Deborah Eve Pedersen v Nicholas Delaveris & Anor [2010] NSWSC 281 | Case summary

2009/289557 DEBORAH EVE PEDERSEN v NICHOLAS DELAVERIS JUDGMENT 1 HIS HONOUR: This is an application pursuant to s 14 of the Property (Relationships) Act 1984 ("the Act") for an adjustment of the interests of the parties in a property at Connells Point. Up until 25 March that property was owned by the first defendant. On 25 March 2010, the first defendant declared himself bankrupt and, as a consequence, the property vested in the second defendant as his trustee in bankruptcy. On the first day of the hearing, the second defendant sought leave to file a submitting appearance agreeing to submit to any order of the court other than an order as to costs and sought leave to be excused from further participation in the hearing. I granted that leave. 2 The plaintiff and first defendant met in about May 1998. The plaintiff then was approximately 16 years old and the first defendant was approximately 24 years old. They met at the Speed Bar Espresso, which was where the plaintiff was working. The first defendant says that he was in a committed relationship at the time. Although the first defendant and his former partner did not live together, the first defendant gave evidence that they generally met each weekend and on most nights during the week. 3 At the time that the plaintiff and first defendant met, the first defendant was working for PricewaterhouseCoopers. He had two investment units in Kogarah, each worth approximately $180,000. He also had several motor vehicles, superannuation in the sum of approximately $35,000 and what he described as "a portfolio of public company listed shares". He owed the St George Bank approximately $450,000. In 2001, a company controlled by the first defendant and known as Delaveris Holdings Pty Ltd acquired a 50 per cent interest in Green Gables Kindergarten for $90,000 from the first defendant's sister-in-law (Mrs Delaveris). The first defendant and his brother, Tony, each held one share in Delaveris Holdings. However, it appears that that company was controlled by the first defendant. The plaintiff had no significant assets at that time. 4 There is a dispute about when the relationship between the plaintiff and the first defendant started. The plaintiff says that they started dating casually shortly after they met and continued to do so for about one and a half years. In any event, the parties agree that they had entered into some form of relationship by early 2002. At that time, the plaintiff moved to a unit in Brighton-Le-Sands. The plaintiff says that the first defendant helped her to find that property. The first defendant denies that. He says that he lent the plaintiff $800 to pay the bond. The plaintiff denies that. Nothing turns on a resolution of those disputes. 5 The plaintiff says that almost immediately from the time she moved into the Brighton-Le-Sands property, the first defendant started staying with her and that, within about 6 months, he had moved his personal belongings into the apartment and was living full-time with her; and that they had an intimate relationship from that time until September 2008. The first defendant denies that. He says that his former relationship did not break down until late 2002 and that, although he may have stayed overnight at the Brighton-Le-Sands' property on occasions, for the most part he stayed home with his parents which is where he kept his belongings. During the time the plaintiff was at the Brighton-Le-Sands property she paid all the rent, all the utility bills and bought groceries and so on. She was responsible for all household chores. 6 In early 2003, the first defendant bought a third investment property at San Souci. The purchase price was $495,000. It is not possible to tell from the evidence how much money the first defendant borrowed in connection with the purchase of that property. Also in 2003, the plaintiff received $31,500 in respect of a workers compensation claim. She used that money to open an investment account with St George Bank. 7 In February 2003, the plaintiff and first defendant looked for an alternative to the property at Brighton-Le-Sands. They found one at Dolls Point. The lease in respect of that property was in the first defendant's name and he paid the bond and removalist expenses, although the plaintiff paid all the rent for the property (which was $240 per week) from February 2003 until July 2007, when the plaintiff and first defendant moved to a property in Connells Point. In about August 2003, the plaintiff and first defendant went shopping for furniture for the property. The cost of that furniture - which was paid for by the first defendant - was approximately $7,000. 8 The first defendant says that the lease of the Dolls Point property was put in his name at the plaintiff's request because the plaintiff told him that she was having difficulty finding another place to rent. He denies that he moved into the property with the plaintiff. I do not accept that evidence. In circumstances where the plaintiff had been renting property in her own name previously, I find it implausible that she could not continue to do so. I also find it implausible that the first defendant would spend $7,000 on furniture for the property if he was not living there. By this time, the first defendant concedes that his previous relationship had broken down. That was a relationship which, on his evidence, was one in which he spent most weekends and most nights with his previous partner. In my view, the most plausible explanation of the move to Dolls Point is that the plaintiff and first defendant had, at least by that time, decided to live together. I do not think that this conclusion is undermined by the fact that it appears that the first defendant left some of his belongings at his parents' place and continued to have his mail delivered to that address. 9 In May 2004, at the suggestion of the first defendant, the plaintiff started working at the kindergarten. She was initially paid $1200 per fortnight. There is a dispute about her role at the kindergarten. The first defendant and Mrs Delaveris, who also gave evidence, suggested that the plaintiff was employed as an administrative assistant. The plaintiff says that, after working at the kindergarten for a couple of months her wages were increased to $1800 a fortnight and from that time she occupied a managerial position and had responsibility for hiring and firing staff, conducting staff appraisals, attending to the payment of staff wages and superannuation and being the point of contact for parents. As might be expected, she also engaged in a wide range of other administrative tasks. The plaintiff says that, as a consequence of her efforts, the performance of the kindergarten improved substantially, that after about a year after she started it was at full capacity with a waiting list and that staff turnover had decreased substantially. 