Y and S

[2006] FCWA 98

JURISDICTION:

FAMILY COURT OF WESTERN AUSTRALIA

ACT:	FAMILY COURT ACT 1997
LOCATION:	PERTH
CITATION:	Y and S [2006] FCWA 98
CORAM:	THACKRAY J
HEARD:	23 MAY 2006
DELIVERED:	22 SEPTEMBER 2006
FILE NO/S:	PT 6604 of 2004
BETWEEN:	Y

Applicant

AND

S

Respondent

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Catchwords:

Property settlement - de facto marriage - major initial contribution - "erosion" principle - assets valued at date of separation - interest ordered on payment from date of separation

Legislation:

Family Court Act 1997, s 205ZG
Property (Relationship) Act 1984 (NSW)

Category: Not Reportable

Representation:

Counsel:

Applicant:	Ms S Bodeker
Respondent:	Mr M Berry

Solicitors:

Applicant:	Shannon Bodeker & Associates
Respondent:	Shann Family Lawyers

Case(s) referred to in judgment(s):

Bilous v Mudaliar (2006) 35 Fam LR 55
C & C (1998) FLC 92-824
Calverley & Green (1984) 155 CLR 242
G & G (1984) FLC 91-582
Kardos v Sarbutt (2006) 34 Fam LR 550
Norbis & Norbis (1986) FLC 91-712
Omacini & Omacini (2005) FLC 93-218
Pierce v Pierce (1999) FLC 92-844

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Rosati v Rosati (1998) FLC 92-804
Way & Way (1996) FLC 92–702
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1 [Mr Y] and [Ms S] separated in November 2004 after a four-year de facto marriage relationship. I am required to resolve a dispute concerning division of their property.

Orders sought

2 The orders sought by [Mr Y] were set out in his Papers for the Judge. He seeks a payment equivalent to 30% of the equity in the two properties [Ms S] owns in [the coastal suburb].

3 The orders sought by [Ms S] were contained in her Amended Response. She is prepared to procure [Mr Y]’s release from all liability in relation to the mortgages relating to the two properties. She is opposed to making any payment in order to retain the properties.

The parties

4 [Mr Y] is 42 years of age. He is a [doctor] in a [hospital].

[Ms S] is 47 years of age. Her primary occupation is that of a
[teacher].

5 [Mr Y] has two daughters from a previous marriage, aged about 11 and 12. They live with their mother. [Ms S] also has two children, aged about 17 and 19. They live with her.

6 [Mr Y] and [Ms S] commenced living together in September/October 2000. They separated in October/November 2004. [Ms S] has continued to live in their last home in [the coastal suburb]. [Mr Y] initially rented accommodation in Perth but then moved [interstate].

The three properties

7 [Mr Y] and [Ms S] initially lived in a unit [Ms S] owned in [the city]. When they moved out in April 2001, the property was let, before being sold in December 2002.

8 In April 2001, the parties moved to a home they purchased in [Ms S]’s name in, [the suburb]. They lived in that property for the balance of the relationship.

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9	In April 2003, [Ms S] purchased an investment property [nearby] in, [the suburb]. She acquired this in joint names with a friend.

Property settlement approach

10 I am required to follow a four-step process in dealing with an application for property settlement pursuant to the Family Court Act

1997. These are: 

• identify and value the assets and liabilities of the parties;

• assess the parties’ contributions to the assets;

• assess a range of factors set out in ss 205ZG(4)(d) to (g) of the Act; and

• consider whether the order proposed is just and equitable.

The issues

11 It is agreed that:

• [Ms S] made a very substantial initial contribution;

• [Mr Y] made only a very modest initial contribution;

• [Ms S] received a significant inheritance and [Mr Y] received funds from a property settlement during the relationship;

• [Mr Y] earned a greater income than [Ms S], but expended significant amounts in meeting legal costs and his child support obligations;

• both parties made non-financial contributions, as well as contributions to the welfare of the family.

12 It is common ground there should be no adjustment on account of the matters in s 205ZG(4)(e) of the Act. Accordingly, the real issue for determination is the weight to be attached to the disparate contributions made by each party. A complicating factor is that the real estate has appreciated in value. [Mr Y] considers he should share in that increase, whereas [Ms S] believes she should receive the entire benefit.

