New South Wales Supreme Court CITATION : Taylor v Webster [1999] NSWSC 48 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 2347/96 HEARING DATE(S) : 21/10/98 JUDGMENT DATE : 12 February 1999 PARTIES : Lynette Nancy Taylor (P) Peter George Webster (D) JUDGMENT OF : Master McLaughlin COUNSEL : Mr. Peter J. Granger (P) Mr. Julian J. Millar (D) SOLICITORS : Callachor & Helby, Solicitors (P) Colin Daley Quinn (D) CATCHWORDS : De Facto Relationships Act 1984; Adjustment of interests in property; Respective contributions of each party; Business of cattle breeding and engineering business conducted on rural property owned by defendant before the commencement of the relationship; Subsequently those businesses were conducted through the vehicle of a company of which the plaintiff and the defendant were the sole directors and held equal shares; Parties resided upon that rural property; Respective earnings and income of the parties; Plaintiff was principal homemaker, whilst defendant was principal breadwinner ACTS CITED : De Facto Relationships Act 1984 DECISION : See orders in paragraph 57 - 20 - Reasons for judgment 1 MASTER: These are proceedings under the De Facto Relationships Act 1984. 2 By statement of claim filed on 3 June 1996 the plaintiff, Lynette Nancy Taylor, seeks orders against the defendant, Peter George Webster, adjusting the interests of the parties in property. The substantive relief sought by the plaintiff is the payment to her by the defendant of the sum of $100,000. 3 The parties lived in a de facto relationship from July 1988 until 9 August 1995. The plaintiff (who is presently aged forty-nine) had previously been married and had three children. No children were born to the relationship of the parties. However, one of the plaintiff's children, Peter, lived with them throughout the entirety of the relationship. Although the evidence is silent as to Peter's age, I gather (especially from the evidence relating to the acquisition by him of a motor car) that towards the end of his mother's relationship with the defendant Peter would have been aged no more than twenty. 4 The defendant (who was born on 29 August 1957 and is presently aged forty-one) also had previously been married. However, none of his four children resided with him and the plaintiff during the relationship, although it would appear that all those children were dependent upon him throughout that period. 5 For about four years before the commencement of the de facto relationship the defendant had been in occupation of a rural property known as Mount Wheogo, situate at Deaths Lane, Piney Range, near Grenfell in New South Wales. In May 1988, shortly before the commencement of his relationship with the plaintiff, the defendant had acquired that property by purchase from a company controlled by his father. 6 The purchase price of Mount Wheogo was $387,078.80. That purchase was funded in the following way. The vendor company owed to the defendant the sum of $189,041, and a subsidiary of the vendor company owed to the defendant $48,037.80. The defendant, the vendor company and its subsidiary agreed that the vendor company and its subsidiary would be discharged from the foregoing indebtedness, upon the transfer of Mount Wheogo to the defendant and the payment by the defendant to the vendor company of the sum of $150,000 (Exhibit 5). 7 The foregoing sum of $150,000 was advanced to the defendant by his father, that advance being secured by a mortgage over the property (Exhibit 4). 8 The defendant's father, upon his death (which occurred during the course of the de facto relationship between the plaintiff and the defendant), by his will, forgave the debt of $150,000 owing to him by the defendant. 9 It will be appreciated that the consequence of the foregoing financial arrangements between the defendant, his father, the vendor company (which was controlled by the defendant's father) and a subsidiary of that company was that it was not necessary for the defendant himself to provide any money for the purchase of Mount Wheogo. That fact, however, does not in any way enhance the claim of the plaintiff in the present proceedings. 10 Upon Mount Wheogo the defendant throughout the period of his occupancy conducted a farming enterprise (concentrating upon the breeding of cattle), and also an engineering business, known as Supreme Engineering. (I note that the defendant in his witness statement of 28 February 1998 gave his occupation as "engineer", whilst in his oral evidence he said that he was a "fitter and turner by trade".) 11 Throughout the period of the relationship the parties resided in the homestead on Mount Wheogo. 12 It is that property and the farming and other activities thereon conducted (firstly, by the defendant, and, subsequently, during their relationship, by the plaintiff and the defendant) that have been the subject of the present proceedings. 