New South Wales Supreme Court CITATION : Gray v Ferguson [2008] NSWSC 984 HEARING DATE(S) : 01/09/08, 02/09/08 JUDGMENT DATE : 24 September 2008 JURISDICTION : Equity Division JUDGMENT OF : Macready AsJ at 1 DECISION : Paragraph 38 CATCHWORDS : Family Law. Application for adjustment of property interests under Property (Relationships) Act 1984. Order for purchase and adjustment. No matter of principle. CATEGORY : Principal judgment PARTIES : Deborah Anne Gray v Ian Ross McDowell Ferguson FILE NUMBER(S) : SC 5287/07 COUNSEL : Mr S Bell for plaintiff Mr MW Anderson for defendant SOLICITORS : Francis Lawyers for plaintiff Athena Touriki for defendant - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION ASSOCIATE JUSTICE MACREADY Wednesday 24 September 2008 5287/2007 DEBORAH ANNE GRAY v IAN ROSS McDOWELL FERGUSON JUDGMENT 1 His Honour: This is an application for adjustment of the parties' properties interests under section 20 of the Property (Relationships) Act 1984. The parties had a de facto relationship from 11 May 2004 until 2 November 2006. There are no children of the relationship but the plaintiff's two daughters, Elena and Claudia lived with the parties during the course of the relationship. The defendant had two children from a previous relationship but they did not live with the parties although one child visited from time to time. Background history 2 The plaintiff, Deborah Anne Gray, was born in November 1952 and the defendant, Ian Ross McDowell Ferguson, in January 1946. 3 The defendant had two children a son, Simon, borne in 1987 and a son Adrian born in 1991. The plaintiff had two children twins Elena and Claudia White born in July 1994. The parties first met in 2001 and in May 2004 they moved into rented accommodation in a house at Epping. In that rented property they contributed equally to household expenses, utilities and maintenance of the property. In October 2004 the parties agreed to purchase a property at Gloucester Avenue, West Pymble for $825,000. The purchase was completed on 26 November 2004 and the plaintiff and her children and the defendant moved into the house on that date. The plaintiff and defendant both provided half of the cash funds used to purchase of the property. There was also a joint mortgage of $450,000. From the time of the commencement of the mortgage both parties contributed equally to the repayments of the mortgage and the rates on the property. 4 In January 2006 there were problems with the relationship and by October 2006 the parties were contemplating what would occur when the relationship was terminated. In October 2006 the plaintiff offered to purchase the defendant's share of the property for $165,000 and payout of the defendant's interest in the mortgage. The defendant rejected the offer. 5 The defendant left the relationship and the property at Gloucester Avenue on 2 November 2006. From that time the plaintiff commenced to pay all mortgage payments, rates, maintenance and expenses. The only exception was one rate notice for $307 which was paid by the defendant. The plaintiff and her daughters continued to live in the property at Gloucester Avenue. 6 In November 2006 the property at Gloucester Avenue was valued at $750,000 which was less than the parties had paid at an earlier stage of the relationship. 7 In April 2007 the plaintiff changed the mortgage payments to interest only payments. In June 2007 the defendant found out about the change to the mortgage and he instructed the bank to change the home loan back to principal and interest repayments even though he was not making the repayments. At that time he had moved into rented accommodation. 8 In June 2007 the without consulting the plaintiff, the defendant withdrew $6,350 from the joint account such funds that were in the account were contributed by the plaintiff. I will return to the reasons for his action later in this judgment. 9 In August 2007 the value of the property had decreased to a value of $745,000 and in March 2008 the value of the property, according to a joint valuation, was $770,000. 10 In Howlett v Nielson (2005) NSWCA 149 the Court accepted that the exercise of jurisdiction under s 20 of the Act involved 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; (3) determination of what if any order is just and equitable having regard to these contributions. 11 To carry out the first step it is necessary to look at the property of the parties at the commencement of the relationship, the conclusion of the relationship and at the time of the hearing. Property of the parties at the commencement of the relationship 12 At the commencement of the relationship the plaintiff had the following items of property: Motor Vehicle $2,000 Clothing and personal effects Value unknown Savings Value unknown Superannuation $32,902.67 Clifton Reserve, Surry Hills Value unknown Interest in property at Commissioner's Road, West Ryde, being a claim under the Act against her former de facto partner Value unknown 13 At the commencement of the relationship the defendant had the following items of property. Clothing and personal effects $5,000 Savings $235,000 Household contents $3,000 Superannuation $224,000 Property of the parties at the conclusion of the relationship 14 As can be seen from the chronology during the course of the relationship the parties purchased the property at Gloucester Avenue, West Pymble. The evidence disclosed that the plaintiff's assets at this time were as follows: Motor Vehicle $2,000 Furniture and personal effects $10,000 Savings $ 5,500 Superannuation $70,898.58 One-half interest in Gloucester Avenue $375,000 Clifton Gardens Reserve, Surry Hills $600,000 Interest in property at Commissioner's Road, West Ryde, being a claim under the Act against her former de facto partner Value unknown 15 The plaintiff had a joint liability to the Commonwealth Bank with the defendant for a total liability of $421.763. 