Burns v Chazan [2000] VSC 328

Supreme Court of Victoria|2000-09-15|Before: Kellam J

PROPERTY LAW - property of de facto partners - financial contribution - contribution as homemaker or parent - relevance of "negative contribution" by way of financial irresponsibility and alcoholism of one party - Property Law Act 1958 (Vic), Pt IX, ss. 275, 285.

The proceedings relate to property arising out of the de facto relationship of the parties which commenced in about 1981 and ended in October 1997. There are two children of the relationship, Grace born 13 September 1987 and Jack born 13 April 1990, both of whom now live principally with the defendant and his wife Helena whom he married on 20 March 1999.

(a) The former matrimonial home situated at 130 Marshall Street, Ivanhoe which has an agreed value of $750,000 and which has been occupied by the defendant and the children since the separation of the parties in October 1997.

(b) Investment properties as follows:

(i) 1 Como Street, Alphington which has an agreed value of $300,000.

(ii) 816 Heidelberg Road, Alphington which has an agreed value of $275,000.

(iii) 826 Heidelberg Road, Alphington which has an agreed value of $205,000.

(iv) 828 Heidelberg Road, Alphington which has an agreed value of $200,000.

(c) A business known as Gumnut Child Care Centre ("Gumnut"), the value of which is the subject of dispute between the parties.

(d) Shares in joint names valued at $29,130.

(e) Shares in the name of the defendant the value of which is in dispute between the parties.

(f) Fees owing to Gumnut, tools, equipment, and a boat totalling approximately $18,000.

The above assets have a total value of approximately $1.8 million. The defendant contends that liabilities of the parties total approximately $750,000 and that the total net assets of the parties are approximately $1,050,000. The liabilities include loans made to Gumnut by the defendant as well as other debts of Gumnut. The plaintiff asserts that the net assets of the parties amount to a sum of approximately $1.48 million.

By her amended statement of claim the plaintiff claims a number of alternative remedies. She seeks declarations that she is in equity a tenant in common with the defendant in each of the real properties to a proportion of at least half and further declarations that the defendant holds his share of such properties on trust for her. In the alternative she seeks orders for partition and sale of each of the properties pursuant to Part 4 of the Property Law Act 1958 ("the Act"). Furthermore she seeks orders for adjustment of the property interests of the parties pursuant to s.285 of the Act. In addition she seeks declarations in relation to interests in other assets including shareholdings of the parties. The defendant by counterclaim seeks an adjustment of property pursuant to s. 285 of the Act.

It became clear in the course of the proceeding, and the parties concede, that the principal issue in dispute is what order is just and equitable having regard to the matters set out in s.285 of the Act, and that as the Court may make an order under s.285 of the Act whether or not it has declared the title or rights of a de facto partner, it is not necessary insofar as the real property, at least, is concerned to consider the declarations sought nor to consider the application for partition and sale. Indeed the case was argued before me on the basis that all assets of the parties could be dealt with pursuant to s.285 of the Act.

Accordingly, the matter falls to be determined principally under the provisions of Part 9 of the Act. In the present case I am satisfied that the jurisdictional requirements of ss. 280, 281 and 282 of the Act are established. Indeed no submission to the contrary was made by either of the parties.

As stated above the case was argued before me on the basis that s.285 of the Act as it presently appears on the Statute book is to apply. Section 285 states:

"(1) The Court may make an order adjusting the interests of the de facto partners in the property of one or both of them that seems just and equitable to it having regard to - (a) the financial and non-financial contributions made directly or indirectly by or on behalf of the de facto partners to the acquisition, conservation or improvement of any of the property or to the financial resources of one or both of the partners; and (b) the contributions, including any contributions made in the capacity of home-maker or parent, made by either of the de facto partners to the welfare of the other de facto partner or to the welfare of the family constituted by the partners and one or more of the following -

ii. a child accepted by one or both of the partners into their household, whether or not the child is a child of either of the partners; and

iii. any written agreement entered into by the de facto partners.

(2) A Court may make the order whether or not it has declared the title or rights of a de facto partner in respect of the property."

In the course of my consideration of the appropriate decision to be made in this case it became clear that the submissions of counsel as to the manner in which all assets are to be considered are based upon a misapprehension as to the relevant applicable law. The Property Law (Amendment) Act 1998 was assented to on 5 May 1998 and came into operation on 29 June 1998. This Act amends Part IX of the Property Law Act 1958 (Vic) which came into operation on 1 June 1988. The effect of the amending Act is to enable the court to adjust the parties' legal interests in both real and personal property. This is an obviously helpful and ameliorative amendment. Regrettably, however, these amendments are not retrospective. Section 6(2) of the Property Law Amendment Act 1998 provides that:

" This Part as in force immediately before the commencement of Part 2 of the Property Law (Amendment) Act 1998 continues to apply in relation to a person who was a partner in a de facto relationship which ended before the commencement of Part 2 of that Act whether or not proceedings had been commenced under this Part as so in force."

In the present proceeding it is beyond argument that the de facto relationship ended before the commencement of the amending Act. Accordingly, and not withstanding the submissions of counsel, I am required to deal with the property of the parties pursuant to the provisions of the Property Law Act 1958 as it applied at the time of the end of the relationship in 1997. Section 285 of the Act at that time stated:

"285. Order for adjustment (1) A court may make an order adjusting the interests of the de facto partners in the real property of one or both of them that seems just and equitable to it having regard to - (a) the financial and non-financial contributions made directly or indirectly by or on behalf of the de facto partners to the acquisition, conservation or improvement of any of the property or to the financial resources of one or both of the partners; and (b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the de facto partners to the welfare of the other de facto partner or to the welfare of the family constituted by the partners and one or more of the following - (i) a child of the partners; (ii) a child accepted by one or both of the partners into their household, whether or not the child is a child of either of the partners; and (c) any written agreement entered into by the de facto partners. (2) A court may make the order whether or not it has declared the title or rights of a de facto partner in respect of the real property."

Section 275 of the Act defines financial resources in the following terms:

(a) a prospective claim or entitlement in respect of a scheme, fund or arrangement under which superannuation, retirement or similar benefits are provided; and

(b) property which, under a discretionary trust, may become used for the purposes of or vested in one or both of the de factor partners; and

(c) property, the alienation or disposition of which is wholly or partly under the control of one or both of the de facto partners and which is lawfully capable of being used for the purposes of one or both of the de facto partners; and

(d) any other valuable benefit."

"Property" is defined in s.275 of the Act as including:

"Real and personal property and any estate or interest in real or personal property, and money, and any debt, and any cause of action for damages (including damages for personal injury), and any other thing in action, and any right with respect to property."

Accordingly, the jurisdiction of the court in these proceedings under s.285 of the Act is limited to the alteration of legal interests in real property. The jurisdiction of the court as to the alteration of legal interests in other forms of property is in accordance with the general law.

In Conn v Martusevicus (1991) DFC 95-109 at p. 76, 397 Vincent J said in relation to s. 185 of the Act:

"It is, of course, the fact that the Victorian legislation authorizes the Court to make orders for the adjustment of interests with respect only to real property. There are no provisions concerned with the making of orders for maintenance such as those to be found in the Family Law Act, and the New South Wales de facto legislation and it is apparent that the objectives sought to be achieved by the legislation are limited. The larger areas of operation of both the Commonwealth and New South Wales Acts require that the Courts when dealing with applications made under them, direct attention to a wider range of considerations than those which possess relevance under the Victorian provisions. Whilst it is, in my opinion, important to remain mindful of these differences, nevertheless the Court is vested with a wide discretion and must attempt to arrive at a result which is just and equitable in the circumstances. Accordingly it must have regard to the whole of the relevant context within which an application is made. Any assessment of the significance and value of the assistance and support provided by de facto partners which did not place them within a framework provided by all of the circumstances of the relationship, would introduce a measure of unreality into the process and a degree of tension would arise between the adoption of a restrictive approach to the factors to be taken into account, and the duty of the Court to attempt to achieve equity between the partners. Whilst s.285 imposes an obligation upon the Court to have regard to a number of particular kinds of contributions which may have been made, the legislation has not attempted to confine narrowly the concept of 'contribution' and there is, in my opinion, no good reason for the Courts to do so."