13 At the commencement of the relationship the assets of the plaintiff consisted of: (a) an entitlement to moneys from her previous husband, by way of property settlement (b) two interest bearing deposits, totalling about $4,000 (c) livestock (28 cows, 1 bull) (d) truck (e) caravan (f) furniture 14 The assets of the defendant at the commencement of the relationship consisted of: (a) rural property, Mount Wheogo (b) cattle and a horse (to which the defendant ascribed a total value of $57,650) (c) farm plant and equipment (to which the defendant ascribed a value of $55,000) (d) two motor vehicles (one being unregistered), having a total value of about $3,000 (e) plant and equipment of Supreme Engineering (to which the defendant ascribed a value of $150,000) (f) caravan (g) bank accounts (totalling about $4,930) 15 The cattle belonging to the defendant which were upon Mount Wheogo at the commencement of the relationship had been purchased by him from his father's company. 16 There was placed in evidence an affidavit of David John Andrew Faulkner, a registered valuer, sworn 1 May 1998, to which was annexed his valuation of Mount Wheogo at the following dates: 10 February 1998, 1 August 1995 and 30 June 1988. Mr. Faulkner's valuation of the property at those foregoing dates was, respectively, $255,300, $186,400, $320,950. 17 At the outset of the hearing it was noted that the parties agreed that that valuation by Mr. Faulkner was an accurate valuation. 18 Although the plaintiff in her statement of claim asserted that one of her assets at the commencement of the relationship (being an asset which she asserted she had contributed to the relationship of the parties) was the sum of $18,690.22 received by her by way of a Family Law property settlement in respect of her previous marriage, it appeared from her bank statement annexed to her witness statement dated 29 October 1997 that the plaintiff received that sum only in September 1990 (a deposit in that amount being recorded on 14 September 1990) --- that being more than two years after the commencement of her de facto relationship with the defendant. 19 In about August 1995 the plaintiff's caravan was sold for $500 and she retained the proceeds of that sale. In February 1996 the plaintiff's truck was sold, and she retained the net proceeds of sale in an amount of $3,289. On 25 September 1995 the plaintiff's herd of cattle was sold for $22,816.83 and were retained by the defendant. 20 During the course of the relationship both parties participated in the conduct of the cattle breeding business, although the nature and extent of that participation was in dispute. In addition, the defendant alone conducted the engineering business. The plaintiff asserted that she performed the role of attending to the sending out of monthly accounts in the engineering business. However that assertion was denied by the defendant. Any involvement by the plaintiff in the engineering business was, at most, minimal. 21 The plaintiff during the relationship for short periods (of about two and a half or three months a year) worked as a wool classer or as a wool roller. In the former capacity she was paid $150 a day; in the latter she was paid $25 for a two hour shift (there being four shifts a day). That employment also gave rise to superannuation entitlements, which were paid to the plaintiff (in amounts totalling about $400) during the course of the relationship. 22 She also at times was engaged in a catering business, although it would seem that little, if any, profit was made from that enterprise. In addition, she did what she described as "a bit of bar work". 23 Apart from the foregoing earnings of the plaintiff during the relationship (which earnings were deposited by the plaintiff in a bank account in her sole name and were, essentially, used for her own separate needs and purposes), the entirety of the income of the parties during the course of the relationship was generated by the cattle breeding business and by the engineering business. It was the income from those businesses which was used to support the parties (and the plaintiff's son Peter), to pay for all household expenses and outgoings, to pay all outgoings in respect of Mount Wheogo, and, of course, to meet the liabilities incurred by each of the two businesses conducted upon the property. 24 According to the plaintiff she was primarily responsible for the cattle breeding business. She had some experience with cattle, having worked on a rural property for thirty years, and having been taught by her father concerning the breeding of cattle. 25 I have already recorded my conclusion that, despite her assertion, any involvement by the plaintiff in the engineering business was, at most, minimal. 