The asset pool

13 There was a dispute as to whether the asset pool and valuations should be struck as at the date of separation or the date of trial. The date of trial is ordinarily chosen, but in some cases it is appropriate for

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another date to be selected. Omacini & Omacini (2005) FLC 93-218 at [17]. I consider the present to be one such case. My reasons are these:

• Apart from [Ms S] having paid the mortgage and outgoings on the real estate and [Mr Y] having paid off the small debt on the car, neither made any ongoing contributions after separation that could be seen as benefiting the other.

• [Mr Y] did not provide an up-to-date Form 13 and there was accordingly no comprehensive statement of the position of both parties at the date of trial; and

• [Mr Y] failed to obtain updated valuations of the real estate (and I refused his belated application for an adjournment to obtain such valuations).

14 I find the assets and liabilities at the time of separation were as set out in the table below.

Description	[Mr Y]	[Ms S]
Assets

[investment property]	$500,000
[main residence]	650,000

Furniture	$1,000	2,000
Bank accounts/cash savings	1,000	4,000

ING savings accounts 120,000

GESB superannuation 52,000 50,000

BT superannuation (two plans)	5,998
Jewellery	2,000
[Motor vehicle]	8,000
Assets TOTAL	62,000 1,333,998
Liabilities
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179,000 179,000
Mortgage (Challenge Bank) [main residence] Mortgage (CBA) [investment property]	55,000 55,000
Centrelink debt	2,065
Car loan	4,800
Liabilities TOTAL	238,800 236,065

15 The figures given for the real estate are taken from [Mr Y]’s affidavit. [Ms S] had given higher estimates in her own affidavit, but these were taken from valuations commissioned almost a year after separation. [Ms S]’s counsel indicated in his opening address that he was content to accept [Mr Y]’s assessment of the value as at the date of separation.

16 The parties gave different estimates of the value of the assets owned by the other party at the date of separation; however, there was no cross-examination and no corroborating evidence to assist me to determine which was correct. I have taken the view that each party was likely to have the better appreciation of their own financial position. I have therefore, for example, taken [Mr Y]’s estimate of the value of his superannuation ($53,500) rather than [Ms S]’s version ($95,000). I felt some uneasiness in taking this approach, since there seemed to be some inconsistencies between the estimates and other evidence; however, the matter was not presented in a way that would allow me to pick and choose between valuations.

Contributions

17 I turn now to consider the main issue, namely the assessment of

contributions.

Initial contribution

18 There was some discrepancy between the estimates provided concerning the assets [Ms S] owned at commencement of cohabitation. Once again, there was no cross-examination or corroborating evidence to allow me to resolve the factual issues (save

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on the value of the [city] unit, in relation to which a concession was made by [Ms S]’s counsel). I have therefore again approached the matter on the basis that each party is likely to have had a better appreciation of their own financial position.

19 I find that [Ms S] owned the following assets at commencement of cohabitation:

[City unit] $400,000

Furniture	10,000
Superannuation	20,000
Shares	10,000
[Motor vehicle]	10,000
Jewellery	2,000
Savings/investments	30,000

20 [Ms S]’s only liability at the commencement of cohabitation was the mortgage on the [city unit], on which she owed about $31,800. Accordingly, I find she had net assets worth around $450,000.

21 [Mr Y] had almost no assets at the commencement of cohabitation and a modest superannuation entitlement. It was common ground he had the following:

Savings	$1,000
Motorbike	5,000
Furniture	2,000
Superannuation (estimated)	45,000

22 [Mr Y] had no debts other than a child support liability of $2,400 at the commencement of cohabitation.

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Contributions during the relationship

23 [Ms S]’s counsel argued that I should assess contributions on an asset-by-asset basis, whereas [Mr Y]’s counsel was of the view that a global approach would be more appropriate.

24 I generally find the global approach to be more convenient, although this is one case in which an asset-by-asset approach might arguably assist in assessing the respective contributions. Norbis & Norbis (1986) FLC 91-712. Such an approach could be warranted because the parties made quite different contributions to each of the three relevant properties. On the other hand, they also pooled their finances to a considerable extent during their relationship.

25 I have elected to adopt a hybrid position – i.e. I will assess very carefully the contributions the parties made to the three properties, but I will then assess their contributions globally. In doing so, I have in mind the advice given by Nygh J in G & G (1984) FLC 91-582 (which was cited with approval by members of the High Court in Norbis) that judges undertaking a purely asset-by-asset analysis sometimes risk mistaking the trees for the forest.