Mandie J in Hughes v Curwen-Walker (1995) DFC 95-160 said at p.77,346 in referring to the legislation:

"In my view, it is important to avoid the erection of any rigid criteria, steps or tests governing the exercise of the Court's discretion under s.285. The Court is empowered to make an order, adjusting the interest in real property, that seems just and equitable to it having regard to contributions made as defined expressly by the section, but, at the same time what seems just and equitable should not and cannot be decided in a state of mind oblivious to all circumstances other than those constituted by the defined contributions."

I accept the views expressed above as being a useful approach to the task before me.

Evidence relating to bank accounts and other financial evidence was put before me in substantial detail during the eight days of the hearing of this case. Some assets of the parties (such as the share holdings) and some liabilities will vary in value from day to day. There are a number of assets which have been accumulated by the parties and there are assets which have been disposed of by the parties at varying times both during the relationship and after the relationship had ended. There are, accordingly, some difficulties in approaching the determination of the issues between the parties on an asset by asset basis. In Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, the High Court made it clear that either an asset by asset approach, or a global approach, was appropriate in proceedings under s. 79 of the Family Law Act 1975 (C'wealth). Nicholson CJ in "D" v "J" (1996) DFC 95-175 at pp 77, 506 expressed the view that it is a valid approach to consider the assets in dispute under Part 9 of the Act in a global manner. I have concluded that such an approach is the most convenient approach in the circumstances of this case. I propose to follow the course suggested by Powell J in "D" v "McA" (1986) 11 Fam L.R. 214 at p. 228 which approach was approved by Vincent J in Conn v Martusevicus as being appropriate and that is, to first identify and value the assets of the parties; second, to determine whether any, and if so what, contributions of the type contemplated by s.285 of the Act have been made by either partner; and third, to determine whether in the circumstances, the contributions of the plaintiff have been already sufficiently recognized and compensated and finally, to determine an order which is appropriate to recognize sufficiently the contributions made by the parties.

The plaintiff is now aged 42 and the defendant is aged 43. The defendant married his former wife Karen in 1972 and a child of that marriage, Michael, was born in 1980. The date of the commencement of the de facto relationship between the parties is equivocal on the evidence before me but I am satisfied it commenced no later than January 1982 and may well have commenced six months earlier than that time. At that time the plaintiff was working as a receptionist at a medical practice. The defendant was employed principally as a musician playing in a band. The parties at that time resided together in rented accommodation at 963 Dandenong Road, East Malvern. In October 1984 the parties became registered proprietors as tenants in common in equal shares of a property situated at 1 Como Street, Alphington and they moved residence to that address from 963 Dandenong Road, East Malvern upon settlement of the purchase. Shortly thereafter, in November 1984 they became registered proprietors as tenants in common in equal shares of a property situated at 15 Great Valley Road, Glen Iris which property was rented by them to tenants.

In 1985 the parties commenced to convert their residence at 1 Como Street, Alphington into a child care centre to be operated under the name of "Gumnut Childcare Centre". That business commenced operation in 1985 with the plaintiff being employed full-time in the business. The defendant at that time continued his occupation as a musician.

On 11 September 1987 the parties became registered as joint proprietors of a property situated at 130 Marshall Street, Ivanhoe. Shortly thereafter they moved from 1 Como Street, Alphington to take up residence at 130 Marshall Street, Ivanhoe where they continued to live, until their separation 10 years later in October 1997.

On 13 September 1987 a daughter, Grace Chazan, was born to the parties. The plaintiff continued to work full-time at the child care centre after the birth of her daughter. In February 1998 the property situated at 15 Great Valley Road, Glen Iris was sold.

In July 1988 the parties were registered as joint proprietors of a property situated at 816 Heidelberg Road, Alphington which property adjoins the premises owned by the parties situated at 1 Como Street, Alphington. Shortly thereafter, the child care centre conducted by the parties at 1 Como Street was extended to be operated together with the property at 816 Heidelberg Road.

In March 1990, a son Jack was born to the parties. The plaintiff continued, after the birth of Jack to work at Gumnut.

In November 1990 the parties became registered as joint proprietors of an investment property situated at 19/23 Adelaide Street, Footscray.

In May 1994, a company, Dimax Pty Ltd, commenced to operate Gumnut. Prior to this date Gumnut had been operated by the partnership with each of the plaintiff and the defendant having a 50 per cent interest in such partnership. The shareholding of Dimax Pty Ltd was distributed, unbeknown, it would appear, to the plaintiff, by the issue of one share to her and seven shares to the defendant.

In 1995 the defendant excluded the plaintiff from further involvement with the management of Gumnut, although thereafter she did continue to work at the centre on a part-time basis with a special needs child. It is clear that for some years prior to 1995 the plaintiff had consumed alcohol to excess and that the relationship between the parties was deteriorating.

In May 1997 the parties became registered as joint proprietors of two properties situated at 826 and 828 Heidelberg Road, Alphington. The parties separated on 27 October 1997 and the plaintiff left the home at Marshall Street, Ivanhoe. From that date she ceased to receive any income from Gumnut.

There have been a number of distributions of money to the plaintiff pursuant to orders of the Family Court and in consequence of the sale of the investment property situated at Adelaide Street, Footscray and by reason of withdrawals from a joint bank account which distributions totalled $54,800.

The major assets held by the parties consist of real property. The parties are in agreement about the value of that property. It is as follows:

In addition the parties agree that a boat in the value of $10,000 is owned by the defendant as are tools and equipment to the value of $5000. There is a dispute about the value of Gumnut and about the value of shares owned by the parties.

Gumnut commenced operation in April 1986 and was operated as a partnership by the parties until Dimax Pty Ltd took it over in 1994. After a difficult start the business became profitable for a period of time. For example the partnership tax return for the year ended 30 June 1992 demonstrated that it made a net profit of $66,905 in that year. The defendant, however, contends that the business has no real value at the present time.

The plaintiff called a certified valuer, Mr Kevin Bice, to give evidence as to the value of the business. Mr Bice inspected the premises on 12 March 1999 and provided a report dated 13 April 1999 to the plaintiff's solicitors. He gave evidence that he has particular knowledge of and expertise in relation to child care centres. He noted that the business is conducted from the combined premises of 1 Como Street and 816 Heidelberg Road, Alphington and is registered to cater for 60 children. He stated that the child care industry has passed through a developmental stage where converted homes predominated, but that the market has shifted to large purpose-built centres built by developers and located on main road sites. He noted that over-building has occurred in the industry and as a result many child care centres are experiencing occupancy problems.

Gumnut is experiencing such occupancy problems and Mr Bice proposes that the value of the business should be assessed on the basis that the business does not continue to be operated from both premises, but should instead operate solely from 816 Heidelberg Road. At present those premises are registered to cater for 32 children.

