Williams v Masterton [1999] NSWSC 203

New South Wales Supreme Court CITATION : Williams v Masterton [1999] NSWSC 203 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 4957/97 HEARING DATE(S) : 4 and 5 February 1999 JUDGMENT DATE : 18 March 1999

PARTIES : Karen Anne Williams v James Albert Masterton JUDGMENT OF : Master Macready at 1

COUNSEL : Mr R. O'Neil for the plaintiff Mr G.A. Coakes for the defendant SOLICITORS : Walker Smith, Taree for the plaintiff Barraclough, Jones & Associates, Forster for the defendant CATCHWORDS : Family Law.; Application under Defacto Relationships Act for an order adjusting parties property interests.; No matter of principle. DECISION : Paragraph 49

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER MACREADY

Thursday 18 March 1999

4957 OF 1997 KAREN ANNE WILLIAMS v JAMES ALBERT MASTERTON JUDGMENT 1 MASTER: This is an application under the Defacto Relationships Act for adjustment of property interests of the parties. There is no dispute about the existence of the defacto relationship and its duration. The parties commenced their relationship on 12 December 1989 and it continued until 11 October 1997. The parties have one child, Jamie who was born on 14 December 1990. In addition the plaintiff had two children by her former husband. These were Gavin who was born on 11 November 1976 and Joseph who was born 28 October 1977. At the commencement of cohabitation Gavin was 13 years of age and Joseph 12 years of age. They both lived with the parties until they left home at various times and were members of the household consisting of the parties and later the parties and their child, Jamie. 2 The plaintiff and the defendant first met in August 1988 and they socialised for some time until they commenced cohabitation in December 1989. At that stage the plaintiff was 35 years and the defendant 26 years. They lived initially in the plaintiff's parent's home in Tuncurry and paid rent to the plaintiff's parents. At the time of commencement of cohabitation the defendant was involved in a business known as Great Lakes Appliance Service. The plaintiff was not working and was in receipt of social security with which she supported her children. 3 At the time of the commencement of cohabitation the plaintiff's financial situation was fairly straightforward. She had the following assets:- A Holden motor car 600.00 Household furniture & appliances 2,000.00 Bank account 500.00 Total $3,500.00 4 The defendant's situation at the commencement of cohabitation also was fairly straight forward although there was some debate before me about the extent of his interest in the business. His business was one which prior to the beginning of December 1989 was operated by him and his brother-in-law. It dealt with the retail sale of household appliances and also the repair of appliances. In November 1989 the defendant and his brother-in-law sold the retail side of the business to Godwins Betta Electrical. Emmanuel Vanary, the defendant's brother-in-law decided at that stage, because he did not have skills in repairing, that he would continue to work with Godwins Betta Electrical. Accordingly the parties came to an agreement for the purchase of his half interest in the remainder of the business. 5 Both the defendant and Mr Vanary saw their accountant and they adopted a figure of $36,000 as the value of the goodwill of the repair side of the business. On 12 December 1989 the sum of $60,000 was deposited to the credit of the account for the business which the two had maintained. That was the purchase price which they received for the sale of the retail side to Godwins. In early December Mr Vanary commenced working with Godwins and over Christmas Mr Masterton and the plaintiff set up fresh premises for the repair business which he was to continue. 6 The defendant and Mr Vanary kept the account open into which the $60,000 had been deposited so that the final payment of creditors and receipts relating to the repair side of the business could be adjusted. Eventually in May cheques were drawn in favour of Mr Masterton for $25,523.37 and in favour of Mr Vanary for $51,640.51. The difference between these two figures, namely, $26,117.14 was accounted for by the amount which the two had agreed was the payment for a half share of the goodwill of the repair business, namely, $18,000 and the balance of $8,117.14 represented an allowance for one half of the value of the stock which Mr Masterton had taken over plus minor matters of interest. 7 There was evidence by both the defendant and Mr Vanary as to these arrangements and I have no reason to doubt the evidence. Given the agreed price for the value of the business it would seem that the total value of the business, excluding stock, would be $36,000. 