26 The defendant disputed the plaintiff's assertion that the stock business was essentially conducted by her. Whilst the defendant attended to the entirety of the engineering business, he asserted that he also was substantially involved in the cattle breeding business. 27 According to the plaintiff each of the businesses conducted on Mount Wheogo generated a more or less equal income. The defendant said that the combined income from the two businesses was at times sufficient to support the family unit constituted by himself, the plaintiff and the plaintiff's son Peter, but that at other times that combined income was not sufficient to support the family unit. 28 During the course of the relationship (probably in 1992 or 1993, although the plaintiff in her statement of claim said that it was about 4 June 1991) the parties commenced to conduct the two businesses through the vehicle of a company, Postgap Pty. Limited, ("Postgap") in which the plaintiff and the defendant were equal shareholders and were the only directors. However, it would appear that the formal corporate structure of Postgap was essentially controlled by the defendant, and that the plaintiff had little involvement in the formal conduct of that company. 29 During the relationship additional capital advances were made to Postgap. These included amounts totalling about $60,000 received by the defendant from the estate of his late father, and, in addition, a considerable quantity of engineering tools (to which the defendant ascribed a value of $400,000) also received from that estate. 30 It will be appreciated that the conduct of each of the two businesses involved payments being made and income being received. In addition, the cattle business involved the breeding and sale of stock, thus generating income, and, from time to time, the purchase of additional stock. 31 At the commencement of the relationship neither party had any liabilities. However, at the termination of the relationship Postgap had considerable liabilities --- including an indebtedness of $100,000 to the defendant. That liability represents the various advances made to Postgap by the defendant from the moneys and the engineering tools which came to him from his father's estate. 32 At the conclusion of the relationship the parties (either in their personal capacity or through the vehicle of Postgap) had the following liabilities: (a) Westpac Term Loan - $27,666 (b) Westpac cheque account, overdrawn - $36,565 (c) Various accounts - $75,699 (d) Balance of lease owing to AGC Limited in respect to a bulldozer - $12,271. 33 After the termination of the relationship the defendant suffered problems with his physical and mental health. He therefore decided to terminate the engineering business and the cattle business which had been conducted upon the property, and to take employment in the town of Parkes. In consequence the defendant sold the cattle, in September 1995, and organised what was described in the evidence as a clearance sale upon Mount Wheogo. That clearance sale was conducted on 11 February 1996. 34 The totality of the cattle on Mount Wheogo (some of which, it will be appreciated, had been owned by the defendant before the commencement of the relationship and some of which had been brought onto that property by the plaintiff when the relationship commenced) were sold, in September 1995, that sale generating about $100,000. The proceeds of sale of those cattle were treated (at least by the defendant, and probably, implicitly, also by the plaintiff) as being owned by Postgap. 35 From the proceeds of the clearance sale (which generated $88,000) and from the proceeds of the sale of the cattle (which generated about $100,000) there were paid by the defendant all outstanding debts, in relation not only to the businesses and to Postgap but also to the parties personally (including, for example, the debts which the plaintiff had incurred on the defendant's Mastercard account). After those payments had been made there remained a sum of about $11,000. The defendant at that time said that he was prepared to divide that sum equally between himself and the plaintiff. Under cross-examination, however, the defendant said that he was not sure if he was still prepared to allow the plaintiff to have one half of that sum. 36 At the termination of the relationship the assets of the plaintiff included the truck which she had owned at the commencement (and which she later disposed of for $3,289); furniture and personal effects; and a superannuation entitlement (contributed by Postgap). 37 The plaintiff seems to have made no attempt since the termination of the relationship to obtain payment of the superannuation to which she appears to have been entitled. Postgap contributed $120 a month towards that superannuation entitlement. The plaintiff herself made no contributions towards that superannuation (which, it will be appreciated, is quite distinct from the superannuation entitlements totalling about $400 which the plaintiff received consequent upon her short periods of employment as a wool classer and a wool roller). 