[City unit]

26 [Ms S] owned this unit at the commencement of cohabitation. She had equity of nearly $370,000. I find the only financial contribution [Mr Y] made to this property was to pay seven mortgage instalments of $825 in the period from October 2000 to January 2001.

27 [Mr Y] had the benefit of living in the property until the parties moved out in April 2001. It was therefore entirely appropriate he should make some of the mortgage payments. He had previously had to pay rent. I find it unnecessary to determine which party was telling the truth about the circumstances in which [Mr Y] commenced making these mortgage payments – the fact is he paid them. I accept that [Ms S] also continued to make mortgage payments. She also met other expenses which would reasonably be regarded as joint.

28 After the parties moved out of [the city unit] in April 2001, it was rented for $300 per week, which would not only have covered all of the costs associated with the property but would have left money to spare.

29 In October 2002, [Ms S] discharged the balance owing on the mortgage ($17,890) from funds she had in her bank account. It will

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be noted from my findings above that she had sufficient resources at the commencement of cohabitation to discharge the mortgage in full in any event.

30 [Mr Y]’s evidence in chief on the improvements allegedly made to this property was sketchy (and I suspect his affidavit confused this property with the [main residence]). The cross-examination of both parties on the improvements was either ineffective or non-existent. I find that there was very little done to this property whilst the parties were living in it. Some work had to be done when the tenants moved out, but this seems largely to have been done by contractors. [Mr Y] recalls the work cost $10,000, but the invoices provided by [Ms S] suggest it probably cost about half that amount. The rent would have been sufficient to cover this expense.

31 The property was sold in December 2002 for $425,000. After commission and expenses, [Ms S] netted $406,300. I find that [Mr Y] made no contribution of any significance to this property.

[Main residence]

32 [Ms S] purchased this property in her name in April 2001 for $415,000. I find that prior to the property being acquired, the parties discussed the possibility of them each making a capital contribution. [Ms S] was going to use the inheritance she was expecting and [Mr Y] said he anticipated receiving at least a similar amount from his marriage settlement. In fact, although [Mr Y] received some money from that settlement, he made no capital contribution to the property.

33 The all-up cost of [the main residence], including expenses, seems to have been $438,000. [Ms S] says she paid $91,800 towards the acquisition, whereas [Mr Y] says she paid $113,000. As they borrowed only $325,000, [Mr Y]’s evidence is more likely to be accurate. It is common ground [Ms S] used her inheritance of $102,000 to make this payment.

34 Although the property was purchased in [Ms S]’s name alone, [Mr Y] was jointly responsible on the mortgage. [Ms S] claimed that [Mr Y] only became a party to the mortgage in order to show the Child Support Agency he had housing costs. I doubt this was the motivating factor and I suspect the arrangement had more to do with the fact that [Mr Y] had the opportunity to salary sacrifice on items such as mortgage payments. I am satisfied [Ms S] was aware of this and considered it was a good idea.

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35	[Mr Y] claimed that [Ms S] was unable to obtain a mortgage as large as $325,000 because of her alleged inability to repay the debt within 25 years. [Ms S] said she could have obtained the funds needed to complete this purchase on her own account, since she had equity in property and a good credit record, whereas [Mr Y] had no property and a poor credit history. There was little or no cross- examination or corroborating evidence on this issue.
36	[Mr Y] also claimed that he was not included on the title to [the main residence] because of [Ms S]’s concern that his former wife would make a claim against the property. I consider it quite likely this was true, since [Ms S] has shown a willingness to assist [Mr Y] to reduce his obligations to his former wife (as to which see below).
37	Given that she had substantial equity in the [city unit]; a moderately good income; rent from [the city unit] and regular child support payments, I doubt [Ms S] would have had any difficulty in persuading a bank to give her a loan for $325,000. However, I wonder whether [Ms S] would have taken on this property, had it not been for the fact that she expected [Mr Y] to make a capital contribution and was anticipating he would help pay the mortgage. On the other hand, [Ms S] had all but paid off the mortgage on [the city unit] and knew she was coming into an inheritance. It would have been a logical time to acquire another, larger home for herself and her teenage children.
38	All of [Mr Y]’s income was banked into the parties’ joint account from the time they acquired the [main] property. The mortgage payments were made from this account. They totalled $64,000 to the date of separation. By the time of separation the debt had increased to $358,000 (with the extra funds being needed, in part, to pay [Mr Y]’s legal costs). [Mr Y] made no contribution to the mortgage after the separation.
39	There was conflicting evidence about the extent of maintenance and improvement the parties each did around [the main residence]. [Ms S]’s counsel cross-examined [Mr Y] only very briefly on this issue. [Mr Y]’s solicitor initially elected not to cross-examine at all on this (and numerous other issues). When prompted, she conducted an inept cross-examination (although it should be noted that counsel apparently returned the brief at the last moment).
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40	Based on a very limited opportunity to assess the credibility of the parties, I gained the impression that the work done around the [main] property was not major. In [Ms S]’s words, the improvements were probably undertaken to “liven it up a bit”. Much of the work was done by paid help and I gained the impression [Mr Y] overstated the work he did to help. I also gained the impression that any contribution he made was matched by other contributions [Ms S] made, especially as it seems she did the great majority of the domestic work, whilst he continued with his studies. Importantly, there was no evidence to indicate that the work resulted in any improvement of significance to the value of the property.