Mr Bice stated that an appropriate value of the business if conducted for only 32 children at 816 Heidelberg Road would be $120,000. This value is based upon recent sales of other child care centre businesses. He noted that purpose built centres with 90%-100% occupancy sell in a range of $4,000 to $5,000 per child place and that $3,750 per child place is an appropriate valuation in the circumstances of the subject child care centre. Gumnut was not purpose built and operates under a moderate fee structure. It should be noted that Mr Bice concluded that the business as presently conducted would be regarded as unprofitable. He noted that the attendance registers for the centre examined by him reveal an occupancy level of 32 children (or 53.3%). Mr Bice said:

"In assessing value at the current date a purchaser would note this trend and accordingly would judge the business as being unprofitable; with these occupancy levels and in the notional circumstance of a leasehold business with the purchaser paying rental for the two freehold properties there would clearly be no profitability. The causative factor appears to be the child care centre recently established in Ivanhoe on the corner of Lower Heidelberg Road and Marshall Street, Ivanhoe which is brand new, purpose built and is registered for 60 children."

Because he regards the child care business as unprofitable in its present circumstance he proposed an "alternative scenario" to "achieve a sale of the business". The alternative scenario proposed by Mr Bice after discussion with the defendant on site, is the operation of the business from 816 Heidelberg Road, Alphington with its current registration of 32 children.

The approach taken by Mr Bice assumes that the division of the child care centre could be achieved at no cost to the business. I am not satisfied that such an approach is justified. It assumes that all of the parents of the 32 children who presently attend the child care centre would have their children remain there if it were to be substantially reduced in size. In my view this cannot necessarily be assumed. Indeed the defendant called as witnesses two parents who currently have children attending Gumnut. These parents expressed doubts to me about whether or not they would leave their children at Gumnut if such a substantial change was to occur. Furthermore, if, as Mr Bice concludes, the construction of a purpose built child care centre nearby has had the effect of reducing the occupancy of the Gumnut business so dramatically, it appears to me to be speculative to assume that the occupancy rate of Gumnut would remain at 100% if its size and area were to be reduced considerably in the future.

Furthermore, Mr Bice did not address the issues of the costs which would be incurred in consequence of the business being conducted at 816 Heidelberg Road only. Mr Philip Ryan, an architect, gave evidence that he had examined (from the viewpoint of an architect) the feasibility of the conversion of 816 Heidelberg Road into a child care centre for 32 children. He concluded that the building works required would include construction of a new children's toilet, paved staff car-parking spaces and a drop-off/pick-up area, together with an outdoor play area and new administration building works. He estimated the cost of such works to be in the range of $30,000 to $40,000. In addition Mr Ryan expressed the opinion that planning approval for such a conversion would not be obtained, particularly as the car-parking arrangements and pick-up/drop-off area would fail to meet the requirements for a housing development, let alone a child care centre situated at a busy intersection. Notwithstanding some of the somewhat speculative nature of some of Mr Ryan's evidence such as whether a planning permit would or could be obtained, I do accept that there would be costs required to convert 816 Heidelberg Road to a stand-alone child care centre and that there is at least a significant risk that planning approval would present considerable difficulty.

In the end result the evidence of Mr Bice is that the current child care centre is at present unprofitable and thus of no commercial value. I consider there to be grave difficulty in undertaking a notional and speculative exercise to ascertain whether or not the business might be turned into a viable venture by a substantial change such as that proposed by Mr Bice. I accept his evidence that the business is, at present, unprofitable and incapable of sale. I am not satisfied that the changes proposed would result in a value of $120,000 being achieved without considerable cost. In addition there is the risk of failure to achieve planning approval. In the circumstances I ascribe no present value to the child care business. In my view the real value of the asset in question is the value of the land upon which it is constructed.

There is a dispute between the parties as to the value of shares which should be calculated in relation to the application before me. The defendant contends that as at the date of the hearing the parties held shares in the approximate value of $29,000 in joint names and that the defendant held shares in his own name to the value of $57,771, making a total of $86,000. The plaintiff submits that shares to the value of $204,000, being the value of the shares as at April 1998, should be divided equally between her and the defendant.

The value of shares held by the parties throughout their relationship is difficult to establish. Clearly the tax returns and other records of the parties produced before the court do not reflect the true position throughout the entire period of the relationship. The evidence before me establishes that the defendant has for many years engaged in share trading activities. The defendant gave evidence before me that he held cash and shares in a total sum of $6,000 at the commencement of the relationship between the parties. He gave evidence that he engaged in share trading throughout most of the time of the relationship. Some of the funds used to purchase shares came from Gumnut but the source of other purchases is not clear.

The defendant gave evidence that shares to an approximate value of $18,000 were sold to purchase Marshall Street and that about $30,000 to $35,000 was obtained through the sale of shares before the 1987 stock market crash. The defendant gave evidence that after the share crash of October 1987 he did not trade in shares for about three years, although it should be noted that his tax returns for the years ending 30 June 1989 and 30 June 1990 contained claims for losses made in respect of sales of shares in those years. The loss from share trading claimed in 1988/89 was $2798. In 1989/90 it was $4991. The tax returns in question are, however, uninformative as to the detail of shares held by the defendant during the period in question. However, and inexplicably on the evidence before me, the defendant gave evidence that "towards the end of 1993" he had $600,000 invested in shares and that in that year he sold shares to the value of $220,000 which partly funded renovations undertaken at Marshall Street, Ivanhoe.

He gave evidence that at the time of the share crash the value of shares held by him was approximately $15,000 but that those shares rose in value by 1991 to "close to $100,000". He said, "I might buy and sell the same stock ten times in one year so I can get lots and lots of leverage out of movements at times". Documents produced in the course of the hearing demonstrate that during 1993, 1994 and 1995 the defendant bought and sold shares of very substantial value in his name, in the joint names of the parties and in the name of Dimax Pty Ltd. By way of example the cost of shares purchased in 1993/1994 totalled $411,844 and net proceeds from sales in the same year totalled $295,484 (see Exhibit 9).

It is apparent that from time to time at least some money from the Gumnut business was used to purchase shares. For example, on 24 December 1996 a cheque for $61,295 was written out on the Gumnut business cheque account in relation to share purchases and made payable to the defendant's sharebrokers.

The defendant gave evidence that some shares were put into a joint superannuation fund which fund is held by trustees on behalf of the parties and is not the subject of dispute in the proceedings before me, nor is any order sought in respect thereof. It should be noted that the value of the plaintiff's interest in the superannuation fund is approximately $120,000.

The evidence before me as to the share trading of the defendant is generally unsatisfactory. I am satisfied, however, that the joint value of the shares held by the parties on 1 October 1997 was $177,388. As at 29 April 2000 the joint value of shares held in the parties' names was valued at $29,130. The plaintiff submits that apart from the sum of $54,800 which has been paid to her from the sale of shares subsequent to the separation of the parties, there is no adequate explanation by the defendant for the reduction of the value of the shares and that a notional value should be ascribed to the shares to reflect the fact that the shareholding has been reduced by the defendant without such adequate explanation. I will return to this issue below. For the purposes of valuing this asset I am satisfied that $29,130 is the value of the joint share holding of the parties as at the date of the hearing and at the same date the defendant is the holder of shares in his own name to the value of $57,771.

Accordingly, for the purposes of the first step in the exercise to be undertaken by me I am satisfied that the present value of the assets of the parties is as follows:

The contribution made by each party during a long relationship is often difficult to establish in full detail many years later and in circumstances where recollection has often failed and documentary evidence is incomplete. This situation is exacerbated by the circumstances of this proceeding whereby I am satisfied that the plaintiff is financially unsophisticated and has left nearly all financial management to the defendant. Recollection of events by both the plaintiff and the defendant are each affected in my view by the unhappiness and bitterness of the relationship in the years leading up to and following their separation. In my view it is helpful in the circumstances of the de-facto relationship under consideration by me to consider the relationship and the contribution made by each party in segments of time.

