Yvette Katherine Stern v Stephen Vincent Kelly - [2009] NSWSC 238

No judgment structure available for this case.

CITATION: YVETTE KATHERINE STERN v STEPHEN VINCENT KELLY [2009] NSWSC 238

HEARING DATE(S): 30, 31 July, 1, 15 and 28 August 2008

JUDGMENT DATE :
3 April 2009

JUDGMENT OF: Smart AJ

DECISION: See para [161]

CATCHWORDS: Property Relationship Act - contributions - increase in value of property - apportionment of increments in value of assets, especially real property - plaintiff providing bulk of purchase price but defendant assuming liability to meet mortgage repayments and having business with income - pre and post separation contributions - child with special needs.

LEGISLATION CITED: Property Relationships Act 1984

CATEGORY: Principal judgment

CASES CITED: Bilous v Mudaliar [2006] 65 NSWLR 615
Howlett v Neilson [2005] NSWCA 149
Kardos v Sarbutt [2006] 34 Fam LR 550
Sharples v McKibben (2008) DFC 95-4

FILE NUMBER(S): SC 4999/2004

COUNSEL: S Christie (P)
G M Johnston (D)

SOLICITORS: Marks Griffiths & Bova (P)
John R Quinn & Co (D) to 1 August 2008

- 52 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Smart AJ

3 April 2009

JUDGMENT

1 The parties lived together in a de facto relationship from April 2000 to July 2003. Mr Kelly was born on 22 July 1968 and Ms Stern on 16 April 1970. He moved into her unit at 2/2 Alexander Street, Coogee. Subsequently they moved to 297 Fitzgerald Avenue, Maroubra which they purchased in their joint names on 25 November 2000. They moved into the semi-detached cottage in January 2001. The parties have one child of their relationship namely Eve, born on 14 May 2001. Ms Stern has a child of a previous relationship, named Sebastian, born on 11 July 1996. He lived with the parties throughout the period of the relationship as a member of the household. Both Eve and Sebastian have resided with Ms Stern since separation.

2 By her Statement of Claim Ms Stern sought that Mr Kelly transfer the whole of his right title and interest in the Maroubra cottage to her and that she pay him $50,000. She was prepared to transfer all her shares in Total Paint Management Pty Ltd ("TPM") to Mr Kelly. She sought a declaration that the parties be declared absolute owners of all other property now in the possession or name of that party including vehicles, bank accounts, furniture, personalty and interest in superannuation.

3 At the start of the hearing Ms Stern effectively withdrew her offer to pay Mr Kelly $50,000. She sought the transfer to her of the whole of his interest in the Maroubra cottage. She remained prepared to abide by an order that she transfer all her shares in TPM to Mr Kelly but sought that he indemnify her from any liability arising therefrom. She also sought an order that Mr Kelly transfer his interest in Australian Scholarships Group Friendly Society Limited.

4 By his cross claim Mr Kelly sought the sale of 297 Fitzgerald Street, Maroubra and after payment of all expenses that he be paid $500,000 with the balance to Ms Stern. This was modified in his counsel's closing submissions when it was submitted that it would be just and equitable to make an order that the Maroubra property be sold and that from the net proceeds of sale the defendant receive 35 per cent thereof. He also sought transfer of Ms Stern's shares in TPM to him.

5 The principal asset of the parties was the Maroubra cottage. It was common ground that Ms Stern sold her Coogee home unit and received net proceeds of sale of $402,505 and that she contributed that sum to the purchase price of the Maroubra property of $702,000. The parties borrowed $313,000. He assumed joint liability for the mortgage payments. It was his painting business and the income from it which initially went to service the mortgage repayments, without which the mortgage would probably not have been granted and the purchase would probably not have been able to proceed.

6 The parties were agreed that the Maroubra property had a value of $1,075,000 for the purpose of these proceedings and that $290,059 was due under the mortgage to Homeside as at 2008.

7 While there are other issues this is effectively a contest as to how the appreciation in value of the Maroubra cottage of about $370,000 between 2000 and 2008 should be shared having regard to the circumstances and the events which occurred. Neither party was responsible for that appreciation, it being a product of the property market. I doubt if any of the maintenance, repairs and renovations contributed significantly to the rise in value of the Maroubra cottage. Without Ms Stern providing the bulk of the purchase moneys for the Maroubra property there would have been no appreciation.

8 There was a small amount of money involved yet the proceedings were lengthy and attended with elaborate detail.

Some legal principles

9 Both parties acknowledged the primacy of s 20(1) of the Property Relationships Act 1984 ('the Act") in resolving their dispute as do I. That provides:

"20(1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to -

(a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them; and

(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely -

(i) a child of the parties;

(ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties."

10 This is essentially a one asset case. However, it is still important to take fully into account the matters mentioned in s 20(1). In the present case the contributions made by Ms Stern to the welfare of Eve are important. Eve has significant disabilities and special needs requiring extended care. There has been discussion in the various cases as to the apportionment of increments in value of assets, especially real property.

11 In Howlett v Neilson [2005] NSWCA 149 Hodgson JA, Ipp and McColl JJA agreeing, held that s 20 involves three steps:

"(1) identification and valuation of the property of the parties

(2) identification and valuation of the respective contributions of the parties, of the types referred to in s 20.

12 This formulation has been followed in subsequent cases. What questions arise will depend, to some extent, on the circumstances of the individual case.

13 In Bilous v Mudaliar [2006] 65 NSWLR 615 at '[59] Ipp JA confirmed that in Howlett v Neilson Hodgson JA was not intending to suggest that a 50 per cent apportionment of the increase in value of the assets was of general application; this was simply the order that was appropriate in the particular circumstances of that case. Ipp JA at [61] commented on portion of the judgment of Brereton J in Kardos v Sarbutt [2006] 34 Fam LR 550 thus:

"His Honour appears to have stated a rule to the effect that, for the purpose of determining what order should be made under s 20(1) … any increase in value in assets initially contributed should be regarded, in all circumstances, as entirely a contribution by the party who contributes those assets. If that is what his Honour intended, I do not agree."

14 At [66] Ipp JA said:

Howlett v Neilson

15 In Sharples v McKibben (2008) DFC 95-414 at 81 Brereton J explained:

Kardos

16 I proceed on the basis that the initial contribution of Ms Stern was important and played a large part in the acquisition of the Maroubra cottage. Of lesser importance, but still of importance, was the assumption of liability for the mortgage repayments of Mr Kelly and his earning capacity and income. I must weigh the initial contributions of the parties, albeit of different kinds, along with all other relevant contributions of both parties.

17 It is convenient first to trace the history of the relationship between the parties noting in particular the matters that bear upon the financial and other relevant contributions of the parties.

18 Ms Stern said that at the commencement of the parties' relationship Mr Kelly was employed as a painter and that about June 2000 he decided to start his own business. It would be more accurate to say that in early 2000 he was acting as a sub-contractor. His copy tax return for the year ended 30 June 2000, prepared by the accountant who acted for the Stern family, describes his main business as "Contract Painting". It reveals his total business income as $59,576, his expenses as $26,849 and his net income as $32,727. It also revealed that taxation deductions of $11,979 had been made. The expenses included $6456 by way of lease expenses. That may relate to a vehicle. Other expenses totalled $16,243 but there is no breakdown of this amount. The tax return tends to suggest that Mr Kelly was running his own business prior to June 2000.

19 Ms Stern said that Mr Kelly arranged a team of painters and began to operate under the name of Steve Kelly Painting and that she commenced to do, and did, basic accounting paperwork for the business. Advice was obtained from an accountant. About 18 December 2000 the company known as Total Paint Management Pty Ltd was formed. Apparently it commenced carrying on business from March 2001. All painting work was invoiced through that company. Mr Kelly and Ms Stern were both directors of the company and each owned half the shares. While the company did well in some years the balance sheet as at 30 June 2007 shows assets of $25,681, total liabilities of $51,144 (being current liabilities of $26,246 and non current liabilities of $24,897, being a shareholder loan - omitting cents). It has no cash on hand and no contracts on foot. The shares are worthless. Mr Kelly can no longer paint because of an industrial accident. While he could still organise and supervise painting jobs, these would have to be available in the depressed market and such as to carry an organiser and supervisor. Further, he has no capital with which to start or carry on a business.

20 The child, Eve, suffers from Asperger's Syndrome and Attention Deficit Hyperactive Disorder (ADHD). She has multiple and complex needs. On 19 June 2007 this expert assessment was made by a team from the Tumbatin Clinic Sydney Children's Hospital.

"The combination of these disorders means Eve requires high levels of support for her behaviour at home and at school. This is ongoing. Eve has difficulties socially, with learning and in terms of safety. She requires constant supervision to direct her to task and to interact with others. Educational curriculum needs to be specifically structured and tailored to meet her needs on a daily basis. She also requires therapeutic input including speech, occupational therapy and social skill development.

