Dow v Smith [2007] NSWSC 992

New South Wales Supreme Court

CITATION : Dow v Smith [2007] NSWSC 992 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 03/09/07

JUDGMENT DATE : 20 September 2007

JURISDICTION : Equity

JUDGMENT OF : Associate Justice Macready at 1

DECISION : Paragraph 42

CATCHWORDS : Family Law. Application for adjustment of parties' property interests under s20 of Property (Relationships) Act 1984. Order for adjustment. No matter of principle.

PARTIES : Andrew Hunter Dow v Ross Smith

FILE NUMBER(S) : SC 3364 of 2006

COUNSEL : Mr G Gould for plaintiff Ms P Carr for defendant

SOLICITORS : Adams & Partners for plaintiff EM Tebbutt & Sons for defendant

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Associate Justice Macready

Thursday 20 September 2007

3364 of 2006 Andrew Hunter Dow v Ross Elliott Smith JUDGMENT 1 His Honour: This is the hearing of an application under the Property (Relationships) Act (the Act) 1984 for the adjustment of the parties' property interests under section 20 of the Act. The parties lived together in an admitted de facto relationship from January 1998 until 1 August 2005. Short chronology 2 The defendant was born on 28 of December 1962 and the plaintiff was born in Scotland on 21 April 1971. They met in Australia on 31 December 1997 and commenced their relationship in January 1998. At that stage they lived in a property at Marrickville owned by the plaintiff as to 75% and by his parents as to 25%. 3 In July 1988 the parties travelled to Dundee Scotland and stayed in the plaintiff's apartment. They worked together to prepare it for sale. In August they returned to Australia where they lived in the defendant's mother's house at Bronte. She allowed them the use of the house at no charge. 4 The plaintiff sold his apartment in Dundee and in December 1998 he received the sum of $26,819 from the proceeds of sale after payment out of the mortgage. He paid this into his Westpac account. In January 1999 the plaintiff obtained a working visa and studied to be a fitness instructor. In April of 1999 the parties moved back to the Marrickville property. The defendant had received $50,000 from the aircraft noise project for the purposes of insulating and air-conditioning the Marrickville property and this work was done. 5 In May 1999 the plaintiff began part-time work as a gym instructor. After being granted a resident's visa in December 1999 he commenced full-time work. In September 2001 the defendant let the Marrickville house to students and the parties moved back into the defendant's mother's place at Bronte which once again she allowed them to use without any charge. 6 On 26 July 2002 there were a number of transfers of property. The defendant's parents transferred their 25% interest in the Marrickville property by way of gift to the defendant. There was also a transfer of the defendant's mother's Bronte property to the plaintiff and defendant as tenants in common. The plaintiff held a 35% interest and the defendant a 65% interest. The proportions were negotiated in discussion between the parties and the defendant's solicitor. The consideration for this transfer was $330,000 which was paid together with certain other sums such as approximately $72,000 to the defendant's mother to cover capital gains tax for which she would be liable. The existing mortgage on the Marrickville property was repaid and after completion of the transactions there was a joint mortgage taken by the plaintiff and defendant over the Bronte property for $420,000 and a mortgage by the defendant over the Marrickville property for $142,720. The Bronte property was valued for stamp duty purposes at the time of transfer at $450,000. Stamp duty was paid on that value. 7 In August 2003 the parties commenced renovation on the Bronte property. For five months they lived in rented accommodation. The plaintiff paid the rent totalling $6,933 while the defendant paid the mortgage payments on the properties. 8 On 6 August 2003 the defendant sold the Marrickville property for $702,000. He discharged both mortgages from the sale proceeds and placed $135,000 into the party's joint account. Immediately thereafter he purchased a Toyota RAV 4 motor vehicle for $27,600 for the plaintiff. 9 In late 2003 the parties took out a loan from the teachers credit union for $190,000 to fund renovations and furnishings for the Bronte property. These funds were used for this purpose together with the defendant's funds in the joint account. By May 2004 all of the renovations were completed and the plaintiff closed his Westpac account and paid the balance of $4668 into the joint account. 10 In December 2004 the plaintiff received a gift from his grandmother of $2,433 which was transferred into the joint account. The parties separated on 1 August 2005 with the plaintiff vacating the property. He took the Toyota motor vehicle and various items of furnishings and personalty. The defendant has continued in occupation and has paid all mortgage payments, Council rates and utilities. The property of the parties of the commencement of the relationship 11 At the commencement of the relationship the plaintiff owned an apartment in Dundee Scotland which was subject to a mortgage of approximately 40,000 pounds. He had 2,000 pounds in a savings account and an investment account policy worth 4,138.98 pounds which matured in June 2002. He also owned an upright piano, various items of furniture and appliances in the Dundee property which at that stage was leased. 