Ergun v Ale [1999] NSWSC 836

New South Wales Supreme Court CITATION : Ergun v Ale [1999] NSWSC 836 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 1123/97 HEARING DATE(S) : 6 August 1999 JUDGMENT DATE : 20 August 1999

PARTIES : Erkan Ergun (P & Cr-D) Marion Fusipala Ale (D & Cr-cl) JUDGMENT OF : Master McLaughlin

COUNSEL : Ms. A. Rees (P) Mr. D. J. Thorley (D) SOLICITORS : Keddies (P) Bryetts (D) CATCHWORDS : De Facto relationship; Application for orders adjusting interests with respect to property; House property acquired by parties as joint tenants; Plaintiff was principal breadwinner; Defendant was principal homemaker and parent; Financial assistance from plaintiff's mother towards acquisition of house property; Respective contributions of parties to relationship; House property must be sold; Whether advance from plaintiff's mother should be repaid out of net proceeds of sale before equal division of balance between the parties; or whether that advance should be repaid out of the plaintiff's share of net proceeds of sale. ACTS CITED : De Facto Relationships Act 1984 DECISION : 1. I make orders as in prayer 1 (substituting in paragraph (a) $34,007 for $50,000 and omitting therefrom paragraph (b)), and prayers 2, 3, and 4 in the statement of claim. 2. I order that the cross-claim be dismissed. 3. I order that the defendant pay the costs of the plaintiff of the proceedings 4. The exhibits may be returned.

SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER McLAUGHLIN

Friday, 20 August 1999

1123/97 ERKAN ERGUN -v- MARION FUSIPALA ALE JUDGMENT

1 MASTER: These proceedings were instituted by summons filed by the plaintiff Erkan Ergun on 20 January 1997. By that summons the plaintiff sought relief pursuant to Division 6 of Part IV of the Conveyancing Act 1919 and, in particular, sought the appointment of statutory trustees for sale of a certain house property situate at and known as 58 Ostend Street, Lidcombe, of which he and the defendant Marion Fusipala Ale are the registered proprietors as joint tenants. 2 The defendant filed a cross-claim to that summons on 16 April 1997, by which she sought relief pursuant to section 20 of the De Facto Relationships Act 1984, adjusting the interests of the parties in certain items of property, including the aforesaid house property, and sought other and consequential relief. 3 The plaintiff filed a statement of claim on 28 October 1998 (the heading to that document bearing a reference to the De Facto Relationships Act). No defence or other pleading has been filed by the defendant in response to that statement of claim. The attitude adopted by the defendant through her present legal advisers was that the cross-claim filed in response to the summons stood as an assertion by her of the relief which she presently claimed, and that the affidavits which had been filed raised the matters which were essentially in dispute between the parties. 4 Although the foregoing course did not strictly comply with the requirement of the Supreme Court Rules that proceedings for relief under the De Facto Relationships Act should be instituted by statement of claim (Part 77 rule 76A), with the consequential operation of the provisions of the Rules relating to pleadings (Part 15), the plaintiff through his legal advisers did not raise any opposition to the matter proceeding to a hearing upon the documents to which I have already referred and the affidavits which were filed on behalf of each party. 5 The plaintiff was born on 14 September 1967, and is presently aged 31. He and the defendant (who was born on 14 September 1963 and is presently aged 35) entered into a de facto relationship in August or September of 1987, when the plaintiff was aged about 19 or 20, and they separated in September 1996. Of that relationship was born one child, Izra (born 9 April 1993, who is presently six years of age). In addition, the defendant had a child from a former relationship, James Easthope (who is now known as Jemal Ergun), who was born on 19 September 1984, and who is presently aged 14. He lived with his mother and the plaintiff throughout the period of the relationship, and was (and continues to be) treated by the plaintiff as if he were the plaintiff's own child. The defendant did not receive any child support from James's father. Since the termination of the de facto relationship both the children have remained in the custody of the defendant. The plaintiff pays to the defendant child support for Izra in an amount assessed by the Child Support Agency, currently $261 a month. 6 At the time of the commencement of the relationship the plaintiff was the proprietor of a café known as the Café Enigma, situate at 177 King Street, Newtown. That business had been acquired by the plaintiff when he was aged no more than 18 (he may have been aged only 17 at the time), with the benefit of an advance from his mother in the sum of $ 40,000 (that sum coming from his parents' savings and from an award received by his mother as a result of a motor vehicle accident). The plaintiff and his parents were residing in the residential accommodation above the café. 7 At the commencement of the relationship the assets of the plaintiff consisted of his interest in the café business, and an unencumbered Datsun motor vehicle (to which a value of $5,000 was ascribed). That motor vehicle was subsequently traded in on another motor vehicle. 