21 Both parents were devastated by Eve's disabilities. They imposed substantial burdens of care upon Ms Stern and Mr Kelly.

22 One other unusual feature was that over the years Ms Stern has received substantial financial support from her father and has been permitted to incur substantial expenditure on his credit card.

23 Mr Kelly seemed to be somewhat forlorn and dispirited. Ms Stern struck me as wily, managerial and determined to destroy Mr Kelly. I was wary of relying on the evidence of both of them. She was well funded (via her father) to conduct the litigation and had diligently assembled documents to support her case. Mr Kelly owed substantial sums to his legal advisers which he could not pay. His case was not so well prepared. His solicitor was unable to attend for some of the hearing and filed a Notice of Ceasing to Act. At least for the closing stages of the proceedings his counsel appeared on a pro bono basis.

24 Ms Stern made it clear, when giving evidence, that she was intellectually and generally superior to Mr Kelly and that she had an active dislike of him and contempt for him. That coloured all her evidence. She was articulate, well spoken, well groomed and well educated. She presented as a well financed lady. He was a working class man pretty close to the end of his tether. She had high expectations which he was not able to meet. They were ill matched. Her answers were long considered as she thought about the implications of her answers. He was inclined to rely on his recollection and answer quickly but not always accurately. He did not have the documents. He was out of his depth and could not cope with her.

25 At the time of the commencement of the relationship she owned:

(a) 2/2 Alexander Street, Coogee

(b) an Audi A4 vehicle

(d) 124 shares in NRMA Limited.

26 She held $54,000 on trust for her father. Around the time the relationship started she commenced consulting work for Family Planning for which she was to be paid $35,000 on completion of the work. It was not clear when she received those moneys and that she did receive all of them. She described herself as a Social Scientist and held a University Degree in Social Science and Policy.

27 She also had an interest (for the child Sebastian) in the fund with Australian Scholarship Group of $2650.90 plus interest. She had no liabilities.

28 At the time of the commencement of the relationship the position of Mr Kelly was:

(a) he owned a minimal amount of household furniture

(b) he had a Holden utility with an estimated value of $40,977. That included leasing charges - its value excluding these was about $33,046.

(c) he claimed to have $13,000 available in cash, but this has been disputed

(d) he claimed to be paying Ms Stern $500 per week in cash

during the period April 2000 to January 2001 when the parties occupied her home unit. This was disputed.

29 He claimed that he contributed $8000 to the purchase of the Maroubra property. This was also disputed.

30 As to these three disputed claims, Ms Stern relied on the net income of Mr Kelly for the year ended 30 June 2000 of $32,727. He paid his share of the rent on his former Balmain premises until about October 2000, his motor vehicle and living expenses. His motor vehicle lease expenses are probably mainly covered in the item of $6456 for lease expenses in his tax return. He had a gross income of $59,576. Initially he referred to having $13,000 with the Commonwealth Bank, but his account was closed in 1999. He transferred his moneys to an account with St George Bank. That bank had records going back to 12 May 2000, ie, to Statement No 3. It was not surprising that the earlier statements were not available. Statement No 3 shows an opening balance of $5780, many paint repayments and some substantial cash withdrawals. There is no documentary evidence supporting the payments of $500 or savings of about $13,000.

31 That is not surprising given that the payments and savings relate to the year 2000. There is no settlement statement or other record substantiating the payment of $8000 by Mr Kelly to the purchase price of the Maroubra property.

32 Ms Stern submitted that if Mr Kelly had had savings of $13,000 he would have used some of that money to pay towards the amount of $7000 required to lease the Holden utility. Mr Kelly said that he made payments over a number of months during 1999 towards that amount. He apparently had contributed that sum by 25 October 1999 when he obtained the vehicle(T163).

33 The figures of $402,505 contributed by Ms Stern and the amount borrowed of $313,000 total $715,505. That leaves an excess of $13,505 over the purchase price of $702,000. However, there would be stamp duty, mortgage duty and legal costs payable. There is no evidence as to what these expenses totalled. I do not know whether $13,505 would be sufficient to cover these.

34 I am not able on the evidence available to make a finding whether Mr Kelly had savings of $13,000 and paid $8000 towards the purchase of the Maroubra property. As to the alleged payments of $500 per week by Mr Kelly to Ms Stern, the reasons why any payments were made in cash were understandable. I think it is probable that Mr Kelly made some cash payments to Ms Stern but I do not think they averaged $500 per week. I am unable to say how much they averaged. I do not think that Ms Stern would have tolerated Mr Kelly making no payment.

35 I think that Mr Kelly probably had an outstanding liability for tax at the start of their relationship, but I cannot quantify that amount.

36 It was Mr Kelly's earning capacity as a painter/supervisor and the income he was able to earn which, at least in part, enabled the parties to obtain a mortgage of $313,000 from Homeside. There was a viable source of income from which the repayments could be made. On any view the mortgagee had a substantial margin of security but it would still need to be satisfied that moneys were likely to be available to meet the repayments. While Mr Kelly was with Ms Stern the mortgage repayments were made from their joint Westpac account. All the earnings they received from TPM were deposited into this account.

37 After the parties moved into the Maroubra cottage work was done on the cottage but there was a major dispute as to the work done, who did it, who paid for it and its quality. Ms Stern said that the necessary work to rectify water damage and carry out general maintenance was mostly undertaken by Peter Needham, a builder, almost entirely under her direction. She said that Mr Kelly occasionally assisted Mr Needham with some physical labour and contributed to some decision making. She said that there was also plumbing and electrical work which was completed as part of the general maintenance or building works. She said that she employed the various tradespeople and dealt with any issues that arose. She said that the total value of building works done was about $25,000 including painting done at a later date.

38 Mr Kelly detailed in para 21 of his affidavit of 3 September 2007 the extensive exterior and interior painting of the cottage which he said he carried out. He agreed in cross-examination that his nephew painted the fencing. Mr Kelly in para 23 of his affidavit said that the painting of the property internally and externally was done by his team of painters from TPM and that he paid the painters their regular rate. He thought the cost was about $13,000. (T148).

39 In para [22] of his affidavit Mr Kelly detailed the work which he said he arranged and paid for on the property. It was extensive. He said that he had many contacts in the building trade and used these for the renovation of the property. He said that he used Peter Needham to renovate the property and he (Kelly) was able to assist him. Mr Kelly said that he gave cheques and cash to Ms Stern to pay the tradesmen when he was not available. Mr Kelly said that because he had contacts in the building trade he received discounts for all building items and his contacts gave him a discounted rate for their services. Mr Needham was a friend of Mr Kelly.

40 In cross-examination (T226-7) Mr Kelly agreed that Ms Stern liaised with many of the tradesmen employed to do the work. She was at home during the day. He did not agree that she liaised with many of the suppliers obtaining quotes for the materials. Mr Kelly said that the builder would do that. The builder quoted and obtained his own supplies. Mr Kelly rejected the suggestion that Ms Stern assisted with the painting and the further suggestion that the interior painting was not completed.

41 Mr Kelly agreed that a small portion of the works necessitated by water damage from water coming from the deck of the main bedroom upstairs was paid for with insurance money (T229). See also T148.

42 I rejected the estimate of the cost of the renovations to the property given in the first sentence of para 24 of Mr Kelly's affidavit because of its form. A global figure of some size was given but no details were given as to how it was arrived at. Mr Kelly could not supply that breakdown without tax invoices from sub-contractors and suppliers which he did not have. Some of the work done, for example, the new flooring was expensive.

43 Ms Stern replied in paras 21, 22, 23 and 24 of her affidavit of 15 October 2007 to his claims as to the improvements made to the property and their cost. She said that less than fifty per cent of the garage was painted by TPM contractors, the rest never being completed. She relied on the report of 23 June 2005 of Mr M Phillips of Accurate Property Inspections on p2 that "approximately 60 per cent of the external painting had been completed". The report was critical of the external painting and also the internal painting. The report notes some of the renovations including non-completion of and defects in them.

44 Ms Stern said that Mr Kelly's building trade contacts only included a pest inspector and a builder, Peter Needham, who worked for the first five days "free of charge" as part of a "contra deal" with Mr Kelly and that the work done by Mr Needham included the laying of the floorboards and some of the basic maintenance work. She said that Mr Kelly only assisted in a minimal capacity in relation to the work as he was away with his own work. Ms Stern said that she does not now recall the costs of the painters but there were only three painters who were paid $25 to $30 per hour each. They were engaged for only a few days. Apparently, this was shortly after the Paynter & Dixon contract was lost.

45 Ms Stern said that she and Mr Kelly paid about $25,000 for the works. The rest of the cost was covered by the contra deal with Mr Needham and the insurance moneys. The contra deal between Messrs Kelly and Needham was a useful contribution by Mr Kelly to the renovations.