12 At the commencement of their relationship the defendant had a three-quarter share in the Marrickville property with the other quarter share being owned by his parents. He had an upright piano, two German grand pianos and a church organ estimated to have a value of $10,000. He also owned various items of household furniture. His liabilities at that stage consisted of a mortgage to the Commonwealth Bank of approximately $140,000. At the time he was employed as a schoolteacher and also worked part-time as a music teacher. The property of the parties at the conclusion of the relationship 13 At the conclusion of the relationship the parties jointly owned the Bronte property in the proportions to which I have referred. The parties are agreed that, as at the date of the hearing, the property has a value of $850,000. There is a mortgage on the property of $164,500. At or about the time of separation the defendant purchased a piano for the sum of $8,000, which was acquired using the redraw facility on the mortgage, which sum is included in the figure I have just mentioned. That purchase was for the defendant's benefit and, accordingly, the relevant parties' equity in the property is $693,500. 14 In addition the plaintiff has retained the Toyota RAV 4 motor vehicle and taken various items of furniture and personalty which have not been valued. The parties' financial contributions 15 It is plain that the plaintiff made no direct contribution to the purchase of the Bronte property other than his contribution as a joint borrower on the loan used to finance the purchase. In respect of those borrowings he made no contributions directly to the mortgage repayments. Plainly the defendant, by paying out the initial borrowings following the sale of Marrickville, has effectively financed the purchase of the property. Once the Marrickville funds were expended there were further borrowings to carry out the improvements on the Bronte property. The plaintiff and the defendant contributed to those mortgage repayments. From March 2004 until separation in August 2005 each of the parties contributed $18,000 in mortgage repayments making a total of $36,000. 16 The plaintiff contributed financially to the Marrickville property and in a non-financial way to the Bronte property. By the end of 1999 the plaintiff had funds totalling $16,000 remaining from the proceeds of the sale of his Dundee property while a sum of $10,000 had already been used on living expenses. Therefore the plaintiff contributed $16,000 to renovations on the Marrickville property. Part of this sum was used to replace the front veranda of the property and to construct a deck at the rear of the property. There was work done on the internal courtyard and an outdoor courtyard was installed. There were some improvements inside the property such as the sanding of the floors and the installation of some parquetry flooring. 17 There is no evidence of the effect that these improvements would have had on the value of the Marrickville property. Given the nature of the improvements the sale price achieved was likely to have been increased. As I have said, the funds from that sale flowed through to the Bronte property and in that sense there was a contribution to the Bronte property by the plaintiff resulting from his expenditure on Marrickville. 18 After completing the aircraft noise renovations in 2000 at a cost of $50,000, the parties decided that the Marrickville property should be used to run a bed-and-breakfast business. The defendant by virtue of his ownership of the Marrickville property received a Government grant of $50,000 to carry out this work. Two new bathrooms were built in order to accommodate this change in plans. The defendant concedes that the plaintiff spent some $10,000 on these improvements. These funds seem to have been drawn from the $16,000 which the plaintiff received from the sale of his apartment. I accept that the plaintiff contributed a total sum of $16,000 to renovations to the Marrickville property. 19 Once the parties had moved into the Bronte property the plaintiff spent $2,000 having the carpets removed and the floors sanded. He purchased kitchen cupboards for $799 and spent $2,700 on the electrical and hot water systems. 20 The plaintiff maintained a separate bank account into which his own funds were deposited. The account was initially with Westpac and later with the Teachers Credit Union. The defendant's only account was a joint account which he held with the plaintiff and into which his salary was deposited. The plaintiff received an amount of $9,169 from his insurance policy in August 2003. He has identified a total of $12,724.29 in payments made towards renovations at about this time. I accept that he spent the funds he received on renovation and improvements to the Bronte property. 21 I have earlier outlined the parties' employment history. The defendant was employed full-time as a teacher and also did part-time work. In 2004 he ceased teaching at the school and concentrated on his part-time work. This did not have a substantial effect on his income. The evidence before me discloses that the taxable income of the parties to the extent known in the relevant years was as follows:- Year ended Defendant Plaintiff 1998 $51,000 Not known 1999 $54,547 Not known 2000 $52,817 $9,988 – estimate 2001 $41,758 $30,059 – estimate 2002 $55,405 $21,350 2003 $73928 $21,234 2004 $49,629 $19,852 2005 $45,396 Not Known