New South Wales Supreme Court CITATION : Loibner v Owens [2006] NSWSC 410 HEARING DATE(S) : 29 March 2006 JUDGMENT DATE : 11 May 2006 JURISDICTION : Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Plaintiff not entitled to receive a property adjustment in her favour. One half of each party's costs to come out of fund and plaintiff to pay the other half of the defendant's costs and bear half of her own costs. CATCHWORDS : FAMILY LAW [105]- De facto relationship- Application for an adjustment of interest in joint property- Relationship under two years- Evaluation of financial and non-financial contributions- Held insubstantial- Plaintiff entitled to recover half of her mortgage payments made during the period of co-habitation- Whether there should be an equitable accounting of notional rent from the plaintiff for over two and one half years sole occupation of the property- Plaintiff is adequately compensated. LEGISLATION CITED : Property (Relationships) Act 1984, ss 5, 17, 20 Bilous v Mudaliar [2006] NSWCA 38 Currie v Schmidt [2004] NSWSC 47 Davey v Lee (1990) 13 Fam LR 688 Forgeard v Shanahan (1994) 35 NSWLR 206 CASES CITED : Kardos v Sarbutt [2006] NSWCA 11 Reilly v Gross (1986) DFC 95-035 Ryan v Dries (2002) 10 BPR 19,497 Street v Bell (1993) 114 FLR 167 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 Weston v Castle (Waddell CJ in Eq, 23.8.1989) BC8901813 PARTIES : Erika Louise Loibner (P) Mark Owens (D) FILE NUMBER(S) : SC 4873/03 COUNSEL : G J McVay (P) S J Burchett (D) SOLICITORS : MCG Lawyers (P) Collaery Lawyers (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Thursday 11 May 2006 4873/03 – LOIBNER v OWENS JUDGMENT 1 HIS HONOUR: These are proceedings brought by a woman against a man with whom she had a de facto relationship and with whom she acquired a house, for unequal distribution of the proceeds of sale of that house in her favour. 2 The plaintiff says that she and the defendant commenced a de facto relationship in August 1999 and that that relationship continued until 17 September 2001. The last date seems uncontroversial; the former is not. 3 In July 1999, the plaintiff took a lease on a townhouse at 2/6 Kenwich Lane Beecroft and moved in with her two daughters. During the period up until 10 February 2001, the defendant stayed a number of weekends at the plaintiff's house. The plaintiff claims that the defendant stayed, on average, three out of every four weekends at the townhouse. The defendant claims this was only five to six weekends and has produced a logbook and a record of the odometer readings for his motor vehicle, to support this. He also has the testimony of a friend, Mr Alexander Petrow, who lived in Canberra, with whom the defendant resided from February 1999 to February 2001. 4 The plaintiff claims that the de facto relationship commenced on 7 August 1999 because, she says, on that day the defendant moved "his furniture, wine and personal effects" into the leased townhouse. The cross-examination of the plaintiff showed this to be an exaggeration. The defendant moved in some wine and clothes, but apart from one antique dining table brought to the house in late 1999, his furniture and the bulk of his possessions were stored at Mr Petrow's house, and his artworks were stored with Mrs Baker-Finch. 5 During this time, the plaintiff paid all rent on the leased townhouse. 6 At the time of their relationship, both parties appear to have been well-to-do people with good jobs and they were able to secure a substantial mortgage to enable them to acquire a house. 7 On 27 March 2001 the plaintiff and the defendant purchased jointly a house at 116 Beecroft Road, Beecroft. The plaintiff contributed $44,776.11 to the purchase of the house and the defendant contributed $43,259. 8 The house was a two bedroomed house. The plaintiff had two female children from a previous relationship who occupied one of the bedrooms. 9 The plaintiff and defendant separated on 19 September 2001 and the defendant moved out of the house. 10 The defendant today is earning relatively little and is in arrears with his child support payments for his three children. The plaintiff is now self employed. 11 The plaintiff claims she contributed the following day-to-day living expenses: (1) Outgoings in respect of the house - $2,233.07 (the defendant paid the extra $697.53) (2) Mortgage repayments in respect of the house - $63,200 (3) Repairs and improvements to the house - $5,207.50 (4) Maintenance to prepare house for sale - $1,949.00 (5) Outgoings during relationship (including outgoings under the townhouse lease) - $2,171 (6) Outgoings after relationship terminated - $13,213 12 The plaintiff moved out of the house on 7 June 2004 and contracts were exchanged for the sale of the house on 29 October 2004. The house sold for $700,000. The mortgage, sale expenses and legal expenses have been paid from the proceeds. The balance of $213,047.90 (as at 28 February 2006) is being held in the plaintiff's solicitors' controlled money account. 