Davis v Davis

Court of Appeal (NSW)|2024-06-24|Before: White JA, Kirk JA, Elkaim AJ

Background

The following facts are not in contention on appeal. This summary is taken in part from J [9]-[23].
The Property was purchased by Paula and his then wife, Ms Irene Rowsell, in 1973. It became the family home. Other than Paula there is one other child born of the marriage, John. Ms Rowsell already had a daughter, Patricia, from a previous relationship.
Victor and his wife divorced in 1985. Paula's evidence was that Ms Rowsell had moved out of the Property shortly before Paula turned 15, in 1983. Paula remained living at the Property with Victor and her older brother John. Some years later John moved to Sydney. Part of the divorce settlement involved Victor becoming the sole owner of the Property in 1986. In order to become the owner Victor required a loan from a credit union. He also borrowed $9,000 from Paula, derived from a sum she had inherited. That loan represented about 20% of the then value of the Property. In 1996 Paula placed a caveat on the Property to protect her asserted interest based upon the loan.

The claims made

In Paula's amended statement of claim she sought orders with the effect of extinguishing Victor's registered life interest in the Property, along with a payment of $400,000. She sought a declaration that Victor held No 38, and the proceeds of sale of No 121, on constructive trust for her in proportion to her contributions made with respect to both the Property and the Lurnea house. At least in part, that equitable claim related to a claimed promise by Victor that he would pay her half of any proceeds of the sale of the Lurnea house beyond $300,000. In written submissions filed prior to the start of the hearing below the equitable claim was said to be based upon a common intention trust or a joint endeavour trust. Victor also sought orders pursuant to s 20 of the Act extinguishing Victor's interest in the Property and for payment of $400,000, in return for which the purported constructive trust over the other property would be extinguished. The claim for the monetary payment seemed to rely upon both equity and s 20.
At the commencement of the trial Paula abandoned most of these claims. The precise nature of what was being abandoned was not clearly explained, as it should have been. In this Court Paula described that step as "refin[ing] her claim on the first day of hearing to solely seeking an order pursuant to section 20 … to adjust her interest in [the Property]". That was not said in terms to the primary judge. All that counsel for Paula indicated was that his client was not pressing her claim for payment of the $400,000 sought but that her "primary claim" was for the Property. That statement left open whether orders relating to the Property were sought only under s 20 or also on the equitable basis. It can be inferred from the exchange in court that there had been some discussion between the parties prior to the start of the hearing, and that Victor understood that the only claim being pursued was one under s 20 relating to the Property. That understanding is supported by the fact that in Paula's closing written submissions she said she continued to rely on her opening written submissions "to the extent they seek to make out her claim pursuant to section 20 of the Act and further, in relation to the defence to the cross-claim".
In Victor's cross-claim he sought declarations that he held a life estate in the Property and Paula held only an estate in remainder; that he had a right to exclusive possession; and that Paula's right of residence had validly been revoked. He sought orders for possession of the Property and compensation for his loss of use of the Property. In response to this claim Paula raised a defence of estoppel founded principally on the Deed and subsequent conduct reliant on the Deed.
The primary judge rejected the cross-claim, holding that despite Victor's registered life estate he did not have a right of exclusive possession: J [37], [78]-[79]. Victor has not pursued an appeal against this conclusion.
As regards the claim under s 20 of the Act, the primary judge noted that on the second day of the hearing Victor had conceded what had previously been disputed, namely that the parties had been in a "domestic relationship" for the purposes of the Act: J [41]-[42]. The remaining issues then were what contributions had been made by the parties for the purposes of s 20(1), and what if any order the Court should make adjusting the interests of the parties in the Property.

Inappropriate statements by the primary judge

His Honour made a general finding against the credit of Victor at J [44]: Wherever there is any conflict with the evidence of the plaintiff, or in fact any other witness, I do not believe the defendant. To describe him as an irascible and difficult man would be an understatement. I had the overwhelming impression that he vehemently resented his grandson, Blake, because Blake, in particular as an adult, had interfered, by his simple presence, in the very deep relationship the defendant had with the plaintiff. …
That a witness is irascible or difficult or has a strong resentment of another are not matters which of themselves lead to the conclusion that the person is not a witness of truth. His Honour erred insofar as he suggested otherwise. The basis for his Honour's conclusion on credit is not otherwise apparent. However, Victor did not seek to resuscitate his credit on appeal.
The primary judge then went on to refer to "indications in the evidence" that the relationship between Victor and respondent was "most inappropriate", though saying the evidence did not "allow me to reach a conclusion that any criminal conduct took place". The supposed indications will not be repeated here. Senior counsel for Victor informed this Court that what his Honour said in this regard had caused his client some anguish. That result is not surprising. His Honour's statements were not relevant to the issues raised. Such findings had not been sought by Paula. Indeed, if criminal conduct had been alleged that would have had to have been done in clear terms. The statements were not supported by evidence of Paula in the sense that they were referred to by the primary judge; part of her evidence in that regard related to her having formed the view that by about 2017-2018 her father was in the early stages of dementia. The judge's statements otherwise drew on some evidence given by Victor's ex-wife and by his grandson Blake, both of whom were estranged from Victor. The evidence had been denied by Victor in his affidavit. His denial was not sought to be challenged by Paula's counsel in cross-examination, no doubt because it was not relevant to the issues in dispute.
The statements his Honour made in this regard did nothing to advance his analysis. To include them in his reasons for judgment was unnecessary, inappropriate and quite unfair.