46 Mr Kelly agreed that at the time the improvements/maintenance to the cottage were carried out he did not have a personal bank account in his sole name and that he did not have a source of income apart from TPM. The parties had a joint bank account with Westpac into which the moneys from TPM were paid. Any money that was paid for those works came from the joint account. All mortgage payments and household running expenses were paid from this account. Ms Stern said that moneys received from her father were deposited into the joint account and then transferred into the Homeside Mortgage account to offset the mortgage; most of such moneys was later used for mortgage repayments.

47 Ms Stern relied on Mr Needham not being called by Mr Kelly. He said his legal representatives did not advise him to have Mr Needham make an affidavit or attend to give evidence. While Ms Stern's case was elaborately prepared and appeared to be well funded, Mr Kelly's case was neither well prepared nor well funded. It was prepared on a shoe-string and he had run out of funds. I did not think it was appropriate to draw any adverse inference from Mr Needham not being called and not providing an affidavit.

48 I thought that both Ms Stern and Mr Kelly underestimated the role the other played in attending to the improvements and overestimated the role he or she played. I thought that Ms Stern underestimated the cost (and value) of the improvements. She did not sufficiently value the

"contra work" of Mr Needham and the painting that was done at the cottage nor the work of Mr Kelly. Cost and value involve different concepts.

49 During 2002 the parties "redrew" these amounts under the Homeside mortgage over the Maroubra cottage:

50 (a) Ms Stern said that the amounts of $9000 and the $16,000 were used to liquidate taxation liabilities of Mr Kelly. She said that Mr Kelly's taxation debt accrued in the 2000/2001 financial year whilst he traded as Steve Kelly Painting (para 59 of her affidavit of 10 July 2007).

(b) The matter is also dealt with in para 59 of Mr Kelly's affidavit of 3 September 2007. He accepted that he had seen Mr R Chammay, the accountant for Ms Stern. He set out a letter received from the accountant about 9 November 2001 summarising the position. Mr Kelly said that he owed the Tax Department $7277.85 and paid this amount from TPM accounts. Mr Kelly accepted that amounts were re-drawn from Homeside of $9,000 on 19 February 2002, $16,000 on 8 April 2002, $22,500 on 3 May 2002 and $3000 on 14 October 2002. He believed that none of these amounts went towards paying his tax liability.

(c) In cross-examination (T184) Mr Kelly agreed that the mortgage was increased by $25,000. The date suggested of 17 October 2001 may not be correct in view of the dates the moneys were re-drawn, namely 19 February 2002 and 8 April 2002.
(d) At T185 counsel for Ms Stern put to Mr Kelly that the sum of $16,000 was applied to both his tax and Ms Stern's tax. Mr Kelly replied, "I don't recall but there is probably documents to state that, yes. I don't recall that but yes." It was also put to Mr Kelly by counsel for Ms Stern that the sum of $9000 was applied at the time of TPM. Mr Kelly said that he did not recall but it could have been. I took it that it was being put to Mr Kelly by Ms Stern's counsel that the $9000 was applied to the purposes of TPM, i.e. in the payment of outstanding bills of TPM. It was put to Mr Kelly that the sum of $3000 was applied to outstanding bills of TPM. He agreed.

51 Ms Stern said that the amount of $22,500 was used to meet Mr Kelly's liability on the Holden utility. Mr Kelly accepted that this was so. She said that the amount of $3000 was used to meet the outstanding accounts of TPM.

Steve Kelly Painting and TPM and Ms Stern's contributions

52 Ms Stern's contributions are not easy to evaluate. Essentially both these businesses were small painting businesses which depended upon Mr Kelly's ability to inspect the proposed painting job, assess what needed to be done by way of preparation of the surface and otherwise to produce an acceptable job, give a competitive quote, with a sufficient margin for profit to produce that result, organise a small team of competent painters, supervise the job closely so that an acceptable result is achieved within the time stipulated or estimated and deal with any problems.

53 I accept that Ms Stern typed quotes and invoices from the information supplied by Mr Kelly, liaised with the accountant and others, generally kept her eye on and attended to some of the financial aspects of each business and did the internet banking. Mr Kelly said that TPM employed a book keeper for six weeks at the beginning of the business to get all the books of the business in order. This was a few weeks before Eve was born. After the initial period the book keeper came in once a week. The book keeper attended to the GST, kept the files for the accounts and prepared all the financial records and details for the accountant. Mr Kelly said that Ms Stern only did the daily account work occasionally. That is probably correct. Mr Kelly said that the first book keeper employed was with TPM for about one year and thereafter TPM employed another book keeper. Mr Kelly said that Ms Stern hired the initial book keeper but no supervision was necessary. Ms Stern handed over the company accounts to the book keeper who prepared matters for the accountant.

54 Upon the arrival of Eve, Ms Stern was fully occupied in looking after her with her special needs. Mr Kelly said that while Ms Stern did the internet banking he always supervised the contractors' payments and checked Ms Stern's records. This is probably correct.

55 (a) Ms Stern said that she performed almost all tasks associated with creditors. She said that, as most accounts were paid by her through the office, Mr Kelly's contribution to financial matters was limited to paying the Bristol paint bill directly at the paint shop from time to time and collecting payments from clients when possible at time of job completion.

(b) Mr Kelly disagreed with Ms Stern's assertions. He said that some clients dealt with Ms Stern but, in the main, he collected payments from the majority of clients as he was on the job and dealt directly with the clients. Mr Kelly is probably correct as to him collecting payments mostly. Mr Kelly has not dealt with the payment of creditors of TPM and it is probable that Ms Stern attended to these matters.

56 It was common ground that Ms Stern was paid as a Business Administrator by TPM and that this was her only source of income. Mr Kelly said that he arranged for TPM to pay her the following amounts:

57 It is difficult to compare the figures as they are taken from different bases. Ms Stern says that she ran the office and performed all administrative tasks including but not limited to filing, physically organising the office which was located in the front room of the Maroubra property including purchasing equipment and furniture and installation of shelving, whiteboards, phone lines, blinds, decorating the office and keeping it clean and organised, ongoing purchase of stationery and taking and making phone calls. Mr Kelly agreed that the office was renovated but said that the blinds were professionally installed, they had a cleaner who cleaned the office weekly, Mr Peter Needham put in the shelves and whiteboards and he (Kelly) paid for them. The electrician put in the telephone lines. Mr Kelly said that he paid for all items in the office and the labour required to set it up, including that of Rodney Fletcher. Ms Stern accepted that Mr Kelly organised for one of his sub-contractors (Rodney Fletcher) to purchase and install a new computer. While it is probable that Ms Stern played a part in renovating the office, in running and organising the office, in performing administrative tasks, purchasing stationery and making and taking telephone calls, I do not think that she did much cleaning. It is probable that Mr Kelly paid for the items in the office and the labour required to set up the office. It is necessary to keep in mind that TPM was a small painting business.

58 Ms Stern said that she performed the majority of tasks associated with employing and terminating staff and dealing with personnel. Probably she placed advertisements for staff and took the telephone calls in response. Mr Kelly found that prospective painters needed to be tested on job sites. He said that Ms Stern took their telephone numbers and he liaised with them directly to determine whether he would engage them (either as sub-contractors or staff). While Ms Stern performed the preliminary work of placing advertisements and taking telephone numbers of applicants, Mr Kelly liaised with them, tested them as the circumstances required and decided whether they should be engaged.

59 Ms Stern said that about a couple of weeks after Eve was born (and after TPM no longer had the Paynter & Dixon contract) Mr Kelly became seriously ill and she became increasingly responsible for most of the matters associated with TPM other than quoting and technical tasks. She said that prior to that time Mr Kelly principally managed the sub-contractors and she attended to the paperwork/administrative tasks and provided assistance in terms of job/personnel planning advice. She claimed that Mr Kelly was not managing the sub-contractors well in that jobs were often not completed on time, often ran over budget or sub-contractors did not turn up to work.

60 Mr Kelly disagreed with Ms Stern's assertions. He said that he had depression at this time but was on medication and able to manage his daily life in business. He said that Ms Stern did minimal clerical work at this time as they had a newly born baby who had many problems and required Ms Stern's attention all the time. He was able to conduct a normal business life.

61 Ms Stern claimed that she did most of the dismissals of sub-contractors except in the cases where Mr Kelly had a direct falling out with a sub-contractor. She said that he asked her to do the firing because he would get angry and not be able to control his temper. Mr Kelly denied that she did most of the dismissals and that he asked her to do the firing. Mr Kelly said that he fired painters on the site in a professional manner. He said that he never lost his temper and Ms Stern was never involved. It is probable that Mr Kelly became aware of unsatisfactory painting work when he received complaints from customers and on the consequent inspection or during the course of his visits to the various sites. It is probable that he raised the unsatisfactory work with the painters and, if thought necessary, he dismissed the painters whose work was unsatisfactory. He would have to tell Ms Stern so any entitlements could be paid and arrangements noted as to the engagement of replacement staff. Most dismissals would probably have taken place at the particular site although some may not have if the painter had left the site. It is probable that Mr Kelly effected the majority of dismissals. Ms Stern may have carried out some of the dismissals by telephone after Mr Kelly had told her that a particular painter had to be dismissed e.g. where sub-contractors did not turn up or left the site.