10 The first defendant says that, over a period of about 12 months, he deposited approximately $30,000 to $35,000 in the plaintiff's (St George) account. The plaintiff says that these deposits were paid to her as a share of the profits that the first defendant earned from the kindergarten - in recognition of the contribution that she was making. The first defendant says that they were amounts paid to the plaintiff to be held on trust for him as a means of forced savings. Because the descriptions on the plaintiff's bank statements are vague, it is not possible to tell from them how much was deposited or when the deposits were made, although it appears that they were made from some time in early 2005. 11 There is ample evidence to support the plaintiff's version of these events. The plaintiff tendered a large amount of material produced on subpoena by the kindergarten in which she was described as one of two "directors" of the kindergarten (the other being Mrs Delaveris). She was described as a director in significant correspondence to parents and in the kindergarten's Policies Manual and Parent Information handbook. Moreover, the plaintiff's version of events is supported by evidence given by Tania Kari, who also worked at the kindergarten at the time and who described the plaintiff as her "boss". 12 The first defendant and Mrs Delaveris dispute this evidence. Mrs Delaveris says that the plaintiff was given the title of "director" to appease her in circumstances where she was being difficult about her role in the kindergarten. Mrs Delaveris also gave evidence that attendances at the kindergarten went down while the plaintiff was working there. However, I regard this evidence as disingenuous. The comparison that Mrs Delaveris sought to draw was between attendance levels in September and November 2004 and attendance levels in December 2007 and January 2008. I accept the plaintiff's evidence that it was normal to have lower attendance levels in December and January; and the fact that Mrs Delaveris was driven to draw the comparison she did casts serious doubt on the reliability of her evidence on this aspect of the case. 13 The first defendant says that the tax returns of the plaintiff show that she was earning substantially less than $1800 per fortnight. He accepts that the plaintiff was paid that amount, but maintains that the extra amount was, in effect, a payment in advance of his profit share which was paid to the plaintiff as a loan by him to her. 14 I prefer the plaintiff's account of what occurred in relation to the kindergarten. It is clear from the plaintiff's bank accounts that the amount she received from the kindergarten was increased. It does not strike me as plausible, having regard to the nature of the relationship between the plaintiff and the first defendant, that the first defendant would put in place a complicated arrangement by which a proportion of his share of the profits would be paid to the plaintiff as a loan by him to her. A more plausible explanation is that the plaintiff and first defendant regarded themselves as a couple by that stage and that the first defendant arranged for his partner (the plaintiff) to take on a greater responsibility at the kindergarten and to be remunerated accordingly. He was also prepared to share with her his share of the profits from the kindergarten having regard to their relationship and the contribution she was making. It is true that the additional amounts are not disclosed in the plaintiff's tax returns. However, I accept the plaintiff's evidence that the first defendant arranged for those tax returns to be prepared and lodged. Although that may not relieve the plaintiff from responsibility for any errors in them, I do not think they demonstrate that she was not entitled to the money. 15 The first defendant also sought to underplay the relationship between him and the plaintiff while they were at the Dolls Point property by suggesting in his affidavit evidence that he was still "seeing other people" and that on 15 November 2005 he "travelled to Shanghai for a holiday with my then girlfriend, Ms Sophia Morano". He said that by that stage he had stopped having intimate relations with the plaintiff and that they did not have sexual relations after that time. However, in cross-examination, he admitted that the reference to "seeing other people" was a reference to social contact with other people, that Ms Morano was a business associate not a girlfriend and that the trip to Shanghai was a business trip not a holiday. 16 While the plaintiff and the first defendant were at Dolls Point, the first defendant did make other contributions to the relationship, although the evidence concerning those contributions was scant. Shortly before the lease for the property was signed, the plaintiff and first defendant went on a skiing holiday to Perisher Blue and, a couple of months later, a holiday to Thailand. The first defendant paid for those holidays. He paid for another holiday to Thailand the following year. He also played a role in persuading the plaintiff to start university studies and I accept that he contributed to some of the costs associated with her course. Finally, I accept that it is likely that he made contributions to some other expenses - such as dinners and the like - although it is not possible from the evidence to tell how much those contributions were. 17 In August 2005, the first defendant sold one of his investment properties in Kogarah for a profit of approximately $90,000. It appears that he used the proceeds of sale to reduce the loan to St George Bank. 18 In mid-2006, the plaintiff and first defendant became engaged and began to prepare for a wedding. The first defendant denies this and in support of his denial said in his affidavit the following: "In addition, I say that in Greek culture, it is a tradition that upon a couple becoming engaged the priest and close relatives would be invited over to celebrate this event. There are certain rituals that we would participate in. The plaintiff and I did not have this celebration."