Conclusions on the s 20 claim

His Honour's main reasons for concluding that Paula should obtain the orders she sought under s 20, extinguishing the legal rights of Victor without compensation, were as follows: [54] My overall conclusion is that the plaintiff continued to do the bulk of household chores throughout the time she lived at No 42 with the defendant. This was regardless of who else lived in the house, what work the plaintiff was doing and what other demands there were on her time. … [56] The defendant gave eight reasons to reject the plaintiff's claim. I will comment on each of them as I list them. (1) Removing the life interest would deprive the defendant of its value, assessed at $185,000. The difficulty with this submission is that it relies on a finding that the defendant had a right of exclusive possession to the property. I have found that he did not. (2) When looking at what is just and equitable, the plaintiff, by the deed, had been elevated from a position of no interest to a full interest in the property which she would have upon the death of the defendant. The defendant's provision of this interest was said to be gratuitous. I completely reject the submission. Not only had the plaintiff contributed $9,000 (about 20% of the value of the property) when Ms Rowsell was "bought out" but she had, since leaving school made significant contributions both to the welfare of the defendant and to the property. (3) The plaintiff had received a significant benefit in that she had been able to live in the property from 1992 to 2023 without paying any rent, a benefit assessed at in excess of $390,000. Again, this submission is defeated by the defendant not having exclusive possession of the property and also by the plaintiff's contributions, when seen on both a monetary and labour involvement, probably exceeding the unpaid rent. (4) The defendant had at least equally contributed to the running of the house and the welfare of the plaintiff. The plaintiff conceded that general "household duties and day-to-day jobs" were shared between her and the defendant. I do not however accept that the sharing was equal and I am satisfied that the plaintiff's contribution far exceeded that of the defendant. (5) The defendant had received no support from the plaintiff since 2019 when he left No 42. Although the plaintiff submitted that the defendant was not obliged by the provisional AVO to leave the premises, I think the environment created by living with Blake, would have been a reasonable basis for him to leave. I accept this factor favours the defendant. (6) If the life interest was extinguished one of the effects would be to improve Blake's position as an adult because he would continue having the benefit of living at No 42 although he has never had an entitlement to do so. Factually, I think this is correct and is another factor in the defendant's favour. (7) If the defendant is compelled to remain at No 38 he will not have the option to rent out No 38 and thereby be deprived of an income which will no doubt be of significant benefit as he ages. The defendant's assertion is correct. But it must be balanced against the fact that he benefited significantly (to the extent of some $800,000) from the estates of his brother and sister, a benefit which he had promised, at least in part, to the plaintiff but never honoured his obligation. The same may be said of his promises in relation to No 121. I stress that in reaching this conclusion I rely on my acceptance of the plaintiff's assertions concerning the sale of the property in Lurnea and surrounding the purchase of No 121. (8) The extinguishing of the life interest was not envisaged by the deed which had already conveyed significant benefits upon the plaintiff. I have to some extent dealt with this point under (3) above but add that the deed recognised the plaintiff's contributions up to 2005 and gave them a formality through its terms. However, the deed did not exclude the possibility of continuing contributions by the plaintiff, in particular of the type envisaged by s 20. I am satisfied that after 2005 the plaintiff continued to make significant contributions to the property as well as the welfare of the defendant. [57] My rejection of most of the factors raised by the defendant obviously goes a long way in the plaintiff's favour. However, the plaintiff retains the onus and must, herself, establish the right to relief under s 20. [58] I am satisfied that she has done so. Even if one were to quarantine her contributions prior to 2005 as having been 'rewarded' by the deed, her contributions continued until the defendant's departure in 2019. She carried on doing the bulk of the housework (cooking, washing, and cleaning) notwithstanding the pressures on her time caused by her work commitments and she contributed significantly on a monetary basis. … [62] In relation to the financial contributions, it is impossible to reach a mathematical conclusion about which party paid precisely how much money. I am however satisfied that the defendant's contributions did not exceed those of the plaintiff and that her contributions of a non-monetary nature far exceeded those of the defendant. [63] Even if these contributions, essentially as a homemaker, are isolated from the financial contributions, I think it just and equitable to make an order under s 20 for adjustment of the property interests in respect of No 42.
The primary judge found that whilst he could not say that Victor's departure from the Property was his fault, he was nonetheless not entitled to compensation because he did not have an exclusive right to possession of the property: J [65]-[67].
The primary judge did order that Paula reimburse Victor for council rates he had paid for the Property since he left it in mid-2019. This Court was informed that that payment had been made. It was also told that his Honour's orders requiring Victor to transfer his life interest in the Property to Paula for no consideration had been stayed. In fact, that stay expired on the day the appeal was heard and no extension was sought. I infer that those orders have still not been complied with.
Victor's challenge to the decision of the primary judge alleged errors in his Honour's reasoning at subparagraphs (2), (3), (7) and (8) of J [56], along with a further error at J [60]. It is convenient to start by addressing the attack on J [56(7)] because that suffices to establish House v The King error such that the discretionary assessment must be re-exercised.