8 Although the arrangements in respect of the sale of the business occupied from December to the following May before the funds were finally paid out they do give a useful indication of what were the assets of the defendant as at commencement of cohabitation on 12 December 1997. Accordingly, it is useful to use these figures in order to determine the position of the defendant as at commencement of cohabitation. On this basis the defendant's position at the commencement of the relationship was as follows:- Goodwill of the business known as Great Lakes Appliance Service 36,000 Stock Great Lakes Appliance Service approx 16,000 Cash resulting from the sale of the retail side of the business 25,523.37 Toyota Landcruiser 4,000 Half Cabin boat & 15 HP Johnson Motor 4,000 Household furniture 4,000 Camping equipment 3,000 Tools 2,000 Personal effects & Jewellery 9 So far as liabilities are concerned the defendant had a loan from his mother of some $12,000 which was due to him and which had originally provided funds for him to go into the business. That amount is still outstanding to his mother and perhaps for the purposes of adjustment of the parties' property can be put to one side. The camping equipment and tools were ultimately received by the defendant after the termination of cohabitation and they can also be put to one side. 10 I will now deal with some of the history which occurred so far as assets are concerned following commencement of cohabitation. 11 It is apparent from the details that I have given of the assets of the parties at the commencement of the relationship that the defendant had the majority of the assets and he also had a business which ultimately turned out to be quite successful. Accordingly, the purchase of properties which are referred to later were made in his name. 12 In December 1990 the defendant purchased a property 57 Surfview Avenue, Forster in his name for $107,000. The purchase price was provided as to $30,000 from the defendant's savings and as to $77,000 by way of a mortgage from the National Australia Bank. The defendant paid the legal costs and stamp duty of $3,673 and thereafter mortgage payments were made at $250 per week. 13 In 1992 the defendant opened an additional business in Taree known as Taree Appliance Service which was initially operated by a manager, Phillip Barry Hodges, with the plaintiff working there one day a week. 14 In October 1992 the National Australia Bank loan was increased $33,000 and this money plus an additional $1,000 from the defendant was used for extensions and renovations on the property Surfview Avenue. The mortgage repayments increased at that stage. In 1995 a caravan was purchased in the defendant's name at a cost of $6,200 funded by a loan from the National Australia Bank of $6,500. Also in this year a boat was purchased with Mr Hodges to which the defendant contributed $500. 15 On 18 August 1995 vacant land at Russell Island was purchased in the name of the defendant for $16,000 which was funded as to $700 by the defendant and the balance by vendor finance. The defendant paid the stamp duty and legal cost of $1,241.20. In January 1996 Joseph, the plaintiff's son, started to work in the defendant's business and in that year the Taree business was sold for $20,000. That sum was used to reduce the mortgage on the Surfview Avenue property. Mr Hodges, the Manager, started working at Foster in that business. On 1 May 1996 the defendant purchased a property at 26 Nanimar Street, Eugowra for $36,000 which was fully funded by a mortgage from the National Australia Bank for $37,000. The defendant paid the legal costs and stamp duty of $1,372. The property had been purchased from the plaintiff's parents and I will return to the arrangements for the determination of the purchase money later when considering contributions. The property was then let out and was negatively geared. 16 On 30 July 1996 the defendant leased a Nissan Pathfinder which cost approximately $48,000. 17 On 25 November 1996 a property at 1 Colvin Avenue, Tuncurry was purchased jointly by the defendant and Mr Hodges for $113,000. This again was financed totally by the National Australia Bank who advanced $117,000. The defendant paid the legal costs and stamp duty. The property was let to Mr Hodges for rent of $150 a week which was used to repay the mortgage. To the extent that the rent was not sufficient Mr Hodges and the defendant contributed the balance. 18 Early in 1997 Gavin left the Surfview Avenue property. 19 At separation the defendant moved from the home at Surfview Avenue to rented accommodation at 26 Pacific Parade, Tuncurry. The parties' child, Jamie and the plaintiff's son, Joseph, remained at Surfview Avenue. Subsequently Joseph left the home and he is presently apprenticed to the defendant as a refrigeration mechanic. 20 The plaintiff not long after the commencement of the relationship commenced work in the business. The extent of her involvement varied and the details of what work she did I will come back to later but it meant of course that she ceased receiving social security. Accordingly the various assets that were purchased came as a result of the income stream coming to the defendant through the business. The plaintiff was paid a wage from the business from October 1990 until November 1996 of $400 per week from November 1996 until November 1997 of $500 per week. These wages were used by her to make payments for household expenses of the family. 