Reported Decision : (2007) DFC 95-401 New South Wales Court of Appeal CITATION: Saric v Steward [2006] NSWCA 260 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S): 8 March 2006 JUDGMENT DATE: 20 September 2006 JUDGMENT OF: Handley JA at 1; Santow JA at 2; McColl JA at 3 DECISION: 1. Appeal allowed with costs. 2. Set aside the judgment for $10,000 entered by Master McLaughlin and substitute judgment for the appellant for $153,000 with effect from 5 April 2005. 3. Set aside the order that the appellant pay the respondent's costs of the proceedings in the Equity Division and in lieu thereof order the respondent to pay the appellant's costs of such proceedings. 4. Respondent to have a certificate under the Suitor's Fund Act 1951. CATCHWORDS: FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS - appeal - application under s 20 of the Property (Relationships) Act 1984 for an adjustive property order - whether Master erred in failing to identify and evaluate parties' direct and indirect contributions to acquisition of property - relationship of two years eight months in three periods over approximately 4 years - one child of relationship - appellant entered relationship with substantially greater asset backing than respondent - significance of that financial strength in assessing appellant's financial contribution to respondent's acquisition of property - evaluating contribution incapable of mathematical precision. LEGISLATION CITED: Property (Relationships) Act 1984 Suitor's Fund Act 1951 Bilous v Mudaliar [2006] NSWCA 38 Davey v Lee (1990) 13 FamLR 688 CASES CITED: Green v Robinson (1995) 36 NSWLR 96 Howlett v Neilson [2005] NSWCA 149; (2005) 33 Fam LR 402 Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550 Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 PARTIES: Maya Saric - Appellant Jason Bruce Steward - Respondent FILE NUMBER(S): CA 40146 of 2005 COUNSEL: Mr R I Maurice – Appellant Ms M T Bridger – Respondent SOLICITORS: Doolan Wagner & Callaghan – Appellant Hardman & Co - Respondent LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 4909 0f 2002 LOWER COURT JUDICIAL OFFICER: Master McLaughlin LOWER COURT DATE OF DECISION: 10 February 2005 LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 43 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40146/05 SC 4909/02 HANDLEY JA SANTOW JA McCOLL JA Wednesday 20 September 2006 SARIC v STEWARD Judgment 1 HANDLEY JA: I agree with McColl JA. 2 SANTOW JA: I agree with McColl JA. 3 McCOLL JA: Maya Saric, the appellant, and Jason Bruce Steward, the respondent, resided together in a de facto relationship during three separate periods, commencing in June 1997 and ending in May 2001, about 2 years and 8 months in all. A child, Luke, was born of their relationship in November 2000. 4 The appellant sought relief by way of adjustment of the interests of the parties to that relationship pursuant to the Property (Relationships) Act 1984 (the "PRA"). Master McLaughlin heard her claim: Saric v Steward [2005] NSWSC 43. She was successful only to a limited extent and on a basis which, having regard to a Calderbank letter, resulted in an order that she pay the respondent's costs of the proceedings from the date he filed a cross-claim in the proceedings. Statement of the case 5 The appellant, who was born on 5 May 1963, was aged 41 at the time of trial. The respondent, who was born on 13 September 1968, was then aged 36. Both had been married before their relationship commenced. Each had a child of their prior relationship. The appellant had a son, Kailin Petar Saric-Williams, who was born on 23 August 1996, while the respondent was also the father of a son, Jarrah, born on 1 August 1995 to whom he had access four days each fortnight. 6 The Master found (at [13]–[14]) that, from the commencement of the relationship, the parties' household consisted of the appellant, her son Kailin, the respondent and his son Jarrah (for four days each fortnight) and, once he was born, their son, Luke. 7 The appellant had the following assets at the time the relationship commenced: · Property at 22 Birdwood Avenue, Pagewood (the "Pagewood property") purchased in 1988 for $179,000; · Property at 122 Union Street, Erskineville (the "Erskineville property") gifted to her by her parents in April 1997, and in which she was living with her son, Kailin; · A company, Corporate Coach Australia Pty Ltd ("Corporate Coach") of which she was sole shareholder and, for all relevant purposes, the sole director, through which she conducted commercial and business activities, including a training and consulting business; · A 1983 Mercedes 230 E motor vehicle purchased for $19,000 in 1995; · Furniture, jewellery and shares with an estimated value of $20,000; · Shares held in trust for Kailin. 8 At the commencement of the relationship the respondent, who had tertiary qualifications in engineering, was employed as a mechanical engineer earning about $51,000 a year. His assets were: · A Daihatsu Charade motor vehicle acquired in 1998 for about $21,000; · An AMP investment bond, a superannuation entitlement, furniture and personal effects – none of whose values was the subject of evidence. 9 During the first period of their relationship the appellant was pursuing studies at the University of Sydney for a degree of Bachelor of Science, majoring in psychology. Her income consisted of rent of $290 a week from the Pagewood property, child support from Kailin's father and a supporting parent's pension. During the course of their relationship, she also engaged in share trading, both in her own name and through Corporate Coach. In addition, she worked as a mortgage broker at times. From May 1999 until November 2000 she was retained by SOCOG. Her earnings from that retainer were paid to Corporate Coach. She received director's fees of $9,000 a month. 10 During their relationship the parties engaged in various real estate dealings. 11 In April 1998 they purchased a house at 79 Gowrie Street, Newtown as tenants in common in equal shares. They made the following contributions to the purchase price of $285,000: · The appellant paid the deposit of $28,500, legal fees and incidental costs totalling about $10,700 and provided $111,532 being the proceeds of the sale of her Erskineville property to Corporate Coach – a total of $150,732. · The respondent contributed $143,954 financed from a mortgage over the property to Westpac to which the appellant was also a party (but in respect of which he met the loan repayments) and an additional sum of $2,085.36 – a total of $146,039.36. 