J [56(7)] - Victor's inheritance

As set out above, at J [56] the primary judge addressed eight reasons given by Victor as to why the s 20 orders sought by Paula should not be made. As his Honour said at [57], his "rejection of most of the factors raised by the defendant obviously goes a long way in the plaintiff's favour". Thus the analysis at [56] formed part of the dispositive reasoning supporting the orders made.
At J [56(7)] his Honour noted that if Victor was excluded from the Property and continued instead to live at No 38 then he would be economically disadvantaged. His Honour accepted that that was so but said it had to be balanced against: Victor's inheritance of some $800,000 from his siblings; that at least some of that amount had been promised by Victor to Paula and he had not honoured his obligation (this seemingly refers to the supposed promise as to sharing half of any proceeds of sale of the Lurnea property above $300,000); and that Victor had made some promise in relation to what would occur with the farm at No 121, which he had purchased with the proceeds of the inheritance.
Ground 1(g) of the amended notice of appeal complains that the primary judge erred in law and took account of an irrelevant matter in taking the inheritance and claimed promises into account in circumstances where: Paula was never a beneficiary of her uncle and aunt's estates; Victor had no legal obligation to gift any part of the inheritance to Paula; Paula's own evidence was that Victor had promised her future wealth on his death and not during his lifetime; and Paula had not pressed an equitable claim premised upon an alleged failure by Victor to honour obligations. This ground is made out. The reasoning at [56(7)] manifests a number of errors.
First, in the interests of clarity, the economic result for Victor of losing the Property was of some, but limited, relevance. That effect was a consequence of any order made under s 20, which was relevant to assessing what was just and equitable having regard to the parties' contributions (see above at [26]). It was not a matter going to assessment of contribution.
Secondly, the inheritance received by Victor from his siblings also had limited relevance. It did not represent a contribution by either party to the acquisition, conservation or improvement of the property or financial resources of the other. It was a windfall for Victor, received relatively late in their long domestic relationship (sometime after January 2013) before it broke down in 2019. There is no doubt that inherited property can be the subject of an order under s 20 as part of an adjustment of the interests of the parties: note Report No 36 at [7.59]. That possibility is a distinct issue from whether or not such property represents a contribution of the relevant kind, which is an issue of fact: note Wallace at 15-16; Powell at [15]-[18], [59], [72]-[73]; Kardos at [37]. In some circumstances it may be such a contribution, for example if it is contributed to the pool of property on which the parties drew in their relationship: see eg Chanter v Catts [2005] NSWCA 411; (2005) 64 NSWLR 360 at [30]-[31] and [50]. On the other hand, inherited property may be held separately. Here, the very criticism made by the primary judge was that the inherited property had not been contributed by Victor, one way or another, to the benefit of Paula.
Given it was not a relevant contribution, the inheritance was only relevant as part of assessing what was just and equitable in the manner explained above. That does not seem to be how it was being deployed by the primary judge. Paula submitted that his Honour was intending to identify evidence from Paula about her contribution by labour and otherwise with respect to the Lurnea property and No 121. That is not so. The judge was balancing the economic consequences to Victor of leaving the Property with the benefits he had received from the inheritance and the dishonouring of the purported "obligation" to pass some of that benefit on to Paula.
Thirdly, as explained above at [23], s 20 is not directed to remedying claimed injustices based upon a claimant's reasonable reliance or expectations from the relationship. Yet that is what his Honour did in taking in account Victor's supposed promises in the weighing up exercise.
Fourthly, J [56(7)] manifests incomplete reasoning. His Honour referred to "my acceptance of the plaintiff's assertions concerning the sale of the property in Lurnea and surrounding the purchase of No 121". Neither those assertions, nor his Honour's basis for accepting them, were addressed anywhere in his reasons.
Fifthly, the implicit findings about the supposed promises were about matters not properly in issue. As explained above at [45], at the commencement of the hearing counsel for Paula indicated, albeit in unclear terms, that his client was not pressing the monetary claim. It appears that Paula also meant thereby to give up her pleaded claim for "equitable relief", and that is how Victor understood it. Insofar as the supposed promises were pleaded - and they were not pleaded in the way referred to at J [56(7)] - it was under the heading "Equitable relief". The better view is that any claim based upon those supposed promises had been abandoned.
It may be that the primary judge did not understand Paula's narrowing of her claim in the way she had intended. His understanding may have been encouraged by the fact that counsel for each party cross-examined the other party about at least some of the supposed promises. There was an inappropriate imprecision about how the narrowing of Paula's case occurred. Fault lies with all concerned. Paula should have identified with specificity what parts of her claim she was abandoning. Indeed, there is no reason why she should not have filed a further amended statement of claim. Victor should have requested, on the record, such specificity. And his Honour should have directed that this be provided, regardless of whether or not he was asked to do so. The point of pleadings is to identify what is and is not in issue. The loose course taken by Paula undermined this aim, and may have led his Honour to reach a conclusion on a matter that was not in fact in play.
Paula submitted that the reasoning at [56(7)] was merely a "subsidiary finding" which did not affect his Honour's ultimate conclusion. That submission cannot be reconciled with the significance his Honour attributed at [57] to his reasoning at [56]. The matters addressed in the subparagraph cannot be dismissed as inconsequential. Paula also maintained on appeal that the work she did assisting to clean up the Lurnea property to prepare it for sale did represent a contribution to Victor's financial resources. That can be accepted (and is considered below) but it was not how his Honour addressed the issue at [56(7)].
His Honour erred in taking the matters addressed at [56(7)] into account in making the evaluations and exercising the discretion pursuant to s 20 in the way that he did. The errors are of a House v The King kind, involving, as they do, legal misdirection and a significant procedural failure. The discretion has miscarried. Neither party sought a retrial, the sums involved are not large, and Victor is of an advanced age. It is in the interests of justice that this Court re-exercise the discretion. In that context it is appropriate to address Victor's other challenges to the judgment below, leaving aside the cumulative ground that the conclusion reached was manifestly unreasonable and unjust. In so doing it is unnecessary to address whether those grounds involve House v The King error.