At the time the parties first met the plaintiff was aged 22 years and employed by Dr Blau as a receptionist at the Gray Street Medical Centre in St Kilda. She was a single woman with no dependents. The defendant was then aged approximately 28 years and employed as a musician. His then wife, Karen, and child, Michael, were financially dependent upon him.

The parties commenced to live in a de facto relationship in January 1982 at the latest. They may have commenced to live together as early as July 1981. The defendant's tax return for the year ending 30 June 1981 demonstrates that his gross earnings as a musician were $11,250. It is apparent that at the commencement of cohabitation neither party had any substantial assets. Although the defendant asserts that he had shares and savings to the value of approximately $6,000 no evidence of payment of dividends or interest appears in his tax returns at that time and, accordingly, I am not satisfied that his recollection is correct as to this matter. Likewise he alleges that the plaintiff had debts of approximately $4,000 at the commencement of co-habitation but no documents were produced in support of such contention. Likewise I am not satisfied that the defendant's recollection about this matter is correct.

I accept that each party had minimal savings at the time of commencement of co-habitation and that they opened a joint bank account which they used for the purpose of accumulating their joint savings. Early in the relationship the plaintiff was awarded the sum of $5,000 compensation in respect of a motor car accident which she had suffered. That sum was deposited into the parties' joint bank account. The parties at that time lived in rented accommodation at 963 Dandenong Road, East Malvern.

On 4 March 1983 a sum of $15,000 was invested in a mortgage loan in the name of both parties through a firm of solicitors, Vail & McBain. The plaintiff stated in evidence that she has no knowledge of the making of this loan and it would appear that she made no contribution to the mortgage investment. It is difficult to ascertain where the savings came from to make this investment although the summary of mortgage provided to the parties at that time stated that $203.13 was to be paid jointly to the parties each month by way of interest.

In October 1983 a loan was made in the name of both parties to the plaintiff's employer, Dr Blau, in the sum of $19,000. On the evidence produced before me it may well be that $5,000 of this sum came from the compensation payment obtained by the plaintiff. The source of the balance is entirely unclear, although the defendant asserts it came in from monies he brought into the relationship.

The mother of the defendant died in July 1981. It would appear from contemporaneous notes kept by the defendant that before the end of 1993 he received a total sum of $28,182 from his mother's estate.

Accordingly, over the period of the first year or so of the relationship it is apparent that the parties established funds sufficient to make loans in a total of $34,000 of which $5,000 most probably came from the compensation payment to the plaintiff. Both parties were engaged in employment at the time and they lived in rented premises. The earnings of the plaintiff are unlikely during this period to have exceeded $160.00 per week. The tax returns of the defendant produced in evidence throw no light on how these funds were accumulated. His gross income for the year ended 30 June 1981 is stated to be $11,250 and his net taxable income is stated to be $5,369. His net taxable income for that year was thus less than the plaintiff's income.

For the year ending 30 June 1982 the defendant's gross earnings were declared as $13,081 with a net taxable income of $6,188. For the year ending 30 June 1983 the defendant's gross income was declared as being $15,174 with a net taxable income of $7,365 (ie $142.00 per week).

It is difficult to see where the accumulation of funds to be invested came from during this period of time if the tax returns are a true reflection of the defendant's earnings. The best I can do on the evidence before me is to say that the plaintiff contributed at least $5,000 and that the balance of funds invested in loans was accumulated either from the savings of the parties alone or possibly from the savings of the parties together with a sum of no more than $10,000 from the estate of the mother of the defendant which sum may have been received by the defendant prior to receiving part of the proceeds of sale of his deceased mother's unit. It is however difficult to see how the plaintiff's earnings during this period could have been a significant factor in the accumulation of the savings referred to above. The likelihood is that such savings were mostly accumulated from the defendant's earnings as a musician which may not be accurately reflected by the tax returns. On balance, it appears to me that the defendant made a more substantial contribution to the accumulation of funds for investment during this period than did the plaintiff.

In July 1984 the parties contracted to purchase the property at 15 Great Valley Road, Glen Iris. The purchase price was approximately $75,000. An application was made to the RESI Permanent Building Society for a mortgage of $60,000 to enable purchase of the property. The application form which included a statutory declaration by both parties stated that the plaintiff at that time earned $148 per week in her position as a medical secretary and in addition earned $75 per week from the Malvern nursing agency. The income declared by the defendant was $150-$200 per week from his employment as a musician and $123 per week from a sum of $44,000 invested with Dr. Blau. The parties became registered as tenants in common of 15 Great Valley Road, Glen Iris, on 12 November 1984 and a mortgage to the RESI Permanent Building Society was registered at the same time. It can be observed that according to their statutory declarations the plaintiff was at that time earning slightly more than the defendant.

At about the same time in July 1984 the parties purchased 1 Como Street, Alphington for the sum of $72,000. A loan of $50,000 was obtained from the State Bank of Victoria. The source of the sum of $22,000, being the difference between the mortgage and the purchase price, is unclear although the defendant asserts it is from monies he brought into the relationship. On 16 October 1984 the property was registered in the names of the parties as tenants in common. The parties established residence at 1 Como Street, Alphington upon settlement. However, in 1985 the parties commenced to undertake works to convert 1 Como Street, Alphington into a child care centre to be operated as a partnership under the name "Gumnut Child Care Centre". There is a significant dispute on the evidence between the parties as to the relevant contributions made by each other towards the establishment and the operation of this business.

The defendant asserts that he had prime responsibility for the renovation work undertaken in relation to the setting up of the business. On the other hand the plaintiff asserts that the evidence given by the defendant as to his contribution is greatly exaggerated and that most of the work was done by tradesmen. The renovation work which was done was substantial and was undertaken over the period leading up to April 1986 when the child care business commenced operation. In my view both parties underestimated the work done by the other at this time in giving evidence before me. I am satisfied that the defendant undertook a substantial amount of the labour including restumping and much of the landscaping. He dug holes for the stumps for an extension to the existing premises, sanded floors, paved the car park and built a playground. However, it is clear also that the plaintiff during this time contributed her labour particularly in relation to painting, purchasing tiles and the planting of plants. She undertook tasks such as "running errands" and distributing "flyers" as the construction works reached a point where the business might soon commence. She also engaged in the interviews with parents and the enrolling of children. Although I am satisfied that the defendant contributed a substantial amount by way of labour to the works required to be undertaken to prepare the business for operation, I conclude that the contribution by the parties in their own spheres in this regard cannot be quantified as being other than equal.

However, it is apparent also that during the year in which works were undertaken in reconstruction of 1 Como Street, Alphington, the defendant continued to work as a musician. His tax returns for the year ending 30 June 1986 reveal gross earnings of $15,302 as a musician with his net income before tax being $10,179 from this source. No doubt much of this work was undertaken at night, the defendant having undertaken construction work at 1 Como Street, Alphinton during the day. At the same time the plaintiff was working part time as a medical receptionist for Dr. Brian Dudakov. Funds for the establishment of the business came from the earnings of the parties and from the repayment of the loan by Dr. Blau.

Gumnut opened in April 1986. The defendant set up the accounting systems but the plaintiff thereafter managed and conducted the business full time. The defendant resumed his career as a musician and played no substantial part in the business until September 1987. During this period of time the business operated at a loss although the number of children enrolled at the centre continued to increase. The partnership tax return for the year ended 30 June 1987 reveals a gross income of $41,000 with expenses of $81,500.