21 It is useful to look at the parties' assets as at separation and at the present time before considering the extent of contributions both financial and non-financial and then the necessary adjustment. 22 The plaintiff's position at separation had not changed substantially. She had household goods and furniture estimated at $4,835, jewellery and personal effects and also a financial resource, namely, a superannuation fund which had a payout value of $3,235.92. 23 At the date of separation the defendant still held the business. The parties are agreed that as at the date of the hearing the value of the business which presumably incudes stock is $113,000. The business has a debt which as at the date of separation was $64,680.63. As at the present time that debt has been reduced to $56,362.48. The business also has a trading account but as that fluctuates from substantial credit to debit from time to time depending upon trade, the amount for these purposes should be taken as zero. There was also a vehicle loan of some $28,332 at separation. That relates to vehicles which are used in the business and is being substantially repaid out of profits. It was suggested that as the valuation was on a capitalisation basis based on profits any repayments of that loan are taken into account and, accordingly, it should not be considered. This is appropriate notwithstanding that the vehicles are not leased. 24 The next property held at separation was 57 Surfview Avenue, Foster. The parties are agreed that it has a value of $132,500 at the present time. That property does not seem to be subject to a loan as at separation or at present. 25 The next property is the vacant land at Russell Island which the parties are agreed now has a value of $16,000. The amount owing at separation was $2,694 and none is now owing. 26 The next property is 26 Nanimar Street, Eugowra which has an agreed present value of $43,000. The liabilities at separation were $34,619.93 and as at August last year $32,899.85. The next property is the defendant's one half interest in 1 Colvin Avenue, Tuncurry which has an agreed value of $62,500. At separation the loan was $56,749.54 and at 23 November 1998 was $53,396.95. 27 The caravan has a present value of $6,000 and was subject to finance of $2,590.25 at separation and none at the present time. The boat has an agreed value of $500 is not subject to a liability. 28 The Nissan Pathfinder had a value at separation of about $37,000 and $33,000 at the present time and is subject to a lease and, accordingly, given that it will probably be retained and ultimately the lease paid out it is best to put it to one side bearing in mind that the amount due under the lease for payout at one stage probably exceeds the value until one comes to the end of the lease. 29 The reason for noting the differences and the liabilities at separation and at the present time is, of course, that the repayment of these liabilities have been by the defendant. The other post separation matter to which consideration has to be given is the fact that the plaintiff has been residing in the property since separation. There is evidence which I am prepared to accept that the rental value of that is $190 per week and the total of one half of the rent since separation is $6,555. The defendant has paid all the rates and taxes on the property since separation. 30 There are four items of personalty which are in dispute between the parties. One is a video camera which each of them wanted in respect of which there is no evidence of value. There are steel rims for tyres worth about $100 which the defendant wishes to retain. There is a spa bath worth $1,500 which the defendant wishes to retain and there is a tub of bromide, value unknown, which the defendant wishes. It is apparently used to clean the pool. 31 The defendant had a superannuation policy with the AMP having a surrender value at separation of $6,119.57. Both parties' policies were as a result of compulsory employer contributions. Later I will deal with the plaintiff's work history and it will be seen that she played a major part in the homemaker and parenting roles. Given her reduced work hours later in the relationship she has in part enabled the defendant to earn his income. The difference between the parties' superannuation entitlements is small but I will take account of this contribution by the plaintiff in the final adjustment process. 32 The assets of the relationship are substantially in the name of the defendant and have been purchased out of or improved using the cash flow of the defendant's business. In these circumstances a global approach rather than an asset by asset approach is appropriate. 