J [56(2)] - the significance of the Deed

In J [56(2)] the primary judge addressed the reliance that Victor placed on the "gratuitous" transmission of the Property from Victor to Paula pursuant to the Deed. His Honour said "I completely reject the submission", saying that Paula had contributed by way of loan some 20% of its value when Ms Rowsell was bought out, and she had made significant contributions to both the Property and the welfare of Victor. At [58] his Honour returned to the point, stating that even "if one were to quarantine her contributions prior to 2005 as having been 'rewarded' by the deed", she had carried on doing the bulk of the housework (cooking, washing, and cleaning) and had contributed significantly on a monetary basis up until Victor left in 2019.
In ground 1(a) of the amended notice of appeal Victor complains that the judge had "erroneously rejected" the fact that he had voluntarily given up substantially the whole of his legal interest in the Property by way of the Deed, giving Paula the entire legal interest subject to his right of residence. The complaint in ground 1(b) is (in effect) that his Honour, having rejected Victor's asserted life estate, erred in failing to take into account Victor's undisputed personal right of residence provided for by the Deed. There is force in these overlapping grounds.
There was no dispute that Paula's loan of 20% of the value of the Property had to be brought to account as a contribution. Even assuming that was treated as equating to a 20% interest in the Property, that meant that Victor had contributed the other 80%. The parties had jointly obtained a valuation which valued the Property at $625,000 as at March 2023 (the Joint Valuation). The valuation methodology was well-explained, being based upon comparable sales. Paula obtained another valuation which appeared to value the property at $560,000 (the Opteon Valuation), seemingly based upon comparable sales and rental figures. The methodology was not well-explained. Neither valuer gave oral evidence. Adopting the Joint Valuation figure, the worth of Victor's 80% portion was some $500,000.
No doubt the transfer of the Property to Paula was not "gratuitous", in the sense that she had made a 20% contribution by her loan, and she had made significant other contributions. She had made further financial contributions to the conservation and improvement of the Property, most notably by the renovations she undertook around the time of the Deed at the cost of some $45,000-$50,000. Nevertheless, Victor's financial contribution to the value of the Property still represented a substantial proportion of its value. And there is no reason why that should not be brought to account as a contribution by him within s 20(1)(a). That this contribution might be characterised as a gift does not remove it from the purview of the provision. Moreover, the transfer was made on the understanding that Victor would receive "a life interest" in the Property, giving him "a right to reside as his principal home in the dwelling situated on the property for life" (see recital D in the Deed, quoted above at [36]).
The primary judge did not state in terms that this substantial contribution by Victor should not be brought to account. However, his Honour made no attempt to articulate the significance and extent of that contribution. And the implication of his reasons at J [56(2)] and [58] is that the contribution was readily offset by Paula's contributions to Victor's welfare and her (unspecified) monetary contributions with respect to the Property. This approach was erroneous. It undervalued the significance of Victor's financial contribution to acquisition of the Property.
Paula submitted that "[u]ltimately, the existence of the Deed and what is said in it cannot be dispositive of the proceedings", being "one piece of evidence to be considered as part of the entirety of the evidence that properly falls within the ambit of section 20". These submissions may be accepted but they do not capture or justify the approach taken by his Honour.
It should be noted, for completeness, that neither side argued that the Deed should be treated as a "domestic relationship agreement" of the kind addressed in Pt 4 of the Act.
The complaint about his Honour paying insufficient regard to the value of the life interest is also made good. As noted, the judge found that while Victor's departure from the Property was not his fault, he was not entitled to compensation because he did not have an exclusive right to possession of the property: J [65]-[67]. The Joint Valuation had valued the life interest as worth $185,000. That was based on an assumption that the interest gave Victor a right of exclusive possession. His Honour held it did not, thus that valuation was excessive. Nevertheless, it was still a right of significant value. If Victor could not exercise that right then he had to live elsewhere, either paying rent or (as occurred) foregoing rent in another property that he owned.
The life interest was not a contribution of Victor. Its relevance was to assessing what was just and equitable having regard to the parties' contributions, because the effect of the orders made below was to extinguish Victor's right of residence. His Honour seemed to accept that the issue could be relevant to the discretionary assessment at [67(2)]. Yet he then set the matter aside on the basis that the extinguishment could be backdated, saying "then I think No 38 assumes the result of simply being an asset of the defendant which he could choose to utilise as he saw fit, to live in or to rent, but not to the detriment of the plaintiff" (at [67(3)]). This reasoning is difficult to understand. Whatever the effective date of the extinguishment, a valuable interest of Victor was going to be extinguished, to his cost and to the benefit of Paula. Even if it was desirable to make such an order to achieve a clean break in the parties' property interests, it was open to order Paula to make some recompense for the value of what she was obtaining, namely the Property free from the burden of Victor's interest.

J [56(3)] - the benefit Victor obtained and Paula's contribution

At J [56(3)] the primary judge noted that Victor submitted that it was relevant that Paula had received a significant benefit in being able to live in the Property from 1992 to 2023 without paying any rent, a benefit assessed at in excess of $390,000. His Honour said that the submission was "defeated" because Victor had not had exclusive possession of the Property, and also by Paula's "contributions, when seen on both a monetary and labour involvement, probably exceeding the unpaid rent".
Ground 1(c) of the amended notice of appeal asserts that his Honour erred in this reasoning as Victor did have exclusive possession of the Property before November 2005 and Paula had enjoyed a considerable rent-free occupation of the Property from 1992-2005. Ground 1(d) says that his Honour failed to take into account the extent of Victor's financial contributions to the Property and Paula's welfare, being contributions evidenced by supporting bank records and receipts. Both grounds have merit.
Until the Deed was implemented, Victor had been the sole legal owner of the Property. It was not disputed that Paula had lived there without paying rent. In Kardos Brereton J said, in the context of a claim relating to a de facto couple, that "a relationship has to be conducted from some place of cohabitation" (at [79]). That is not so for a parent and an adult child. Since Paula was an adult (from 1986), there was an appreciable benefit in her not paying rent for nearly two decades. That Victor allowed her to do so can be regarded as a financial contribution to the financial resources of Paula.
As for the judge's additional point about any contribution being outweighed by Paula's other contributions, his Honour did not provide reasons for the conclusion and was too ready to dismiss the issue. Paula's written submissions sought to support this part of his Honour's reasons by detailed reference to the evidence. Those submissions served to illustrate that his Honour had not attempted that task. The extent of the parties' respective contributions is addressed further below.