During this period the parties purchased a property at 130 Marshall Street, Ivanhoe which was to become their residence. They became registered as joint proprietors of these premises on 11 September 1987. The purchase price of this property was $250,000 which was supported by a mortgage loan stated by the defendant to be in the sum of $236,997. Their first child Grace Chazan was born on 13 September 1987.

The birth of Grace marked a traumatic event in the relationship of the parties. It is clear that the plaintiff had experienced considerable difficulty in the financial management of the child care centre from its establishment until that time. She did not attend to the payment of group tax in relation to the employees of the centre from the time of the commencement of the business in April 1986. This matter came to a head in August 1987 when the defendant learnt that such payments had not been made and that the business owed a sum of approximately $10,000 to the Commissioner of Taxation. At the same time the plaintiff informed the defendant that she had removed money from a bank account which was in the name of the plaintiff and the defendant but which contained monies held by them on trust for the benefit of the defendant's brother David Chazan. The plaintiff asserts that the sum she removed was approximately $9,000. The defendant gave evidence that he believed it was approximately $30,000. No documentary evidence was produced to support the defendant's allegations in this regard.

It should be noted that in relation to this issue the defendant swore an affidavit on 13 August 1999 which was filed in the Family Court whereby he alleged that the plaintiff "withdrew $62,000 from the monies" the defendant was holding in trust for his brother by forging the defendant's signature.

In giving evidence before me the defendant agreed that the plaintiff had not forged his signature and stated that the sum in question was approximately $30,000 and not $62,000. The affidavit sworn in the Family Court proceedings demonstrates that the defendant has been prepared to make exaggerated allegations against the plaintiff. For this reason I have wherever possible looked for contemporaneous records such as tax returns or other documents for support of financial claims made by the parties. Nevertheless I accept that the plaintiff did remove funds from the account holding trust monies for the benefit of the defendant's brother prior to August 1997 without the permission or authority or knowledge of the defendant. I accept her evidence, however, that this money was used in the conduct of the business. I am unable on the evidence before me to be satisfied as to the exact quantum of this money but it was almost certainly a substantial sum of at least $9,000 and possibly more.

It is apparent that until September 1987 when the true state of the business came to light, the defendant was not involved closely in supervising and managing the business. During this period he was continuing his career as a musician. In my view the problems of the business arose because the plaintiff did not have the business acumen or experience to conduct the business and because the defendant failed to instruct and supervise her adequately. The defendant through his counsel submits that the plaintiff's mismanagement should be seen as a "negative contribution". In my view, if that is so then both parties were equally responsible. The plaintiff did not tell the defendant of the problems because she was fearful of his response. On the other hand, the defendant failed to give her the support and assistance she clearly needed to properly conduct the business in question . It should be noted that during the period immediately before and after the opening of the business the plaintiff suffered three miscarriages. She was nevertheless left to manage the business with insufficient support.

Following the revelation of the failure to pay group tax and the improper withdrawal of money from David Chazan's trust account and following the birth of Grace Chazan the defendant took over the financial management of the business. It is clear that he has considerable managerial expertise in that the business over the following years was built into a successful and viable enterprise. The first step that was taken to improve the financial position of the parties was the sale of the investment property at 15 Great Valley Road, Glen Iris the settlement of which took place in February 1988.

Apart from a very short period of agency work the plaintiff continued to work full-time at Gumnut, although she played no part in its financial management after the birth of Grace in September 1987. Indeed she continued to work substantial hours at Gumnut until 1995. Although after September 1987 the plaintiff did not have a fixed roster at Gumnut she gave evidence that she was there most days from 8.00 am to 6.00 pm. I accept her evidence that from 1987 to 1995 she worked in a substantially full time capacity at Gumnut and was engaged in child care, cooking when required, dealing with parents, enrolments and cleaning up during this period. Over the ensuing period the child care centre improved in profitability. The partnership returns for the year ending 30 June 1988 reveal that the business made a net profit of $20,613. On 28 July 1988 the parties purchased as joint proprietors the property situated at 816 Heidelberg Road, Alphington. This property adjoins 1 Como Street and the child care centre was extended on to it. The defendant once again did much of the building work required to convert the premises into part of the child care centre including partial restumping, installation of electrical wiring, some plumbing, removal of walls and the construction of kitchen cabinets. He laid a considerable amount of paving and built a timber deck in addition to undertaking other works.

The partnership tax return for the following year ending 30 June 1989 states that the business had made a net profit of $48,754.

In March 1989 a son, Jack Chazan was born to the parties. The plaintiff took several weeks off work before resuming at Gumnut. The tax return for the year ending 30 June 1990 reveals a net profit of $39,309 and for the year ending 30 June 1991 a net profit of approximately $47,000. The net profit for the year ending 30 June 1992 is stated to be $66,905. During the period 1987 to 1992 the plaintiff worked at Gumnut as well as looking after two young children whilst the defendant managed and improved the business.

It is apparent that by 1992 the relationship between the parties had begun to deteriorate seriously. They separated in October 1997. The defendant submits that the plaintiff's contribution during this period was "largely negative".

The evidence establishes that during this period the plaintiff's life reached a low ebb indeed. There is a dispute between the parties as to how often and how regularly the plaintiff attended at the child care centre during this period. I accept the evidence of the plaintiff that she attended regularly up until 1995 when the defendant requested her not to attend although it is clear that in the two years or so leading up to that event the plaintiff's attendance and contribution declined.

During this period the plaintiff became a heavy user of alcohol and of barbiturates to the point where she sought medical and psychiatric treatment and joined Alcoholics Anonymous. Although she was provided during this period with sums of between $250 and $500 per week from Gumnut for house-keeping and in addition had access to accounts at the butcher, greengrocer and supermarket, she nevertheless took money from the business without the knowledge, permission or authority of the defendant. Her methods for taking this money were deceitful. For example she took cash from parents of children and wrote out receipts from the business in their name without banking the cash. She then removed the duplicate receipt from the receipt book. From time to time she wrote cheques on the business cheque account either to cash or in her own favour and then removed the cheque butts. In the course of giving her evidence she agreed that she does not know how much money she took from the business during this period nor did she at the time, care.

It is clear that during this period the capacity of the plaintiff to contribute to the conduct of the business and as a homemaker and parent was significantly undermined by her dependence on alcohol and drugs. There can be little doubt that her financial irresponsibility and her methods of taking money from the business caused at the minimum, significant disruption to the conduct of the business.

On 30 June 1994 the defendant transferred the operation of the child care business from the partnership to a company Dimax Pty. Ltd. Apparently unbeknown to the plaintiff her 50% share in the partnership was altered to a shareholding of one eighth with the remaining seven eighths being held by the defendant. During this period substantial renovations were undertaken at Marshall Street and two further properties at 826 and 828 Heidelberg Road, Alphington were purchased by the parties as joint proprietors. The renovations of Marshall Street spanned a period of about nine months in 1994. The defendant supervised the renovation works and undertook much of the labour himself. The plaintiff was not engaged in the provision of labour and had little to do with the reconstruction works apart from discussions about redecoration and the planting of some plants.

In 1995 extensive renovations costing in excess of $150,000 were undertaken at 816 Heidelberg Road. The defendant registered himself as the builder and sub-contracted the work to various tradesmen. During 1995 he spent up to twelve hours per day undertaking those works.

The Contribution of the Parties as Homemakers and Parents

This issue is relevant because of s.285(1)(b) of the Act. As with other contributions made by the parties there is dispute between them as to the extent of such contribution.