[Investment property]

41 This property was purchased jointly by [Ms S] and a friend in April 2003. It cost $806,000 and there was stamp duty of $38,000.

42 [Ms S] contributed at least $200,000 as a deposit on this property. This money came from the sale of her [city unit]. She and [Mr Y] jointly borrowed $214,800 to cover the balance of the cost of acquisition of her half interest.

43 [Ms S] said she did not know how it came about that [Mr Y] was a party to the mortgage, since there was no need for his “financial situation to be taken into account at all”. She did acknowledge that because [Mr Y] was a member of the AMA they received a discounted rate of interest (i.e. .5% less) for 12 months and paid no establishment fees. The interest saving was $1,000, but [Ms S] claimed she would have received a similar discount as a [teacher].

44 The parties’ share of the initial mortgage payments was $598 per fortnight, but in November 2003 [Ms S] used a further $100,000 from the proceeds of sale of [the city unit] to reduce the loan. After this reduction, the fortnightly payments went down to $319 before increasing to $359 in April 2005.

45 [Ms S]’s friend lived in the home on the property, which they planned to subdivide. There is no indication that the friend paid any rent or made any contribution to [Ms S]’s share of the mortgage on account of having the benefit of occupation. On the other hand, the friend seems to have been responsible for preparing and lodging the application for subdivision and arranged for an architect to draw up plans for a dwelling at the rear. It seems [Ms S] paid part of the cost of the architect.

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46	[Mr Y] made no direct contribution to the mortgage or any other expenses associated with the [investment] property. The only thing he had to do with this property was to assume liability under the mortgage with [Ms S] and accompany her to a few meetings with the architect.

Contributions generally

47 When the parties started living together, [Ms S] was the acting head of a [department of the school] and [Mr Y] was a [trainee doctor]. Each contributed their income in payment of expenses that should reasonably be regarded as joint. Neither was any more extravagant than the other and neither put any money aside. In these circumstances, it seems to me to be irrelevant to consider just what expenses each of them paid, since they mingled their funds to a significant extent. What is important is to consider what each of them contributed overall.

48 I find that in the period from 1 July 2000 to 30 June 2004 (i.e. the financial years straddling most of their relationship) [Mr Y]’s total taxable income was $359,500, whereas [Ms S]’s total taxable income was $228,000. (The discrepancy in incomes may have been higher since [Mr Y] was salary sacrificing at least part of the time. This would have reduced his taxable income, but no information was given to allow me to factor this into the equation.)

49 [Ms S] complained about loss of income in 2002, when she gave up her full-time position in the [teaching system]. This came about when she colluded with [Mr Y] in his plan to avoid meeting his child support obligations by moving overseas. The arrangements fell through at the last moment. As a result, [Ms S] was only able to obtain a part-time position during 2002. I must say I have little sympathy for [Ms S] since she was a willing participant in an arrangement to avoid payment of legitimate expenses for young children. Nevertheless, I accept that primary responsibility should fall on [Mr Y], whose plan it was. Had he not proposed the plan, I accept that [Ms S] would have earned somewhat more income during 2002 than she did. The income loss was never quantified.

50 Although [Mr Y]’s income during the relationship was greater than [Ms S]’s, the differential would be completely offset by virtue of these facts:

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•	[Mr Y] spent $50,000 on payment of legal expenses relating to his disputes with his former wife during the relationship;

• [Mr Y] also paid at least $73,728 in payment of child support. (I say “at least” because this is the figure put to [Mr Y] in cross-examination, even though my own reading of Exhibit 1 would suggest that the payments [Mr Y] made could have exceeded that amount.)

