New South Wales Supreme Court CITATION : Gillard v Heazlewood [2005] NSWSC 806 HEARING DATE(S) : 16, 17 June 2005 JUDGMENT DATE : 12 August 2005 JURISDICTION : Equity Division JUDGMENT OF : Associate Justice Macready at 1 DECISION : Paragraph 42 CATCHWORDS : Family Law. Application under the Property (Relationsips) Act 1984 for adjustment of the parties' property interests under s 20 of the Act. Orders made. No matter of principle. PARTIES : Brenda Rose Gillard v David Brian Heazlewood FILE NUMBER(S) : SC 6399 of 2003 Mr D. Flaherty for plaintiff COUNSEL : Mr R.J. Brender for defendant Wallbanks for plaintiff SOLICITORS : Sheather & Associates for defendant LOWER COURT JURISDICTION : - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Associate Justice Macready Friday 12 August 2005 6399/2003 Brenda Rose Gillard v David Brian Heazlewood JUDGMENT 1 His Honour: This is a hearing of proceedings for adjustment of the parties' property interests under the Property (Relationships) Act 1984. The parties lived together in a de facto relationship for two periods, namely, from December 1994 until April 1996 and from November 1996 until final separation on 12 September 2003. There were no children of the relationship but the plaintiff's children from her earlier marriage resided with the parties. History of the relationship 2 The plaintiff had married on 21 January 1984. She and her husband purchased her parents property at 12 Bates Street Homebush in December 1991. They separated in February 1992 and orders for a property settlement were made in the Family Court in June 1993. As a result of those orders, the plaintiff was entitled to reside in the property until June 1997 when the property was to be sold. On sale of the property, the proceeds were to be divided 40% to Mr Little and 60% to the plaintiff. 3 They had three children being Andrew born 24 June 1986, Sean born 24 May 1988 and Max born 10 October 1992. 4 The parties met in March 1994 and commenced to live together at the Homebush property in December 1994. In April 1996 the defendant left the property until the parties resumed cohabitation at the property in November 1996. Although there was contact between the parties through 1996 they did not reside together in a de facto relationship. 5 In early 1997 the plaintiff and her former husband agreed that, notwithstanding the terms of the property settlement, he would transfer his half interest in the Homebush property to defendant for $50,000.00 (being a debt of the plaintiff and her husband to his parents) plus 40% of the net balance of the agreed market value. The agreed market value for stamp duty purposes was $300,000. 6 On 12 September 1997 the purchase by the defendant of the plaintiff's husband's share was completed. As a result, the parties then owned the property as tenants in common in equal shares. There were borrowings of $195,000 from the St George Bank which were applied in payment to the father of the plaintiff's former husband the $50,000 debt owed by the plaintiff and her former husband, $92,000 to the plaintiff's former husband for his share and $45,000 to the defendant's cheque account for repayment of the plaintiff's car loan and for planned renovations. $15,000 was spent discharging the car loan and the balance on improvements to the house such as a swimming pool. 7 The defendant commenced paying $1,300 by way of mortgage payments each month to plaintiff's account and this amount was paid to the mortgagee by direct debit. He ceased payments on 17 November 2000 and resumed them in April 2001. This did not cause a problem as the payments were well in advance. 8 The parties separated on 12 September 2003 and the defendant moved out in September 2004. At that time the parties agreed about the mortgage in these terms: "Note the further undertaking of the plaintiff pending final hearing she will: (a) properly maintain the building and improvements on the property and pay all outgoings in respect of the property. (b) pay to the defendant an occupation fee of $300 per week, and it shall be a sufficient discharge for that payment that she pay that sum directly to the mortgagee of the property in satisfaction of the defendant's obligation to pay the mortgage payments." The property of the parties at the commencement of cohabitation 9 The plaintiff owned a half share of the Homebush property the value of which does not appear in the evidence. By mid 1997 the property was valued at $300,000. She had furniture, which was not valued and a 1988 Magna station wagon. The plaintiff owed $25,000 to her former husband's father. 10 The defendant had the following assets at the commencement of the relationship: 1. Boat brokerage business estimated at $25,000 2. Furniture of $10,000 3. 