Reported Decision : (2003) DFC 95-270 New South Wales Supreme Court CITATION : Parn v Parn [2003] NSWSC 110 HEARING DATE(S) : 19 February 2003 JUDGMENT DATE : 28 February 2003 JURISDICTION: Equity Division JUDGMENT OF : Master Macready DECISION : Paragraph 36 CATCHWORDS : Family Law. Application under Property (Relationships) Act 1984 in respect of a 31 year relationship. One party contributes house at commencement of relationship. Assessment of contribution. PARTIES : Beverley Ann Parn v Raivo Parn FILE NUMBER(S) : SC 5477 of 2001 COUNSEL : Mr R.D. Wilson for plaintiff Mr N. Jackson for defendant SOLICITORS : Peninsula Law for plaintiff Symons & Company for defendant - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Master Macready Friday 28 February 2003 5477/01 BEVERLY ANN PARN v RAIVO PARN JUDGMENT 1 MASTER: This is an application by the plaintiff in which she seeks orders imposing a constructive trust in respect of a property at 22 Golf Parade, Manly. She also seeks an adjustment of the property rights for herself and the defendant pursuant to the Property (Relationships) Act 1984. The parties lived in a de facto relationship for 31 years from January 1970 until May 2001. The defendant also cross-claimed against the plaintiff seeking adjustments under the Act and, surprisingly, a claim for a constructive trust. A Judge of the court has referred the whole of the proceedings to a Master for determination 2 The plaintiff filed an amended statement of claim in which she sought the imposition of a constructive trust as the original claim was the one under the Property (Relationships) Act. No defence has been filed to that amended statement of claim nor has there been any defence to the cross-claim bought by the defendant. The parties are agreed that the plaintiff's constructive trust claim is denied and that the defendant does not pursue the constructive trust claim in his cross-claim. As the parties have proceeded on this basis I will deal with the matter also on this basis. History of the parties' relationship 3 The defendant was born in 1942 and the plaintiff in 1947. The defendant purchased a property at 22 Golf Parade, Manly for $9000 in 1967. He borrowed $4000 from the Commonwealth bank for this purpose. He moved into the property and started doing some renovations to the property. 4 In 1969, the plaintiff first met the defendant and in January 1970 they commenced living in a de facto relationship. At the time both parties were working the plaintiff then working, as a head cashier with Safeways Ltd. In Easter during 1970 they both moved to live at the defendant's property at 22 Golf Parade, Manly. The defendant's mother also lived with them there until September of that year. Because of differences with the defendant's mother the parties moved out of the Golf Parade home pending their purchase of a property at North Narrabeen. 5 In February 1971 the defendant purchased a property at 27 Taiyul Road, North Narrabeen for the sum of $11,000. This was financed by a mortgage of $8000 from the ANZ Bank. The parties moved into the property in March 1971. 6 Between 1972 and 1976 the parties had four children three of them either being stillborn or dying within a few days of their birth. The surviving child Julie was born on the 22nd of February 1976. She is now married and has child. 7 In 1977 the parties moved back to the Golf Parade property where they resided for a period of seven years until 1984. The North Narrabeen property was rented until it was sold in 1981 for $45,000. The sale had enabled the parties to buy a property at 305 Thirlemere Way, Thirlemere in 1982 for $17,500. The property was purchased in the name of the plaintiff. This was decided by the defendant as he wanted the plaintiff to have some security in the event the relationship did not continue. 8 In October 1999 the defendant decided that the property of Thirlmere should be transferred to the parties' daughter Julie. The plaintiff initially opposed it suggesting that they should sell the property and provide some funds to Julie so that she could purchase a home. Ultimately the property was transferred to Julie for no consideration and she, her husband and child have continued to live on the property. The defendant had done a lot of work on the Thirelmere property and had commenced the building of a second dwelling house on the property. 9 In the middle of the year 2000 the parties returned to live at Golf Parade, Manly. Shortly prior to that the plaintiff had received an inheritance of $19,652 from her father. That sum was used as to $14,800 to purchase a 1992 Holden believer station wagon in the name of the parties and the balance namely $4852 was used to buy furnishings for the Manly home. The defendant has retained the car and most of the furnishings. 10 The parties separated on 31 May 2001 and the only property in respect of which they seek adjustment is the property Golf Parade, Manly. In the property of the parties at the commencement of the relationship 11 The plaintiff gives no evidence of her property at the time of commencement of the relationship and accordingly I will assume, as the parties have in the running of the case, that she had no such property. 12 Evidence shows that the defendant owned the property in Golf Parade, Manly outright as he had managed to pay off the mortgage prior to the parties entering into a de facto relationship. As I have mentioned the property was purchased for $9000 in 1967 and shortly after the purchase of the property the defendant commenced renovating it. These renovations included replacing internal linings making good surfaces, painting inside and outside and also carpeting the premises. There is no evidence of the value of the property at the time of commencement of the relationship in the 1970 but I will assume that it had increased slightly due to the improvements and the passage of three years. 