62 Ms Stern said that she was responsible for liaising with the sub-contractors employed by TPM in relation to administration and human resources issues including processing their time sheets and ensuring that the sub-contractors had all of their paperwork such as insurances in order. She said that she assisted the sub-contractors who often did not have their paperwork in order. She said that this was very time consuming as sub-contractors changed often. Mr Kelly disagreed with Ms Stern’s assertions. TPM required all sub-contractors to be fully insured and all paperwork to be up to date before work commenced. Mr Kelly asserted that the checking involved was a simple task requiring minimal effort and time.

63 Ms Stern said she often prepared invoices to TPM on behalf of the contractors and on occasion met with them to sign invoices and assist them to update their paperwork, that Mr Kelly contributed to these tasks at varying levels at different times but in general she was responsible for doing at least 95% of those tasks after he became seriously ill. She said that Mr Kelly performed some very limited administrative tasks under her direction as she usually did the preparatory work for him and she detailed what she alleged she did. Mr Kelly disagreed with Ms Stern’s assertions. He had no serious illness and said her invoice work was procedural and not onerous. The contractors had to sign in the correct place and did not need assistance. I think that the probabilities are that Ms Stern gave the contractors (or sub-contractors) some assistance but her rendering of assistance was neither time consuming nor onerous. It is overstating the position to say that Mr Kelly was seriously ill. He did suffer from depression but he was able to carry on and did attend to the affairs of TPM.

64 Ms Stern said that after TPM commenced internet banking, Mr Kelly told her of the hours worked by staff and/or contractors and she then worked out the payment due and processed it. Mr Kelly agreed but said that he always supervised her work as to the contractors’ payments.

65 Ms Stern said that she managed the business finances and was responsible for “finding” the money to pay people, process incoming payments, finalise payments and collect debts. She said that it was often a considerable task to balance the cash flow and required a lot of debt collection and “chasing up” of debtors as well as much liaison with the bank. She said that she spent a considerable amount of time debt collecting including physically collecting payments and depositing payments with the bank and fast tracking clearance of funds. She said the physical collection of payments was very time consuming as she met the clients and often drove considerable distances. She said that she commenced debt collecting the day after she got out of hospital from giving birth to Eve.

66 Mr Kelly disagreed. He said that she was only given the task of collecting debts on one occasion. Her visit led to an unfortunate incident at a customer’s business premises and Mr Kelly told Ms Stern it was inappropriate for her to collect debts for TPM. There was a loss of control on her part. I think it is probable because of the financial state of TPM that Ms Stern chased up, by telephone, payment of her company’s debts and probably made some trips to collect payments prior to the unfortunate incident. I do not accept that she made a lot of trips to do so. I think it is probable that she probably spent some time working out which accounts to pay and what to pay them and ensuring that there were sufficient funds to meet the accounts which it was desired to pay.

67 Ms Stern said that she undertook Project Management for TPM. That overstates what she did. She said that she kept whiteboards in the office up to date with project information including job sites schedules, contractors and account information. Mr Kelly agreed that there were whiteboards in the office. They were used by both of them. Mr Kelly said that there were set tasks which took days or weeks, that the whiteboards were not changed daily (as suggested by Ms Stern) and that sometimes the whiteboard would not be changed for a month. Only occasionally did he and she need to liaise during the day. Mr Kelly said that about once a week for a maximum of one hour she and he would discuss issues in relation to the job sites. The children were with them demanding their attention during this time. Mr Kelly said that on occasions he asked Ms Stern to contact clients and contractors. Mr Kelly said that he attended to all “project management” as there were always technical questions in relation to the job and he dealt with staff and customers and Ms Stern assisted on a casual basis as the children took up most of her time.

68 For the small business of TPM there was no need for other than relatively modest organisation and administration. It is probable that Ms Stern attended to some matters of organisation when requested to do so by Mr Kelly. This was not major. She did contact clients and contractors when he requested her to do so. There was probably a little more contact on organisational matters between Ms Stern and Mr Kelly than he concedes, that is, additionally one or two times per week but this extra contact(s) and discussion(s) was (were) probably quite brief, that is, 10-15 minutes. There is substance in Mr Kelly’s assertion that the children took up most of Ms Stern’s time. This is not to say that Mr Kelly and Ms Stern did not speak more frequently about family matters including the children.

69 Ms Stern said that during the periods when Mr Kelly was not well, which was for the majority of their relationship, she assisted Mr Kelly to plan his own schedule and make a list with him of the tasks he had to perform the following day. Mr Kelly disagreed. While he admitted he was suffering depression he said that he was able to function normally with the assistance of his psychiatrist and the medication prescribed.

70 Ms Stern said that she arranged for the hire of any additional equipment for specific jobs and that she assisted Mr Kelly to clean up job sites occasionally when he was on a tight time frame and that when she did this it was very time consuming, often taking a whole day. Mr Kelly disagreed. He said that twice she vacuumed a couple of rooms in a house and that this took about one hour (on each occasion). He agreed that Ms Stern arranged sign writing and advertisements but these were not ongoing tasks. They did not take a lot of time, that is, no more than a matter of hours.

71 Ms Stern said that from the commencement of their relationship Mr Kelly complained of continuing to be unwell and she encouraged him to seek medical attention and arranged medical appointments. She said that Mr Kelly did not seem to improve and stated that he was feeling worse. She said that she observed that he was not coping with organising himself and his work and was absent from work for significant periods. Mr Kelly agreed that Ms Stern organised for him to see a psychiatrist and psychologist. Ms Stern attended the psychiatrist with Mr Kelly on some three occasions but the psychiatrist refused to have Ms Stern attend further after they had a spirited disagreement. Mr Kelly said that he managed his life and organised his work life as normal. He said that he only had the odd day off. Mr Kelly said that Ms Stern was not involved, as she claimed, in arranging further appointments and passing on information about the medication not working. After the third visit the psychiatrist would not communicate with Ms Stern.

72 Ms Stern attended a psychiatrist during her relationship with Mr Kelly. He said that she had attended a psychiatrist for about ten years before he met her. He said that she continued to attended a psychiatrist during their relationship for her depression. She attributed her attendances to other reasons.

73 Ms Stern said that from mid 2001 until about July 2002 and again from mid 2003 she became more involved in assisting Mr Kelly with an increasing amount of his personal tasks when he was ill. She said that at times Mr Kelly was barely able to care for himself in that he would not get out of bed and not get ready for his day without her encouragement and would often not go to work or go to work for short periods and then either sleep in his car or return home and sleep on the sofa. She described the support she allegedly gave him. She said that at such times Mr Kelly had almost no capacity to run TPM. She said that at these times she would do almost everything that was needed. Mr Kelly disagreed with Ms Stern’s assertions. He said that on a few occasions he did not get out of bed because of his depression. He denied she gave him the support she alleged. He said that for approximately two months he employed a cook to cook all the family meals.

74 Ms Stern said that when Mr Kelly did go out to work during the six months after Eve was born he would return home in the afternoon and typically lay on the sofa until bedtime. She said that she was solely responsible for the care of the children and attended to all the household chores without assistance from Mr Kelly and that he said that he was too sick to help. Mr Kelly disagreed with her assertions. Mr Kelly said that on the odd occasion after work that he lay on the sofa this was because he was exhausted after a big day at work. This is probably correct. If he returned home from work early enough he said he took the children out to a park or to the beach. Ms Stern stayed at home as this gave her a break from the children. Mr Kelly said that these outings occurred quite often. I think that some such outings occurred but I am not able to say with what frequency.

75 Ms Stern said that during Mr Kelly’s depression she organised his daily schedule and performed many of his organisational tasks for him, for example, ordering paint and liaising with workers and clients during the day. She said that initially Mr Kelly would do some of these tasks but became more reliant on her as he was ill during the majority of the relationship. She said that by the end of the relationship she was generally doing most of these tasks and that she had to telephone him regularly throughout the day to tell him what to do and say and to check that he was adhering to the list she had written out for him of things to attend to and complete on the job. Mr Kelly disagreed with Ms Stern’s assertions. Mr Kelly said that Ms Stern was only occasionally involved with ordering paint and rarely liaised with staff and clients. He denied that she was involved in checking on him. He said that when Ms Stern telephoned it was usually about Eve or Sebastian. Ms Stern mentioned on occasion that a client had called. Generally, telephone messages were attended to when he arrived home.