38 In addition the plaintiff took from Mount Wheogo at the termination of the relationship a ride-on lawn mower (which had been acquired during the relationship), which she subsequently sold for $2,500. Another item which the plaintiff took with her upon her departure from Mount Wheogo was a Ford Falcon motor vehicle. That vehicle had originally been purchased during the relationship with a gift of $12,000 from the defendant's father. It was ultimately sold by the plaintiff for $1,200. 39 Despite the assertion of the plaintiff that she had paid expenses on behalf of Postgap, when asked under cross-examination why she did not obtain reimbursement from the company for those expenses, her response was that she "just didn't think of it". 40 It will be appreciated, from the agreed valuation of Mount Wheogo, that the value of that property diminished considerably during the period of the relationship (from $320,950 to $186,400), although it has increased somewhat (to $250,300) in the two and a half years succeeding the termination of their relationship. 41 It was not disputed that the plaintiff had the major responsibility for the domestic activities at Mount Wheogo, although the defendant asserted that his participation in those activities was considerably greater than the plaintiff would concede. The plaintiff had the primary role as homemaker and as parent to her son Peter whilst he was part of the family unit. 42 Although the defendant asserted that he acted in the role of a father to Peter, that assertion was denied by the plaintiff. The defendant conceded in his oral evidence that he and Peter had had their differences, and that for most of the time they were distant from each other. Nevertheless, the defendant after the termination of the relationship accompanied Peter to Sydney with a view to the purchase of a motor car by Peter. The defendant advanced to Peter the sum of $8,000 towards that purchase, that money being regarded by the defendant as a gift. Apparently it was also regarded by Peter as a gift, since it has never been repaid. 43 The relationship came to an end when the plaintiff departed from Mount Wheogo, taking with her her furniture and personal possessions (that removal being effected with the physical assistance of the defendant). It was in consequence of that departure of the plaintiff that it fell entirely to the defendant to do all work associated with the winding up of each of the two businesses. That winding up extended over the period from August 1995 to February 1996. 44 It was necessary for the defendant to attend to the payment of all debts owing by the parties and by Postgap. After the termination of the relationship the plaintiff made no contributions towards the payment of those debts. This exercise of winding up the businesses, which was performed by the defendant, constituted, so it was submitted on his behalf, a significant contribution by the defendant, in that it resulted in reducing the liabilities of the parties, by getting in amounts from the clearing sale and from the sale of the cattle. 45 The plaintiff asserted that she had little knowledge of and no involvement in the activities of Postgap, and that she never attended any meetings of the company, either in the capacity of a shareholder or in that of a director. 46 The financial statement of Postgap for the year ended 30 June 1995 contains an item described as "loan account of directors", in an amount of $43,862. 47 That item, which is not otherwise explained, would appear to suggest an acknowledgment on the part of the defendant that the plaintiff (who was the only other shareholder and director of Postgap) should be entitled to share equally in the amount of that loan account. 48 In my view not only is it not possible, but it is not desirable, that the outcome of these proceedings should depend upon strictly arithmetical calculations (see Evans v Marmont (1997) 42 NSWLR 70, especially at 75 per Gleeson CJ and McLelland CJ in Eq). For example, I do not consider that it would be a correct approach to the plaintiff's claim to award her the value of the initial contributions which she said she made to the relationship (asserted to be $36,000), or to award to her one half of the directors' loan account ($21,931) plus one half of the balance remaining upon the winding up of the two businesses ($5,500) --- a total of $27,431. Such an approach would disregard not only the plaintiff's own non-financial contributions to the relationship, but would also disregard almost the entirety of the contributions, financial and non-financial, made by the defendant. 