J [56(8)] - Paula's contributions after 2005

At [56(8)] the primary judge addressed the significance Victor attributed to extinguishment of his life interest. His Honour noted that he had to some extent dealt with this at [56(3)], then added that the Deed recognised Paula's contributions up to 2005, that it did not exclude the possibility of continuing contributions by Paula of the type envisaged by s 20, and that he was satisfied that she had continued to make significant contributions to the property and the welfare of Victor after 2005.
Victor complained that in this reasoning his Honour: 1. failed to take into account that Paula had covenanted in the Deed that Victor was entitled to enjoy use of the Property as his principal home for life, that Paula would be obliged to make Victor's occupation of the Property "comfortable for the remainder of his life", and that Paula's interest in the Property was a fixed future interest only crystallising after Victor's death (ground 1(e)); 2. failed to take into account that such home duties as Paula provided in the period after the execution of the 2005 Deed were incidental to her obligations under the 2005 Deed, which (as she was aware) were to ensure that Victor would be comfortable in the Property, as he grew older in life (ground 1(f)); 3. erred in finding that Paula continued to make "significant" contributions to the Property and the welfare of Victor following execution of the Deed (ground 1(h)); 4. erred in placing weight upon Paula's continuing contributions to the Property after 2005 in circumstances where such contributions were envisaged by the Deed, and were naturally expected to have been made by Paula in the course of living in the Property with her increasingly elderly father.
The main complaint manifest in grounds 1(e) and (f) is a failure to take account of the significance of Victor's transfer of the Property to Paula pursuant to the Deed. The reference to the covenant to make the Property comfortable is to cl 2 of the Deed which required that Paula was responsible for payment of the phone account, for keeping the Property insured, and for "all maintenance of the property to ensure the property remains comfortable for Victor".
The errors alleged here overlap to some extent with those raised in grounds 1(a)-(b). As addressed above, the s 20 analysis required recognition of the transfer of ownership of the Property by Victor as a financial contribution, and Victor's loss of his lifetime right of residence was relevant to considering what was just and equitable. Those matters having been acknowledged, these further complaints tend to fall away. Relevant contributions by either side after 2005 can be brought to account in considering what if any property adjustment orders should be made. What the Deed provides is relevant to undertaking the s 20 analysis but exercise of the statutory power is not dictated to by what the parties have agreed (in circumstances where, as noted, it was not suggested that Pt 4 of the Act applied). Section 20 is no more directed to protecting the reasonable expectations of Victor than it is those of Paula. However, the age and life circumstances of Victor, the familial nature of the parties' relationship, and the promises made by Paula, may be relevant to assessing what order is just and equitable having regard to the parties' contributions.

J [60]-[61] - Ms Rowsell's evidence about Victor's approach to money

His Honour included the following in his reasoning: [60] Ms Rowsell, reflecting on her time living with the defendant, stated in her affidavit at paras [20]-[21]: "Vic would not give me enough money to pay for food, household expenses and the children's schooling needs. His money was spent on alcohol and cars. Not only did I pay for most of these expenses, but I was expected to pay for his personal expenses as well." [61] Ms Rowsell then describes the need she had to find employment as well as to look after the children. The defendant's assumption of the plaintiff as a housewife following the departure of Ms Rowsell has the same ingredients.
In ground 1(j) of the amended notice of appeal Victor complains that this evidence of Ms Rowsell was irrelevant. The complaint is valid. It is difficult to see how the evidence of what supposedly occurred in a different relationship, at a time prior to when Paula was an adult, has any relevance to the contributions of the parties or what was just and equitable for the purposes of s 20. There seems to be an implication in the reasoning that the division of domestic labour and expenditure between Victor and his ex-wife was mirrored in the subsequent domestic relationship between Victor and Paula. It seems to have been applied as some kind of tendency evidence. No attempt was made to explain how doing so was consistent with s 97 of the Evidence Act 1995 (NSW). Paula submitted that the evidence was admitted without restriction such that Victor cannot now complain about it. That no objection was taken does not establish that it was relevant to the analysis that his Honour had to undertake. Little if any weight should have been given to the evidence.