8 At the commencement of the de facto relationship the defendant and her son, James, entered into residence with the plaintiff in the residential premises located above the café. Shortly thereafter the plaintiff's parents left those premises, and moved into a house they owned at 70 Thomas Street, Croydon, which they had purchased in about 1987. The entirety of the premises at 177 King Street, Newtown, being both the café premises and the residential premises above it, were the subject of a lease to the plaintiff. Throughout the period whilst the parties were residing in that accommodation the plaintiff paid the entirety of the rent, and all outgoings for electricity, telephone, gas and the like. 9 At the time of the commencement of the relationship the defendant had no assets. She was employed as nurse's aide. She remained in that employment for a period of only about three weeks after the relationship with the plaintiff commenced. The defendant was also in receipt of a sole parent pension during at least some part of the de facto relationship. 10 Whilst the defendant was working in the nursing home full-time either the plaintiff or his mother (who was also working in the café) cared for James. It was asserted by the defendant the she worked, without pay, in the café of an evening (her hours at the nursing home being from 6:30am to 2:30pm). The frequency and extent of any such assistance given by the defendant in the café was disputed by the plaintiff. In any event, any such assistance cannot have subsisted for more than eight months, since the Café Enigma was sold in April 1988 for $48,000. The entirety of the proceeds of sale were paid to the plaintiff's mother (representing her original advance of $40,000, together with interest thereon). 11 Thereafter the plaintiff, the defendant and James resided rent-free for some months with the plaintiff's parents at 70 Thomas Street, Croydon, before moving into rented accommodation. The plaintiff was working as a labourer throughout that period until September or October 1988, when he commenced work as a dock hand for Jetspress Air Couriers. In about August or September 1988 the defendant worked as a data operator for a short period; and then was employed in office work at John Kaldor Fabrics. 12 In November 1988 the plaintiff purchased, as an investment, a home unit at 28/412 Horsley Drive, Fairfield, for $105,000. That purchase was financed by an advance of $50,000 from the plaintiff's parents (who encouraged him in that investment), the balance being provided by the St. George Building Society (later called the St. George Bank). That advance of $50,000 from the plaintiff's parents was secured by a mortgage dated 16 December 1988. The unit was rented, and the shortfall in the mortgage payments and outgoings was paid entirely by the plaintiff from his earnings. Throughout the period of his ownership of the Fairfield unit the plaintiff made no repayments to his mother. 13 In September or October of 1989 the plaintiff commenced work as a courier. Although nominally an independent contractor, the plaintiff had only one client, Jetspress Air Couriers. In his work as a courier it was necessary for the plaintiff to have a van. He acquired such a van on lease, and for that purpose the plaintiff's mother advanced the sum of $5,000, being the required amount of the deposit. Although at first the plaintiff's income from that work was low, after about a year he began to earn about $1,500 a week. For the 1995-1996 year the business returned a net income (before tax) of $83,000. 14 The defendant asserted that she assisted the plaintiff in his courier work, in early mornings, when he was driving her to her employment (both the courier depot and the defendant's employment being each located at Alexandria). The extent of any such assistance was disputed by the plaintiff. But even if there were such assistance to the extent asserted by the defendant (but disputed by the plaintiff), the opportunity for such assistance on any regular basis did not continue beyond July 1991, when the defendant was retrenched from her employment (indeed, she had been overseas during the period immediately before that retrenchment), and there was no evidence to suggest that any such assistance increased the earnings of the plaintiff from his courier business. 15 In July 1991 the defendant was retrenched from her employment at John Kaldor Fabrics. Thereafter, with the exception of some part-time acting work (for which she earned a total of $2,500) the defendant was not in receipt of any income throughout the remainder of the relationship, extending over slightly more than five years. 