12 Gowrie Street was the parties' home. After its acquisition and during their relationship, the appellant contributed a total of $25,860 towards repairs and improvements on the property, while, in addition to meeting the mortgage repayments, the respondent contributed $14,219 towards improvements sourced by increasing the Westpac mortgage to $155,000. 13 In July 1998 Corporate Coach purchased a property at 56 John Street, Rydalmere for $245,000. The purchase was financed by borrowings of $185,000 secured by a mortgage over the property and $66,000 the appellant borrowed from her mother. 14 The respondent purchased a property at 55 Susan Street, Newtown as an investment in January 1999. The entirety of the purchase price, $290,000, as well as stamp duty and associated costs ($305,000 in all), was provided by a loan from Westpac in his name secured by a mortgage over the property. He met all repayments (either from rental income, or his own income) as well as other outgoings relating to the property. It was common ground that it was an interest only mortgage and that the principal of $290,000 was outstanding when the property was sold. (Appeal Transcript 12–13). 15 The appellant's case at trial (which the respondent disputed) was that she had indirectly contributed to the respondent's acquisition of Susan Street by giving a guarantee to Westpac, limited to $73,000 and secured over the Gowrie Street property, in respect of the monies he borrowed to acquire the property. The respondent accepted in cross-examination that it was a condition of the Susan Street loan that the appellant provide that guarantee. The guarantee was never called upon. 16 The respondent sold the Susan Street property on 31 May 2003 for $690,000. The net proceeds of sale of $363,000 were invested in the parties' joint names pending the outcome of the proceedings. The Court was informed that the proceeds of sale were released to the respondent as a result of the Master's orders. 17 The respondent purchased another investment property at 123 Michael Street, Jesmond (a suburb of Newcastle) in July 2000. The purchase price of $86,000 was funded as to $20,000 by monies sourced from an amount he had received for a victim's compensation claim and an advance of $68,800 from Westpac secured by mortgage over the property. He paid the stamp duty and legal costs of the acquisition from his own savings. The property was rented for $150 a week. He met all mortgage payments, costs and insurance from his own funds. The Jesmond property was sold in September 2003 for $176,000 and the mortgage debt, which then stood at $20,000, was discharged at settlement. 18 In November 2000 Corporate Coach purchased a property at 213/88 King Street, Newtown for $155,000. It appears the appellant re-structured her finances at this time, borrowing $520,000 secured by mortgage over both the King Street and Pagewood properties. She used part of that amount to acquire the King Street property and applied the balance as follows: (a) $171,000 to discharge the existing mortgage over the Pagewood property; (b) $66,000 to repay her mother; (c) $22,000 on renovations to the Pagewood property; (d) $79,000 to Corporate Coach's trading account; (e) $20,000 to herself. 19 While the parties did not intermingle their finances to the extent of conducting a joint bank account during their relationship, they both contributed directly and indirectly to household expenses and outgoings. The extent of their contributions was a matter of dispute. The appellant's case (see primary judgment at [34]) was that her financial and material contributions supported the respondent and the parties' children, whereas the respondent contended that his contributions, although different, were no less overall than the appellant's. After noting the parties' respective contentions in this respect, the Master recorded (at [35]) that the respondent was employed throughout almost the entirety of the relationship and that his earnings were considerably greater than the appellant's. The Master also concluded (at [36]) that the evidence did not enable him to establish what the appellant actually earned during the relevant period. There was apparently a discrepancy between the appellant's income as disclosed to the Australian Taxation Office and income details she provided in a loan application upon which she was cross-examined. The Master concluded (at [36]) her responses to that cross-examination were "unbelievable" and reflected upon the credibility of her evidence generally. 20 There was a direct conflict between the parties on some aspects of their evidence, which was otherwise uncorroborated. The Master concluded (at [50]) that he could not accept uncorroborated disputed assertions by either party. Neither party submitted that finding affected the orders this Court shall make. 21 The Master concluded (at [47]) that the relationship came to an end on 12 May 2001, and, therefore (at [58]) that it enured for two years eight months. This finding is not challenged. He found (at [51]) that as May 2001 the appellant's assets and liabilities were: · Her interest as tenant in common in equal shares with the respondent in the Gowrie Street property, said to be worth about $345,000, but subject to the Westpac mortgage of $155,000; · The Pagewood property, valued as at May 2001, at about $580,000, subject to the mortgage of $520,000, which he noted was also secured over the King Street property; · Her interest in Corporate Coach; · A 1999 Mercedes A160 motor vehicle, to which a value of $22,000 was ascribed; · Shares held in trust for Kailin; · A superannuation policy with MLC, valued at $11,712; · A life policy with Sun Alliance; · Household furniture (to which a value of $5,000 was ascribed); · Jewellery (to which a value of $10,000 was ascribed); · Gold held in trust for Kailin; · Gold held in trust for Luke; · A half share with the respondent in a holiday time-share, to which a total value of about $12,500 was ascribed. 