Re-exercising the s 20 discretion

As explained above, s 20 of the Act confers a broad, evaluative and discretionary power on the court, the exercise of which commonly involves three stages of identifying and valuing the relevant property of the parties, identifying and valuing the respective contributions of the parties of the types referred to in s 20, and determining what if any property adjustment order should be made as being just and equitable having regard to those contributions. As with most litigious tasks, however, the parties can delimit the area of the dispute. Victor and Paula have done so here.
As already noted, the focus of the parties was on what if any orders should be made with respect to Victor's interest in the Property. That was the property of the parties at issue, although, in terms of contribution, Paula also referred to the work she had undertaken with respect to the Lurnea property. Victor did not argue that extinguishment of his personal right of residence was not an adjustment of an interest in property within the meaning of the Act (noting the broad definition of "property" in s 4(1)).
On appeal, there were three proposals as to what order should be made if the Court came to re-exercise the discretion: 1. Victor's preferred position was to restore the status quo by overturning the orders made below, such that he continued to have a non-exclusive right to reside in the Property. 2. Victor's alternative position was that Paula should be required to pay him $100,000, upon which he would be required to transfer his interest in the Property to Paula. 3. Paula argued that the appropriate orders were those made by the primary judge.
Giving effect to Victor's primary position would not be an appropriate exercise of the Court's discretion. Victor's evidence of his "deep connection with my home", and his "wish to remain there until my death", can be accepted. Yet there is also no reason to doubt Paula's own strong attachment; she has lived there for essentially her whole life. Victor's primary position would potentially lead to Victor residing back in the Property not only with Paula but with his grandson Blake. This litigation suggests that Victor and Paula's relationship has substantially broken down. And the evidence indicates that the relationship between Victor and Blake is a hostile one. Victor submitted that Blake had said he did not actually wish to reside at the Property himself (noted at J [71]). However, the Court was informed that he still does so (as he did at trial - J [22]). That may be because Blake also gave evidence that he could not afford to live elsewhere. The Law Reform Commission endorsed application of the "clean break principle" to orders made under the Act, such that courts lean in favour of orders which do not require the parties to continue to interact: Report No 36, [6.23], [9.20]-[9.22] and [9.25]. The wisdom in that view is applicable here. It would not be in the interests of the parties, nor just and equitable in all the circumstances, to restore the status quo.
Thus the remaining choice is as to whether it is just and equitable that Paula should have to pay $100,000 to Victor to obtain the benefit of the extinguishment of his interest in the Property, having regard to their relevant contributions. The choice presented is binary. Of course, the Court could opt for some intermediate position, but given that the amount claimed is not large that is not a very meaningful possibility. The issue for resolution in this Court is relatively simple, and it is not necessary to engage in the sort of detailed analysis that might be appropriate in other cases.
Commencing with contributions made to the acquisition, conservation or improvement of the Property, and to the Lurnea property, the following can be said: 1. As explained, Victor made a substantial financial contribution by way of provision of the Property itself. His allowing Paula to reside there without rent until 2005 was a financial contribution to her financial resources. Victor also gave unchallenged evidence that he had paid some $14,000 on renovation of the kitchen and the bathroom in the period 2016-2018. 2. Paula made significant financial contributions in the form of the loan equating to 20% of the value of the Property along with the amount of some $45,000-$50,000 she paid for renovations around the time of the Deed. 3. There is evidence that each of them paid some sums and undertook some chores involved in maintaining the Property. From 2005, under the Deed, Paula was responsible for many but not all costs of its upkeep. Neither the parties nor the primary judge sought to draw a clear distinction between these expenses and those incurred for the benefit of the household, falling within s 20(1)(b), so these expenses are addressed below. 4. Victor pointed to the significant work that she had done assisting her father to clean up the Lurnea house prior to its sale. The parties agreed that the house had been in very poor condition after the death of Victor's siblings. Victor disputed that Paula had done as much work as she claimed. It is sufficient to accept that she made a significant contribution in this regard, over a limited period of time, to the benefit of the financial resources of Victor.
With respect to financial contributions to household expenditure on groceries and upkeep of the household and the Property, the primary judge noted that the parties had drawn up schedules listing their claimed contributions, but that they were not complete and some matters were unknown. His Honour said: [62] In relation to the financial contributions, it is impossible to reach a mathematical conclusion about which party paid precisely how much money. I am however satisfied that the defendant's contributions did not exceed those of the plaintiff and that her contributions of a non-monetary nature far exceeded those of the defendant.
Paula had provided a document to his Honour listing payments made at supermarkets and department, hardware and furniture stores in the period 2013-2019, which added up to some $54,000. Not all of this expenditure can be assumed to have been for the benefit of the household, but the ready inference is that substantial portions of it were. There is also no doubt that Victor made significant financial contributions to the household, albeit it seems he spent less on groceries than Paula did. For current purposes it suffices to treat Paula as having made somewhat greater financial contributions of this kind over the length of the domestic relationship (which the parties effectively treated as commencing when Paula became an adult). Doing so is consistent with the view expressed at J [62].
As regards non-financial contributions, Paula argued that her domestic contributions were significant. Victor submitted that she had promised to make such contributions under the Deed. That does not mean it should be disregarded in this analysis. While it is difficult to quantify the balance precisely, the evidence suggests that the following assessment of the primary judge was justified: [54] My overall conclusion is that the plaintiff continued to do the bulk of household chores throughout the time she lived at No 42 with the defendant. This was regardless of who else lived in the house, what work the plaintiff was doing and what other demands there were on her time.
That is not to say that Victor made no such contributions. However, as Paula submitted, the primary judge was entitled to prefer Paula's evidence about her role in performing domestic duties. As noted above, Victor did not seek to revive the credit of Victor in this Court.
In sum, on a broadbrush assessment, the financial contribution of Victor with respect to acquisition and improvement of the Property is significantly greater than that of Paula; both made financial contributions to the Property's upkeep and to the benefit of the household, although Paula's contributions to payment for groceries and the like was somewhat greater than Victor's; Paula contributed also with respect to the Lurnea house to the benefit of Victor; Paula made greater non-financial contributions to the upkeep and welfare of those in the household than did Victor. Both thus made substantial contributions of a financial and non-financial nature to the benefit of the relevant property and the household.
In these circumstances I cannot accept that the contributions of Paula so outweigh those of Victor that it is just and equitable that he be deprived of his right to reside at his home for the rest of his life without any compensation. Nor do these circumstances suggest that requiring Paula to pay $100,000 for obtaining the benefit of the extinguishment of that interest would be unjustified in the process of adjusting the parties' property interests.
Victor gave some explanation of how this proposed compensation figure had been arrived at. He referred to two rationales. First, the Joint Valuation had assessed the value of Victor's life interest at $185,000. However, that was based upon an assumption that Victor had a right to exclusive possession. That position was rejected by the primary judge and not reagitated on appeal.
The second rationale was to refer to evidence from the Opteon Valuation that the adopted annual rental value of the Property in 2023 was some $28,080. Victor divided that by three, on the basis that it was a three bedroom house and he had had use of one bedroom whilst he lived there. That led to a figure of $9,360. If one multiplied that by 11 years to account for the period from when he left the Property in 2019 to his actuarial life expectancy it led to a figure somewhat over $100,000. In fact, that approach tends to undervalue the loss of the benefit of occupying the Property as Victor now occupies No 38 by himself. It would not be reasonable to expect Victor, now aged 82, to take in strangers as housemates. There was another Opteon valuation in evidence indicating that as at 2023 the rental value of No 38 was some $24,440 per annum. Paula noted that Victor's son John had been residing at No 38 and was directed to leave by Victor. Even if it was reasonable to expect Victor to share the residence with his son - a matter it is not necessary to determine - that would still involve rental value of some $12,000 per annum.
These considerations offer some basis for the $100,000 claimed beyond accounting for contributions. They reinforce my conclusion that it is just and equitable that Paula should have to pay Victor that sum, in return for extinguishment of Victor's interest in the Property, as an adjustment of their respective property interests. There is no reason to disturb the order made below (which has been complied with) that Paula reimburse Victor for his payment of rates on the Property from 2019, given that Victor has not been in occupation since then.
Paula sought to rely on her evidence that she had left school at 14 at the insistence of her father, who wanted her to take over the household role when Ms Rowsell left (which occurred when Paula was aged about 14 years and 11 months). Victor had denied he had done that. The primary judge referred to the issue at J [48]-[51]. His Honour did not resolve the dispute, although he appeared to favour the evidence of Paula in this regard. Counsel for Paula said in this Court: [The fact] her father made her leave school is relevant to consideration of her contribution, even if only as an adult, because it has affected … her life, the possibilities of what she might do with her life as an adult thereafter. In the sense of ultimately, if the Court's discretion is enlivened, as to what is just and equitable.
As discussed above at [26], a range of considerations might be relevant to considering what is just and equitable having regard to the parties' contributions in the context of their relationship, and that can include opportunities lost. However, s 20 is not directed to punishing the choices or conduct of parties to a domestic relationship. What occurred in 1983, prior to the commencement of the domestic relationship, has no meaningful relevance to the issue before the Court in this matter. Neither that consideration, nor any other, leads to a conclusion that it is not just and equitable that Victor be compensated for the loss of his right of residence.