76 While I accept that Mr Kelly suffered from depression during the relationship, Ms Stern has overstated the effects of that depression as Mr Kelly was able to continue running the painting business of TPM including attending at various sites. I do not accept that she organised his daily schedule and performed many of his organisational tasks. Nor do I accept that by the end of the relationship she was generally doing most of the specified tasks for him. I do not accept that she had to call Mr Kelly regularly throughout the day to tell him what to do and check on what he was doing. From my observations of him, he would not have tolerated this. There may have been the odd occasion when she performed some of his organisational tasks.

77 Ms Stern said that on occasions and not regularly she carried out some practical tasks. She instanced collecting paint from the paint shop and delivering the paint to jobs. Mr Kelly said she did this on two occasions because his vehicle was being serviced. She said that she picked up sub-contractors and took them to jobs. Mr Kelly said that she, once or twice, collected a sub-contractor from the railway station and took him to a job. She also stated that she went to jobs to direct the sub-contractors. She stated that from time to time she also went to job sites to sort out problems either with the client or the contractors. Mr Kelly stated, probably correctly, that Ms Stern never directed sub-contractors and was unable to do so because of her lack of knowledge and expertise (in painting) and that she was never on site to deal with clients or contractors.

78 Mr Kelly agreed that Ms Stern undertook tasks such as purchasing Christmas gifts for clients such as Payntor & Dixon although the example given may not have continued after mid 2001. She said that she took meals to Mr Kelly and occasionally to the sub-contractors as well. She said that sometimes she stayed on at job sites to keep Mr Kelly company and offer moral support. Mr Kelly said that when he was working fifteen hours per day she visited him twice on site offering moral support but urged him to keep going as she wanted more money. He rebutted her claim that she maintained his utility.

79 Ms Stern said that following Mr Kelly becoming seriously depressed she spent a great deal of time trying to keep TPM solvent. She contacted clients suggesting they start their jobs earlier than scheduled. She also made follow up telephone calls to people to whom TPM had given quotes. She made necessary withdrawals from the mortgage account to pay moneys previously mentioned (tax debts, the car lease payout) to keep TPM solvent, to pay outgoings and household expenses. She said that Mr Kelly did not want to stop trading and pressured her to borrow further funds to pay TPM debts. He wanted to expand. She said that reluctantly she organised an additional credit card from Citibank with a credit limit of $7000 for the purpose of paying the debts of TPM. She stated that without the re-drawings from the mortgage, her father’s money which had been previously deposited into the mortgage account and the additional credit card loan TPM would have become insolvent. The reference to her father’s money is a reference to $63,000 and $4000 being moneys received from her father. Mr Kelly incorrectly denied that there were serious financial problems. He denied that he told her that she would have to find more money and that he was going to expand. He said that on one occasion Ms Stern organised an additional credit card.

80 According to Mr Kelly the gross turnover of TPM for the year ended 30 June 2003 was $217,357, a decrease from the gross turnover of $246,338 for the year ended 30 June 2002. This is a decrease of $28,951 or about 12%. The gross turnover of TPM for the year ended 30 June 2004 was about $153,211. That was a big drop and likely to lead to financial problems.

81 Mr Kelly was having difficulty meeting the mortgage payments on the Maroubra property with cheques being dishonoured. His principal source of income came from TPM. While the figures given to the Court may not be conclusive they point in the direction of TPM having substantial financial difficulties.

82 Mr Kelly said that for the year ended 30 June 2001 the gross turnover of TPM (possibly Steve Kelly Painting or a combination of the two) was $259,344 and that he paid Ms Stern $26,662 for clerical duties. There was some debate as to the term “clerical duties”. Mr Kelly said that these moneys were paid to Yvette Stern Consulting and that he noted her payments as Project Management/Business Administration Consulting. The amount of the gross turnover and the amount paid to Ms Stern are probably correct. A substantial portion of the early business of Steve Kelly Painting and TPM revolved around the work done by Payntor & Dixon. That work was lost in about May 2001.

83 The Profit and Loss statement of TPM for the year ended 30 June 2002 shows a gross income of $248,505, an operating profit of $37,069 and a net profit of $27,600. Amongst the expenses it shows Bookkeeping fees of $4350 and Project/Bus. Admin Consultant of $19,490 and Home Office costs of $2904. No accounting records for later years were tendered in evidence. There was a significant drop in turnover after the parties separated.

84 Mr Kelly said that the gross turnover of TPM was:

Year ending 30 June:

Amount

85 Generally, neither Mr Kelly nor Ms Stern was a project manager or engaged in project management. Those are loose terms used to describe highly skilled engineers who direct the construction of major buildings, those qualified experts who plan and manage medium size projects and sometimes those who manage small operations of a contractor or sub-contractor. Although Ms Stern performed some clerical tasks she did more and assisted with the running of the small businesses of Steve Kelly Painting and TPM. She tended to overstate what she did and its importance and he tended to undervalue her work. Neither was reliable.

86 Ms Stern stated that upon separation she organised all of the business affairs of TPM so that they were ready to hand over to Mr Kelly and the TPM paperwork. She said that she wrote a handover package for Mr Kelly and that she received no benefit from her shareholding in TPM either during the period she continued to work for TPM, that is, until October 2003 or since. At T185 Mr Kelly agreed that Ms Stern attended to TPM’s banking from the time of its incorporation until October 2003.

Mortgage Payments

87 Exhibit 5 contains details of payments off the mortgage to Homeside from June 2001 to September 2007 at the instance of Mr Kelly. This shows that payments were made out of the joint account from 19 June 2001 to 8 August 2003, with one payment of $1100 on 30 May 2003 being dishonoured. From 30 November 2001 the payments were made fortnightly. Mr Kelly did not make any mortgage payments in the latter half of August 2003, September, October, November 2003 and for most of December 2003. He resumed causing payments to be made on 30 December 2003. Mr Kelly stated that he made mortgage payments during 2004, 2005, 2006 and 2007. He conceded that during the years 2006 and 2007 some five of the payments he made were dishonoured.

88 Ms Stern received amounts of $4000 and $63,000 from her father. She said that on receipt of $63,000 she transferred this amount into the mortgage account with Homeside and used it as an offset against the mortgage to reduce interest rates. This amount also facilitated the various amounts redrawn under the mortgage. She said that she used some of her father's money to meet some of the mortgage repayments.

89 Ms Stern said that at the time of the separation the mortgage debt to Homeside was about $313,947, that in January 2004 Mr Kelly took over the repayments of the mortgage, that Mr Kelly made 14 dishonoured payments, that she borrowed the sum of $8616 from her father and applied it towards those dishonoured payments (para 60 of her affidavit of 10 July 2007). In para 27 of her affidavit of 15 October 2007 she said that she had paid Homeside $8818 during 2006 and the sum of $9432 for the payments in July, August, September and October 2007. The payments initially made by Mr Kelly for those months had been dishonoured. In cross-examination Mr Kelly agreed that he had not made any mortgage payments since 24 September 2007 (T241).

90 Mr Kelly agreed that his copy income tax returns revealed the following:

Year ended 30 June Income

2004 (total income) $18,366

2005 (taxable income) $11,584

91 The cross-examination does not make clear whether $48,284 represents taxable income or income calculated in some other fashion. Where the phrase "total income" appears in the transcript that may accurately represent what was said or it could be that the words should be "taxable income". The cross-examiner was speaking very quickly.

92 The cross-examiner's point was that Mr Kelly was not earning enough to meet all the mortgage payments to Homeside. Mr Kelly said that he used his various credit cards to obtain moneys to pay the mortgage instalments. He did not make direct payments via his credit card. He gave this explanation (T210):

"I've either put money into my working account and then transferred the money across or I'd pay it by cash, take the money out of the credit cards in the cash at the ATM and then pay it over the counter by cash."

93 An examination of the Mastercard statements in the name of Stephen Kelly for the years ended 30 June 2005 and 30 June 2006 reveals that the cash withdrawals would not have been sufficient to meet the mortgage instalments for those years. Mr Kelly agreed that he obtained the American Express card. There were various cash withdrawals which could have been made to assist with the mortgage repayments. He agreed that the balance of the payments must have come from his earnings. Whether he observed the distinction between his earnings and those of TPM may be open to question. While the credit cards were useful in meeting bills of Mr Kelly and obtaining items and supplies for the business the cash withdrawals on the credit cards played a relatively small part in meeting the mortgage repayments.

94 Mr Kelly agreed that his taxable income for the year ended 30 June 2006, excluding workers compensation payments was $20,714. Ms Stern's point was that this was a modest income and did not allow Mr Kelly much room

Credit Cards

95 (a) The David Jones card was obtained by Mr Kelly and Ms Stern in her name to purchase a new bed for $3500. Mr Kelly said that he was given the bed by Ms Stern on separation and he did not make any payments to David Jones after separation. Ms Stern caused this debt of $3272.57 to be paid.