1982 Holden Commodore worth $4,000 4. Savings of $12,987 5. Superannuation of $5,000 6. A timber yacht worth $4,000 11 The defendant had no liabilities. The property of the parties at the conclusion of the relationship 12 The parties owned the Homebush property which was subject of a mortgage to the bank. They owned furniture and a number of boats and cars. At the time of the hearing the plaintiff had the following property acquired during or before the relationship apart from her interest in the property: 1. Furniture worth $30,000 2. Superannuation of $45,000 3. 1994 Mitsubishi star wagon worth $5,000 13 The plaintiff had a credit card debt of $7,090.00. 14 At the time of the hearing the defendant had the following property acquired during the relationship apart from his interest in the property: 1. 1998 Ford Fairmont 2. An unregistered 1966 Jaguar MK2 3. An MG car valued at $5,000 4. ½ interest in a Caporn motorboat valued at $8,000 5. Cole 19 yacht valued at $7,500 6. A runabout boat valued at $1,300 7. Furniture 8. Superannuation of $32,138.32 9. Savings of $1,000 15 The defendant had a number of liabilities at the time of the hearing but the only one that related to the period of the relationship with the plaintiff was his debt to Westpac on his Mastercard. This is now an amount of $30,000. At the time of separation the debt was approximately $11,000. 16 The Homebush property was valued by Mr Bird, on behalf of the plaintiff, who estimated its value at the present time to be $760,000. Mr Neskovski on behalf of the defendant valued it recently in the sum of $840,000. The property is presently subject to a mortgage of $151,938.55. 17 The valuers were cross-examined before me in an effort to resolve the difference between their valuations. Both valuers had adopted comparable sales as the basis for their valuations. The exercise was difficult because of the depressed state of the market and what has been an admitted fall in the value of Sydney properties between early 2004 and the present time. 18 There were a number of properties sold during 2004 when the market was somewhat higher. The defendant's valuer had originally given a valuation, as at 28 August 2004, of $870,000. His most recent valuation, as at 20 May 2005, was $840,000. There was one comparable in which there had been a very recent exchange of contracts. That was the property at 32 Badgery Ave, Homebush. It had originally been on the market for $800,000 but was exchanged in May 2005 at a price of $775,000. 19 Mr Bird considered the matter and his analysis was as follows: "Considered the best and most recent comparable sale given it is similarly located, in fact closer to the playing field of Airey Park (see aerial photo below), offers four bedroom accommodation in superior condition, has recently renovated bathroom and kitchen of a superior nature to the subject, and countered by the fact the subject has some original bungalow character and a pool. " 20 In contrast the defendant's valuer described his analysis in these terms: "Property comprises a reasonably presented 1950's brick tile dwelling on a 697 sqm lot comprising 4 bedrooms, bathroom, garage, in reasonable order only with newly renovated large eat-in kitchen, family room. All in all very inferior dwelling and location, as subject is situated across road from Airey Park which is a fairly quiet street. Sale dwelling has no character and with the presentation of the sale dwelling is very poor not much more than land value. " 21 It is apparent from the photographs of the property that not only are there renovations as described by the defendant' valuer but they also include a new bathroom and kitchen. It seems to be fully renovated inside but has an original exterior that dates back to the 1950s. It is a classic red brick house in an area said to be dominated by Federation and Californian bungalow dwellings. It is the comparison on this aspect that leads the defendant's valuer to consider it inferior to the subject property. 22 It should be noted that the subject property only has three bedrooms and is not truly described as a Federation or Californian bungalow. The plaintiff's valuer conceded that the subject property had a more pleasing facade but he did not consider that to be a major factor. He considered that problem could be overcome by a minor makeover. The defendant's valuer suggested that the property was overlooked at the rear by large two-storey dwelling. Although there is a two-storey wall on the back boundary there does not seem to be any overlooking of the backyard. Another point of difference to the valuers was the fact that the subject property was close to the part of Airey Park that does not have playing fields in contrast to the comparable sale which is close to the playing field at Airey Park. 23 The subject property has a smaller area than the comparable sale and, according to the evidence, the fact that the subject property has a pool is not necessarily a selling point. There has been a substantial drop in the market which even the defendant's valuer acknowledged and it seems to me that the most recent sale assumes a great significance in determining the present value of the property. Although clearly there might be some difference as to the merits of the presentation of the two properties, it seems to me that the comparable sale is a reasonable comparison, having regard to some of its superior points such as renovations internally, a larger area and access to the playing fields and parkland. 