16 The Fairfield unit was sold on 16 August 1991 for $105,000. From the proceeds of sale an amount of $65,748 was repaid to the St. George Building Society. The plaintiff's mother agreed to (what was described as) "roll-over" the advance which she had made on the Fairfield unit for the purpose of the purchase of another property. The plaintiff used the balance of the proceeds of sale, being $34,007 to purchase a house property at 58 Ostend Street, Lidcombe. That property was acquired in the names of the plaintiff and the defendant as joint tenants. The purchase, for the sum of $172,000, was financed by an advance of $140,000 from the St. George Bank, secured by mortgage, with the balance being met from the proceeds of sale of the Fairfield unit. 17 Since the plaintiff's mother had not been repaid the amount of $50,000 which she had advanced towards the purchase of the Fairfield unit, and which had been secured by a mortgage over that property, the plaintiff executed a mortgage over 58 Ostend Street, Lidcombe (to which I shall refer as "the Lidcombe property") to secure a loan of $50,000 from his mother. That mortgage was executed by the plaintiff alone, and not by the defendant. It was dated 16 August 1991. It was asserted by the defendant that she was not aware of the existence of that mortgage until after the institution of the present proceedings. That mortgage provided for an interest free period until 1 June 1993, and provided for interest to be payable thereafter at bank rates. 18 I would here observe that both the 1991 mortgage over the Lidcombe property and the earlier, 1988, mortgage over the Fairfield unit name both the plaintiff's parents as mortgagees, although the evidence (especially the oral evidence of the plaintiff and of his mother) suggests that the moneys were advanced by the plaintiff's mother alone. 19 Although stamp duty has been paid on the 1991 mortgage, it has not been registered against the title to the Lidcombe property. 20 From the time of its acquisition by them the Lidcombe property was the residence of the plaintiff and the defendant and James and, after her birth on 9 April 1993, Izra, the daughter of the parties. 21 The plaintiff's earnings were deposited in his bank account with the St. George Bank. From that account were automatically deducted all mortgage payments owing to the St. George Bank and were paid all other expenses relating to the house property and to the household of the plaintiff, the defendant and their children. Upon the plaintiff's earnings the family appears to have maintained quite a comfortable lifestyle. The plaintiff paid for all entertainment and for holidays, to Queensland, New Zealand, and on one occasion a holiday for the family to Vanuatu (upon which they were accompanied, at the plaintiff's expense, by the defendant's father, who was residing with them at the time). For months at a time (in one instance for about a year) the defendant's brothers resided with the parties in the Lidcombe property. Apparently they were not working during those periods, throughout which they were supported by the plaintiff, who was the only person in the household then earning an income. By the same token, it should be stated that the plaintiff's teenage brother also stayed with the parties for about a year. 22 In 1993 there was incorporated a company, Ergun Pty Limited, which was used as a vehicle for the conduct of the plaintiff's courier business. The plaintiff and the defendant were the sole shareholders and sole directors of that company. In 1995 the plaintiff ceased to operate Ergun Pty Limited, and that company no longer trades. The plaintiff then performed his courier work under the business name, Black Magic Carrier until mid-1996. Since then he has conducted the business under the name Ergun Trust. 23 Also in 1993, or thereabouts, the plaintiff purchased a boat. For that purpose he borrowed an amount of $5,000 from his mother. That boat was sold on 28 April 1995. The plaintiff did not, however, repay his mother the advance of $5,000 which she had made to enable him to purchase the boat. He applied the net proceeds of the sale of the boat, in an amount of $3,650, in reduction of the amount outstanding on the mortgage over the Lidcombe property. 24 On 10 April 1995 the plaintiff sold his motor vehicle and applied the amount of $11,200, representing the net proceeds of sale thereof, also in reduction of the amount outstanding on the mortgage over the Lidcombe property. 25 The parties separated in September 1996 and the de facto relationship thereupon terminated. The plaintiff left the Lidcombe property. At the time of separation the amount outstanding under the mortgage to St. George Bank was $101,734. 26 At the termination of the relationship, apart from their joint interest in the Lidcombe property, the only asset held by either of the parties was the plaintiff's courier business. The liabilities of the parties were their joint liabilities in respect to the Lidcombe property. 27 The payments which the plaintiff had made in reduction of the amount outstanding under the mortgage (the payments made in April 1995 totalled almost $15,000) were well in advance of what was required by the terms of the mortgage. No payments were made from 19 October 1996, shortly after the plaintiff left the Lidcombe property, until 27 May 1999. There were then made two payments, in May and in July 1999 (each being in an amount of $991), which were each made by the defendant. It was agreed between the parties that the mortgage is presently in arrears to an amount of $179.27, and that the balance presently outstanding under the mortgage is $122,405.45. 