Orders and costs

The form of orders proposed by Victor to give effect to his alternative proposal involved the Court making a declaration pursuant to s 8 of the Act that Victor has a non-exclusive personal right to reside in the Property; to order that he transfer the whole of his interest in the Property to Paula upon her paying him $100,000; and to declare that when that occurred his non-exclusive personal right would be extinguished. These orders overly complicate the matter. Victor seemed to be seeking to give Paula the option of whether to seek extinguishment of the interest. Paula, through her counsel, indicated that she did not request any such option, and if the Court was inclined to adopt Victor's alternative proposal then it could be addressed by direct orders. On that understanding, the Court can and should adjust the parties' property interests simply by order Paula to pay Victor $100,000 (pursuant to s 38(1)(d) of the Act) and in substance maintaining orders 1-3 made by the primary judge that he be required to transfer his interest in the Property to Paula (pursuant to s 38(1)(a) of the Act). The words "for no consideration" in order 1 should be deleted as they are not consistent with the order for payment. For clarity and convenience it is appropriate to set aside orders 1-3 made below and restate them in orders of this Court.
The declarations proposed by Victor are not necessary. It was not argued by either side that Victor has any right of residence at the Property beyond such interest he had as was manifest in the registered life estate. Orders 1-3 made below had the effect of extinguishing that estate.
Order 4 made below required Paula to pay Victor $6,815.27, being the rates that he had paid since moving out of the Property. As explained, that order has been complied with and there is no reason to disturb it. Order 5, which dismissed the cross-claim, has not been challenged.
Victor is successful in this Court and should have his costs of the appeal. As for costs of the proceedings below, addressed by order 6, Victor's primary position was that Paula should have to pay 50% of his costs given two points. First, in light of the success of the appeal, Paula did not obtain all that she had sought as regards the Property. Secondly, Paula had abandoned her claim for payment of $400,000, and the equitable basis of her case, at the commencement of the hearing below. There is some force in those submissions.
It is worth noting what the primary judge said on the issue in his subsequent judgment on costs (Davis v Davis (No 3) [2024] NSWSC 125), in which he reaffirmed his initial conclusion that Victor pay Paula's costs: [9] At first sight, the abandonment of the monetary claim at a very late stage could be seen as a basis to amend the costs order. But it has this flaw; it was always open to the defendant to resolve the claim by an offer of compromise under the court rules, or even a 'Calderbank' offer which did not include the $400,000 but did allow for the ultimate result in the case, or close to it. Such an offer could have terminated the proceedings or, had it not been accepted, given rise to very favourable costs orders in favour of the defendant.
This reasoning manifests significant error. That a party has made an offer of compromise in one form or another may improve that party's position when it comes to addressing costs. The failure to make such an offer cannot be held against them. His Honour was purporting to consider what order for costs should be made in light of the issues raised then abandoned by Paula. Undertaking that assessment was distorted by invoking the irrelevant fact that the defendant could have made an offer of compromise.
Allowing for the points made by Victor about costs, there remains the facts that Paula has, in the result, still had some success in her application under s 20. And Victor did not succeed in his cross-claim. In all the circumstances the appropriate result is that each side should bear their own costs of the proceedings below, including as regards the cross-claim.
The orders of the Court should be as follows: 1. Appeal allowed in part. 2. Set aside orders (1)-(3) and (6) made in the Equity Division on 15 December 2023 and in lieu thereof: 1. Order that Victor Bernard Davis (the defendant) transfer to Paula Jane Davis (the plaintiff) the whole of his interest in the property [to be formally identified in the order as entered]. 2. The defendant is to do all such things and execute all such documents which are necessary to transfer the interest referred to in order (i) above. 3. Should the defendant default in complying with order (ii) above, the Registrar in Equity is to do all of those things and sign all necessary documents in order to give effect to order (i) above. 4. The plaintiff is to pay the defendant $100,000. 5. Order that each party bear their own costs of the proceedings in the Equity Division. 1. The respondent is to pay the appellant's costs of the appeal.
BASTEN AJA: I agree with Kirk JA.