33 At the commencement of the relationship the parties assets were:- Plaintiff $3,500 Defendant $89,523 (Including tools and camping equipment) 34 The parties have helpfully agreed many values of present assets. There is also agreement on the outstanding loans at separation and at the present time. Such equity is, however, in both cases, based upon the present value of the asset. Asset Equity at Separation Equity at Trial Business 48,319 56,637 57 Surfview Ave,Foster 132,500 132,500 Russell Island land 13,306 16,000 26 Nanimar St, Eugowra 8,380 10,100 Half 1 Calvin Ave, Tuncury 5,750 9,103 Caravan 3,409 6,000 Boat 500 500 Nissan Pathfinder __ - -__ Total $212,164 $230,840 35 The increase in the defendant's assets is thus $122,641 at separation and $141,317 at trial. 36 The plaintiff's assets have increased from $3,500 to $4,835 a sum of $1,335. 37 Earlier in paragraph 19 I have referred to the fact that the plaintiff was paid a wage from the business from October 1990 until November 1996 of $400 per week and from November 1996 until November 1997 of $500 per week. These wages were used by her to make payments for household expenses of the family. This is a total drawing of $152,400. Over the same period the defendant's gross personal taxable earnings from the business were $301,916. There is no doubt that both parties used these funds for the purposes of their joint relationship. No doubt the payment of wages to Karen was useful from a taxation point of view for the business as it provided an appropriate deduction. However, even leaving this aside it is probably useful to look at the plaintiff's contribution to the business in terms of the nature and quantity of work which she was engaged in the business. Clearly, of course, the defendant himself was working full time in the business. The plaintiff has set out her work in some detail in her affidavit and it is clear that the extent of her involvement varied depending upon the progress of the business and also the birth and age of the child of the parties, Jamie. 38 The business moved in December 1989 and the plaintiff was involved in the move and setting up the new arrangements. By April 1990 she says she was working full time and she typically worked from 8 a.m. until 6 p.m. the business being open five and half days a week. Her work involved telephone, reception, arranging for the booking of repair and service jobs, liaising with customers, selling spare parts and second hand appliances. There was also a variety of book-keeping functions including typing, some ordering and pricing of stock and various checking of matters connected with stock, warranty claims and other accounting matters. By August 1990 a full time mechanic was engaged as the plaintiff was pregnant and was finding it difficult to keep working on a full time basis. She started to take time off and ceased work in November 1990. In February 1991 she started coming to the business working one or two days a week. Her work started to change to more book work and computer work. She would tend to spend several days per week doing two hours work per day. By 1993 she was working two days per week at the Foster outlet and one day per week at the Taree outlet. Taree was sold in 1995 and the plaintiff concedes that around this time she obviously did not attend Taree and was spending less time at the business and more time at home. By the time the parties separated the business had expanded to the extent that there were some six employees and a number of service vans which it used and they even had to sub-contract out work. This indicates the extent to which the business had grown. With the growth of the business the plaintiff's involvement as she freely conceded in her affidavit did diminish. 39 For the defendant's part, as I have mentioned, he was working full time in the business. It was he who had commenced it and continued its direction. He made the major decisions in relation to the ordering of stock and the management of the business since he had the knowledge necessary for the operation of the business in a practical sense. 40 So far as homemaker contributions are concerned, it seems that the plaintiff was primarily responsible for cooking, washing, ironing, sewing, shopping and cleaning. At times the defendant, who regarded himself as house proud, was not satisfied and would do some work including vacuuming and occasionally the defendant would prepare one or two meals a week quite often when the plaintiff was out on one of her activities such as playing tennis. 41 Of greater significance in this case is, of course, the parenting contributions. 