22 The Master also found (at [52]) that Corporate Coach was the appellant's alter ego and, therefore, its assets should be treated as hers. The appellant does not challenge this finding. As at May 2001 Corporate Coach owned the Erskineville property (said to be worth $370,000, subject to a mortgage of $322,000) and the property at King Street, Newtown (said to be worth about $180,000, and also part security for the $520,000 mortgage taken out in November 2000). The Master noted (at [53]) that evidence was placed before the court that the present value of Corporate Coach was nil and that "the defendant did not dispute that valuation". In this Court, the respondent contended that he had not made any such concession. Nothing ultimately turns on whether or not this is the case, as the Master also noted (at [54]) that while it may be literally accurate that Corporate Coach's value was nil, nevertheless the court should not disregard the fact the appellant treated the company as her alter ego. 23 The Master found (at [55]) that at the termination of the relationship, the respondent's assets and liabilities were: · His interest as tenant in common in equal shares with the appellant in the Gowrie Street property, said to be worth about $345,000, but subject to the Westpac mortgage of $155,000; · The property at 56 Susan Street, Newtown; · The property at 123 Michael Street, Jesmond. 24 In the course of the appeal, the parties agreed that the value of the respondent's real estate assets at the termination of the relationship (or at a time not significantly remote from that date) was $581,000. Disposition at trial 25 The Master concluded he had jurisdiction to make an order under the PRA because the parties had a child: s 17(2)(a); judgment at [61]. 26 The Master noted (at [67]–[68]) that there was considerable assertion and counter-assertion between the parties concerning their respective contributions to the properties. He concluded (at [68]) it was unnecessary to deal with these individual assertions as it was appropriate for him to approach the matter holistically, and not attempt to evaluate the respective contributions of the parties, referring to Davey v Lee (1990) 13 Fam LR 688. 27 He was satisfied, however, (at [69]) that the appellant's contributions which he could take into account under s 20(1)(a) of the PRA were "far less" than she asserted in her Statement of Claim and affidavits and that the respondent's contributions were greater than the appellant conceded, even if they were not as great as he asserted. 28 Insofar as the parties' respective contributions as homemaker and parent were concerned, the Master concluded, again, (at [70]) that it was unnecessary for him to deal with the parties' individual assertions. He was satisfied the appellant's contributions were greater than the respondent's. He did not accept the appellant's assertion that the respondent made little or no contributions in this respect, but was satisfied that he, too, made significant contributions as a homemaker and parent. 29 He recorded (at [79]) the relief the appellant sought as: 1 and 2. Transfer to the Plaintiff the Defendant's interest in the Gowrie Street property, with the Plaintiff being responsible for refinancing the mortgage presently secured on that property. 3. Payment to the Plaintiff of the balance of the proceeds of sale of the Susan Street property, presently invested in the joint names of the parties, together with interest thereon. 4 and 5. Transfer to the Plaintiff of the Defendant's interest in the holiday time-share, the Plaintiff to indemnify the Defendant in respect to the personal loan obtained by the parties in order to purchase that time-share. 6. Payment of $10,000 to the Plaintiff by the Defendant. 7. The Plaintiff to be solely responsible for, and to indemnify the Defendant in respect to, the Visa card. 8 and 9. Consequential orders and declarations. 10. Costs. 30 The respondent consented to the relief sought in items 4, 5 and 7, and, by way of cross-claim, sought the following relief (see judgment at [80]): 1. Transfer to the Defendant of the Plaintiff's interest in the Gowrie Street property, subject to the existing mortgage. 2. Alternatively to item 1, the sale of the Gowrie Street property, and the net proceeds of sale (after payment of agent's commission, advertising expenses and legal costs) to be divided equally between the parties, the Defendant to be responsible for the payment of the outstanding mortgage. 5. Consequential orders and declarations. 6. Costs. 31 The Master identified, (at [81]) the substantial areas of dispute between the parties as their respective claims to the entirety of the Gowrie Street property and the appellant's claim to the entirety of the proceeds of the sale of the Susan Street property and the payment to her of the sum of $10,000. 32 The Master concluded (at [82]) that he was not satisfied that the appellant's contributions to the acquisition, conservation and improvement of the Gowrie Street property were "significantly greater" than the respondent's, "certainly not so much greater as to entitle her to receive the entirety, or any part," of the respondent's interest therein. He considered (at [83]) that it was appropriate to grant the relief sought by the respondent, namely that the Gowrie Street property be sold and the net proceeds of sale be divided equally between the parties. 33 The Master rejected (at [84]) the appellant's claim to the proceeds of sale of the Susan Street property first, because the guarantee was never called upon and secondly, because he said there was no evidence the respondent could not have acquired Susan Street without her guarantee. 34 The Master found ([85]) that the appellant's contributions as homemaker and parent were "somewhat greater" than the respondent's. For that reason and because during the first period of their relationship and for some early months of the second period, the parties resided in the Erskineville property, he concluded she was entitled to a payment of $10,000. 35 The final orders required the Gowrie Street property to be sold and, after payment of the costs of sale, the balance to be divided equally between the parties, with the respondent being responsible for discharging the mortgage to Westpac. The respondent was to transfer to the appellant his interest in the holiday time-share and she was to indemnify him from all liability in relation to the personal loan they obtained to purchase that interest. She was also to indemnify the respondent from all liability with respect to their joint Visa card and the respondent was to pay the appellant $10,000. Subsequently the Master ordered, by consent, that the investment order in respect of the proceeds of sale of the Susan Street property be discharged. Submissions on Appeal 36 The effect of the Master's orders, according to Mr Maurice, who appeared for the appellant on appeal, but not at trial, is that from a total pool of assets of $913,500, the appellant received assets with a net value of $322,500, approximately 37% of the pool, whereas the respondent received assets with a net value of $581,000, approximately 63% of the pool. She complains that that outcome did not properly reflect either her initial or subsequent contributions relative to those of the respondent. She also complains that the Master erred by failing to deal with her application for an award of $10,000 to compensate her for jewellery she owned which the respondent either retained or disposed of. In the course of argument Mr Maurice handed up a document outlining the orders the appellant sought, the most significant of which was an order that the respondent pay the appellant $475,000. The other orders either reflected orders already made by the Master as to the holiday time-share and the parties' Visa card or were procedural in nature. 