(b) Ms Stern organised for Mr Kelly to have what she has described as a Personal Credit Card. He used that card for his own personal expenditure and expenditure for TPM. Mr Kelly accepted that it was a debt they had accumulated during their relationship. Ms Stern caused this debt of $8700 to be paid.

(d) The total paid by Ms Stern amounted to $19,142.05.
Ms Stern said that her father advanced her $15,000 so she could pay off the credit card debts.

Maintenance of and expenditure on Maroubra Property

96 In paragraph 109(i) of her affidavit of 10 July 2007 Ms Stern stated that since separation she had continued to maintain the Maroubra cottage. She lists what she has done. Most of the items are routine but some are not. She installed and replaced various items. These have not been costed. In para 109(ii) she lists the works she arranged to have completed by others. They included installation of a full security system. Most of the items in para 109(ii) have not been costed. Ms Stern produced a folder containing receipts relating to some of the items.

97 The folder contained for the period August 2003-October 2007 a mixture of items, for example Home Insurance, Council rates, repairs to household items and what were described as “Security/Repairs due to violence”. They totalled $23,227 of which about half related to the last mentioned items. Her expenditure claims in the folder could be summarised thus:

Aug 03 - Oct 07 - evidence of payment available 23,227

8150

98 Ms Stern had not included water rates as she did not recall the exact amounts nor had she included standard utilities charges.

99 Ms Stern totalled her mortgage payments from October 2007 to July 2008 at $25,117. When these are combined with the amounts in the preceding para they total $63,503. No argument was advanced that the amounts for security etc should not be taken into account.

Australian Scholarships Group

100 At the time co-habitation commenced between the parties Ms Stern had become a member of this Group in respect of Sebastian. Its program involves promoting a complete education for children by providing them with encouragement and motivation to complete secondary schooling and to continue with post-secondary studies. I gathered that financial assistance is provided. After Eve was born the parties discussed this and decided that she would also be enrolled. Ms Stern said that she paid $4609.42 to the Group’s education fund for arrears after separation. She has produced a series of accounts from the Group relating to Eve for the period from 1 June 2004 to 30 September 2007. They involve payment of a substantial amount in total. She has also produced a series of accounts relating to Sebastian covering the period 1 May 2003 to 30 June 2008. In total, they also involve a substantial amount.

101 In her assessment of her expenditure for Eve, Ms Stern for the period August 2003 to October 2007 has included an amount of $23,069. She stated that as at the date of separation the interest in the ASG Fund was $34,432.36.

102 I accept that Ms Stern paid $4,609 for ASG education debts. I also accept that the provision for the education expenses for Eve to date have been heavy. Her father’s financial help has been a major reason why they have been able to be met. This fund should stand in the sole name of Ms Stern for the education of the children.

Debt to builder and to Centrelink

103 Ms Stern said that post separation she paid personal debts of $1700 to the builder and $2124 to Centrelink. There was not much evidence about either of these. She appears to have had building works done at the house and to have had a builder there. I do not know if the Centrelink payment involved the repayment of monies previously advanced by her to Centrelink. Neither of these debts is a large amount.

Contributions to children’s welfare

Sebastian

104 Ms Stern said that she had been the primary carer for Sebastian since his birth and attended to and took responsibility for almost all of his personal needs. She said that Mr Kelly made a significant effort to get on with Sebastian. She alleged that Mr Kelly had difficulties with Sebastian but Mr Kelly denied that this was so. Mr Kelly said that he was substantially involved with Sebastian, being Sebastian’s soccer coach and supervising him at Nippers. Mr Kelly was a lifesaver. Mr Kelly took Sebastian to some music lessons and rode bikes with him. Mr Kelly denied that he was unwell as alleged by Ms Stern. Mr Kelly denied that Ms Stern arranged his work schedule to accommodate soccer training as it took place at night or on weekends. Mr Kelly said that Ms Stern went only once or twice to Nippers and that she preferred to stay at home with Eve. I have noted the different versions given by Ms Stern and Mr Kelly as to his involvement with Sebastian and her participation and attendances at the sporting and recreational activities of Sebastian. I think Mr Kelly’s version is probably correct. Mr Kelly was keen on sport and helping Sebastian in the sporting activities. Ms Stern said that she had continued to care for Sebastian since separation and has paid for and attended to all his personal needs without assistance from Mr Kelly. This is probably correct in general. However, allowance should be made for Mr Kelly’s constant contact with Sebastian after separation and their joint activities. She deposed to Sebastian’s health issues.

Eve

105 Ms Stern complained about Mr Kelly being uncaring and neglectful and abusive during her pregnancy with Eve and thereafter. This was denied by Mr Kelly. Mr Kelly said that he looked after Sebastian when Eve was in hospital. He said that on Ms Stern and Eve returning home after Eve’s birth he did all the housework (except what the cleaner did) and bought and prepared food. He attended to Eve by nursing her, changing her nappies amongst other things. He took Eve for walks, sang to her and bathed her. He also looked after Sebastian, giving him breakfast, taking him to and from school, attending to his normal and sporting routines.

106 Mr Kelly said that because Eve was developmentally challenged she slept in the bed with Ms Stern. Mr Kelly said that he and she decided it would be better if he slept in a different room at this time. Ms Stern attributed the changed sleeping arrangements to Mr Kelly’s aggressiveness. He slept in the same room as Sebastian. Mr Kelly said that when she was one year old Eve joined them in Sebastian’s room and Ms Stern decided to keep the bedroom to herself so he (Kelly) was responsible for the children during the night.

107 I accept that Eve’s disabilities and her needs involved time and care on the part of Ms Stern and that from an early date Eve would have required medical and other care. I accept also that from about the time Eve was about 18 months old Ms Stern took Eve to paediatric and other specialists for diagnosis, advice and treatment on many occasions. She also attended to the home therapy recommended which was time consuming and emotionally exhausting. Ms Stern detailed the arrangements she made for Eve’s home care so she could do the work of TPM.

108 Ms Stern said that all of the costs associated with Eve’s care have been borne by her since separation other than the sum of a few hundred dollars which Mr Kelly gave her in the form of cheques shortly after separation when she was still working for TPM and was receiving no income (para 84 of her affidavit of 10 July 2007).

109 Ms Stern further said that she had not received any Child Support payments from Mr Kelly and had not pursued collection of payments via the Child Support Agency as Mr Kelly commenced the mortgage repayments in January 2004. I have referred to the position as to mortgage payments elsewhere.

110 Ms Stern produced a folder of documents in support of her assertion that she had spent $174,731 in relation to Eve from May 2003 – August 2008. This covers a variety of items. As to some of the expenditure itemised Ms Stern has no receipts and she has relied on her estimation based on her recollection and credit card entries. Many of the items appear on her father’s credit card with Credit du Nord. Ms Stern has been authorised by her father to debit expenditure to his account.

111 While some of the expenditure claimed may be debateable many items appear to be sustainable. There are some which require further explanation, for example:

08/03 – 10/07 baby sitting/nanny

($200 pw x 3.5 yrs) $38,400

$20 pw x 3.5 yrs $3,640

08/03 – 10/07 Entertainment

112 There is also an item:

08/03 – 10/07 Australian Scholarship Group $23,069

113 It is reasonable to proceed upon the basis that $150,000 has been spent on the maintenance, welfare and advancement of Eve as a result of the combined efforts of Ms Stern and her father. Eve has been the beneficiary of care for her disabilities that would probably not be open to children from families without the resources of Ms Stern and her father who has effectively borne the brunt of the expenses for Eve.

114 Mr Kelly has not paid Ms Stern any money for the maintenance of Eve. His contribution to her welfare has been to make mortgage payments so she has a reasonable home in which to live. Mr Kelly had an obligation to provide for Eve but he did not have the resources to do so to the level of Ms Stern and her father. He was fully stretched financially meeting the mortgage payments.

Apprehended Violence Orders

115 On 26 November 2003 the Local Court made an Interim Apprehended Violence Order in favour of Ms Stern, Eve and Sebastian against Mr Kelly.

116 On 10 August 2005 after a hearing extending over nine days an Apprehended Violence Order was made in favour of Ms Stern against Mr Kelly for a period of 30 months. Inter alia, he was prohibited from entering the Maroubra premises. The Orders provided, by consent, that they were not to affect contact by Mr Kelly with the two protected children (Eve and Sebastian) in accordance with Orders made in the Family Court on 30 January 2004. It is not clear why this Order was made in view of the discharge prior to 10 August 2005 of the Orders of 30 January 2004 by the Family Court Order of 20 May 2004. Mr Kelly was ordered to pay $25,371 on account of Ms Stern’s costs of the Local Court proceedings and given six months to pay. When he withdrew his appeal, Mr Kelly was ordered to pay $750 on account of the costs of appeal. None of the costs have been paid.

