91-565. Parties in the position of the parties in this case who purchase a property and contribute to the purchase of that property in unequal shares are presumed, in the absence of evidence to the contrary, to intend to hold their equitable or beneficial interests in that property in the proportions to which they contributed to the purchase of that property. The applicant contributed $160,861 to the acquisition of the property and the respondent $270,000. The property cost $415,000 plus additional monies for stamp duty, conveyancing costs and rate adjustments. Whilst the figures do not precisely reflect a 63%/37% share their legal interests closely match the equitable interests that would apply. Given this I would not apply the presumption that they intended their beneficial interests to be other than 63%/37%. My starting point therefore is a 63%/37% division.
However, as I have indicated, were I to proceed under section 90SL the position would be more complicated than simply dividing the property to 63%/37%. In a common law partition suit there would also need to be a taking of accounts with respect of transactions which occurred after the purchase of the property.
In taking accounts regard can be had to the benefits to a co-tenant who is in sole occupancy of the property and an order can be made charging the co-tenant in occupation with an occupation fee. On separation the applicant left the property. The respondent has continued to occupy it. While she has maintained it and paid rates and other outgoings she has not had to make any mortgage payments. The respondent would have me charge her with such an occupancy fee.
I do not believe the applicant is entitled to any form of occupation fee. The relevant principle is that a co-tenant is liable to pay an occupation fee to his or her other co-tenant if, and only if, there has been an ouster, that is if the co-tenant in occupation has excluded the other co-tenant from the property. See Dennis v McDonald [1982] Fam 63 and the cases cited therein and Foregeard v Shanahan (1994) 35 NSWLR 206 per Meagher JA at 223. In the present case the respondent did not exclude the applicant from the property but rather he was excluded by operation of law. There was an incident between the parties and the applicant conceded to assaulting the respondent. In consequence of this he was charged by the police with assault and a bail condition was that he not occupy the property. Later an apprehended violence order was taken out by the police which included a similar condition. Under these circumstances I find there has been no ouster and that the applicant is not entitled at common law to payment of an occupation fee.
An allowance can also be made for money expended by a co-tenant on the property. In this case each of the parties made lump sum contributions towards renovating the property. Whilst they shared the premises the applicant contributed $29,106 and the respondent $4,250. Taking accounts however does not involve reimbursing each for the amount expended but involves making a pro-rata adjustment to reflect any increase in the value of the property resulting from the expenditure. See for example Brickwood v Young (1905) CLR 387 and Foregeard v Shanahan to which reference has been made.
I add for completeness that some of the authorities could be read as establishing a rule that no allowance will be made in favour of a party making improvements unless that party is in sole occupation of the property. For example in Brickwood v Young both Griffith CJ and O’Connor J said that a co-tenant in sole occupation of a property is entitled to a taking of accounts with respect to improvements made by him or her. However it seems to me that those judges were simply reciting the facts of that case and it is one thing to make the type of observation I have referred to and quite another to say that a co-tenant who expends money on improvements whilst sharing the premises with the other co-tenant is not entitled to any compensation. Such a rule would be illogical. None of the authorities of which I am aware require such an interpretation. Given the conclusion I have reached it would be an academic exercise were I to research the authorities to come to a definitive conclusion and I do not propose to do so.
Were I to proceed under section 90SL therefore I would divide the property 63%/37% in favour of the respondent and order that any increase in the value of the property referable to the improvements be divided pro-rata between the parties, that is in the proportions to which they contributed to the improvements. Would proceeding in this way be appropriate or is it just and equitable to alter the common law entitlements of the parties under section 90SM?
In my opinion it would be just and equitable to alter the parties’ interests. First there is no evidence of the amount, if any, by which the property has increased in value because of the improvements. The parties would have to go to the expense of getting a valuer’s opinion and there might be a dispute as to this issue. In addition, as the property is valued at only $15,000 more than it was purchased for, I suspect that the improvements have added little if any to the value of the property. Given that the parties fixed their legal and equitable shares with reference to the amount each contributed to the purchase of the property it is only just that the amount each spent on improvements be treated in the same way.