The plaintiff contends that from the commencement of her relationship with the defendant in early 1982 she made a substantial contribution as a homemaker. She at that time was employed as a medical receptionist and the defendant was involved in his full-time career as a musician. The living arrangements at that time were that the plaintiff performed the household duties which included washing, ironing, cooking and shopping for herself and the defendant when he was at home. She made curtains for the rental premises in which they lived and also sewed some clothes for the musical performances of the defendant. During that time, the defendant's son, Michael Chazan, stayed with the plaintiff and the defendant each weekend. Michael Chazan was born on 21 April 1980 and, accordingly, was then aged about two years.

In the early days of the operation of Gumnut the plaintiff performed most household tasks for herself and the defendant when he was not travelling in connection with his musical career. This continued until 13 September 1987 when Grace was born. In the period following the birth of Grace the plaintiff breastfed and looked after her and at the same time continued to operate the child care business although the defendant did all the bookwork following the birth of Grace. At about the same time Michael Chazan moved in to live permanently with the plaintiff and defendant. He was then aged about five years and attended a local primary school in preparatory year. Over the following years the plaintiff cooked meals for him and undertook other tasks including taking him to school and other places. She washed for him until a dispute broke out between Michael and her about her alleged theft of money from him in about 1994.

Jack Chazan was born on 13 March 1990. The plaintiff ceased work at Gumnut a short time before his birth and returned to work two weeks later. She continued to be the primary carer of Grace and Jack. She breastfed Jack for seven months who, like his sister, attended Gumnut with her on a daily basis. In addition she provided care for Michael Chazan during this period. She continued full-time work at Gumnut until 1995 when she ceased except for working several hours per day some days each week looking after a special needs child. Throughout this period she was the primary care giver to both children of the relationship although the defendant cooked many of the household meals. She cooked, cleaned, fed the dog, washed children's clothes, cleaned baths, basins, mirrors, made beds and did the linen for a household of five persons. She helped Grace with her school work, went to fetes and school excursions with her and took her to drama and music classes. At this time the plaintiff was suffering great stress in her relationship with the defendant and with the operation of the household as well as the care of the children and the continuance of her work at Gumnut. She concedes that her heavy drinking at that time led to a deterioration in her contribution as a parent and homemaker. Nevertheless she remained the primary care giver to the children of the relationship until the separation of the parties in October 1997. Since separation she has had the care of the children for six nights out of 14 and for one half of all holidays.

The defendant is highly critical of the contribution made by the plaintiff as homemaker and parent. He relies particularly upon the heavy drinking of the plaintiff which commenced in approximately 1993. The fact that the plaintiff rarely ironed a shirt for him is relied upon by him, as is the fact that the plaintiff left empty bottles of liquor around the house during the period of heavy drinking, particularly in 1994. He concedes however that the plaintiff was the dominant care giver during the first three years of Grace's life, although he asserts that the plaintiff discouraged him from being engaged in bathing and dressing activities with Grace. He asserts however that during the first three years of Jack's life (ie 1990 to 1993) the plaintiff and he shared equally in the necessary care giving responsibilities. The defendant asserts that he became aware in about 1993 that the plaintiff had a "very bad drinking problem". He asserts that her ability to manage the home properly and care for all of the children was "reduced to the extent that it was practically non-existent". He said that he woke the children, often made their breakfast, made their lunches and took them to school. During this period he cooked the children's evening meals and regularly took them to after school activities. He arranged for Jack to join the local football team of which he became the assistant coach for one season. He said he arranged social functions, birthday parties and other activities for the children and took care of their emotional well-being and needs which were increased in the circumstances of the problems associated with the plaintiff's alcoholism. He gave evidence that the house was in a mess and that the plaintiff did not carry out the household chores such as washing and ironing. In addition to the problems in the home caused by the alcoholism of the plaintiff the defendant had the responsibility of endeavouring to care for the plaintiff, search for hidden alcohol and attend with her at consultations with psychiatrists and at Alcoholics Anonymous meetings over the years in question.

The defendant called his son Michael Chazan to give evidence. It is clear that Michael Chazan and the plaintiff have never had a good relationship. The relationship deteriorated during the period that Michael lived with the plaintiff and the defendant full-time from 1994. The plaintiff from time to time allegedly stole money which Michael had obtained by way of pocket money or from his father or by working a newspaper round. Michael contends that the defendant cooked nearly all the meals and that the defendant was principally responsible for the care of Jack, Grace and Michael and that during the time Michael lived with both the plaintiff and his father the house in which they lived was untidy. Michael supported the defendant in his assertions that during the latter years of the relationship the plaintiff carried out few of her housekeeping responsibilities.

Helena Margaret Smith who married the defendant on 20 March 1999 has known the parties since 1991. She gave evidence that during the early 1990s Grace and Jack were often in attendance at Gumnut and that Jack often attended the creche in the same clothes during a three or four day period and was often smelly. She said that the children often came to the creche without having had breakfast and without having brushed their teeth or combed their hair. She said that there were times when she visited the home of the parties and it was often untidy with clothes strewn around. During this period it was obvious to her that the plaintiff had been drinking and the plaintiff told her on many occasions how she had been drinking and how unhappy she was within herself and within the relationship. Ms Smith's observation during this period was that the defendant took responsibility for more of the day to day chores such as cooking and taking care of the children than did the plaintiff.

The defendant continues the major role in the care of the parties' two children pursuant to orders of the Family Court. The defendant has continued to conduct Gumnut and has accepted responsibility for payment of all instalments of principal and interest due and/or fallen due in respect of mortgages over the real property.

The plaintiff submits that the defendant has exaggerated the extent of his own contribution and depreciated the contribution made by her. She submits that much of the evidence given by the defendant as to his contributions and the effect of the plaintiff's "negative contribution" is embellishment, exaggeration and/or untrue and submits that her contribution to the accumulation of the assets of the relationship by way of labour and as a parent or homemaker is such that she should receive a sum equal to 50% of the net assets of the parties. The defendant's submission in essence is that he has made the major financial contribution to the accumulation of assets and that he has made the major contribution in terms of labour and time to such asset accumulation. He submits that throughout the relationship, the plaintiff's financial irresponsibility, her failure to fulfil the role of homemaker and parent has been such that her contribution was not equal and should be calculated "at best" in "the order of 20 to 30%".

In applying the provisions of s.285 of the Property Law Act I am bound to have regard to the financial and non-financial contributions made directly or indirectly by the parties and the contributions made to the welfare of the other party or to children of the parties or to a child accepted by one or both of the parties into the household. Having had regard to these matters adjustment of interests of property that is just and equitable may be made.

Some assistance in this task is provided by the approach taken by the High Court in the context of s.79 of the Family Law Act in Mallet v Mallet [1984] HCA 21; (1983-1984) 156 CLR 605. Referring to the requirement of the court to evaluate the respective contributions of the parties, Mason J said at p.623:

"In undertaking this task it is open to the court to conclude on the material before it that the indirect contribution of one party or homemaker or parent is equal to the financial contributions made to the acquisition of the matrimonial home on the footing that that party's efforts as a homemaker and parent have enabled the other to earn an income by means of which the home was acquired and financed during the marriage. To sustain this conclusion the materials before the court will need to show an equality of contribution, that the efforts of the wife in her role were equal to the husband in his".

That theme was carried further by Wilson J at p.635 when he said:

"However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere are equal. The quality of the contribution made by a wife as homemaker or parent may vary enormously from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than the minimum requirements. Similarly, the contribution of the bread winner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case that where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contribution of the parties are made to an equal degree."