• The income figures I have used are gross, whereas

[Mr Y] only contributed what was left after tax was deducted. Even if his marginal rate of tax was as low as 30%, this would reduce the differential in incomes by $39,450.

51 [Ms S] conceded that [Mr Y] also received about $35,000 by way of settlement from his previous marriage during the relationship. This contribution of capital was more than matched by the $102,000 inheritance that [Ms S] received whilst they were together.

52 [Ms S]’s funds were, of course, used in meeting costs associated with the care of her two children. She also paid a total of $4,000 towards the cost of their cars. She did have the benefit of regular child support payments of $600 per month, which would have gone some way towards meeting the costs associated with the children. She also had income from her capital because she was receiving rent from the [city unit].

53 Both parties made a contribution to the welfare of the family in that they did things for each other’s children, although [Ms S]’s contribution lasted only a year before [Mr Y]’s children stopped visiting. [Mr Y]’s contribution to [Ms S]’s children was minor and I accept his contribution was a negative one in some respects. Ultimately, I did not consider that any positive/negative contributions made by either party to the welfare of the family made any difference to the assessment.

Contributions after separation

54 [Mr Y] has made no contribution to the [suburban] properties since separation. [Ms S] has paid all of the mortgage instalments and the other outgoings.

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55	[Mr Y] has discharged the loan relating to the motor vehicle which he took with him at the time of separation. There was $4,800 owing on the vehicle at the beginning of November 2004.

Assessment of contributions

56 The pool of assets (including superannuation) grew from $532,600 at commencement of cohabitation to $921,000 at the time of separation. This increase in value was caused in part by a $146,300 increase in the value of real estate. This was made up as follows:

• $6,300 on [the city unit] (after allowing for all expenses associated with sale);

• $62,000 on [the main home] (after allowing for all expenses associated with acquisition); and

• $78,000 on [the investment property] (again after allowance for all expenses associated with acquisition).

57 The other major reasons for the increase in the value of the pool

of assets were:

• [Ms S]’s inheritance of $102,000;

• [Mr Y]’s marriage settlement of $35,000; and

• the increase of $43,000 in their combined superannuation entitlements, most of which was referable to [Ms S]’s work.

58 The items identified above explain $326,000 of the $388,400 improvement in their combined assets. In making this analysis, I have not overlooked the fact that the basis on which assets such as cars and furniture were valued for the purposes of initial contributions appears to have been different to the basis used at the date of separation. Therefore, the real increase in the value of the assets is likely to have been a little more than the figure I have used. I have also not overlooked the fact that my calculation excludes the increase in

[Mr Y]’s child support debt during the period of the relationship.

59 If [Mr Y] were successful in his application, [Ms S] would be obliged to pay him $204,600, which would result in him receiving property to the value of $261,800. The value of his assets would therefore have increased by $208,800 during the four years of the relationship. [Ms S]’s assets would have increased by almost

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precisely the same amount, namely $209,190. In effect, therefore, what [Mr Y] is proposing is an equal sharing of the increment in the value of the parties’ assets.

60 Such an outcome has an alluring simplicity and appearance of fairness, but in my view it would be unjust and inequitable. It ignores:-

• the fact that although other contributions were of roughly equivalent value, [Ms S]’s financial contribution during the marriage was greater than [Mr Y]’s contribution, after allowance is made for his very large payments on legal costs and child support; and

• the fact that [Ms S] had capital of $450,000 at the commencement of the relationship, on which she could be expected to make a reasonable return over a period of four years. Even using a simple rate of interest of as low as 4%, this would amount to $72,000.

61 Both [Ms S] and [Mr Y] mounted arguments that sounded suspiciously like what the Full Court in C & C (1998) FLC 92-824 (at 85,398) pejoratively called the “Eliza Dolittle argument”. The Eliza Dolittle argument goes like this: -

‘She came from Covent Garden selling flowers in the street, your Honour. At the end of our marriage why should she leave with far more than she could have aspired had she remained (to use the words of Professor Higgins) ‘a prisoner of the gutter?’’

62 [Ms S] says that [Mr Y] would never have accumulated any significant capital in four years had he not commenced a relationship with her. He had almost nothing to begin with and, although he had a good income, had substantial outgoings on lawyers’ bills and child support. On the other hand, [Mr Y] says that were it not for his good income, [Ms S] would not have ended up owning two valuable pieces of real estate.