16 At the conclusion of the relationship the defendant had the following items of property. Furniture and personal effects $3,000 Savings $40,000 Motor vehicle $15,000 Superannuation $330,000 One-half interest in Gloucester Avenue $375,000 17 The defendant also had a joint liability to the Commonwealth Bank with the plaintiff for a total liability of $421,763. 18 At the time of the hearing the parties had separated their personal effects and they still owned the Pymble property. The plaintiff's and defendant's assets had not changed except for the valuation of the Gloucester Avenue, West Pymble property which is worth $770,000. The mortgage was $397,626. Financial contributions between the parties 19 During the course of the relationship the parties contributed equally to the repayment of the mortgage and household expenses. After the conclusion of the relationship the defendant ceased mortgage payments and these were continued by the plaintiff who also paid the household expenses for herself and her daughters. 20 I have referred to the withdrawal by the defendant of $6,350 from the joint Commonwealth Bank account in June 2007. The defendant says that this sum related to Child Support Payments made to the plaintiff by the father of her children. He calculated his entitlement of $14,580 being one half of the Child Support Payments paid during the period of the relationship. His claim is based on the fact that the Child Support Payments were not contributed by the plaintiff to the account from which the expenses were paid but retained for her general purposes. No doubt a great portion of these payments would have used by the plaintiff to support her children. 21 During the course of the relationship the plaintiff also received income by way of rent from her property at Surry Hills. The defendant helped her to calculate the outstanding rent payable by the tenant which rent had apparently fallen into arrears. 22 During the course of the relationship the plaintiff had $135,000 made available to her from her father and for a time she had these funds in the mortgage account which reduced the amount of interest payable by the parties. These funds were in the account from the first half of 2005 until 1 September 2006. 23 During 2008 the plaintiff had students staying in her home and she received money from them for board and accommodation. In February she had a student for five weeks paying $220 per week. As part of this arrangement the plaintiff would provide meals, washing facilities and some transport. In May 2008 she had another Chinese student for $220 a week who was still there at the time of the hearing. 24 In 2007 the plaintiff had received a total of $2,360 from students. Non-financial contributions 25 The plaintiff and the defendant shared homemaking contributions, household tasks and care of the children. The evidence does not disclose any disproportion between the parties for these activities. 26 In addition the defendant claims to have made a contribution by carrying out work and maintenance to the Surry Hills property. The actual details of the work he did at the property are set out in paragraph 28 of his affidavit in these terms: Poisoned and cut down a tree (Olea Africana) in or around June 2004 with my chainsaw, including the cost of the fuel; Pruned ivy and two camellia trees at front of house on or around October 2004; Repaired balustrade in October 2004; Painted fibro walls surrounding front balcony, pulled up old carpet from first­floor, removed nails and tacks from the floor and made good (Oct 04) ; Painted kitchen area and ground floor - Oct 04; Removed concrete capping and impregnated glass from wall on northern boundary of the rear of the house Oct 04 ; Cleaned up house prior to new tenants moving in Oct 04; Pruned Canary Island palm in the rear yard and bundled up the fronds for collection Oct 04; Weeded and improved the garden bed along rear wall, northern side Oct 04; Planed front door, reset lock and re-hung the door with assistance from my son Adrian on or around Jan 2005 ; Accompanied the Plaintiff/Cross-Defendant to repair and maintain the premises when down pipes were leaking (around Jan 06) and on several other occasions when tenants required repairs. Prepared Excel spreadsheet to show deficiencies in rental paid by the tenant Sheila Brown from February 1998 to May 2004; Attended meetings with the Plaintiff/Cross-Defendant and her accountants regarding the Plaintiff/Cross-Defendants income tax on rental receipts between 1994-2004; Provided advice and attended meetings in respect of parking easement, planning and development issues and drafted letters in this regard. 27 As usual there is no evidence to suggest what effect this work had on the value of the property. No doubt they were carried out at the time the property was being maintained to make improvements and enhance the appearance of the property for future tenants. There is a dispute about the extent of the work in the sense of how long it took. It seems that both parties were involved in work and maintenance on the property and it seems to me that judging from its description there was at least a week's work involved for the defendant. This has to be taken into account. 