13 As I have mentioned, the plaintiff was a head cashier for Safeways Ltd when she met the defendant and she earned $52 net per week. The defendant was employed as a storeman and his salary was slightly in excess of that the plaintiff. The plaintiff continued working at Safeways for a while and then obtained employment with another company with whom she continued working till July 1972 when she first became pregnant. During the period of her pregnancies she worked for about five and a half months in a pre-school at North Sydney but does not remember the amount of her wages. It is plain that the plaintiff had contributed the whole of her wages in this time to the relationship either by paying for household requirements or contributing towards repayments of the mortgage on the North Narrabeen property. For the rest of the relationship the plaintiff was not employed and she was engaged full-time in household and parenting duties. The property of the parties at the conclusion of the relationship 14 At the conclusion of the relationship the plaintiff had no assets and her only income was a social security benefit of $369 per fortnight. She now lives with her sister. 15 The defendant's assets consist of the property Golf Parade, Manly, some cash which was not quantified but likely to be in the order of $12,000 and a small amount of superannuation. The parties have not sought adjustment in respect of the superannuation which appears to amount to $1,668. The parties are agreed that the evidence discloses that as at May 2001 the Golf Parade, Manly home was valued at $725,000 and as at 7 February 2003 $850,000. The claims of the parties 16 The plaintiff submitted that in respect of the claims for a constructive trust and adjustment of property interests, the proper conclusion was that she should be entitled to one half of the proceeds of sale of the Golf Parade property. The defendant for his part submitted that the plaintiff should receive 20 percent and that he should receive 80 percent of such proceeds. In Jones v Grech 27 Fam L R 711 the court referred to the necessity of determining interests of the parties in the relevant property at the commencement of the relationship or the acquisition of the property. In the present case there is no doubt that the defendant owned the only property that falls for consideration outright and unencumbered at the time of commencement of the relationship. 17 As can be seen from the recounting of the history of the relationship the parties were involved in the development of two other properties. The first of these was sold and the proceeds used to purchase the property at Thirlmere. The plaintiff eventually gave the property at Thirlemere to her daughter. This was both at the instigation of and the insistence of the defendant. Contributions to that property thus do not fall to be considered except to the extent that they indicate a long and committed relationship between the parties. The plaintiff's constructive trust claim 18 This claim was squarely based upon the principles set out by the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137. It expressly was not based upon any actual or presumed common intention. At 147-148 the majority explained the principle in these terms: "Deane J (with whom Mason J. agreed) reached this result by applying the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them. His Honour said (at p 620): "... the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude (1868) LR 3 Ch App 369, at pp 374-375 and per Jessel M.R., Lyon v. Tweddell (1881) 17 ChD 529, at p 531." His Honour pointed out (at p 614) that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention "to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle". See also p 617. In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged (at p 616) that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust." 19 In her submissions the plaintiff suggested that the following circumstances would give rise to a constructive trust as to a one half interest in the property. (a) After living in a de facto relationship for 31 years, the substratum of the parties' relationship has failed without wrongdoing on the part of the plaintiff. (b) The Golf Parade property was used for the purposes of this relationship. The parties initially lived there from Easter 1970 until September 1970. The parties lived there for a second period of seven years from 1977 until 1984 when they moved to the Thirlmere property. From 1984 until 1988 the Golf Parade property was rented and the rent was applied to the day to day living expenses of the parties. From 1988 until 2000 the property remained vacant and was used as a holiday home for the parties (Defendant's affidavit sworn 2 August 2002, para 12). For a period of about 12 months from June 2000 until 29 May 2001 the parties lived at the Golf Parade property for a third and final time. (c) The plaintiff contributed her labour to the renovations and improvement of the Golf Parade property as alleged in paragraph 17 of the amended statement of claim. (d) The plaintiff pooled her resources towards the purposes of the joint relationship as alleged in paragraph 18 of the amended statement of claim together with pooling her inheritance of $19,652 received in May 2000. It is to be noted the defendant similarly alleges he pooled his resources and labour for the purposes of the joint relationship in paragraph 37.9 of the cross claim. (e) The defendant has unconscionably denied that the plaintiff has any interest or title in the Golf Parade property. 20 It can be seen from the matters recounted above that the plaintiff did not contribute to the original purchase of the property. Her contribution of $4,852 to furnishings would be a contribution that should be recognised for the purposes of the principles that I am considering. Similarly she contributed her labour to the renovations and improvement of the Golf Parade property. Such renovations included painting the skirting boards and around the doors and windows, wall-papering a bedroom and gardening. She assisted the defendant with some other jobs and maintenance work on property. She also dug a hole for an in-ground pool on the property. 