13 The plaintiff claims that pursuant to s 20 of the Property (Relationships) Act 1984 she should receive the entire balance. In the alternative, a declaration should be made that the defendant holds his legal interest in the property on a resulting trust or alternatively subject to a constructive trust for the benefit of the plaintiff, and that the defendant transfer to the plaintiff the whole of his right, title and interest in the property. 14 The defendant says that the proceeds of sale should be split equally. However, the defendant accepts that the plaintiff should be made an allowance for paying his share of the mortgage payments, but only during the period of cohabitation. 15 The figures before me indicate that a total of $65,600 was paid on the mortgage by the plaintiff. Of this sum $30,600 was paid during cohabitation and $35,000 afterward. 16 Under s 20 of the Act a court may make an adjustment to the property interests of parties who have been in a domestic relationship. For an order to be made, the plaintiff must satisfy at least one of the prerequisites in s 17. The first, in s 17(1), is that the parties "have lived together in a domestic relationship for a period of not less than 2 years." The second, s 17(2)(b)(i), is that the applicant "has made substantial contributions … for which the applicant would otherwise not be adequately compensated if the order were not made and that the failure to make the order would result in serious injustice to the applicant." 17 I will first consider whether the parties satisfy s 17(1). 18 The plaintiff claims that the parties entered into a domestic relationship while she was renting the townhouse so that the total time spent in a domestic relationship is 25 months. The defendant claims it began when they moved into the Beecroft Road property, so that only seven months were spent in a domestic relationship. 19 Section 5(1) of the Act defines a domestic relationship as: (a) a de facto relationship, or (b) a close personal relationship …between two adult persons… who are living together, one or each of whom provides the other with domestic support and personal care. 20 There is no doubt that the parties were in a de facto relationship after 27 March 2001. The question that I am considering at present is whether the evidence shows a domestic relationship on or before 19 September 1999 so as to make it a two year relationship. 21 In my view, the evidence does not support the plaintiff's claim that the defendant was in a domestic relationship while she rented at the Kenwich Lane townhouse. The defendant's version of the time he spent there is more likely to be correct than that of the plaintiff as it is corroborated. 22 However, even if the defendant spent more weekends at the plaintiff's residence than the six he claims to have spent, he had not moved the bulk of his possessions into the townhouse. Some wine and a few personal effects hardly constitutes moving in. Furthermore, the defendant did not contribute towards rent or outgoings (apart from a trifling amount) and there was no evidence to suggest that at that time either party thought it appropriate that he should. 23 Thus I do not find a two year domestic relationship. 24 I now must turn to s 17(2)(b)(i) of the Act to determine whether the plaintiff has made substantial contributions for which she would not be adequately compensated if no order was made under the Act. 25 Thus, I must first look at the position if no order were made under the Act, then look at the plaintiff's contributions and then ask whether, in view of my findings on those two matters, the plaintiff would not be adequately compensated. 26 Mr G J McVay, counsel for the plaintiff, claimed that the plaintiff was entitled to the defendant's half of the mortgage payments including those paid after cohabitation ceased. She paid these for the period 19 September 2001 until June 2002 and one further payment in May 2003. 27 Mr S J Burchett, counsel for the defendant, agrees that mortgage payments borne by the plaintiff up to September 2001 should be the subject of an allowance to the plaintiff. These appear to amount to $ 30,600, so that the allowance should be $15,300. 28 However, he submits that in respect to the interest payments made after September 2001, being $35,000, the onus rests on the plaintiff to do equity and to provide the basis for an equitable account for her occupation of the property. The plaintiff and her two daughters lived in the house over a period of three years after the defendant left, despite the defendant's early willingness to sell the property (an attitude that later changed). 