117 The access arrangements embodied in the Orders of the Family Court of 30 January 2004 did not work well. They were conditional upon Mr Kelly continuing to attend upon his psychiatrist who was to provide a short report to his and Ms Stern’s solicitors on whether Mr Kelly was complying with his medication and therapy requirements and whether there was anything currently in Mr Kelly’s mental health that could pose a risk to any children in his care for contact visits either in the form of abuse or neglect (Order 3). Mr Kelly found this Order oppressive. It may well have involved Mr Kelly in expense. Not surprisingly the Psychiatrist did not wish to comply with the father’s authority.

118 On 20 May 2004 the Family Court discharged all interim orders. Mr Kelly was to have contact with Eve as agreed between the parties in writing. He withdrew all outstanding applications for contact. All outstanding applications by Ms Stern were dismissed. The initial contact conditions were onerous and the costs of proceedings in the Family Court were beyond Mr Kelly. Since 20 May 2004 there has been no contact by Mr Kelly. Further, he does not want Ms Stern endeavouring to supervise his mental health.

Occupation Fee

119 Mr Kelly asked me to take into account that Ms Stern had been living in the Maroubra cottage since he moved out in about August 2003.

120 Mr G W Brook assessed the gross weekly rental value of the cottage as follows:

121 Ms Stern pointed to certain defects in the premises, principally those caused by water penetration. Mr Brook was aware of these.

122 Ms Stern submitted that while she has had the benefit of occupation of the cottage this was not a case in which the Court would consider that an occupation fee was due to the defendant for the following reasons:

123 The property did need repairs and further renovations but it had four bedrooms and Ms Stern did have people staying with her for periods. At T64-65 she deposed to having paying boarders staying with her for short periods. She also had a person live in the cottage for 10 months. Ms Stern said that that person came to live with her under extraordinarily difficult circumstances and provided services such as baby care. I would not think in terms of an occupation fee as such but I would take into account that the cottage provided a home for Ms Stern and the two children. On the other hand, Mr Kelly was not paying any maintenance for Eve. I was unable to determine whether Mr Kelly made any capital contribution to the acquisition of the property but if he did it was a small one, that is not more than $8,000. His main contribution was the assumption of liability to meet the mortgage repayments because he had an income as a painter and his subsequent payment of many but not all the mortgage payments.

Compensation Monies

124 Mr Kelly went through the Workers’ Compensation procedures for the assessment of his whole of person impairment of 15%. He fell off a ladder in the latter part of 2005 severely injuring both his hands. He said that on 2 March 2008 he received a cheque for $31,500 ($35,000 less $3,500). Apparently $10,000 had been withheld for payment to Medicare. He said he had paid American Express and some of his other credit card debts. He had also used some of the money for his living expenses. He had not made any payment to Ms Stern in respect of the cost order.

125 Mr Kelly said that ever since having his physical impairment he had found it difficult to pay his debts, his legal team and his general living expenses.

Mr Kelly’s Credit Cards

126 The Platinum Master Card statements of Mr Kelly show that from at least 10 July 2004 Mr Kelly was using the Master Card to obtain supplies for and meet the expenses of the business (TPM). That appeared to continue during 2005 until May 2006. I have assumed that Master Card wanted a natural person (Mr Kelly) as the primary debtor. That avoids the problems which can arise with guarantees. As at 9 May 2006 Mr Kelly’s indebtedness was shown as $38,540.74 (see Exhibits U and V).

127 The American Express Card was also used to obtain supplies for and meet the expenses of the business (TPM). The American Express Credit Statement of 16 January 2006 states that as at 15 January 2006 the Credit Limit was $21,000 and that the Available Credit Limit was $242.69. Both cards also appear to have been used to meet some of Mr Kelly’s general expenses.

128 The Court was asked to proceed on the basis that the Credit Card indebtedness of Mr Kelly was of the order of $60,000. The figure of $60,000 was based on the maximum borrowings permitted by the cards and such borrowings had been utilised. Put colloquially, they were described as “maxed out”. While I would have preferred up to date statements the sum mentioned appears to be broadly correct. There was no evidence whether these amounts were appreciably reduced after the plaintiff received his compensation moneys in 2008. Neither TPM nor Mr Kelly were in a position from July 2004 to May 2006 to meet the expenses debited to the cards. That applies with particular force after Mr Kelly had his accident in the latter half of 2005. I am conscious that s 20 of the Property Relations Act focuses upon contributions.

Alleged loan by father

129 In her submissions Ms Stern contended that her father, Mr Ivan Stern, had lent her $621,000. When para [5] of his affidavit was being read I did not admit the words “and I’ve calculated from records that I have retained and from credit card statements that I have lent Yvette the sum of $621,000”, counsel for Mr Kelly having objected to the allegation that $621,000 had been advanced. (see T15, line 33 - T16, line 35). Mr Stern’s calculations were not produced. Statements from the Credit du Nord were tendered by the parties and admitted but they and the other records tendered did not enable either the defendant or the Court to verify the amount of the alleged advance. The statements of Credit du Nord were expressed in Euros. I would not assume that the exchange rate did not fluctuate over the years.

130 Mr Stern said that there were persons who held credit cards to operate on his account with Credit du Nord, a Bank, namely his wife, his daughter Yvette and himself. Mr Stern said that since last week, that is from about 24 July 2008 a limit of 2000 Euros per month had been placed on his daughter’s card. He believed that the Bank had placed a limit on the card but he did not know what the limit was. He was shown a statement from Credit du Nord which indicated an indebtedness of $300,000 Euros on the whole account. Mr Stern agreed that her card (that is the amounts his daughter had expended) was part of the whole account.

131 Ms Stern agreed (at T59) that she spent tens of thousands of dollars on a Credit du Nord card and that she has never paid for any of the charges she had incurred.

132 Ms Stern (T71) accepted that she charged a wide variety of expenses on her credit card on her father’s account. In answer to the question whether her father put her on a monthly limit on what she could charge to his credit card she replied “You’ll need to ask him, I couldn’t answer that”. What amounts she had debited to his account her father paid.

133 I thought it was odd that she was not aware of any spending limit, if it existed.

134 I did not accept the evidence of Mr Stern when he said that within approximately one week prior to the hearing he had placed a limit of 2000 Euros per month on the amount his daughter could debit to his account. That was a limit contrived for the purpose of these proceedings. He had not made his daughter aware of the limit. It is plain that Mr Stern had provided a large measure of financial support for his daughter and Eve and probably Sebastian. Mr Stern was not obliged to do so.

135 Mr Stern was prepared to allow his daughter to use her credit card on his account with Credit du Nord. There was no loan. Mr Stern knew that his daughter was purchasing items for the needs of herself, Eve and probably Sebastian and he was prepared to allow her to do so.

136 Mr Stern appeared to agree that probably in the future he would embark on some estate planning. He had not yet reached that stage. How he will divide or leave his estate when there are children and grandchildren with special needs remains a matter for him to determine. There is no reliable evidence as to what he will do. Mr Stern mentioned some potential beneficiaries. He gave me the impression that he was yet to decide what he would do. He still had small children at home, one of whom has Downes Syndrome. Much will probably depend on the needs of the various members of his family. Mr Stern appeared to be deeply attached to his daughter and prepared to assist her and her children financially. This is a favourable circumstance for Ms Stern and her children. It does not lessen the obligations of Mr Kelly to provide for Eve to the extent that he is able to do so.

Post separation contributions

137 Ms Stern gave evidence that in the past she had worked for the University of New South Wales and was still doing so. In July-August 2008 she was teaching Social Science and Policy for about three hours per week for which she was paid about $220 - $230 per week. She said that her tutoring is casual. Some semesters there is work available and some there is not. She has also done some consulting work for which she had received a number of separate commissions or requests. Apparently her commissions resulted in her being paid about $2,500 for about 5 days work on one commission and lesser sums ($1,000 to $1,200) on smaller commissions. Ms Stern valued her work as a social scientist.

138 She has also been receiving Social Security Benefits. The amounts varied depending on her other income. She received a carer’s allowance for Eve of about $50 per week. She received a Family Tax Benefit. Part A was about $290.92 per fortnight and Part B was $87.08 per fortnight. They varied occasionally but not to a large extent. She also received the sole parent pension; this varied depending on her income. The highest amount was about $550 per fortnight at the full rate.

139 She used her credit card on her father’s account to cover the balance of the expenses she incurred for herself and the two children. Having regard to her limited income, some of which is derived from Social Security Benefits, a measure of caution has to be adopted in assessing Ms Stern’s post separation financial contributions. It is also desirable to isolate the medical expenses she paid allowing for Medicare and other contributions. Her father’s financial assistance was important but this is in a different category from Medicare payments, Centrelink and other Social Security contributions.