It appears that the furniture and other personal property were divided in accordance with that proposal. 28 On the first day of the hearing the first defendant produced, for the first time, a copy of that document signed by him and dated 14 October 2008. An unsigned copy had been attached to his affidavit. Having regard to the time when the signed version of the document was produced, and the alteration that the first defendant made to his bank statement, there must be a serious question whether that document was signed on the date it bears. However, I do not think it is necessary to resolve that question. The first defendant's counsel said in closing submissions that the first defendant did not contend that the document gave rise to a binding agreement. It was simply put forward as an indication of what the plaintiff thought was a reasonable division of the property of the relationship. 29 On 16 October 2008, the first defendant paid $6,400 towards a bond and several months' rent for new accommodation for the plaintiff. He also gave evidence (which is not denied by the plaintiff) that she withdrew $950 from his keycard savings account on 6 October 2008 and that between 16 October 2008 and 15 December 2008 he paid her approximately $16,300. 30 It is not possible from the evidence to determine the first defendant's financial position immediately before he went bankrupt. The statement of affairs he filed in his bankruptcy contained a large number of basic inaccuracies and was clearly unreliable. In his affidavit evidence in these proceedings, he listed his assets as the Connells Point property, superannuation to the value of $10,000, furniture to the value of $10,000, a Mercedes E320 motor vehicle valued at $30,000 and savings of approximately $6,000. In cross-examination, he put a value on the motor vehicle of $13,000. He estimated the Connells Point property to have a value of $800,000 - although, given that it was purchased for $865,000, that valuation seems somewhat low. The current mortgage on the property is approximately $735,000. 31 Section 14 of the Act provides that a party to a domestic relationship may apply to the court for an order for the adjustment of interests with respect to the property of the parties to the relationship or either of them. 32 Section 20 of the Act provides that, on the application of such a person, the court may make an order adjusting the interests of the parties in that property of the parties to the relationship as to it seems just and equitable having regard to the financial and non-financial contributions made directly or indirectly to the acquisition, conservation or improvement of any property of the parties or their financial resources and the contribution made by either of the parties to the welfare of the other. Section 38 gives the court a broad power to make a variety of orders including any order it thinks it is necessary to make to do justice. 33 A court may only make an order under s 20 if it is satisfied that the parties to the application have lived together in a domestic relationship for a period of not less than 2 years: s 17. "Domestic relationship" is defined relevantly to include a de facto relationship: s 5(1)(a). A de facto relationship is one in which the parties live together as a couple, but are not married or related by family: s 4(1). In determining whether a de facto relationship exists all the circumstances of the relationship are to be taken into account including the following (see s 4(2)): "(a) the duration of the relationship; (b) the nature and extent of common residence; (c) whether or not a sexual relationship exists; (d) the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties; (e) the ownership, use and acquisition of property; (f) the degree of mutual commitment to a shared life; (g) the care and support of children; (h) the performance of household duties; (i) the reputation and public aspects of the relationship." 34 The plaintiff maintains that a domestic relationship was established some time in 2001 or 2002 when the plaintiff was living in the Brighton-Le-Sands property. However, I am not satisfied that a domestic relationship had been established by that time. 35 On the plaintiff's own evidence, she was entirely responsible for rent, household expenses and household chores. Although the first defendant spent most nights with her and left many of his clothes at the unit, I do not think it could be said at that stage that there was a mutual commitment to a shared life or that there was a sufficient degree of interdependence between them to say that they were in a de facto relationship. At that stage, I think the position was that the Brighton-Le-Sands unit was the plaintiff's home, but, as the relationship developed, the first defendant began spending more time with her and, as a result, more time in her unit. But I do not think that that is sufficient to establish a de facto relationship between them. 36 On the other hand, I am satisfied that a de facto relationship had been established by the time the plaintiff and first defendant moved to the Dolls Point property. They had looked for that property together. The first defendant took out the lease in circumstances where the expectation of both parties must have been that they would live there together and that is what happened. The first defendant paid the bond and removalist expenses and bought furniture for the property. On the other hand, the plaintiff paid the rent. By this time, the relationship was firmly established. In my opinion, those factors are sufficient to establish that they were in a de facto relationship by that time. 37 It is accepted that, in determining whether an order should be made under s 20, the court should adopt a three stage process. The first is to identify and value the property of the parties in order to determine the divisible pool. The second is to balance the parties' respective contributions. The third is to determine what order should be made having regard to those contributions: see, for example, Kardos v Sarbutt [2006] NSWCA 11 at [29] per Brereton J (with whom Basten JA and Hunt AJA agreed). 