29 The general rule in equity is that where there has not been an exclusion of a co-owner from the property and where there is no claim for permanent improvements, no occupation fee is chargeable against a co-owner in occupation. However, if costs of improvements are claimed, an occupation fee is chargeable: see Forgeard v Shanahan (1994) 35 NSWLR 206. 30 However, in Ryan v Dries (2002) 10 BPR 19,497, a differently constituted Court of Appeal held that mortgage payments were to be regarded in the same plight as improvements, and that, if an owner in possession claimed mortgage payments it was appropriate in an accounting in equity to bring into account an occupation fee. Further, that case supported the view that all improvements were to be taken into account, not merely capital improvements. 31 I believe that there was a majority in Ryan's case on the mortgage point, and I should follow it and include post separation payments under the general equitable accounting. 32 I consider that rates must be treated differently. They are a statutory charge and must be paid by holders of interest in land whether in occupation or not. They have to be paid to avoid a council selling the land and thus putting an end to the owners' rights to sell in due course in a growing market. The plaintiff paid $10,782 in excess of the defendant. She must be made an allowance of $5,391. She also paid $1,517.11 more than the defendant on the purchase, which warrants an adjustment in her favour of $758.55. 33 This means that of the sum in hand, before doing any exercise of accounting in equity, the plaintiff should receive $106,523.95 + $15,300 + $5,391 + $758.55 = $127,973.50 and the defendant, the balance of $85,074.40, less, of course, any costs. Interest earned after 28 February 2006 is to be shared equally. 34 Thus, this case is over $85,074.40 and costs. 35 As I have noted above, the plaintiff also claims in respect of outgoings in respect of the house - $2,233.07 (the defendant paid the extra $697.53); repairs and improvements to the house - $5,207.50; outgoings during relationship (including outgoings under the townhouse lease) - $2,171; and outgoings after relationship terminated - $13,213. 36 The plaintiff paid $1,949 to prepare the property for sale. Most of this cost was for painting and for installing a gravel driveway. 37 Although in general, the court takes into account pre-relationship expenses, in the present case, I accept the defendant's evidence that there were only intermittent stays by him at the townhouse and those were short in duration. There was probably a sexual relationship between the parties at this time, but the stays of the defendant were more of a convenient pied a terre and a place to store excess goods and overnight necessities rather than a family home. 38 Thus I do not consider that, when looking at the position in equity as to the division of the proceeds of the sale of the house, I should allow any sum for the plaintiff's expenses prior to the acquisition of the house. 39 As to the expenses after the acquisition which I have not yet ruled upon, most seem to be the sort of expense that equity does not allow a co-owner in sole occupation, at least unless there was a countervailing occupation fee. The plaintiff's claim for these extra items is, on my calculation, $4,340 (being half of the post acquisition claims ending at separation) plus half of the mortgage payments, ie $15,000 being half of 30,000: a total of $19,340. 40 The home was a substantial one in a good suburb. I have no substantial evidence as to its letting value, but $300 per week is probably a conservative estimate. On this basis, the plaintiff enjoyed sole occupation of the house for 2 years 9 months, a total of 143 weeks, which at $300 per week would be $42,900. Even at $150 per week, the occupation fee would well exceed her claim. 41 The court has not been given any satisfactory evidence as to the rental value of the Beecroft property. The onus is on the plaintiff to demonstrate that bearing in mind the other party's contribution, she is in a position of having made substantial contributions for which she would not be compensated under the general law. 42 The plaintiff has not discharged this onus. I will not send the accounts to an Associate Judge to take a formal accounting as such of the raw figures as I have been provided with show at least a balance in favour of the defendant. 