I refer to the Full Court’s statement in Rogers to the effect that any alteration in the parties’ interests in a property should go no further than the justice of the matter demands. It has been said in many cases that the process involved in an alteration of property interests is not an accounting exercise. However this was a short relationship and in my opinion this case is an exception. I believe that it is appropriate to undertake such an exercise.
The course I propose to adopt is to apply what might be termed a modified Calverley v Green approach. I propose to divide the property in proportion to the parties’ lump sum contributions, whether or not those contributions were made to either the acquisition of, or on improvement to, the property.
On this basis the applicant contributed a total of $189,967 being $160,861 to the acquisition of the property and $29,106 to its improvement. The respondent contributed a total of $274,250 being $270,000 to the purchase price and $4,250 to the improvements. This is a total of $464,217. The applicant’s share is 41%.
I will also order a payment by the respondent to the applicant of an amount to reflect a credit card liability of $7,044 assumed by the respondent on separation. Whilst this card was in the name of the applicant alone it was used for the benefit of the parties. Half of this is $3,522. The card carried interest at a rate of 13.24% which equates to $933 per annum or $2.56 per day. From the date of separation until the date of judgment this amounts to $1,546. Half of this is $773. I will order that the respondent pay this amount to the applicant. The total adjustment is therefore $4,295.
In addition to the monies contributed by the applicant towards renovations he contributed about $10,000 towards the purchase of furniture. Almost all of this furniture is now in the possession of the respondent. Although there is no valuation of this furniture no issue was taken about the respondent’s contention that it is now worth $3,500. Given this fact, and given the fact that the applicant enjoyed the use of the furniture for a period of time, it would not, in my opinion, be appropriate to order the respondent to repay the $10,000. However I propose to make some, admittedly somewhat arbitrary, allowance in the applicant’s favour to reflect this contribution. I fix the amount at $6,000. I do not propose to make any adjustment with respect to the other chattels, given their modest value.
The reasons I have not gone further with the alteration are as follows:
a)As I have indicated this was a short relationship.
b)There was a dispute between the parties as to precisely when their de facto relationship commenced. In many respects I regard this as an arid dispute. There is no basis for having regard to the contributions either made before October 2006. From October 2006 to March 2007 they effectively lived together and whilst there was no financial interdependence each would have made contributions both financial and non-financial to the relationship. The applicant points to the fact that on his calculations he contributed an amount of over $12,000 to the support of him and the respondent in this period. Determining whether parties are in a de facto relationship is important from the point of view of jurisdiction but that is not an issue in this case. What label one would give to the arrangements between the parties in the period October 2006 to March 2007 is, in my view, irrelevant. The applicant was in employment during that time and irrespective of his calculations of the amount he contributed to the relationship I think it likely that he contributed more financially than did the respondent. On the other hand there is more to a relationship than financial contributions and it is not possible to make any assessment of non-financial contributions. It is not possible to determine where the balance lies.
c)From April 2007 until the parties moved to the South Coast in August of that year the applicant would have been making financial contributions. On the other hand he had the benefit of occupying the respondent’s home which was unencumbered. Furthermore each would have made non-financial contributions. The applicant drew on superannuation and most of these monies were contributed to the welfare of the couple. However the respondent also contributed financially to the relationship and each made non-financial contributions. Again it is impossible to make findings as to precisely where the balance lies.
d)I have no regard to section 90SF(3) factors. Both parties are now retired. I am satisfied that neither is capable of employment. There will be a discrepancy between their capital positions as a result of this litigation but, as I have stated, this was, on any version of events, a short relationship which in my opinion does not justify any alteration in property interests on the basis of section 90SF(3) matters. Indeed I was not urged to the contrary by either party.

The end result is that I will make orders that the respondent may acquire the property on payment to the applicant $186,595 plus $1.28 (ie half of the $2.56 referred to in paragraph 27) a day from the date of the judgment until payment calculated as follows:
a)$176,300 with respect to his 41% share of the property.
b)$4,295 with respect to the credit card.
c)$6,000 with respect to furniture.
In the event that the respondent is unable to pay this amount I will make orders for a sale of the property.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Brewster FM

Date: 30 November 2011