21 There is no doubt in the present case that the parties regarded the property as their home and there was a joint endeavour in work which they did to renovate and maintain it. It also clear that the substratum of that the venture has in circumstances of this case disappeared without attributable blame. What is difficult are those elements of the submissions that refer to the length of the relationship and which were amplified in oral submissions to include household tasks undertaken by the plaintiff and the parenting role she also undertook. There is nothing in either Baumgartner or any other cases dealing with the principle that suggests one should take into account contributions of this nature. Indeed, it was the inability to fully recognise these contributions that led to the introduction of the De Facto Relationships Act 1984 and other similar legislation. 22 The contributions made by the plaintiff to the house and furniture are insignificant in the context of the present value of the house. I would have thought that only a very small percentage of the house would be appropriate to satisfy a constructive trust which might be imposed. In these circumstances I turn to consider the claim by the parties under the Property (Relationships) Act. The claims under the Property Relationships Act 23 It is clear that the plaintiff was at home for the substantial part of the relationship. Her role was to run the household and to assist with some matters such as gardening and renovations. Although the defendant has on occasion assisted with household tasks the plaintiff has undertaken the great preponderance of them. The parties brought up their daughter, Julie, and they both assisted in her parenting. However, given that the defendant was not home during the day as he was working, a substantially greater contribution to parenting was made by the plaintiff. 24 The plaintiff contributed her financial resources to the relationship in those few years she was working. The defendant contributed the majority of his earnings in a similar way although some of these, namely the sum of $12,000 was kept in a plastic bag under paving stones in the garden. In order to consider what might be an appropriate approach to a case such as the present where one-party has contributed the property and the other has contributed 31 years of homemaker and parenting contributions, the plaintiff referred to decisions of the Family Court in order to obtain some guidance. The plaintiff's submissions naturally referred to the reservations to be adopted respect of this approach in these terms: "Historically, decisions of the Family Court of Australian have been of great assistance in the evaluation of homemaker contributions within s20(1)(b) of the 1984 Act. For example, see Jones v Grech , ibid at 723 per Ipp JA and Matheson v Wallis , ibid at 300. However, as the 1984 Act does not contain any provisions equivalent to s75(2) of the Family Law Act 1975 (Cth) (" the 1975 Act ") "it is quite inappropriate uncritically to apply an approach evident from decisions concerning the Family Law Act to application under s20" (see: In the marriage of Black (1991) 15 Fam LR 109 at 113 quoted by Powell JA in Jones v Grech , ibid at 718, 749). In practical terms, the determination of an application for property adjustment under s79 of the 1975 Act in a three stage process. First, the contributions of the parties under s79(4)(a), (b), (c) (similar s20(1)(a) (b) of the 1984 Act) from the date of cohabitation until the date of hearing are assessed as a percentage of the net value of the assets of the parties. Second, an assessment of what adjustment, if any, to the contributions based entitlement is carried out by reason of the matters in s79(d), (e), (f), (g) and is expressed as a percentage of the net value of the assets of the parties nominating the party in whose favour the adjustment should be made. Third, the result of the first and second stages on the effect of the orders sought is considered in the context of the financial position of each party. " 25 It was submitted that there was a significant line of authority in the full court of the Family Court of Australia which in the context of a long marriage deals with the weight which ought to be given to a parties contribution at the commencement of the relationship of a significant asset such as the family home. The first of the cases which was referred to was In the Marriage of Money (1993-4) 17 Fam LR 814 at 816, Fogarty J stated: "In an appropriate case, in my view, an initial substantial contribution by one party may be 'eroded' to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party". 26 At 828 Holden J expressed attraction to the reasoning of Fogarty J. 27 These comments have been approved in The Marriage of Bremner (1994-5) 18 Fam LR 407 at 411 (per Baker J) and 412 (per Nicholson J) and In The Marriage of Way and Way (1996) FLC 92-05, Bartlett, Finn and Butler JJ at 83,404expressly approved Fogarty J's "erosion" principle as settling the law in this area. 28 However, in the later 1996 decision of Aleksovski v Aleksovski (1996) FLC 92-705 Baker and Rowlands JJ, at 83,437, rather than referring to the "erosion" principle referred to a similar principle as follows: "... nevertheless the passage of time is the element which reduces the significance of initial or early contributions. For this reason it is clear that the character and significance of the contribution changes as the period of cohabitation lengthens, with initial or early contributions gradually diminishing with the passage of time." 29 Kay J (at 83,443) dealt with the issue of initial contributions in the following way: "A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For 20 years the parties each strive for their mutual support and at the end of the 20 year marriage, they have the gold bar. In another scenario they enter the marriage with nothing, they strive for 20 years and on the last day the wife inherits a gold bar. In my view it maters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements". 