49 Throughout the period of the relationship the direct and indirect financial contributions of the plaintiff were considerably less than those of the defendant. The indirect contributions of the plaintiff as homemaker and parent were greater than those of the defendant. 50 It must, however, be appreciated that the relationship and the two businesses were conducted upon premises which were owned by, and had for some years before the commencement of the relationship been occupied by, the defendant. Throughout the relationship the household expenditure, as well as all the expenses associated with the conduct of the two businesses upon the property, were paid essentially by the defendant, since the income of the plaintiff throughout the period of the relationship was significantly less than that of the defendant. 51 Not only did the plaintiff have the benefit of accommodation in the defendant's residence throughout the relationship, but also her son Peter enjoyed a similar benefit during the relationship. Had the plaintiff not been in the de facto relationship with the defendant she herself would have incurred all the expenses of maintaining a residence for herself and Peter. 52 Further, the cattle breeding activities conducted by the plaintiff took place upon land owned by the defendant, upon which he himself had been conducting cattle breeding activities for some years before the commencement of the relationship. Had the plaintiff not been in the de facto relationship with the defendant, it would have been necessary for her to accommodate her herd of cattle somewhere else, at cost to herself. 53 I have reached the conclusion, in all the circumstances of this case, and conformably with the principles enunciated by the Court of Appeal in Evans v. Marmont (in particular, the joint judgment of Gleeson CJ and McLelland CJ in Eq), that it is appropriate that the plaintiff should receive an order in her favour which would reflect the predominancy of the plaintiff in the roles of homemaker and parent. The plaintiff may have a legal claim to one half of the assets of Postgap, although her beneficial entitlement to share in those assets is far more dubious. However, she should not retain one half of the assets of Postgap and, in addition, receive an order in her favour (as was submitted on her behalf that she should) in the amount of her capital contribution to the relationship. 54 In the exercise of my discretion, I propose to order that the defendant pay to the plaintiff the sum of $25,000. An order for the payment to the plaintiff of that amount will recognise not only the predominancy of the plaintiff in the role of homemaker and parent, but also the fact that the direct and indirect financial contributions of the defendant to the relationship (both at the commencement of the relationship and during its continuance) were very significantly greater than those of the plaintiff. 55 Conformably with the admonition contained in section 19 of the Act (requiring the Court, so far as is practicable, to "make such orders as will finally determine the financial relationships between the de facto partners and avoid further proceedings between them"), I propose that an order should be made which will have the effect of discharging both the defendant and Postgap from any entitlement or claim which the plaintiff might otherwise have in respect to that company and, in particular, to the loan account of the directors of Postgap. 56 Not only is the amount of $25,000 very much less than the sum of $100,000 originally sought by the plaintiff in her statement of claim and is less than the $36,000 sought in the final submission by her Counsel, but --- more significantly --- that amount is less than the limit of the jurisdiction of the Local Court of New South Wales. Thus the plaintiff, in consequence of the provisions of Part 52 Rule 24A of the Supreme Court Rules, is not entitled to her costs unless the Court otherwise orders. 57 I have not heard any submissions as to costs. Accordingly, unless within seven days of the date hereof either party arranges with my Associate for the matter to be listed for argument as to costs, I make the following orders: 1. I order that the defendant to pay to the plaintiff within 28 days of the date hereof the sum of $25,000. 2. I order that, upon payment of the foregoing sum by the defendant to the plaintiff, any claim or entitlement which the plaintiff might otherwise have had in respect to the assets of Postgap Pty. Limited shall thereby be discharged. 3. I reserve to the parties liberty to apply upon seven days' notice in respect to the implementation of order 2 hereof. 4. I make no order as to costs, to the intent that each party shall bear her or his own costs of the proceedings. 5. The exhibits may be returned. I certify that this and the preceding pages are a true copy of the reasons for judgment of Master McLaughlin Dated: 12 February 1999 Associate Mark Provera Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.