28 There were no financial contributions to the Surry Hills property by the defendant. The plaintiff received the rent and paid all expenses for the property which she owned unencumbered at the commencement of the relationship. I do not think it is appropriate to deal with this property as part of the global pool of assets. A preferable view would be take some account of the contributions made to the property by the defendant in the adjustment process which I will deal with later in respect of the property at Gloucester Avenue, West Pymble. Discussion 29 The defendant has consistently refused to allow the plaintiff to purchase his half share in Gloucester Avenue, West Pymble. In October 2006 when the property was valued at $750,000 and a mortgage of $424,000 his interest was $163,000. It will be recalled that the plaintiff offered to pay the defendant $165,000 at that time. 30 The plaintiff gave evidence that her daughters who are now aged 14 years attend Turramurra High School. They are in Year 8 and they find it convenient to travel to school by bus from their present home. As well as being happy at school they have made many friends in the neighbourhood and they attend the local soccer club and one daughter attends a local church group. In addition the home is close to Macquarie University where the plaintiff works and this enables her to spend more time with her children. The plaintiff made it clear that she did not wish to move out of the area and her preference was to buy out the defendant. 31 Although the plaintiff has not made any application for a loan it is plain that the plaintiff who is employed at Macquarie University as an English teacher would probably be able to raise the necessary finance. It is to be remembered that she has her property at Surry Hills which is unencumbered. In my view if at all possible the plaintiff should have the opportunity to purchase the defendant's share in the property as no valid reason has been suggested as to why the property should be sold which would only cause the parties more expense. 32 One difficulty when coming to an appropriate figure for adjustment is that the plaintiff has paid the mortgage since separation in the sum of $80,303.31 and other expenses relating to the property of $13,229.10 which total $93,532.41. 33 The mortgage over the period since separation has been reduced from $421,763 to $397,626 an amount of $24,137. During this period the defendant has been living in rental premises paying rent of $1,560 a month. 34 Over the period since separation the property has increased in value and the mortgage has been reduced due to the payments made by the plaintiff. The plaintiff should have the benefit of that reduction in the mortgage. This can be achieved by calculating the defendant's present equity by using the present value and the mortgage amount due at separation. The net equity for the defendant is $174,118 and the plaintiff is $198,255. This gives the defendant the benefit of the increase in value since separation and gives the plaintiff credit for the amounts by which she has reduced the principal of the mortgage since separation. 35 In order to keep the property for the benefit of both parties the plaintiff has expended $69,395 in interest, rates and outgoings. The defendant for his part has paid rent of $34,320 for his accommodation. The plaintiff is now responsible for providing accommodation for herself and her children. I think it is appropriate for there to be some adjustment for this on this aspect. 36 The plaintiff should allow for at least one third of the rent collected from students ($6,540), namely, $2,189 in favour of the defendant. The defendant for his part should allow the sum of $6,350 to the plaintiff as I accept that the plaintiff most likely used the child maintenance payments for her children's maintenance. There has to be an allowance for the other non-financial contributions of the defendant to the plaintiff's house at Surry Hills. 37 To reflect these adjustments there should be a reduction in the defendant's net equity of $15,000 to $159,118 which the plaintiff should have the opportunity to purchase. 38 The orders I make are as follows: 1. Upon tender by the plaintiff of the amount of $159,118 together with a discharge of the mortgage granted by the plaintiff and the defendant to the Commonwealth Bank of Australia with respect to the property at Gloucester Avenue, West Pymble, the defendant shall transfer to the plaintiff all his right, title and interest in the property at Gloucester Avenue, West Pymble. 2. In the event that the plaintiff does not tender the amount specified and the discharge of mortgage within 90 days of the date of this judgment, the parties are to sign all documents and take all steps necessary expeditiously and in good faith to sell the property at a fair market price. (a) The proceeds of sale, after payment of all necessary expenses, will be divided between the parties so that the plaintiff will receive 57.26% and the defendant the balance. (b) The plaintiff shall in any event take all necessary steps to ensure that the defendant obtains a release of the defendant's liability in respect of the overdraft facility with the Commonwealth Bank of Australia. 39 I will hear the parties on costs. ********** 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.