43 The defendant says that, in any event, expenses incurred by the plaintiff after separation were as a result of choices made by the plaintiff in which the defendant had no say, or expenses from which he will not benefit. This view, which has some merit, will be taken into consideration when I make "a holistic value judgment" of the case; see Davey v Lee (1990) 13 Fam LR 688; Kardos v Sarbutt [2006] NSWCA 11 and Bilous v Mudaliar [2006] NSWCA 38. 44 The non-financial contributions that the plaintiff claims to have made include her assistance with the defendant's Executive MBA degree at the Australian Graduate School of Management in 1999. She had previously completed the degree. It also includes her help with the development of a seminar development program for the defendant's employer. The defendant denies this. 45 In my view the weight to be given to this factor is very slight. Friends often help each other with their studies. This sort of contribution comes within the definition of a contribution to the welfare of a partner, but the sort of contribution on which there is to be prime focus under the Act is contributions to the family property, resources or welfare. 46 Another contribution was the defendant's use of the plaintiff's business car. Whilst the defendant did benefit from the use of the car, where the petrol was paid by the plaintiff's employer, and also managed to claim money from his own employer for this travel time, the plaintiff did not suffer detriment, though she permitted that to be suffered by her then employer. The plaintiff had the benefit of driving the defendant's car during this period. Other contributions included preparing miscellaneous forms and spreadsheets and reports related to the defendant's work. 47 The question for me to decide is whether these contributions of the plaintiff are substantial, for which the plaintiff would not be adequately compensated if the order were not made, and that failure to make that order would result in serious injustice to the plaintiff. 48 The plaintiff's contributions must be set against the defendant's contributions. The defendant has not provided much evidence concerning his contribution throughout the domestic relationship, except in the way of rebutting and clarifying the plaintiff's allegations. The defendant did contribute to the household duties. For instance, it would appear that he cooked most of the evening meals. He also lived in a house where the plaintiff's two daughters lived but where his own children spent little time. 49 The probabilities are that the plaintiff did, from time to time, watch over the defendant's children, but the defendant probably did more than the plaintiff in this regard seeing that her children were at Beecroft, but his were not. 50 The fact that there was $213,000 to be distributed has largely come about because of the increase in the property market, rather than from any improvements to the house. Thus little can be directly attributed to the plaintiff's effort or intentional contribution. 51 There was some evidence given before me that the defendant was initially prepared to take the $42,000 he had put into the property and assign his interest to the plaintiff. This was unacceptable to her. Then he was keen to sell the house at an early date, but the plaintiff was not. Then there were draft settlement deeds passing between the parties or their lawyers and the matter was almost settled. By that time, the defendant had perceived that the property had risen in value with the market and changed his position. I put little store on these events. 52 Mr McVay put that, "to allow the defendant to share the increase in the value of the home on an equal basis with the plaintiff when the plaintiff has contributed solely to keeping the property in the parties' joint names between September 2001 and October 2004 would be a serious injustice to the plaintiff. She spent all the money and he gets all the benefit". 53 This is good advocacy, but not a convincing submission for a number of reasons. First, the plaintiff actually only paid the mortgage for 9 months of the 2 years 9 months she and her family stayed in the home plus an additional $7,000 during 2003. Secondly, she could have accepted an offer of the defendant at an early stage and bought him out or made an application under s 66G of the Conveyancing Act 1919. Thirdly, the increase in value was not due to her efforts, but was a result of market forces in which both co-owners were entitled to share. Fourthly, she and her family had a "free" home for 143 weeks. 54 I do not consider that the contributions made by the plaintiff which were not taken into account in equity can be termed "substantial" within the meaning of s 17(2)(b)(i) of the Act. 55 The word "substantial" is, as Deane J said in Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 at 348, a word "not only susceptible of ambiguity: it is a word calculated to conceal a lack of precision." The word varies its connotation according to the circumstances. 