37 Ms Bridger, who appeared for the respondent at trial as well as on appeal, submitted that the total pool of assets should take into account the real estate the appellant "owned" through Corporate Coach, in particular, the King Street property, which was acquired during the relationship, to which she attributed a value of $185,000. Accordingly, she contended, of a total pool of $1,088,500, the appellant received assets worth $507,500 (approximately 46%) compared to the respondent's $581,000 (approximately 54%). 38 Mr Maurice also complained that the Master had failed to identify and value all the parties' assets and contributions at the termination of the relationship or at the date of hearing. Accordingly, he argued, it was not possible to determine from his reasons, how the Master concluded his orders were just and equitable, as required by s 20. He submitted that if the Master had identified and valued all the parties' assets at the date of hearing, he would have appreciated the appellant's capital assets had diminished during the relationship, while the respondent's substantially increased. Ms Bridger contended there was no dispute between the parties as to the value of the property in dispute and that there was scant evidence of the value of any other property as at the date of hearing. 39 Mr Maurice next submitted the Master failed to take into account the fact that the appellant's initial contributions were significantly greater than the respondent's. While the Master had identified this imbalance when he set out the assets the parties had brought into the relationship, he did not refer to it again and, he contended, there was no indication its significance had been taken into account. 40 Ms Bridger argued that the appellant's initial contributions were irrelevant as it was not her case at trial that she had contributed any property she had at the commencement of the relationship to any property acquired during its course. Accordingly, she contended, the imbalance in the property each party had at the commencement of the relationship was of no more than historical significance. She contended that, in any event, there was no evidence that prior to living with the appellant the respondent lacked the means to acquire real estate. He had been employed and hence earning an income and had the capacity to borrow. 41 Mr Maurice submitted that on the assumed value of the Gowrie Street property at the date of hearing ($345,000) the appellant effectively received nothing to reflect her contributions. This was because, while pursuant to the Master's orders she received 50% of the value of the property she still owed $111,582 plus interest in respect of the funds she had contributed to the property's purchase. In contrast, he argued, the net effect of the Gowrie Street orders was that the respondent received $17,500 net ($172,500, being half the assumed value of the property, less the mortgage of $155,000). 42 Mr Maurice also argued that the Master erred in finding that the appellant's contributions to the Gowrie Street property were not significantly greater than the respondent's and for failing to give sufficient reasons for this conclusion. He submitted the evidence demonstrated that the respondent lacked the means to acquire real estate independently prior to living with the appellant. He contended that because the money the appellant borrowed to fund her contribution to the acquisition of the Gowrie Street property was not secured over that property, nor under the Master's orders to be discharged from the proceeds of its sale, it should be treated as a capital contribution to the property's acquisition. 43 Mr Maurice submitted that the appellant's direct financial contribution towards the acquisition etc. of the Gowrie Street property, taking into account the repairs, hardware and improvements she had financed throughout the relationship, was $176,670, while the respondent's (calculated on the same basis) was $160,268. At the hearing the Master found (at [55]) that the balance owing on the mortgage over Gowrie Street was $155,000 which meant that over a period of approximately six years, Mr Maurice submitted, the respondent had only serviced the mortgage rather than contribute to any increase in equity. He contended that the net financial contribution to the equity of the property by the respondent, therefore, was about $5,000 while the appellant's was about $150,000 (her initial contribution). 44 Mr Maurice also submitted that the Master should have taken the appellant's indirect contributions, both of a financial and non-financial nature, to the acquisition of the Gowrie Street property into account. Thus, he contended, the appellant facilitated the respondent obtaining the loan over the Gowrie Street property and therefore indirectly contributed to his initial contribution by offering her share of Gowrie Street as security for the loan, by paying the deposit and financing half the cost of the acquisition of the property. He also contended that the appellant had indirectly contributed to the property's acquisition by contributing to the joint expenses of the household thus freeing the respondent to apply part of his income to service the mortgage. In addition, he contended, the appellant had made an indirect contribution through work carried out by her father on the property in 1998 and 2000. He also contended that the appellant's domestic and parenting contributions had assisted the respondent by freeing him to work full-time. In contrast, he argued, the only evidence of any indirect financial contribution by the respondent was that he helped with the painting of the house on the first occasion. 45 Mr Maurice contended, accordingly, that the appellant had contributed 96% ($150,000) by way of direct financial contribution to the net equity to the Gowrie Street property, whilst the respondent's direct contribution had been about 4% ($5,000). He argued that the appellant's contribution at the date of hearing should not have been measured as a proportion of the current net value of the property but, rather, as a proportion of the total initial contribution of the party it represented. It was only in that manner, he argued, that the significance of the appellant's initial contribution would be adequately recognised. 