30 In 1999 in Pierce v Pierce (1998) FLC 91-844, Ellis, Baker and O'Ryan JJ declined to use Fogarty Js erosion principle in considering the husband's substantial financial contribution at the commencement of a ten year marriage. The Court stated, at 85881 "In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached in all the circumstances, to the initial contribution. It is necessary to weight the initial contribution by a party with all other relevant contributions of both husband and wife." 31 Recently in Jones v Grech (2001) 27 Fam L R 711 Mr Justice Davies referred to the case of In the Marriage of Mallet (1984) 156 CLR 635 which dealt with the decisions of the Family Court of Australia in which the Court had adopted the notion of "equality is equity". He referred to the comments of Wilson J, at 635-636 which were in these terms: In the earliest of these cases, Rolfe v. Rolfe, reported in 1979 but delivered on 28 April 1977, Evatt C.J. referred to s. 79(4)(b), saying: "The purpose of sec. 79(4)(b), in my opinion, is to ensure just and equitable treatment of a wife who has not earned income during the marriage, but who has contributed as a home maker and parent to the property. A husband and father is free to earn income, purchase property and pay off the mortgage so long as his wife assumes the responsibility for the home and the children. Because of that responsibility she may earn no income or have only small earnings, but provided she makes her contribution to the home and to the family the Act clearly intends that her contribution should be recognised not in a token way but in a substantial way. While the parties reside together, the one earning and the other fulfilling responsibilities in the home, there is no reason to attach greater value to the contribution of one than to that of the other. This is the way they arrange their affairs and the contribution of each should be given equal value." With all respect, I agree with her Honour's exposition of the purpose of the paragraph subject to one reservation. The Act requires that the contribution of a wife as a home maker and parent be seen as an indirect contribution to the acquisition, conservation or improvement of the property of the parties regardless of where the legal ownership resides. The contribution must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets. However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as home maker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than the minimum requirements. Similarly, the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree. What the Act requires is that in considering an order that is just and equitable the court shall "take into account" any contribution made by a party in the capacity of homemaker or parent. It is a wide discretion which requires the court to assess the value of that contribution in terms of what is just and equitable in all the circumstances of a particular case. There can be no fixed rule of general application." 32 Dawson J, at 646 in Mallet also referred to the statement by Evatt CJ in the marriage of Rolfe. He went on to say: "No doubt such an approach is appropriate in those cases where the financial contribution of the husband does not extend beyond the provision of the family home and the acquisition of savings to provide support for both parties to the marriage in retirement." 33 The comments of the Judges in this case with their emphasis on the assessment of the contributions does nothing to detract from the position that the Family Court has adopted as exemplified by Pierce v Pierce. 34 There is nothing in the evidence in this case to suggest the plaintiff was anything other than an ordinary, competent homemaker and parent. There is nothing in the evidence to suggest that the defendant was anything other than an ordinary breadwinner given his position as a storeman. One commonly sees a situation where the parties, through their earnings, in most cases by the breadwinner alone, obtain a house and pay it off. The question which I have to resolve in this matter is whether in the context of a long relationship of 31 years' duration contributions of the plaintiff as homemaker and parent are equal to the contributions of the defendant as a breadwinner who contributed most of his earnings (but not all) to the relationship and also brought into the relationship what became from time to time the family home. The plaintiff contributed her inheritance, which has effectively been taken by the defendant, but the amount is small compared to the other contributions in the case. 35 It must not be forgotten that there has been an enormous increase in the value of the property as a result of the passage of time the parties have been together with both contributing to their relationship. However this is not a case where the plaintiff has, by her homemaking efforts, allowed the defendant the opportunity to go out and earn money to purchase or pay off the home. It was a capital contribution of a home, which he owned free of debt at the start of the relationship. In the circumstances it seems to me that the long period of the relationship means that the proper division of the asset to recognise the contributions over the years is a division of 45 percent to the plaintiff and 55 percent to the defendant. 36 I order that the property 22 Golf Parade, Manly be sold and the proceeds, after paying costs and expenses of the sale, be divided between the parties as to 45 percent to the plaintiff and 55 percent to the defendant. The defendant is to retain the car and furnishings. I will give any necessary directions to facilitate such orders and will hear the parties on the question of costs. ********** Last Modified: 03/03/2003 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.