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. Decision last updated: 19 September 2024

Pigott Stinson (Appellant) Lindeman Lawyers (Respondent) File Number(s): 2023/465354 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2023] NSWSC 1563 Date of Decision: 15 December 2023 Before: Elkaim AJ File Number(s): 2021/19641

HEADNOTE [This headnote is not to be read as part of the judgment] The appellant, Victor Davis, is the father of the respondent, Paula Davis. The dispute between them relates to a house in Macksville (the Property). That Property had been owned by Victor until he transferred ownership to Paula pursuant to a deed executed in November 2005 (the Deed). The Deed gave Victor a continuing right of occupation for the term of his life. Pursuant to the Deed Paula was registered as owner in remainder with Victor holding a registered life estate. Both parties resided at the Property until mid-2019, when Victor moved out because of a dispute with Paula's son. Paula brought a claim in the Supreme Court seeking exclusive possession of the Property pursuant, relevantly, to s 20 of the Property (Relationships) Act 1984 (NSW). In a cross-claim Victor sought exclusive possession on the basis of his registered life estate. The primary judge concluded that the Deed did not create a life estate in favour of Victor and that Victor only held a personal right of residence in the Property. Pursuant to s 20 he made an order that Victor transfer to Paula "for no consideration the whole of his interest in the property". Victor appealed against the order made pursuant to s 20, seeking that he retain his right of residence. Alternatively, he sought an order that Paula pay him $100,000 in return for the extinguishment of his interest in the Property. No appeal was brought from the dismissal of the cross-claim. The Court (Kirk JA, White JA and Basten AJA agreeing) allowed the appeal and held:

Section 20 involves a discretionary decision as to potential adjustment of the property interests of the parties to a domestic relationship. The task involves identification and valuation of the relevant property of the parties, then evaluation and balancing of the respective contributions of the parties of the kinds referred to in s 20(1)(a) and (b). The court then must decide in its discretion what if any order should be made adjusting the property interests of the parties to compensate the claimant for such contributions, where the criterion is what seems just and equitable having regard to those contributions. The focal point of that discretionary judgment is the identified contributions of the parties. Nevertheless, a decision as to what seems just and equitable is made in the context of the relationship of the parties such that broader considerations may be relevant to the decision. Any such considerations must not distract from the understanding that s 20 is directed to providing compensation for contributions of the relevant kind, not seeking to remedy any injustice from detrimental reliance or failed expectations or the like: at [27]. Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550; Manns; Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24; Dwyer v Kaljo (1992) 27 NSWLR 728; Wallace v Stanford (1995) 37 NSWLR 1; Dwyer v Kaljo (1987) 11 Fam LR 785; Powell v Supresencia [2003] NSWCA 195; (2003) 30 Fam LR 463, referred to.
That Victor had received an inheritance from some siblings was of limited relevance to exercise of the s 20 discretion and did not go to assessment of contribution: at [60]-[62]. Section 20 is not directed to remedying claimed injustices based upon a claimant's reasonable reliance or expectations from the relationship, yet that is what his Honour did: at [63]. Supposed promises made by Victor in relation to his inheritance were about matters not properly in issue. The primary judge may have misunderstood how Paula had narrowed her claims because of her failure to identify with specificity what she was abandoning. She should have done so; the respondent should have requested she do so; and the primary judge should have directed she do so: at [65]-[66]. The errors made with respect to the inheritance are of a House v The King kind, involving, as they do, legal misdirection and a significant procedural failure. The discretion has miscarried. In the circumstances this Court should re-exercise the discretion: at [68].
Victor's financial contribution to the value of the Property, prior to the Deed, represented a substantial proportion of its value. That this contribution might be characterised as a gift does not remove it from the purview of s 20(1)(a). Moreover, the transfer was made on the understanding that Victor would receive "a life interest" in the Property, giving him "a right to reside as his principal home in the dwelling situated on the property for life". The implication in the primary judge's reasons that the contribution was readily offset by Paula's contributions to Victor's welfare and her (unspecified) monetary contributions with respect to the Property was erroneous: at [72]-[73]. The primary judge paid insufficient regard to the value of Victor's life interest which, although it was not a contribution in the relevant sense, was relevant to assessing what was just and equitable having regard to the parties' contributions: at [76]-[77].

Legal Principles relating to s 20

The concept of a "domestic relationship", which is a threshold for obtaining relief under s 20, is defined in s 5(1)(b) of the Act to include: a close personal relationship (other than a marriage or a de facto relationship) between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care.
Towards the end of the hearing below Victor accepted that his relationship with his daughter fell within this definition, commencing from the time his daughter was an adult (defined in s 3(1) to mean a person aged 18 or above).
Section 8 empowers courts to declare the title or rights in respect of property in proceedings between parties to a domestic relationship, any such declaration being binding only on the parties to the relationship.
Section 9 provides for the Local Court and the Supreme Court to have jurisdiction under the Act. Section 14(1) of the Act, within Pt 3, addresses the making of an application for an adjustment order: Subject to this Part, a party to a domestic relationship may apply to a court for an order under this Part for the adjustment of interests with respect to the property of the parties to the relationship or either of them or for the granting of maintenance, or both.
Section 20(1) of the Act, also within Pt 3, grants the courts the power to make such an order and sets out the basis for doing so: (1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to - (a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and (b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely - (i) a child of the parties, (ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties. (2) A court may make an order under subsection (1) in respect of property whether or not it has declared the title or rights of a party to a domestic relationship in respect of the property.

(2010) 43 Fam LR 260

(1987) 11 Fam LR 785

(2005) 33 Fam LR 402

(2006) 34 Fam LR 550

(2007) 37 Fam LR 489

(2003) 30 Fam LR 463

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