New South Wales Supreme Court CITATION : COLLINS v NOWAK [2001] NSWSC 526 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1651/00 HEARING DATE(S) : 15/06/01 JUDGMENT DATE : 1 August 2001 PARTIES : LYNNE VICTORIA COLLINS v JOHN CHARLES NOWAK JUDGMENT OF : Master Macready at 1 COUNSEL : A. Rees for plaintiff R. Wilson for defendant SOLICITORS : Ferry's Law Firm for plaintiff Peninsula Law for defendant CATCHWORDS : Family Law. Application for adjustment of parties' property interests pursuant to the Property (Relationships) Act. Order made for adjustment. No matter of principle. DECISION : Paragraph 31 - 1 - 1 MASTER: This is an application under the Property (Relationships) Act 1984 to adjust the parties' property pursuant to s 20 of that Act. The parties lived together in a de facto relationship from either late 1993 or very early in 1994 through until their separation in March 1999. There were no children of the relationship. At the time of the commencement of the relationship the plaintiff had her son, Bradley, born on 4 April 1980 and daughter Bronwyn, born on 30 December 1974 living with her. Most of the time the parties were living together in a de facto relationship Bronwyn was working in Sydney during the week and living at home at the weekends. The parties had met in 1990 and although there was some dispute on the pleadings as to the exact commencement date of the relationship, given the evidence that emerged at the hearing , the defendant accepts that in fact it commenced shortly after Christmas 1993. 2 From the commencement of the relationship the parties lived in a home which was owned by the plaintiff. She had received that home pursuant to a property settlement with her former husband and to do so she paid a sum to her former husband. The property which was at 21 Casuarina Close, Umina was not subject to a mortgage. However the plaintiff had borrowed the sum of $35,500 from her parents in order to pay out the amount due to her former partner under the property settlement. 3 Apart from the home the only assets which the plaintiff had was furniture valued at $10,000. The defendant had no assets. He had recently completedhad a property settlement with his former spouse. 4 The plaintiff placed her property for sale in September 1993. This was because she and the defendant had planned to acquire a property at Woy Woy with the plaintiff using her funds as her contribution to that property. It was anticipated that the defendant would borrow funds for his share and in due course it would be paid off. After about a year it became apparent that the plaintiff's property was not going to sell and it was taken off the market. 5 In 1995 the parties agreed that the defendant would purchase a half share in the property from the plaintiff. This was to be by payment of $100,000 which was to be borrowed by the defendant from the Police Department Employees Credit Union Limited. As a result the property was transferred from the plaintiff to both parties as joint tenants and a mortgage entered into for $100,000. That amount was not all paid to the plaintiff and ultimately there must have been a change in plans probably resulting from the change in the defendant's employment. He had been employed as a driver or guard with Brambles and decided to start his own business known as Coastal Tactical Training which was to train persons who wanted to work in the security industry. The $100,000 which was obtained from the mortgage on the property was disbursed as follows:- A sum of $16,900 was paid to the plaintiff's parents which discharged the amount that the plaintiff still owed to her parents in 1995 as a result of borrowing the sum to pay out her former husband. There were amounts paid to discharge a car and other loans of the defendant and also to help set up the defendant's new business which amounted to $35,179. In addition the parties spent a number of sums on the house. $4,450 was paid for a retaining wall. $25,000 for a swimming pool. $3,100 for a pool fence and other home improvements of $10,000. These sums totalled $42,550. 6 Throughout the period of the relationship the plaintiff worked at the Everglades Country Club doing bar work and other general club work. Her income for the relevant years are as follows:- Year ended 30 June 1995 $27,005 Year ended 30 June 1996 $27,807 Year ended 30 June 199 7 $30,040 Year ended 30 June 1998 $33,402 Year ended 30 June 1999 $22,642 Year ended 30 June 2000 $45,878 7 The defendant was out of work for some periods during the relationship particularly at the earlier stage and in the latter period he was engaged in setting up his business which did not operate at a profit during the period of the relationship. The evidence suggests that his income was as follows:- Year ended 30 June 1995 $41,373.05 Year ended 30 June 1996 $34,099.93 8 Thereafter the evidence does not give details of his income. Certainly he was working. 