46 In summary, he contended that taking into account all contributions by each party to the acquisition etc of the Gowrie Street property, it would be appropriate to measure the appellant's contribution as 90%. 47 Ms Bridger submitted the evidence supported the Master's findings as to the parties' respective financial contributions to the acquisition of the Gowrie Street property. She also argued there was no evidence that, at the time of hearing, the appellant had not repaid the monies she borrowed for the Gowrie Street purchase. She contended the parties had made similar contributions towards improvements on Gowrie Street, pointing to the respondent's contribution of approximately $14,000 sourced from the increase of the Westpac mortgage. 48 Ms Bridger submitted that the appellant had suffered no injustice or disadvantage in the Master failing to take into account the appellant's indirect contributions to the Gowrie Street property. She argued that had it not been for the respondent, the appellant would not have had her equity in the property. This was because, she argued, the appellant's case had been that she could not buy Gowrie Street as she could not qualify for a loan and had no savings to pay the deposit. This was a reference to a passage in the appellant's affidavit evidence to the effect that she had transferred the Union Street property to her company, as she was not able to qualify for a loan whereas the company could. I note for convenience at this point that there does not appear to have been any elaboration upon the proposition that the appellant could not qualify for a housing loan, although I would infer it may well have been because she earned her income through Corporate Coach. As Corporate Coach was found by the Master to be her alter ego, it is proper, in my view, to regard her application of monies raised by that company towards the Gowrie Street purchase as her direct contribution. 49 Ms Bridger argued it did not accord with the evidence to assert, as Mr Maurice did, that the respondent had made a net financial contribution of $5,000 to the Gowrie Street property. She drew attention to what she contended were lump sum payments the respondent had made to the Gowrie Street loan, being an amount of $30,000 from victim's compensation monies he had received, his August 2000 tax refund of $4,466 and another tax refund of $9,106 in September 2001 as well as his salary and rent from the Jesmond property. The respondent had also used the loan account as an operating account to assist him with supporting the appellant and her son. She argued the Master had properly taken these contributions into account when carrying out the balancing exercise to arrive at an appropriate s 20 order. Finally she argued that the order requiring the respondent to pay out the Gowrie Street mortgage fully compensated the appellant for her contributions to the property. She submitted the appellant received her share of the property's appreciation in value as well as of the contributions made to it since its purchase. 50 Mr Maurice next contended that the Master fell into error in finding there was no evidence the appellant's guarantee assisted the respondent to acquire Susan Street. He submitted the Master appeared to have overlooked the respondent's concession under cross-examination that it was a condition of the Susan Street loan that the appellant provide that guarantee and indemnity. He argued there was no evidence the respondent had any independent resources to acquire Susan Street so that her guarantee was critical to its acquisition and should have been taken into account. The fact the guarantee was not called upon did not lessen its significance. Having contributed to the acquisition of Susan Street, he argued, the appellant ought to share in its capital gains. 51 Mr Maurice also complained that the Master erred by failing to take into account the appellant's indirect, non-financial contributions towards the conservation and improvement of the Susan Street property. These included encouraging the respondent to enter the property market, showing him how to finance the property, assisting him to locate a suitable purchase, assisting with some household items, procuring her father to paint the property and preparing the property for tenants. The Master did not refer to these matters and, accordingly, it could not be determined whether they had been taken into account. 52 Mr Maurice contended that even if by procuring development approval for Susan Street, the respondent had contributed to an increase in its capital worth, it was the appellant's initial contribution which gave him the opportunity to acquire the property which had to be recognised in an appropriate adjustment. 53 Ms Bridger argued that the Master had not erred in concluding that the appellant's guarantee had not relevantly contributed to the acquisition of Susan Street. Although she accepted that the appellant providing a guarantee was a condition of the respondent's loan to acquire that property, she contended that that did not constitute a relevant contribution in circumstances where the guarantee had not been called upon. She also submitted the respondent had contributed substantially to the improvement in its value by obtaining development approval from the local council for the construction of three home units on the property. She contended that this explained why the property was sold for a considerable gain over the relatively short period the respondent had owned it. 54 Mr Maurice next complained that the Master's attribution of the amount of $10,000 to the appellant's contributions as homemaker and parent was inadequate. He submitted that there was unchallenged evidence of the appellant's considerable domestic and homemaker contributions which ought to have been accorded greater weight having regard to their indirect contribution to the acquisition of the parties' property. He also submitted that the appellant's contributions as homemaker and parent were greater than the respondent's and that the sum of $10,000 undervalued that contribution. 