24 In these circumstances I accept the evidence of the plaintiff's valuer as to the value of the property. 25 As has been noted, there were two separate periods of cohabitation. The parties relied on contributions made during the first period of the relationship. I dealt with this matter in Del Gallo v Frederiksen [1999] NSWSC 737 at paragraphs 32 to 35 where I had the following to say: "Can pre-relationship contributions be taken into account in the adjustment process? This brings me to the question which was debated in submissions about whether one can take into account contributions prior to the commencement of the relationship. In Roy v Sturgeon this matter was dealt with at length by His Honour Mr Justice Powell then sitting at first instance. At pages 460 through to 466 His Honour analysed the provisions of the Defacto Relationships Act and the Family Law Act and ultimately came to a conclusion that, contrary to the approach taken by the Family Court in applications under s 79 of the Family Law Act , it was not open to this Court when dealing with applications under s 20 of the Act to have regard to contributions said to have been made prior to commencement of the of the particular "defacto relationship". His Honour pointed out that there was no injustice in this result for it would still remain open to a defacto partner to rely upon prior contributions as supporting a claim under the general law. (See the Act ss 7, 14(2), 38(1), 38(2).) This aspect of the decision which was not over-turned on the appeal from the particular decision has been referred to at first instance in two cases. The first of these is Griffiths v Brodingham Fam LR 822 a decision of Chisholm J of the Family Court who was hearing an application under s 20 of the Defacto Relationships Act pursuant to the cross-vesting legislation. His Honour concluded that it was open to the court to have regard to the contributions of the kind mentioned in s 20 notwithstanding that those contributions might have been made before or after the period of the defacto relationship. His Honour's conclusion is at page 834 to 835. His Honour's reasons, particularly his consideration of the Family Law Act decisions do not seem to take account of the significant differences between the Family Law Act and the Defacto Relationships Act. However, I will not go into His Honour's reasons at this stage in detail for reasons to which I will later refer. The second decision is a decision of Mr Justice Bryson in Foster v Evans (1997) DFC 95-193. He was there concerned with contributions which were made after the conclusion of a relationship. His Honour did not accept that s 20 within its own terms contained a limitation for the period during which there was a defacto relationship as a period during which any contributions to the welfare of the family might have been made. He ultimately held that there could be contributions after the defacto relationship in circumstances where one of the partners continued to care for a child. So far as I am concerned I think the matter is put to rest by the subsequent decision of the Court of Appeal in Fotheringham v Fotheringham . In that court the Judges were Powell JA, Beazley JA and Stein JA. One of the principle matters in issue was whether it is possible for a court to have regard to contributions made during an earlier period of a defacto relationship which pre-dated the relationship which was brought forward in the proceedings. The question which arose was whether it might be necessary for there to be leave to bring the action in respect of the earlier period of the relationship. Inherent in the judgment of Mr Justice Powell is an acceptance of the proposition which he had adumbrated in Roy v Sturgeon that it is not possible to take account of contributions prior to a defacto relationship. Justice Beazley agreed with the decision of Justice Stein who held that the relevant six week interruption did not mean that there were two periods of cohabitation. Accordingly, it was not necessary for either of these two justices to address the point in question in these present proceedings. However, the decision of Powell J is a decision of a judge of an appellate court reaffirming a decision which he had made at first instance. In these circumstances I feel constrained to follow his Honour's decision in Roy v Sturgeon and for this reason it is