140 At the time of the hearing Ms Stern had the following assets:

(a) One half share in 297 Fitzgerald Avenue, Maroubra. The property had an agreed value of $1,075.00;

(b) One half of the share capital in TPM – these shares are worthless;

(c) Volvo sedan said to have a value of about $40,000. This alleged value may be overstated;

141 I decline to treat her interest in the ASG Fund as part of her assets. I understand this Fund is held in trust for the eduction of Sebastian and Eve. Ms Stern should be the sole trustee. She, with the help of her father, is making most of the contributions to the Fund for the children.

142 Her liabilities include the mortgage to Homeside. Mr Kelly is also liable for this amount under the mortgage. I have assumed that the liability is both joint and several.

143 I have not accepted and do not accept as claimed that there is a loan to Ms Stern from her father of $621,000. Mr Ivan Stern has, by means of his credit card account, by allowing Ms Stern to use her credit card to debit expenses, made gifts which have a considerable value to Ms Stern. It remains to be seen how these will be adjusted. Mr Stern has also made substantial funds available to his daughter. I do not accept that these were made by way of a loan.

144 At the time of hearing, Mr Kelly had the following assets:

(a) One half share in 297 Fitzgerald Avenue, Maroubra;

(b) One half of the share capital in TPM – these shares are worthless. Whether it will ever be possible to resurrect TPM is not a question I can decide;

(c) 1999 Holden Utility. This was said to have a value of about $28,000. This alleged value is probably markedly overstated. While this vehicle is used by Mr Kelly it may be that it should be regarded as a vehicle of TPM. A ten year old Holden utility which has been extensively used would probably not be worth more than several thousand dollars.

145 His liabilities include the mortgage to Homeside. Mr Kelly will probably still be liable for this amount if the property is transferred to Ms Stern. Mr Kelly also has outstanding liabilities for legal costs.

146 Mr Kelly owes about $26,000 for the legal costs of Ms Stern of the AVO proceedings and the appeal. He also owes his own solicitors about $65,000 for outstanding unpaid costs. In all he owes about $91,000 for outstanding legal costs. Ms Stern also sought interest on the costs of $6,412 on the costs of the AVO proceedings.

147 There is also the liability of Mr Kelly of about $60,000 on credit cards.

148 These liabilities are not contributions and the Court does not have a general discretion to do what is just and equitable. The Court is empowered to make such order adjusting the interests of the parties as to it seems just and equitable having regard to the financial and non-financial contributions made directly or indirectly by or on behalf of both parties. Mr Ivan Stern’s gifts were made on behalf of Ms Stern and Eve at Ms Stern’s behest. Mr Kelly was in no position to match these. His current financial position could be described as parlous.

149 At one stage counsel for Mr Kelly suggested that Ms Stern should have made an application for child support. I rejected that submission as such an application was unlikely to be successful against Mr Kelly in circumstances where Mr Kelly’s income was modest, he had been injured and accommodation was being provided for Ms Stern and the children. That position may change upon the conclusion of these proceedings, depending on the orders made and the new formula which has been introduced by the Federal Government.

150 The relationship between Ms Stern and Mr Kelly was of short duration. She provided the bulk of the purchase price of the Maroubra cottage, namely $403,000 out of $702,000. Mr Kelly brought his painting sub-contracting business to the relationship and could point to a source of income from which the mortgage payments could be made. He also assumed liability to make the repayments. These two contributions enabled the purchase to proceed. He made a large number of payments after the separation although there were some defaults and he has not made any payments since September 2007. He did not make any payment to Ms Stern for the maintenance of Eve. He could not afford those and the mortgage payments. Ms Stern and her father have met the maintenance costs and the medical payments for Eve not covered by Medicare.

151 Ms Stern also asked the Court to consider what Mr Kelly had received, namely:

152 Ms Stern made contributions to the business and running of TPM. I would not attach as much importance to her work as she did but it must be taken into consideration and given weight.

153 She has been the principal carer and provider for Sebastian and Eve since the parties separated. The children have resided with her. Her father has helped her substantially financially. Ms Stern has taken Eve to see various medical and other specialists.

154 Before the separation Mr Kelly did engage in a lot of care for Eve. He encouraged Sebastian, particularly in his sporting and recreational activities but his support of Sebastian was not limited to such activities.

155 Having weighed up the contributions of Ms Stern and Mr Kelly to the acquisition of the Maroubra property (including the obtaining of the mortgage), the contributions of both Ms Stern and Mr Kelly to the conduct of the business of TPM, their respective contributions to the welfare of Eve and Sebastian and their post separation contributions I have reached the conclusion that it would be just and equitable for the Maroubra property to be transferred to Ms Stern subject to an obligation on her part to pay $72,000 to Mr Kelly but I would allow Ms Stern to set off the sum of $32,0000 – on account of the costs (and interest thereon) of the AVO proceedings. This would result in a net payment of $40,000 by Ms Stern to Mr Kelly. The order for transfer would be on the basis that Ms Stern meet the full cost of all future mortgage payments and ensure that they are paid and indemnify Mr Kelly accordingly. I would dismiss Mr Kelly’s cross claim. In reaching these conclusions I have not overlooked that not all the relatively sparse financial material available is completely consistent.

Superannuation

156 Ms Stern has a modest superannuation entitlement through her work with the University of New South Wales. It was not suggested that any of her superannuation entitlements should be taken into account. They remain undisturbed.

Costs

157 Ms Stern has been substantially but not completely successful. Mr Kelly enjoyed a small measure of success. In my opinion Mr Kelly should pay 87½% of the plaintiff’s costs of her proceedings and the whole of the costs of his cross claim.

Indemnity

158 The plaintiff sought an indemnity in these terms:

“the Defendant shall indemnify and keep the plaintiff indemnified from any liability arising therefrom” (the transfer of all her shares in Total Paint Management Pty Limited to the defendant).

159 The shares issued were fully paid up. It was not easy to see that any liability would arise from the transfer of her shareholding. It is possible that TPM could be wound up or removed from the Register. There was no sufficient basis shown for the defendant to indemnify the plaintiff for anything she did while a director.

160 I doubt if any indemnity would, on the facts of the present case, serve any useful purpose. The indemnity sought should not be required.

161 I make the following orders:

1. Upon the plaintiff paying the sum of $72,000 to the defendant and giving an enforceable undertaking to keep Mr Kelly indemnified in respect of any liability to make payments to Homeside in respect of the mortgage over 297 Fitzgerald Avenue, Maroubra order that the defendant transfer the whole of his right, title and interest in 297 Fitzgerald Avenue, Maroubra to the plaintiff;

2. Order that Ms Stern be at liberty to set off from her payment the sum of $32,000 on account of the costs (and interest thereon) of the AVO proceedings.

3. The plaintiff transfer to the defendant all her shares in Total Paint Management Pty Limited.

4. The defendant, within 28 days of being forwarded by the plaintiff or her solicitor all necessary forms to transfer into her name as sole trustee the funds invested in Australian Scholarships Group Friendly Society Limited with membership numbers 30512441 and 30554659, do execute all documents to effect such transfer as may be reasonably necessary.

5. That the parties be declared absolute owners of all other property now in the name or possession of that party including vehicles, bank accounts, furniture and interest in superannuation.

6. Cross claim of Mr Kelly dismissed.
7. That the defendant pay 87½ per cent of the plaintiff’s costs of her proceedings and the whole of her costs of his cross claim.

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Citations

Yvette Katherine Stern v Stephen Vincent Kelly [2009] NSWSC 238

Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Howlett v Neilson [2005] NSWCA 149

CITATION:	YVETTE KATHERINE STERN v STEPHEN VINCENT KELLY [2009] NSWSC 238
HEARING DATE(S):	30, 31 July, 1, 15 and 28 August 2008
JUDGMENT DATE :	3 April 2009
JUDGMENT OF:	Smart AJ
DECISION:	See para [161]
CATCHWORDS:	Property Relationship Act - contributions - increase in value of property - apportionment of increments in value of assets, especially real property - plaintiff providing bulk of purchase price but defendant assuming liability to meet mortgage repayments and having business with income - pre and post separation contributions - child with special needs.
LEGISLATION CITED:	Property Relationships Act 1984
CATEGORY:	Principal judgment
CASES CITED:	Bilous v Mudaliar [2006] 65 NSWLR 615 Howlett v Neilson [2005] NSWCA 149 Kardos v Sarbutt [2006] 34 Fam LR 550 Sharples v McKibben (2008) DFC 95-4
FILE NUMBER(S):	SC 4999/2004
COUNSEL:	S Christie (P) G M Johnston (D)
SOLICITORS:	Marks Griffiths & Bova (P) John R Quinn & Co (D) to 1 August 2008