55 Finally, Mr Maurice complained that the Master failed to deal with the appellant's application for $10,000 to compensate her for jewellery retained by the respondent. The appellant's evidence was that she had given her jewellery to the respondent for safekeeping prior to being admitted to hospital in November 2000 to give birth to Luke. Upon her discharge from hospital the respondent told her he had lost her jewellery. (Blue 28) When cross-examined the respondent had said he had left the jewellery in an ashtray at the Bronte Hotel, evidence the Master described as "bizarre": judgment at [48]. The appellant complained that the Master had made no award to her of the undisputed value of this jewellery and appeared to have overlooked it. 56 There was a substantial debate, in the course of oral submissions, as to whether the appellant had substantially more capital at the end of the relationship than she had formally acknowledged. The respondent contended that the appellant had not accounted for approximately $201,000 in assets on separation – an argument directed, no doubt, to disputing her argument that her capital position had substantially eroded over the period of the relationship. Mr Maurice contended that the evidence did not support this proposition and, in any event, that it was never properly put to her in cross-examination. 57 Ms Bridger also drew attention to the Master's conclusion (at [36]) that he could not establish the amounts the appellant had earned to the relationship. She argued that to the extent there was evidence of the appellant's income that demonstrated it would have been impossible for her to contribute to the joint expenses of the household. 58 Insofar as non-financial contributions were concerned, Ms Bridger argued that the respondent's matched the appellant's. She also submitted that the Master's finding that the appellant's homemaking contributions were "somewhat greater than those of the defendant in the same capacities", was open to him and was properly reflected in his conclusion that that disparity entitled her to "a relatively small sum". She contended that the appellant had not demonstrated appealable error from the Master's discretionary decision in this respect. 59 Insofar as the appellant complained that the Master had failed to give reasons, Ms Bridger submitted that the Master had made findings as to the contributions each party had made under s 20(1)(a) and (b) of the PRA. She contended that it was not in issue between the parties that apart from Gowrie Street and Susan Street, the properties as to which the Master had made findings, neither had made a contribution to any other property either owned. She contended that s 20(1) did not proceed from the premise that upon the cessation of a de facto relationship each party was to emerge with equality of property: see Green v Robinson (1995) 36 NSWLR 96 at 114 per Cole JA. Consideration 60 The decision as to what is the appropriate order to be made by way of adjustment of the interest of the parties pursuant to s 20(1)(a) of the PRA is a discretionary one subject only to interference on appeal in accordance with the principles of appellate review of discretionary decisions. In my view, application of those principles in this case leads to the conclusion that appellate intervention is warranted. This is because the Master erred in the following respects. He failed to identify or value the parties' respective contributions (direct and indirect) to the acquisition of the Gowrie Street and Susan Street properties. His conclusion that the appellant had made no contribution to the acquisition of Susan Street paid no regard to the respondent's concession under cross-examination that the guarantee was a condition of the Susan Street loan. Further, he made no provision for the appellant's claim in respect of her jewellery. 61 The exercise of jurisdiction under s 20 of the PRA involves three steps: "(1) identification and valuation of the property of the parties; (2) identification and valuation of the respective contributions of the parties, of the types referred to in s 20; and (3) determination of what, if any, order is just and equitable having regard to these contributions." See Howlett v Neilson [2005] NSWCA 149; (2005) 33 Fam LR 402 (at [25] per Hodgson JA, Ipp and McColl JJA agreeing); Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 523 per Mason and Deane JJ, (with whom Brennan J generally agreed). 62 In Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550 at [29] Brereton J (with whom Basten JA and Hunt AJA agreed) said that the second step "typically though not invariably results in an apportionment between the parties on a percentage basis of the overall contributions of the types referred to in s 20 of each of them, made to the date of hearing", while the third "typically results in an order which leaves the applicant with that percentage identified in the second step of the divisible property identified in the first step." However it is also fundamental, as his Honour pointed out (at [51]) that the PRA "… does not dictate the employment of any particular method in the formulation of an appropriate order for the adjustment under s 20 of property interests, and it is not desirable to attempt to formulate principles or guidelines designed to constrain judicial discretion within a predetermined framework". 63 Thus, the Court has "a broad discretion in determining the approach to adopt in considering what order to make under s 20(1): Bilous v Mudaliar [2006] NSWCA 38 at [42] per Ipp JA (Giles and McColl JJA agreeing). Two approaches are usually referred to, global and asset-by-asset: Kardos v Sarbutt (at [51]). In Bilous v Mudaliar Ipp JA observed (at [43]): "43 If a global approach is adopted, regard must still be had to the origin and nature of the different assets. If an asset-by-asset approach is adopted, care must be taken to avoid the risk of undervaluing domestic and non-financial contributions and regard must be had to the overall result: Kardos v Sarbutt at [51] and [54]. Some situations do not lend themselves either to a pure global approach or to a pure asset-by-asset approach. In some cases the judge may decide to have regard to the particular contributions made to individual assets, weigh up the overall respective contributions to the parties and make differing apportionments in relation to the interests of the parties in different assets." 64 As I have recorded the Master said (at [67] – [68]), in substance, that it was unnecessary for him to deal with the parties' assertions concerning their contributions to the real estate they respectively owned throughout the relationship, referring to McLelland J's statement in Davey v Lee (at 689) that, in exercising the s 20 discretion, courts are injuncted not to undertake a "reductionist process analogous to the taking of partnership accounts … but to make a holistic value judgment in the exercise of a discretionary power of a very general kind". In my view the Master erred in this respect. 