9 Consistently with the agreement the parties had made the defendant met the repayments on the mortgage which had been taken out in 1995 for $100,000. By 1998 the mortgage had been reduced to $88,831.77. On that date the parties refinanced the mortgage and took a new mortgage from the Police Credit Union in the sum of $116,000. The original loan was paid out and $19,785 was used to pay out the defendant's car loan and contribute towards the running of his business. A sum of $4,800 was used to repay a joint loan both parties borrowed from the plaintiff's parents. The defendant continued to make repayments on that loan until the cessation of the relationship and thereafter the plaintiff has made them. The present amount owing is something less than $110,000. 10 At the conclusion of the relationship the parties jointed owned the property which they are agreed has a value at the present time of $330,000 subject to the mortgage to which I have referred. Each party appears to have a car and the defendant retained his business which he set up during the course of the relationship. There is no evidence of its value at the conclusion of the relationship although it was recently sold by him for $25,000. He has retained the proceeds of that sale. There is still an amount of $4,751.79 which the parties owe to the plaintiff's parents which has not yet been repaid. The amount is sitting in a credit union account in the defendant's name with the Police Credit Union and no doubt can be paid to the plaintiff's parents. 11 Leaving aside minor items which do not call for a decision in the case the court's role is to assess what is a proper adjustment to give effect to the various transactions which I have recounted. The plaintiff wishes to have the share of the property still in the name of the defendant transferred to her with an appropriate cash adjustment. It will be necessary in this process to take into account the financial and the non-financial contributions. 12 As far as the plaintiff is concerned it is apparent that during the period of the business it was the plaintiff who did a lot of the secretarial work for that business. She kept the accounts of the parties during the period of the relationship as such job naturally fell to her. The defendant himself did the actual training work in the business. For a period when the defendant was unemployed he did a number of items of work on the plaintiff's property including concreting pathways, painting work inside and out, various items of woodwork and erecting a retaining wall. The precise detail of these is not available on the evidence nor is there any evidence to show what value that work added to the property. 13 So far as homemaking contributions are concerned the evidence did not descend into a great deal of detail and the parties are a little at odds. It seems that the defendant did the outside work and the plaintiff did the inside work. There is no evidence of any substantial parenting contribution which the defendant made to the plaintiff's children. They were quite old at this stage and would only have needed someone to keep an eye on them when the plaintiff was late at work on one or two days a week. In terms of the balance of the homemaker and parenting contributions I would think that overall for the five years these were in favour of the plaintiff and I will take this into account in the adjustment process which has to be undertaken. 14 The plaintiff seeks the transfer to her of half the house and a payment to her of $40,000 by the defendant on the basis that she will continue to pay off the mortgage. So far as the adjustment process is concerned the plaintiff points to the fact that originally she went into the relationship being the only party with any assets. She then owned a house which was unencumbered worth $230,000 to $250,000 with a debt to her parents of some $35,500. At the conclusion of the relationship she ended up with a half share of a house worth $330,000 which was subject to a mortgage for $110,000. The defendant had retained his business which he had sold for $25,000 and he also had a half share of house worth $330,000 which was subject to a mortgage for $110,000. 15 The defendant's approach is somewhat different. He accepts the liability for the mortgage of $110,000 and a value of the home at $330,000. He submits that by taking one half of that value and debiting it against it the whole of the mortgage advance which was his responsibility he would be entitled to a net interest in the land of $55,000. This assumes a starting point of the parties as half owners of the property. It was submitted that one then moves into the next stage to look at the benefits each party received during the period and then subsequently adjust homemaker contributions. In those circumstances the defendant submits that on the transfer of his half share to the plaintiff there should be a payment to him by the plaintiff of some $15,000. 