The defendant through his counsel Mr Udorovic QC submits that what he terms as the "negative contribution" of the plaintiff is such that a significant adjustment in favour of the defendant is required.

The alcoholism of the plaintiff and its alleged affect upon the viability of the child minding centre and the plaintiff's contribution as a homemaker is relied upon heavily by the defendant.

Cases can be found under the Family Law Act where behaviour which has had direct economic consequence is relevant to the issues of contribution under that Act. In Weber v Weber (1976) FLC 90-072, Zelling J concluded that the alcoholism of the wife in that case reduced her contribution as a homemaker and that such reduced contribution should be reflected in the distribution of the joint assets of the parties.

Likewise in Krotofil v Krotofil (1980) FLC 90-909 Murray J took the drinking of the husband into account in relation to the issue of contribution in observing that it was the wife mainly who ran a family business as the husband became less capable of conducting the business because of his drinking. In Fane-Thompson v Fane-Thompson (1981) FLC 91-053 the Full Court of the Family Court found that the dissipation of financial resources by a husband who engaged in heavy drinking was a significant issue in consideration of his financial contribution towards the assets of the parties. In Mead v Mead (1983) FLC 91-354, Asche SJ held that any contribution which the husband had made to the acquisition, conservation or improvement of the matrimonial home was offset by the losses sustained in a milk bar business which losses were caused by the heavy drinking and gambling of the husband. The issue of waste of assets caused by the gambling of a wife was considered by the Full Court of the Family Court in Donnelly (unreported, 27 January 2000).

I accept that behaviour of one party which has a directly deleterious economic consequences upon the property of the parties may, in appropriate circumstances, be taken into account in the evaluation of the respective contribution of the parties under s.285 of the Act. However, the behaviour in question must be related directly to the dissipation of or reduction or minimisation of value of such property before it is relevant to the issue of contribution. It is clear that there are no circumstances under which an order for adjustment of property under s.285 of the Act can be made as a penalty for inappropriate or undesirable conduct. As stated by Baker J in Kowaliw v Kowaliw (1981) FLC 91-092 at p.76,644:

"As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances: (a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or (b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value."

The relationship between the parties was a long one during which two children were born and during which the parties accumulated substantial assets. The defendant is a person of ambition and drive. The plaintiff has a different personality but nevertheless has been a mother and homemaker and has made a contribution beyond that of mother and homemaker by working in the Gumnut business for a substantial number of years.

The parties did not have substantial assets at the time of the commencement of their relationship. They pooled their earnings which at that time were not excessively disproportionate from each other. Soon after the relationship commenced the plaintiff obtained a compensation payment of $5,000 and the defendant obtained an inheritance which totalled approximately $28,000, both of which sums were jointly pooled in investments and loans before the first property was purchased. The financial contribution by the defendant to the assets first acquired by the parties was higher than that of the plaintiff particularly because of his inheritance. However, I am satisfied that at this time the non-financial contributions made by the parties can be said to be equal.

During the period between 1982 and October 1987 when Grace Chazan was born the parties engaged in a considerable amount of effort to acquire property and in particular to set up Gumnut. The plaintiff kept the home and worked full-time. I am satisfied that that she made a substantial contribution during this period of time. She worked full-time in the centre without salary although the tax returns indicate the parties took drawings which were equal during the period. She also played a substantial part in the setting up of the property and the business. As explained above I do not consider that the financially difficult period which followed the commencement of Gumnut and the financial mismanagement of the plaintiff in failing to pay Group Tax, as well as not advising the defendant of the use of David Chazan's money in the centre should be used to substantially depreciate the contribution of the plaintiff during this period. At the same time, during much of this period the defendant worked hard to create the physical environment of Gumnut and to make it a success. He continued his musical career and there can be no doubt his financial contribution towards the creation and improvement of the centre was of a high order. In my view the contribution of the parties during this period is difficult to separate and is relatively equal, with any balance being inclined more towards the contribution of the defendant.

Between 1987 and 1992 the plaintiff had the responsibility of looking after two young children as well as assisting in the care of Michael. At the same time she continued working at Gumnut. During this period the industry of the defendant resulted in the centre becoming profitable and this together with his share-trading activities enabled the assets of the parties to be increased by the acquisition and renovation of Marshall Street, Ivanhoe and by the re-building of 816 Heidelberg Road. I accept that during this period the defendant was engaged in share trading and he built up a substantial portfolio although the evidence does not permit any detailed analysis of this activity. Although the parties are each highly critical of each other's respective contributions during this period I conclude that the contribution by the plaintiff as a homemaker and parent and her contribution at Gumnut was significant and substantially equal to the financial and non-financial contribution of the defendant.

The period between 1992 and 1997 was a most unhappy period in the relationship between the parties and in particular for the plaintiff. Although an analysis of the cause of this unhappy situation is neither helpful nor relevant, it is apparent that the plaintiff felt unwanted and rejected and descended into a downward spiral of dependence upon drugs and alcohol. I am satisfied that her contribution as a parent and a homemaker decreased significantly during much of this period. I have no doubt that her theft of money from Gumnut caused disruption and inconvenience as did her alcoholism. Although I do not accept that such conduct caused such a degree of disruption that it can be said that the consequences of it were financially disabling for the business I accept the evidence of the defendant that some families left during the period by reason of the behaviour of the plaintiff and that there was a deleterious financial consequence for Gumnut.

Nevertheless it is apparent that the financial and non-financial contribution of the defendant during the period leading up to separation was significantly in excess of that of the plaintiff and furthermore that her contribution as a homemaker and parent was significantly reduced during the time in question.

The plaintiff's pleadings seek a declaration that the plaintiff is in equity a tenant in common with the defendant of an equitable estate in the real property, alternatively partition and sale of the real property and alternatively an order that the interest of the defendant in the real property be adjusted in her favour. Declarations are sought as to the other property and in particular in relation to the shareholding of the plaintiff in Dimax Pty Ltd.

As stated above the case was conducted on the basis that all property of the parties should be the subject of an appropriate order for adjustment of the interests of the parties. However, the provisions of s.285 as applicable at the time that the relationship ended do not permit me to adjust the interests of the parties pursuant to that section in other than real property.

The general law must be applied to assets other than the real property. I turn to those other assets before returning to the issue of the adjustment of the real property interests.

There appears to me to be no basis upon which the property interests of the defendant in the boat, tools and equipment should be altered. The two significant issues of property other than the real property are the interests of the parties in Dimax Pty Ltd including the interest in Gumnut and in shares.

As stated above I am not satisfied on the evidence before me that Gumnut has any value at all. It is, at present, regarded by the valuer called on behalf of the plaintiff as being unprofitable and of no commercial value.