65 McLelland J's observation was made following his discussion of the fact that in the context of a de facto relationship, "it would usually be highly artificial to attempt to evaluate" contributions of the sort referred to in s 20(1)(b). His Honour was not saying the Court should eschew the exercise of identifying and evaluating the financial contributions referred to in s 20(1)(a). Indeed his Honour carefully examined the financial contributions each party in Davey v Lee had made to the acquisition, conservation and improvement of the property in which they lived. He also analysed closely the business in which the parties had participated, including assessing its value at relevant dates. Having identified (at 691) their actual contributions in percentage terms to their residence and the business, his Honour adjusted those figures to take into account intangible factors, such as the defendant's greater contribution to the business and his occupancy of the joint property for four years following the termination of the relationship. It was at that stage that his Honour undertook the exercise he had earlier identified of making a holistic judgment. That holistic judgment was, however, grounded in his financial analysis. 66 McLelland J's approach in Davey v Lee accords with Hodgson JA's statement in Howlett v Neilson (at [27] – [28]) that because consideration of what is just and equitable under s 20 of the PRA turns on the parties' contributions in all the circumstances, it is particularly important to identify and evaluate those contributions. 67 In Howlett v Neilson (at [29]) Hodgson JA said that the task of evaluating financial contributions for the purposes of s 20: "29. … is not a narrow or purely mathematical process. In many cases, it may be appropriate simply to treat the contributions of the parties during the relationship as equal, even though the nature of the contributions are different, although of course there is no presumption of law to that effect, and this assessment depends on a judgment being made that the quality of the contribution of each, in his or her own sphere, deserves to be considered as equal: Mallett v. Mallett (1984) 156 CLR 605. However, that judgment is one that often may be readily reached: Marriage of Ferraro (1992) 16 Fam LR 1, Marriage of Clauson (1995) 18 Fam LR 693, Jones v. Grech ." and added (at [37]) that: "…even if parties are not necessarily entitled to a return of their initial contributions, these contributions should be identified and evaluated." 68 Accordingly, it was necessary for the Master to identify and evaluate the contributions each party had made to the acquisition, conservation and improvement of the properties in contention, Gowrie Street and Susan Street. While the Master referred (at [21]) as a matter of history to the amount each had contributed to the acquisition of the Gowrie Street property, when he came to consider the orders he should make, he deliberately eschewed the task of identifying and valuing the parties' contributions to that property or to Susan Street at the date of hearing, the usual date when that exercise is conducted: Kardos v Sarbutt at [30] – [31]. Although he had concluded, erroneously in my view, that the appellant had not contributed to the acquisition of Susan Street through the provision of her guarantee, it was also part of the appellant's case that she had indirectly contributed in other ways to the acquisition of that property. Because of the approach he adopted, the Master also failed to deal with that contention. 69 The parties asked the Court, should it determine that the Master had erred, to re-exercise the s 20 discretion rather than remit the matter for a new trial. In my view it is appropriate that the Court should do so. 70 Although the parties identified the parameters within which the s 20 jurisdiction should be exercised by reference to their total pool of assets, the only properties either claimed should be the subject of an adjustment order were Gowrie Street and Susan Street. No formal valuations of either property was tendered, however the Court was informed the Gowrie Street property was sold for $520,000 after the trial, while Susan Street was sold prior to the hearing for $690,000. It is appropriate to treat those sale prices as the prima facie value of those properties for the purposes of re-exercising the s 20 jurisdiction. 71 The fact that the appellant entered the relationship with substantially greater asset backing than the respondent should be taken into account in assessing the parties' respective contributions. The appellant was asset rich, being the owner of two properties (Pagewood and Erskineville) in her own right, while the respondent had negligible assets – certainly no real estate. Contrary to the respondent's submission, the appellant's case at trial as it emerges from the written submissions was that her financial strength contributed to the parties' acquisitions of property. It is appropriate, therefore, to have regard to that asset strength in identifying and valuing the parties' contributions, although it is important to ensure that double counting does not occur. 72 This was not, comparatively speaking, a long relationship. It lasted for two years and eight months, over the period 20 June 1997 to 12 May 2001. Over this period the respondent went from having few assets of any significant value, a car worth $21,000 being the only one deemed worthy of valuation at trial, to owning real estate with a net value of $581,000. He did not assert at trial, nor does he claim on appeal, that he should receive any part of the appellant's assets, but he asserts he should be entitled to retain the assets he acquired during the relationship, without any adjustment in the appellant's favour. 73 During the relationship the appellant increased her real estate portfolio by her half interest in the Gowrie Street property and (through Corporate Coach) acquired the King Street property, to which she had also transferred the Erskineville property. 74 If one accepts Ms Bridger's contention that the King Street property should be regarded as part of the pool to be considered for s 20 purposes, the outcome of the Master's orders was that the appellant retained approximately 46% of the property pool compared to the respondent's approximately 54%. In my view that outcome was not just and equitable in that it did not reflect the appellant's contributions to the respondent's acquisition of his assets. 