28 Since the date of the termination of the de facto relationship the defendant and her two children have remained in residence at the Lidcombe property. The defendant's father (who had resided with the parties since 1992) also remained in residence in that property for a period. 29 The plaintiff did not dispute that throughout the relationship the defendant had the primary responsibility as homemaker and mother to the family constituted by the plaintiff, the defendant, the defendant's son James and, after her birth, the daughter of the parties Izra. That contribution was a significant one. 30 It must also, however, be appreciated that throughout the relationship the plaintiff was the primary breadwinner of the family. Although for quite legitimate taxation purposes the income of the plaintiff's courier business was notionally split between himself and the defendant, and income tax was assessed separately in respect of each of those parties upon that notional division of income, nevertheless, that income was generated exclusively by the efforts of the plaintiff. The plaintiff paid the entirety of the income tax of himself and of the defendant. 31 The parties were both in agreement that it was inevitable that the house property must be sold, and that from the proceeds of sale the amount outstanding on the mortgage to the St. George Bank must be paid. 32 It was agreed between the parties that present value of the Lidcombe property was $350,000. 33 Essentially, however, the dispute between the parties concerned the question of whether the advance of $50,000 originally made by the plaintiff's mother on the Fairfield unit, which she had allowed to be "rolled over" upon the sale of that property and the purchase of the Lidcombe property, and which was secured by the mortgage granted to her and her husband by the plaintiff should be repaid from the proceeds of sale of the Lidcombe property before the balance then remaining be divided equally between the parties (as was the submission of the plaintiff); or whether, after the discharge of the mortgage to the St. George Bank the proceeds be equally divided between the parties, and the responsibility for any repayment to the plaintiff's mother rest upon the plaintiff alone, with the consequence that if the plaintiff's mother is to be repaid, then the amount which the defendant would receive would not be reduced by the proportional share of her payment to the plaintiff's mother (as was the submission of the defendant). 34 Whether or not the defendant was aware of the existence of the mortgage which the plaintiff had granted to his mother, and whether or not the plaintiff's mother (or both his parents) has a legal entitlement consequent upon the existence of that unregistered mortgage to secure her funds of $50,000 against the property itself; or whether or not that advance was a loan (as was submitted by the plaintiff), or was a gift (as was submitted by the defendant), does not seem to me to be in any way determinative of the rights of the parties to the Lidcombe property and the distribution of the proceeds of sale thereof under the provisions of the De Facto Relationships Act. 35 It is abundantly obvious that the purchase of the Lidcombe property was made possible as a result of the net proceeds of sale from the Fairfield unit being applied to the purchase of the Lidcombe property. Had the plaintiff's mother not advanced $50,000 towards the purchase of the Fairfield unit, then there would not have been available the amount of $34,000 which the plaintiff from the proceeds of sale of that property was able to advance to the acquisition of the Lidcombe property. Similarly, had the plaintiff's mother required repayment of the $50,000 from the proceeds of sale of the Fairfield unit, then there would have been no part of those proceeds available to purchase the Lidcombe property. If, without the benefit of that contribution by the plaintiff's mother, the Lidcombe property had been purchased, then, of course, the mortgage to the St. George Bank would have been for the entirety of the purchase price, and the amount necessary to discharge that mortgage would now be appreciably higher. 36 There was no suggestion on the part of the defendant that the balance of the purchase price of the Lidcombe property, being that part not advanced by the St. George Bank, came otherwise than from the plaintiff (being the net proceeds of sale of his Fairfield unit). It seems to me to be totally immaterial to a consideration of the legal rights and entitlements between the plaintiff and the defendant whether the plaintiff generated that amount through his own efforts, or whether he acquired it through the beneficence of his mother. Similarly, it seems to me to be totally immaterial whether the advance which had originally been made by his mother, and which was the ultimate source of that part of the purchase price not advanced by the St. George Bank, was an amount which the plaintiff was legally obligated to repay to his mother. 