fruitless for me to embark upon a consideration in detail of the decision of Bryson J and Chisholm J and to contrast them with Mr Justice Powell's decision in Roy v Sturgeon on this point. However I do note that Griffiths v Brodingham predated Evans v Marmont (1997) 42 NSWLR 70 in which the majority relied upon the difference between the provisions of the Family Law Act and the Defacto Relationships Act. They were of the view that those differences were conspicuous and deliberate. They noted the lack of the application of s 75(2)(o) which is fundamental to views taken by Powell J in Roy v Sturgeon . Mr Justice Bryson does not seem to have been referred to these aspects of the approach of Powell J." 26 There was an appeal in Del Gallo v Frederiksen [2000] NSWCA 293 to the Court of Appeal and in the judgment of 24 October 2000, the Court dismissed the appeal. Although there was substantial argument on the appeal as to whether or not the earlier views which I have followed of His Honour Mr Justice Powell in Roy v Sturgeon (1986) 11 NSWLR 454 should prevail, the Court ultimately did not decide that matter because it made no difference to the factual outcome of the appeal. 27 The matter was briefly touched upon again by the Court of Appeal in MacDonald v Stelzer [2000] NSWCA 302. This was an appeal from Bergin J. There was a suggestion that Her Honour had taken into account contributions made prior to the relationship. On a factual basis the Court did not come to this conclusion. However, His Honour Mr Justice Priestley, having had regard to what was said in Evans v Marmont (1997) 42 NSWLR 70, concluded that a trial judge was entitled to take into account circumstances of or to related to the parties' relationship which occurred prior to the commencement of the relationship provided such circumstances were closely connected in subject matter, time and relevance to the financial and non-financial contributions made during the period of the relationship. Such matters could be given some but not fundamental weight. 28 The matter has recently been dealt with by the Court of Appeal in Jones v Grech [2001] NSWCA 208, an appeal from a decision of Master McLaughlin. Powell JA, at paragraph 10, found that there were two distinct relationships involved. One from 1984 to 1991 and the second commencing in 1993 and ending in September 1997. Relying upon the reasons he had previously adumbrated to which I have referred above, His Honour only allowed the contributions made within the second period. Ipp AJA, at paragraphs 70 to 74, referred to Fotheringham v Fotheringham and came to a different conclusion than Powell JA. He held that a court must take into account the aggregate periods during which the de facto partners have lived in a relationship adopting my reasoning at first instance in Fotheringham v Fotheringham. Given the current state of appellate difference I could follow either Powell JA or Ipp AJA. In accordance with my previously expressed views I will follow Ipp AJA. 29 Importantly Ipp AJA [at 81-82] also referred to McDonald v Stelzer, which he said was determinative of whether the court may have regard to contributions made before the de facto relationship commenced agreeing with the comments of Priestly JA. His Honour said that he found no difference in principle between contributions made before the de facto relationship started and those made thereafter. The court, he said, could have regard to both. Davies AJA agreed with Ipp AJA that it was necessary to have regard to events, which occurred prior to the last period of the de facto relationship. 30 Accordingly, I propose take into account any contributions throughout the whole period of the parties' relationship. Financial contributions 31 The parties both worked during the relationship. The plaintiff worked part-time in the first years of the relationship after which she continued to work full-time. During the course of the relationship she received income by way of child support as well as her earnings and Centrelink payments. Her net income for the relevant periods for the years ending on the 30th of June were as follows: 1995 $24,758 1996 $32,100 1997 $35,451 1998 $39,135 1999 $45,104 2000 $46,306 2001 $48,571 2002 $52,436 2003 $56,168 Total $380,029 32 The defendant had two periods when he was not earning income during the period of the relationship. These were a period of six months between July 2000 and March 2001 and a further period between June 2002 and October 2002. His net income including car allowance, so far as it can be shown on his tax returns, is as follows: 1995 $22,141 1996 $30,682 1997 $25,327 1998 $30,336 1999 $30,391 2000 $30,282 2001 $18,030 2002 $44,272 2003 $21,528 Total $252,989 33 The parties did not intermingle their financial affairs except to the extent of contributions to the mortgage. There are number of disputes between the parties as to contributions said to have been made in cash by the defendant to the plaintiff for household expenses. 