38 In this case, the first step is straightforward. The only property available for division is the property in Connells Point. 39 In taking the second step, the court has a broad discretion in determining the approach to take. In a majority of cases, a global assessment of the contributions that each party made to the relationship is likely to be more appropriate than an asset by asset approach: see Bilous v Mudallar (2006) 65 NSWLR 615 at [42]. An asset by asset approach is unlikely to give sufficient weight to non-financial contributions. In any event, it is difficult to apply where, as in this case, there is only one asset to be divided and the parties' respective contributions are not entirely clear. 40 In this case, the plaintiff made very substantial contributions to the relationship before the Connells Point property was acquired. She contributed to the success of the kindergarten, which was sold for a substantial profit. She paid rent on the Dolls Point property and did most, if not all, of the domestic chores and cooking. The first defendant also made significant contributions. He paid for at least one holiday during the period of the domestic relationship. He paid other expenses including the bond payable in respect of the Dolls Point property, removalist expenses, the cost of furniture and, shortly before their separation, he bought the plaintiff a motor vehicle. 41 It is not possible on the material before me to determine precisely what contribution the first defendant made to the acquisition of the Connells Point property. That is because the mortgage he took out exceeded the value of the property and was used in part for other purposes. The best way, I think, to analyse that contribution is to take the total cost of the property ($891,000), deduct the plaintiff's contribution ($43,500) and deduct the amount of the existing mortgage ($735,000). On that basis, the first defendant made a contribution of $112,500. However, it is important to bear in mind that part of that contribution came from the profit on the sale of the kindergarten and the plaintiff made a direct contribution to that profit. The first defendant took on the liability of the mortgage, but the repayments were made by both of them. Those repayments were approximately $3,500 per month. From August 2007 to April 2008, the plaintiff paid $1,400 (or, on two occasions, $1,300) per fortnight to the first defendant in respect of them, although it needs to be borne in mind that some of the plaintiff's personal expenses were paid for by the first defendant. The first defendant made the balance of the mortgage repayments. He has continued to make those after the plaintiff left. However, he has had the benefit of the property since then and, in those circumstances, I do not think any weight should be given to those contributions. 42 In my opinion, this is a case where the parties' contributions should be seen as being equal: see Howlett v Neilson [2005] NSWCA 149 at [29] per Hodgson JA (with whom Ipp JA and McColl JA agreed). It is true, of course, that the first defendant contributed more money to the acquisition of the property. But, apart from the kindergarten, no part of his contribution appears to have come from assets he held before the commencement of the relationship and, so far as the kindergarten is concerned, I have already found that the plaintiff made a substantial contribution to the profits that the first defendant earned from the sale of that business. Consequently, to the extent that the first defendant's contribution to the Connells Point property came from those profits, the plaintiff must get some credit for that contribution. In addition, the plaintiff contributed to the relationship in other ways. She paid the rent on the property they occupied previously. She did all the housework and cooking. Weighing all these matters up, in my opinion, the plaintiff and first defendant should be treated as having contributed equally to the Connells Point property. 43 One other adjustment, however, needs to be made. After the relationship ended, the first defendant paid the plaintiff a total of $23,650. In my opinion, he should be given credit for that amount. One way of giving that credit is to adjust the parties' shares in the Connells Point property. However, the difficulty with that approach is that the value of the property remains unclear. In those circumstances, I think a better approach is to make orders the effect of which will be that the first defendant will be paid that amount from the plaintiff's share of the proceeds of sale when the Connells Point property is sold. 44 In circumstances where the first defendant is bankrupt, the only order which will do justice to the plaintiff is a declaration that the first defendant holds the property on trust for them both. 45 Having regard to the conclusions I have reached, I think it is appropriate that the first defendant pay the plaintiff's costs. However, I direct that in the event that either party seeks a costs order other than the one which I have made, an application to that effect should be made by arrangement with my Associate within the next 7 days. 46 I also give the parties liberty to apply on 3 days' notice for consequential or ancillary orders to give effect to the orders that I have made. **********

Deborah Eve Pedersen v Nicholas Delaveris & Anor

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Judgment (13 paragraphs)

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Cases Cited (3)