The plaintiff holds a 1/8th share in Dimax Pty Ltd ("Dimax"). It will be recalled that Dimax took over the conduct of Gumnut in 1994. Little evidence of the details of the transfer of the interests of the partnership into Dimax was put before me. The tax returns for Dimax for the years ending 30 June 1995, 1996, 1997, 1998 and 1999 were placed into evidence. It is apparent that Dimax has been used as a corporate vehicle by the defendant to conduct Gumnut, operate a rental property in Footscray and trade in shares. The 1999 tax return for Dimax demonstrates that it made a trading loss of $37,969 for that year. However, its balance sheet establishes that its liabilities include loans from shareholders. In my view and notwithstanding the fact that the plaintiff became entitled to only a 1/8th share of Dimax when it assumed the conduct of Gumnut in 1994 there is no basis upon which her interest in this company should be adjusted. Although the plaintiff in her pleadings asserts that there had been an agreement to conduct Gumnut as a joint business venture and furthermore pleads that it was a term of such agreement that the plaintiff would be a director and equal shareholder in Dimax, no evidence was led to this effect. It is apparent that apart from her contribution to the creation and conduct of Gumnut prior to the incorporation of Dimax, she has had nothing to do with the conduct of the company, nor has she made any contribution to the assets acquired by it. Her contribution to the creation of and conduct of Gumnut prior to the incorporation of Dimax can be taken into account in the consideration of the appropriate adjustment of property interests under s.285 of the Act. Furthermore, during the period that Dimax operated Gumnut the plaintiff's contribution to the conduct of Gumnut was minimal and consisted only of the contribution of several hours per week when she took care of a special needs child. Accordingly I do not propose to order that the plaintiff's interest in Dimax be altered. That leaves her holding a 1/8th interest in that company which shareholding on the basis of the 1999 Dimax tax return would appear to be of little value. The shareholders' loan account was stated in the 1999 tax return of Dimax to be $300,126. There is no evidence as to the manner in which the shareholders' loan account is composed but, assuming as Ms Molyneux did in her final address to me that it is proportionate to shareholdings held then the plaintiff's interest in Dimax is unlikely to exceed the maximum sum of approximately $39,500. In my view that is a matter for an accounting to be conducted should the plaintiff seek to sell her share to the defendant, or should the company be wound up.

The other substantial property asset apart from the real property is the holding of shares held by the parties in public companies. The evidence relating to the share trading of the defendant over the years was, as I have said, most unsatisfactory. However I am satisfied that at the date of the ending of the de facto relationship the parties held in joint names shares valued at $177,388.

That shareholding was composed and valued at 1 October 1997 as follows:

As at the date of the hearing the only shareholding in the joint names of the parties were 549 Coles Myer shares and the 100,000 units in the Global Property Fund referred to above. Those joint holdings were valued at the time of the hearing in the sum of $29,130.

The defendant produced a schedule of sales of many of the shares referred to above which schedule was not challenged by the plaintiff. Those shares have been sold to enable payments of $40,700 to be made to the plaintiff and other payments of the costs of selling the Footscray property. A total sum of about $55,000 has been used to support Gumnut.

The plaintiff submits that property interests of the defendant should be apportioned against him to reflect the disposal of the jointly owned shares. The defendant submits that any reduction in the value of the jointly held shares is exceeded by the payments made to and/or on behalf of the plaintiff which payments he submits total $108,789 (see Exhibit 4). The plaintiff submits that moneys received by her total $54,800. As I understand the plaintiff's submission in this regard it is that the plaintiff has received a total of $40,000 pursuant to the sale of shares and pursuant to interim orders made in her favour by the Family Court and that this sum together with a sum of $14,800 which has been drawn from a joint account by the plaintiff between December 1999 and February 2000 is the sum of moneys advanced which should be taken into account.

However, the plaintiff agreed in the course of giving her evidence that in addition to the sum of $54,800 she has received other sums from the defendant including $35,500 being a distribution of half the proceeds from the sale of 23 Adelaide Street, Footscray the total of which sums amount to $108,789.

Doing the best that I can on the evidence which was put before me I am satisfied that shares held in joint names were valued at about $177,000 at the date of the end of the relationship between the parties. The shares now jointly held by the parties are valued at approximately $29,000. The difference in their value is approximately $140,000 over the period of the breakdown of the relationship. Leaving aside the sum of $37,500 advanced to the plaintiff from the sale of Adelaide Street, Footscray, I am satisfied that $71,289 has been advanced to the plaintiff since that time, a good part of which was funded by the sale of shares owned in joint names. Taking into account brokers fees and other costs it appears to me that on a broad brush basis the plaintiff has received total sums of money which approximate nearly 50% of the reduction in value of such shares. In those circumstances I propose to make no orders in respect of the joint shareholding of the parties save to declare that the plaintiff has a 50% share in the 549 shares in Coles Myer and in 100,000 units of Global Property Fund held jointly by the parties as at the date of the hearing.

No basis was established before me in terms of reliance, unjust enrichment or unconscionability to say that the shares held by the defendant in his own name and which were valued at $57,771 at the time of the hearing should be the subject of any order in favour of the plaintiff.

Accordingly, I return to the issue of the appropriate order to be made in relation to the real property. I have concluded that a proper adjustment of the interests of the parties taking into account their respective contributions is 37.5% to the plaintiff and 62.5% to the defendant.

In my view this proportion properly reflects the fact that the defendant has throughout the relationship made the more substantial direct and indirect financial contribution to the acquisition of assets of the relationship. Furthermore, it reflects the fact that although I accept the plaintiff made a substantial contribution both indirectly by her labour at Gumnut and as a home-maker and parent during a period of about two-thirds of the relationship (ie 1982 to 1992) her contribution during the latter period of about five years was minimal, both in relation to the operation of Gumnut and in relation to her capacity as a home-maker and parent. During this latter period the defendant clearly made the major contribution both financially and as a parent endeavouring to protect the children of the relationship from the consequences of the alcoholism of the plaintiff. I accept the evidence of the defendant that during this period he was primarily responsible for the management of the household, the cooking and the children of the relationship as well as totally responsible for the conduct of the financial affairs which provided the income of the family.

The value of the real property after deduction of mortgages is $1,141,000. In addition, the property at Adelaide Street, Footscray which was sold pursuant to consent order of the Family Court requires to be taken into account. The net proceeds distributed to the parties totalled $75,000. That sum was distributed equally between the parties notwithstanding the fact that the consent order provided that it was to be held in an interest bearing account in the joint names of the parties.

Accordingly, by my calculation, the value of the real property to be apportioned after taking into account the net proceeds obtained by way of sale of Adelaide Street is $1,216,000. Applying the sum of 37.5% to such sum the plaintiff is entitled to $456,000. From that sum should be deducted the sum of $37,500 which has already been paid to her in respect of proceeds of sale of Adelaide Street, Footscray. Accordingly, the sum which I calculate should be paid to the plaintiff is $418,500. As previously indicated to counsel I am prepared to leave for further submission the precise consequential orders which should be made following this finding. In the absence of agreement between the parties or in the absence of any contrary submission I contemplate making orders in accordance with the following draft orders:

1. Order that the plaintiff transfer to the defendant all of her right title and interest in all those pieces of land being situated at 1 Como Street, Alphington, 816 Heidelberg Road, Alphington, 826 Heidelberg Road, Alphington, 828 Heidelberg Road, Alphington, 130 Marshall Street, Ivanhoe. 2. Declare that the plaintiff and the defendant be the joint beneficial owners of 549 Coles Myer shares and 100,000 units in the Global Property Fund. 3. Order that on or before 1 December 2000 the plaintiff do execute a registrable instrument of transfer of her interest in the said land to the defendant and deliver the same to the plaintiff's solicitors in exchange for a bank cheque in the sum of $418,500. 4. Liberty to apply generally in addition to leave to make submissions as to the appropriate form of the orders in this case. I will hear submissions as to costs. 5. I will also hear submissions as to whether an accounting should be ordered as to the 1/8th share held in Dimax by the plaintiff.

I propose to adjourn the proceeding to 10.30am on Tuesday 19 September 2000 for the purpose of hearing any submissions as to the form of the orders and for the purpose of making such final orders in accordance with my findings.

Property Law (Amendment) Act 1998

Property Law Amendment Act 1998

Law (Amendment) Act 1998

At a glance

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Before

Source

Judgment (136 paragraphs)

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Legislation Cited (5)

Cases Cited (2)