34 The arrangement for the payment of the mortgage was that the amount of the mortgage repayment in the sum of initially $1,300 was paid by direct debit from the plaintiff's account and the defendant reimbursed the plaintiff for these amounts each month. The total of the amounts the defendant paid was close to $107,000. 35 The plaintiff suggested that apart from purchase of pool chemicals, a small proportion of his clothing and the cost of food and entertainment when the parties went out alone that the defendant's financial contribution was limited to his monthly payment of $1,300. Certainly it appears that the plaintiff paid the utility bills, rates and outgoings, telephone bills, food and most of the usual family expenses. There is evidence that the defendant did pay for restaurant bills of some $2,998 over a number of years and various other items of domestic expenditure. He also gave evidence that he gave cash payments of various amounts of approximately $400 per month to cover miscellaneous expenditure. I accept that the defendant did make some cash payments but, having regard to his income and other expenditures, I would not have thought these were as substantial as he contends. 36 As I recounted, the plaintiff's salary and earnings were greater than those of the defendant's, although it should be acknowledged that the defendant contributed $12,261 as a result of the sale of his business and $6,888 from the sale of half of the Cruiser. Given the evidence it seems likely that the defendant effectively paid the whole of the mortgage repayments and made some contributions, that were not substantial, to the other household expenses. Non-financial contributions 37 There was not much debate about household contributions and both parties seem to have contributed to this aspect of their life. So far as parenting contributions are concerned, plainly the plaintiff was the primary carer but both parties were working and the defendant helped the plaintiff from time to time when he could and it would not seem that there is a substantial disparity in this area. Discussion. 38 The parties were at issue as to how one characterises the contributions made to the house having regard to the circumstances in which they each came to have a one half share of the title. It seems to me that this is not a constructive trust claim but a claim under the Property (Relationships) Act which focuses upon the parties' contributions. It is perfectly apparent that the property would have had to have been sold in 1997 were it not for the ability of the defendant to join in and fund that purchase. 39 One way of approaching the matter is to consider that the defendant's funding of the mortgage enabled him to acquire an interest in the property and also to provide funds for the parties to make improvements to their jointly owned property and discharge the plaintiff's car loan. If one is to approach the matter of the adjustment of the parties interest on the basis that the defendant should have one half of the value of the property, less the present outstanding mortgage, one could then make further adjustments to reflect the other financial contributions and non-financial contributions of the parties. 40 In the first period of the relationship the defendant had the benefit of accommodation provided by the plaintiff. He paid rent up until March 1995 for his old premises so the period of benefit was from March 1995 until April 1996. The parties accepted the plaintiff's children as part of the household. In these circumstances I do not see it as appropriate that the plaintiff should bear a greater burden of the cost of their maintenance. As they were part of the joint household this burden should be borne equally. 41 The plaintiff had a benefit from the payment of her car loan which effectively was taken over by the defendant and the house improvements were for the joint benefit of the parties. The non-financial contributions favour the plaintiff and the plaintiff's overall contribution in terms of income was greater than that of the defendant. It is also necessary to take into account that the defendant had some personal assets after the relationship ended which must have come from his earnings during the period of the relationship. The appropriate percentage figure for the defendant's ownership, from which the present outstanding mortgage should be deducted, is 40%. 42 This means that in respect of the only asset subject to adjustment, namely the realty, the plaintiff would be entitled to purchase the defendant's share for the sum of $152,062 and in addition she would have to take over the existing mortgage on the property. 43 I direct the parties to bring in short minutes. ********** 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.