56 "Substantial" has a dictionary meaning of "not insubstantial", "not illusory" "something considerable", but, in each case, what is substantial must be measured against the totality of the volume of the subject matter. 57 As far as my research goes, s 17(2) has received little judicial attention. In Street v Bell (1993) 114 FLR 167, Renaud J of the Family Court (the matter having been cross-vested) said, at 175, that the court must adopt a broad brush approach to the plaintiff's contributions, view them as a whole and then ask whether there is no way of avoiding serious injustice save than by an order under the Act. Her Honour's decision does not appear to have been subsequently commented upon in any reported case. 58 In Weston v Castle (Waddell CJ in Eq, 23 August 1989) BC8901813, the then Chief Judge in Equity, said of s 17 at p 13, that the question of whether there was a substantial contribution: "must be answered purely by a comparison of the contributions made with the value of the interest held in the property in question." 59 There are two reported instances of a woman selling up her property and providing the proceeds to the man for him to buy a home in his name. Both cases ruled that as the woman would have no right to compensation under the general law, she had suffered a substantial detriment (see the decision of Powell J in Reilly v Gross (1986) DFC 95-035 and that of now Associate Justice Macready in Currie v Schmidt [2004] NSWSC 47). However, they were decisions involving an obvious substantial detriment, so do not assist me in the present case. 60 Mr Burchett helpfully provided me with a series of references to unreported decisions where a judge had mentioned s 17 of the Act, but none of those cited provides any further assistance in the instant case. 61 Putting together the plaintiff's contributions and bearing in mind those of the defendant, they are, to my mind ephemeral rather than substantial. Both parties were working in steady and time demanding jobs. It was not a case of one party staying at home as a homemaker. The plaintiff was not the entire provider of housekeeping or child minding services. The plaintiff's contributions, even viewed as a whole are minor compared with the amount in issue. 62 Had the plaintiff made substantial contributions of the type she specifies, it is obvious that these would not have been the subject of compensation under the general law. 63 However, I am not satisfied that this would produce injustice. Particularly is this so when one realises that the plaintiff and her children had the free occupation of a substantial home for 143 weeks paying only the rates and for about half that period what was due on the mortgage. 64 Having reached this conclusion, it is unnecessary for me to explore further the question as to whether there was indeed a de facto relationship after February/March 2001. Indeed, the defendant admitted it on the pleadings. I only mention the point as the present case involved a situation where the defendant was living and working in Canberra for some of the relevant time and this sort of factor can mean that whilst the animus of a relationship is present, the factum is not. 65 I now have to consider the question of costs. 66 When a co-venture comes to an end, it is ordinarily equitable that the costs of winding it up should be borne rateably by the co-venturers. 67 However, where a person makes a claim under the Act for provision and fails, particularly where she fails on jurisdictional grounds, that person should ordinarily pay the opponent's costs. 68 Although I have not heard submissions on costs, I believe that the proper order for costs is that one half of each party's costs should come out of the fund and that the plaintiff must pay the other half of the defendant's costs and bear half of her own costs. However, either party is to be at liberty, at his or her own risk as to further costs, to argue costs either before me or a Registrar. 69 Ordinarily I would stand the matter over for short minutes to be brought in. However, as I will be away from the court until 31 July 2006, I will stand the matter over to the Registrar's list for mention on a day suitable to counsel or, if none is specified to 23 May 2006. If counsel for the parties can themselves settle the appropriate order, then it can be made by the Registrar. Otherwise it can be listed before any appropriate judicial officer. If the parties wish me to deal with it further, it can be listed before me on a Tuesday or Thursday in the first week of August, either for mention or for a short hearing. ***************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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