63 The Full Court has warned about the traps associated with “Eliza Dolittle” arguments; however, I consider there is somewhat more power in the version of that argument advanced by [Ms S]. Had it not been for [Ms S]’s strong capital base at the commencement of cohabitation, the parties would not have been in a position to accrue

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the gain in their combined resources that they have achieved,
especially in light of the many large calls on [Mr Y]’s income.

64 I nevertheless accept there could be some merit in [Mr Y]’s proposition that weight should be given to his assumption of liability on the two mortgages. However, in considering the merits of his argument it is important to recognise that I am required by the Act to give consideration to actual contributions made by the parties. This is not a court of equitable jurisdiction and hence principles of equity such as those which were applied in Calverley & Green (1984) 155 CLR 242, (which was relied upon in the submissions) have no direct application. The significance given by equity to the assumption of liability under a mortgage is not echoed in the long line of authority relating to the assessment of contributions under the Family Law Act 1975 or the more or less identical provisions of the Family Court Act 1997.

65 The significance of assuming joint and several responsibility for a liability can vary from case to case. In some cases it may be seen as an indirect contribution of vital significance, since a property may not have been acquired at all without that preparedness to accept responsibility. In the present case, I do not consider the assumption by [Mr Y] of responsibility under two mortgages can be discounted altogether; however, he has not established to my satisfaction that

[Ms S] would have been unable to acquire at least one of the two properties without his assistance. On the contrary, I consider it highly likely she would have acquired at least one without any input from him at all.

66 I consider it less likely [Ms S] would have felt confident about taking on and developing the second property without knowing she had [Mr Y]’s financial support in meeting some of their joint liabilities. Given the state of the evidence it is impossible to come to any firm conclusion either way.

67 Counsel for [Ms S] cited in argument the decision of the New South Wales Court of Appeal in Kardos v Sarbutt (2006) 34 Fam LR 550 concerning the weight to be given to initial contributions under the Property (Relationships) Act 1984 (NSW). In that case, Brereton J, with whom Basten JA and Hunt AJA agreed, applied to the NSW legislation the authorities relating to initial contributions developed under the Family Law Act 1975.

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68	In doing so, his Honour placed weight on what he called “the time value of money”, which recognises that capital gains are the product of the initial introduction of the property, rather than of ongoing contributions. He contrasted this approach to an alternative approach which:-

“treats any increment in capital value of an asset held at the outset of the relationship as if it were part of the fruits of the relationship, when it is not: it is the result of the asset having been held by one of the parties at the commencement of the relationship, and not the result of joint efforts of wage earning, homemaking and parenting, and mutual support of the type described by Deane J as producing “fruits of the relationship”. It disregards the “time value of money”. It is likely to produce erratic results, because under it the significance of any particular asset in the ultimate evaluation will depend on its value when it was introduced. If one party has a house worth $250,000 at the outset, and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 – not of money worth $250,000”.

69 Brereton J referred to Pierce v Pierce (1999) FLC 92-844, in which the Full Court of the Family Court of Australia (Ellis, Baker and O’Ryan JJ) explained the significance of initial contributions and their “erosion” in a way which makes clear that substantial initial contributions may be eroded by ongoing contributions, not all of which can be satisfied in full out of the available pool. As the Full Court has also made clear, the initial contribution may be “eroded” by later contributions of the other party, even though those later contributions do not necessarily at any particular point outstrip those of the party who made the initial contribution. Way & Way (1996) FLC 92–702.

70 I drew attention at the trial to the fact that there is division within the New South Wales Court of Appeal on the application of the “erosion” principle. Within a matter of months of the decision in Kardos v Sarbutt, a differently constituted bench of that Court declined to follow the reasoning in that case. Bilous v Mudaliar (2006) 35 Fam LR 55. It is not appropriate for me to enter into the debate pertaining to a somewhat differently worded statute; however, the propositions advanced in Kardos v Sarbutt are in accordance with

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a long line of authority in cases heard under the Family Law Act 1975
and the Family Court Act 1997.

71 In applying that line of authority, it is important to keep in mind that the use of the word “erosion” is no more than convenient shorthand for a more complex principle. As the Full Court said in Pierce v Pierce (supra) at [28]:

“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife.”