75 The parties' direct contributions to the acquisition of the Gowrie Street property (including legal fees and incidental costs) were, as to the appellant, $150,732 (approximately 51%) and as to the respondent, $146,039 (approximately 49%) while, both contributed to its repair, the appellant in the amount of $25,860, the respondent in the amount of $2085.36. The appellant's direct contributions, $176,592 (approximately 52.5%), were, therefore, slightly greater than the respondent's $160,258 (approximately 47.5%). 76 The appellant also made a financial contribution to the acquisition of the Gowrie Street property by securing her borrowings in respect of its acquisition over the Erskineville property, which was sold into Corporate Coach. By doing so she left a large part of the equity in Gowrie Street free to secure the respondent's borrowings from Westpac and thus assisted him to acquire his interest in the property. In addition she was a party to the mortgage secured over the Gowrie Street property. Thus, although the parties held that property as tenants in common, she assumed two financial burdens in relation to its acquisition: the mortgage raised through Corporate Coach to finance her contribution to the acquisition and the financial liability she incurred as borrower and joint mortgagor with the respondent in relation to the Westpac mortgage. She was able to make these contributions because of her strong asset position. 77 The respondent, for his part, met the repayments due under the Westpac mortgage over the Gowrie Street property. While that must be taken into account as a relevant contribution, the appellant was also obliged to meet repayments, albeit in respect of the monies she borrowed through Corporate Coach to finance her contribution to the Gowrie Street acquisition. In my view the parties' repayments of the monies each borrowed (in whatever capacity) should be regarded as approximately equal. 78 Overall, therefore, the appellant's contributions to the acquisition of the Gowrie Street property were greater than the respondent's. It is appropriate that that greater contribution is recognised by an order adjusting the parties' interests in that property in her favour. It is unnecessary to characterise the appellant's contributions to the Gowrie Street property as of a capital nature as Mr Maurice submitted. It is sufficient to recognise their significance to determine what, in the circumstances, would be a just and equitable order to give her contributions due recognition. Evaluating this contribution does not lend itself to mathematical precision. It is, as Hodgson JA said in Howlett v Neilson (at [29]), a matter of assessing the quality of that contribution. In my view when regard is had to the overall picture, the appellant's contribution to the acquisition of the Gowrie Street property was substantially greater than the raw financial contributions. It should be reflected by an order in the appellant's favour in relation to that property, in addition to that made by the Master, in the sum of $60,000. 79 As to Susan Street the condition that the appellant provide her guarantee to secure the respondent's loan for the purchase, demonstrated, in my view, that the appellant made a financial contribution, albeit indirect, to the acquisition of that property. It ought to have been taken into account and would appropriately be measured by the extent of the guarantee she was prepared to provide in order to secure the respondent's financial accommodation by Westpac. That is an amount of $73,000 which ought to have been awarded to her, in my view, by the Master and ought, therefore, attract interest from the date of trial. 80 It would not be appropriate, in my view, to interfere with the Master's assessment of the appellant's homemaking contribution at $10,000. This is clearly an area of significant dispute at trial and, too, one where the evaluation of the parties' contributions must be essentially impressionistic. 81 Finally, there is the question of the appellant's jewellery. Although not claimed in the originating process, there is no doubt that by the time the hearing concluded the appellant's claim for $10,000 in respect of the jewellery was on the table. It had been referred to in evidence and was addressed in the appellant's written submissions before the Master. The Master's characterisation of the respondent's explanation for its disappearance as "bizarre" indicates that he rejected his account that he had returned that jewellery to the appellant by throwing it on a table at the Bronte Hotel. In my view it would be appropriate to award the appellant $10,000 in respect of the jewellery. 82 Taking into account the matters to which I have referred it would be appropriate, in my view, for the appellant to receive an additional $143,000, representing $60,000 in the case of the Gowrie Street property, $73,000 in respect of the Susan Street property and the $10,000 in respect of her jewellery claim. This would result in the appellant receiving approximately 59% of the asset pool accepting, as I do, Ms Bridger's submission that the King Street property should be taken into account in this respect. In my view that is a just and equitable outcome having regard to the parties' respective contributions to the properties involved. Conclusion 83 Mr Maurice handed up a document setting out the orders the appellant sought. Some in effect were in the nature of submissions identifying the amounts the appellant sought, others appeared to repeat orders the Master made, while one (7) sought a declaration as to the title to property and other matters which were not the subject of these proceedings. The orders I propose below appear to me to be sufficient to dispose of the proceedings but the appellant may have liberty to apply to be exercised no later than 7 days after judgment should she wish to submit that other orders (other than for the payment of money) ought be made. 84 I propose the following orders: (a) Appeal allowed with costs. (b) Set aside the judgment for $10,000 entered by Master McLaughlin and substitute judgment for the appellant for $153,000 with effect from 5 April 2005. (c) Set aside the order that the appellant pay the respondent's costs of the proceedings in the Equity Division and in lieu thereof order the respondent to pay the appellant's costs of such proceedings. (d) Respondent to have a certificate under the Suitor's Fund Act 1951. ********** 21/09/2006 - SC file number of cover sheet 4909/05 - Paragraph(s) front sheet 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.