16 As has been pointed out in Jones v Grech [20001] NSW CA 208 the court should start with an understanding of the property interests of the parties for it is those interests which are to be adjusted. Part of paragraph 13 of the plaintiff's affidavit of 5 September 2000 was in these terms:- "When the house did not sell the defendant moved into the home on a full-time basis and the full-time defacto relationship commenced. The anticipated sale price was $225,000. We could not sell the property and accordingly decided to borrow the sum of $100,000. In conjunction with the loan and at the time that it was granted the property had to be transferred into joint names. This was done by Registration of Memorandum of Transfer number 0115434. Annexed hereto and marked with the letter "J" is a true copy of that Transfer. In conjunction with the Transfer and mortgage in 1995 we borrowed the sum of $100,000 from the Police Department Employees Credit Union Limited. The loan originally was to be in the sole name of John Nowak. It was intended to be paid to me to acquire a 50% interest in the Casuarina Close property. John, however, was unable to obtain the loan in his sole name as he had no security for it. It was necessary to borrow the money in joint names and to have the property transferred into joint names. Whilst the original intention was for the money to come to me for the purposes of acquiring a 50% interest in the property in fact the monies were never paid to me. The money was distributed in the following manner:-" 17 The defendant agreed with this evidence. 18 On the face of this evidence it was clear that the parties intended to own the property equally and that they changed their mind as to the disposition of the proceeds once the funds were borrowed. 19 The evidence shows that $16,900 went to the plaintiff, $42,550 was joint expenditure on the house and $35,174 went to the defendant. These figures total $94,624. 20 The house was again used to obtain finance and the proceeds were used as to $4,800 to pay a joint loan and $19,785 went to the defendant. 21 In the adjustment process this asset should be treated as equally owned. The process will have to take account of the disposition of the proceeds of the loans. 22 The other asset is the business of the defendant. Of the funds obtained by the defendant from the loan $9,900 was used by him in setting up the business. There is no other evidence of the purchase or set up costs. It was sold for $25,000 and the defendant retained these proceeds. It did not operate at a profit. 23 The property to be adjusted is of a value of $355,000 less a mortgage of $110,00, namely, $245,000. It is not practical to look at the adjustment process in respect of the combined assets as this does not take account of the different contributions to each asset. 24 The defendant contributed $9,900 to the business plus his work. The plaintiff also contributed her work. Noting that the plaintiff was also working at her other employment at this time I would assess her value of the work at less than the defendant. I will assume for this purpose a contribution by the defendant of $10,100 and the plaintiff of $5,000. The contributions are thus in the proportion of 4 to 1. On this basis as he has retained the proceeds, the defendant owes the plaintiff $5,000 by way of adjustment. 25 In adjusting the interest of the parties in the realty, a starting point is their entitlement to half each of the present value to reflect their joint ownership and the increase in value since 1995. The failure to pay the plaintiff $83,100 on the acquisition in 1995 by the defendant of a half share should also be taken into account. 26 There are a number of factors which are hard to take into account in a purely numerical way. These include the difference in the parties' earnings and the expenditure by each party on household expenses. The use of jointly borrowed funds cannot be linked in any quantifiable way with the increase in value of the property of some $105,000. The joint expenditure on the property was $42,550 but I could not conclude that the increase due to inflation was $62,450. The evidence does not address the matter. 27 The plaintiff complains about now having a mortgage of $110,000. But she had had, as a result, improvements to the property. The repayments of the mortgage which have been made by the defendant have reduced the mortgage principal. The reduction in principal by these payments has been at least $17,168.23. Perhaps at least in the process this figure should be deducted from the short payment to the plaintiff of $83,100 leaving $71,931.77 by way of adjustment. 28 One also has to take into account the household contributions which I have found are in favour of the plaintiff but not to a large degree. 29 As the plaintiff will retain the mortgage an order transferring the half interest in the land to the plaintiff will be to deprive the defendant of an asset worth $110,000. On the adjustment for the business and the failure to pay the purchase price he owed the plaintiff $76,931.77. This takes no account of the time value of money. 30 The business the defendant started was not profitable. However, I accept that he also had part time employment for these years but the evidence does not quantify that income. Accordingly, it may be that he brought in less from his endeavours than the plaintiff. 31 Taking into account all the factors which apply, including the various non-financial contributions, I think that the appropriate adjustment is to order the defendant to transfer his interest in the property to the plaintiff and pay to her the sum of $15,000. 32 The parties can argue costs and bring in short minutes. Last Modified: 08/02/2001 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. 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