72 The Full Court went on to say in Pierce that “in considering the weight to be attached to the initial contribution… regard must be had to the use made by the parties of that contribution”. In the present case, [Ms S]’s initial contribution has been put to very good use. It was the “springboard” from which the parties were able to amass the current pool of assets and is now reflected in property of even greater value. Rosati v Rosati (1998) FLC 92-804

73 In attaching weight to all of the contributions, it needs to be kept firmly in mind that this was a short relationship, there were no children of the relationship and both parties worked and contributed their earnings to a joint pool.

74 In these circumstances, I consider that very great weight indeed must be given to the far greater initial contribution made by [Ms S]. Some weight should also be given to the somewhat greater financial contribution she made during the course of the relationship. Weight, although not a great deal, should be given to [Mr Y] for being prepared to assume responsibility on two mortgages.

75 Taking all of these matters into account, I consider that [Mr Y]’s contributions should be assessed at 15%, which would result in

[Mr Y] receiving assets to the value of $138,170 of which he already has $57,200. [Ms S] would therefore have to pay him an additional amount of $80,970 which I propose to round off to $81,000.

76 Although the question was not raised at the trial, subject to hearing from counsel, I consider that the payment [Ms S] is required to make to [Mr Y] should carry interest. I would propose ordering interest for the same reasons Brereton J considered it appropriate to do

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so in Kardos v Sarbutt. In dealing with that issue his Honour said at
[98]:

“Where, as here, the relatively uncommon course is adopted of valuing the property as at a date earlier than the date of hearing, and evaluating the parties’ entitlements according to that pool of property, it will ordinarily be appropriate to award interest from the date at which the entitlement is struck. That is because the adjustment is calculated at the date of valuation, and the award of interest reflects the fact that the applicant has been kept out of his or her money, the benefit of which the respondent has enjoyed, during the period from then until to judgment. When the property is ascertained and valued as at the date of hearing, then the judgment will strike the entitlements according to current values, and in that way take into account appreciation of property since separation. But if the values used are as at separation, an award of interest will be appropriate.”

77 These sentiments have particular application in this case, since it is known that [Ms S]’s interest in the two pieces of real estate increased in value by $50,000 in less than one year after the separation. I consider it highly likely that the property has since increased in value even more. In making this observation I consider that in this Court of specialist jurisdiction I can take judicial notice of what (until recently at least) has been the remarkable boom in the real estate market in Perth.

78 It seems Brereton J saw an interest rate in the region of 6% to be appropriate, but given the real estate market conditions prevailing since the parties’ separation, I consider an interest rate of 8% would be appropriate.

Just and equitable?

79 As the final step in the process, I am required to stand back and consider whether or not the outcome is just and equitable. In some respects, this was a difficult case to determine and reasonable minds could differ as to the appropriate outcome.

80 [Mr Y] came into the relationship with assets/superannuation worth $53,000. He brought into the relationship a further $35,000 making a total of $88,000 of capital contributions. He leaves the relationship with about $138,000 – an improvement of $50,000 over four years. In the meantime, he has lived comfortably, travelled

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overseas, paid substantial sums by way of child support and
discharged significant legal costs.

81 [Ms S] came to the relationship with assets worth $450,000. She introduced a further $102,000 capital from her inheritance making a total of $552,000. She will leave the relationship with about $783,000, making an overall improvement in her position over four years of about $231,000.

82 In all the circumstances, I consider the outcome to be just and

equitable.

Orders

1. Within 60 days the Respondent pay to the Applicant the sum of $81,000 together with interest calculated at the rate of 8% per annum from 1 November 2004 until the date of payment.

2. That the parties do all acts and things necessary to procure a release of the Applicant from all liability in relation to the mortgages secured over the titles to:

(a) [the investment property]; and

(b) [the main residence].

3. The Applicant transfer and assign to the Respondent any interest he may have in any assets/superannuation currently in the possession or registered in the name of the Respondent.

4. The Respondent transfer and assign to the Applicant any interest she may have in any assets/superannuation currently in the possession or registered in the name of the Applicant.

5. In the event either party seeks an order for costs, they shall file and serve submissions (not exceeding 5 pages in length) in support of that application within 14 days.

6. The respondent to the costs application shall file and serve submissions in response (not exceeding 5 pages in length) within 14 days of receipt of the submissions.

7. In the event the applicant for costs wishes to respond to the respondent’s submissions, they shall file and serve submissions (not exceeding 2 pages in length) within 7 days of receipt of the submissions.

I certify that the preceding [82] paragraphs are a true copy of the reasons for

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judgment delivered by this Honourable Court

Associate