42 I have earlier referred to the time that Karen spent in the business. Although she had some personal activities substantially the remainder of her time when not working was involved in undertaking parenting responsibilities for the children. At the time of commencement of cohabitation Gavin was aged 13 years and Joseph was 12 years old. At that stage the defendant had known the plaintiff and the children for over twelve months. The defendant took a great interest in the plaintiff's children probably because he had been deprived of a father at an early stage in his life. He had missed the activities and the enjoyment of a relationship between a father and a son. The defendant in his affidavit set out a substantial number of examples which showed the assistance which he gave the children. Clearly these bespeak an interest in the boys' welfare and a willingness to be involved in their activities. The plaintiff does not deny this. However, the fact of the matter is that the defendant was also working very hard in his business. He had to do service calls and, accordingly, a substantial part of the organisation of the children's life fell upon the plaintiff. She was also, of course, the primary care giver for the parties' child, Jamie, as he grew up and in his infancy. By the end of the relationship the plaintiff's children were becoming independent and I have referred to when they moved out from home. One must conclude that a substantial part of the parenting contributions were provided by the plaintiff. However, this does not diminish the quality of the contribution that the defendant made to the children's upbringing. 43 One thus has a situation where over the period of the relationship there has been an increase in the parties' assets of something in the order of $125,000. One has to balance the homemaking and parenting contributions which have to be recognised in a substantial way. In addition one has to take account of the actual work that the plaintiff did in the defendant's business. To this extent there was a contribution to the joint enterprise which was in the defendant's name. 44 There was, as I have mentioned earlier, a claim for an adjustment in respect of the plaintiff's occupation of the property at Foster since separation. The defendant is paying maintenance to the Child Support Agency and the accommodation which has been made available over this period has also been for the benefit of the parties' child. In these circumstances I do not see that it is appropriate to make a full deduction for the rental value. Probably what would have been more appropriate would be direct costs involved but there is no evidence of the amount of these costs. I have earlier referred to the rental value of the unit and taking these factors into account I propose to make an allowance in the final figure in the defendant's favour for $5,000 in respect of this benefit. 45 The plaintiff gave evidence that in respect of the purchase from her parents of the property at Eugowra the defendant was given a discount of $5,000 to $36,000 to take account of a family arrangement whereby each of the plaintiff and her siblings were to receive $5,000 from their parents. The defendant said that he negotiated the price with the plaintiff's father and that no such arrangement was mentioned. Such an arrangement may have been considered a private matter so I would not make an inference adverse to the plaintiff about the failure to call her father. I am prepared to accept that this reduction was a contribution on the part of the plaintiff 46 The plaintiff, in her application, seeks a transfer to her absolutely of the house at 57 Surfview Avenue, Forster. The defendant, for his part, originally contended that an appropriate adjustment would be for him to retain the assets and to pay the plaintiff $50,000. In submissions at the hearing this figure was modified to $20,000. 47 I have earlier indicated that I am putting to one side certain matters, namely, the tools and camping equipment which the defendant brought into the relationship and the loan which he had at the commencement of the relationship which he still owes to his mother. There is a minor adjustment to be made in regard to superannuation which I have earlier referred to and after noting these matters it seems to me that the appropriate order to properly reflect the contributions, both financial and non-financial would require a payment by the defendant to the plaintiff of $67,500. This pre-supposes that the defendant will retain the property in which the plaintiff and the child of the parties are presently residing and also the Nissan Pathfinder which is leased. The plaintiff is to retain her assets being household goods, furniture and personal effects. 48 In paragraph 29 I referred to the items of personalty in respect of which there is a dispute. The defendant is to have the steel rim tyres for an additional $100 and if the defendant retains the house he should retain the spa bath and the tub of bromide for an additional $1,500. The plaintiff is to have the video camera. 49 There is no suggestion that the plaintiff who is now in receipt of Social Security could finance any purchase of the property. Accordingly, it is likely that the defendant will retain the property and can raise the appropriate finance to pay out the plaintiff. In the event that this does not occur the property can be sold. In any event it will be necessary for the plaintiff and the child of the parties to move out of the property. It may be that the parties can spend some little time fruitfully arranging for these matters to take place. Accordingly, I will not make orders at this stage but will direct the parties to bring in short minutes to reflect these reasons which I now publish. **********