37 Upon the assumption that the Lidcombe property when sold will realise $350,000, after the amount presently outstanding on the mortgage and the arrears have been repaid there will be about $227,000 remaining. It is likely that estate agent's fees and associated legal costs upon the sale will reduce that amount to something not exceeding $220,000. Upon the plaintiff's submission, that amount should then be reduced further by the repayment to the plaintiff's mother of $50,000, leaving an amount of about $170,000 to be divided equally between the plaintiff and the defendant. That would give to each of them an amount of about $85,000. The defendant, on the other hand, submits that the amount of about $220,000 should be divided equally between the plaintiff and the defendant, thus giving to each of them an amount of about $110,000, and that, if the plaintiff's mother is to be repaid her advance, that repayment should come out of the plaintiff's share, so that the plaintiff would ultimately receive about $60,000. 38 In my view the parties equally had the benefit of the advance made by the plaintiff's mother. I can see no reason, on legal grounds, why, if the plaintiff's mother requires repayment of that amount (as she stated in her evidence that she does), that amount should not be regarded as being an amount to be repaid before the balance of the proceeds of sale are divided equally between the parties. It should be appreciated, however, that (although the plaintiff might be under a legal obligation to repay to his mother the sum of $50,000), the amount of her money which was advanced for the purchase of the Lidcombe property was only $34,007, being the net proceeds of sale of the Fairfield unit. 39 In any event, it seems to me that the direct financial contributions of the plaintiff to the relationship, in meeting the totality of the mortgage payments, in substantially reducing the amount owing on the mortgage by contributing the proceeds of sale of a motor vehicle and of a boat, and by being the principal breadwinner of the family throughout the entirety of the relationship and being the sole breadwinner for most of the relationship more than equal the significant contributions of the defendant as homemaker and mother. 40 If the approach which I have earlier outlined, of treating the advance of $34,007 from the plaintiff's mother as being an indirect financial contribution by the plaintiff to the relationship --- since it is abundantly obvious that the plaintiff's mother would not have made such an advance towards the purchase of the Lidcombe property if it had not been her son who was one of the persons purchasing that property --- then, in my conclusion, the contributions of the plaintiff as principal breadwinner significantly exceed the contributions of the defendant as homemaker and mother, to the extent that the plaintiff is entitled to receive from the proceeds of sale of the Lidcombe property an amount which exceeds by $34,007 the amount to be received by the defendant from such proceeds of sale. 41 In consequence, I am satisfied that the plaintiff is entitled to relief essentially of the nature sought by him in his statement of claim. However, I do not consider that the plaintiff has established an entitlement to have the $10,000 (representing the two loans of $5,000 each from the plaintiff's parents) also to be deducted from the net proceeds of sale before the division between the parties. It seems to me that those two advances by the plaintiff's mother (and any liability resulting from those advances) were essentially private arrangements between him and his mother, unconnected with his relationship with the defendant. It will be appreciated that when he had the opportunity to do so he did not repay those amounts, but chose rather to reduce the amount of the indebtedness to the St. George Bank under the mortgage. Further, the boat, which was acquired and used by the plaintiff purely for recreational purposes, could not be regarded as in any way necessary for the generation of income. If the plaintiff was liable to repay his mother the loan for the motor vehicle, then he had the opportunity to do so upon the sale of that vehicle and his mother has had ample opportunity to request such repayment since that sale. 42 Accordingly, I propose to make an order of the nature of the relief sought in prayer 1 in the statement of claim, substituting in paragraph (a) $34,007 for $50,000, and omitting therefrom paragraph (b). As I understand it, there is no opposition by the defendant to the relief sought in prayers 2, 3 and 4 of the statement of claim. 43 Upon the matter which was essentially in dispute between the parties --- whether the $50,000 claimed by the plaintiff's mother should be repaid before the equal division of the net proceeds of sale of the Lidcombe property, or whether that amount should be repaid exclusively from the share of the plaintiff of the net proceeds --- the plaintiff has been largely successful and the defendant has been unsuccessful. In those circumstances, therefore, I consider that the plaintiff has established an entitlement to an order that the defendant pay the costs of the plaintiff. However, since the defendant has not had an opportunity to make submissions concerning costs in the light of my ultimate conclusions, I will give to the defendant such an opportunity, if she so desires. 44 Accordingly, unless either party within seven days of the date hereof arranges with my Associate to have the matter listed for argument as to costs, I make the following orders: