Ferrao v Separovich

6423 of 2008 PAULA CRISTINA FERRAO -v- STEVEN MICHAEL SEPAROVICH JUDGMENT 1 HIS HONOUR: These are proceeding under the Property (Relationships) Act 1984. 2 By statement of claim filed on 24 December 2008 Paula Cristina Ferrrao claims orders adjusting the interests in property of herself and the Defendant, Steven Michael Separovich. 3 The Defendant filed a defence and a cross-claim on 9 April 2009, and the Plaintiff filed a defence to that cross-claim on 22 April 2009. 4 It was not disputed that the parties were in a de facto relationship from 30 October 1996 until about 17 June 2008. There was one child born of the relationship, being Nicholas Tyler Ferrao Separovich (who was born in February 1997 and who is now aged 13). 5 At the commencement of the relationship the Plaintiff (who was born in 1974 and is presently aged 35) was employed as an accounts officer by Schindler Lifts Pty Limited and was studying on a part-time basis at the University of Technology, Sydney. Her pre-tax income for the 1996 year was $30,193 and for the 1997 year was $22,250 (although in that latter year she was not working for six months, and thereafter was working on a part-time basis, on account of the birth of their son Nicholas). 6 At the commencement of the relationship the Defendant (who was born in 1973, and is presently aged 36) was employed as a bricklayer, his pre-tax income for the 1996 year was $20,757 and for the 1997 year was $17,810. 7 Neither party had much in the way of assets at the commencement of the relationship. The Plaintiff had savings of about $2,000, furniture and personal effects, and a superannuation entitlement of almost $6,000. The Defendant owned a Ford Falcon motor vehicle, and some band equipment, together with superannuation entitlements. 8 In addition, the parties conjointly owned a residential property situate at Quinalup Street, Gwandalan (near Budgewoi, on the Central Coast of New South Wales). That property had originally been purchased by the Defendant and his now deceased brother, Nicholas Separovich, in 1993 for a purchase price of $39,000. At that time the property consisted of vacant land. 9 It was the Defendant's evidence that the purchase of the Gwandalan land had been financed by a deposit paid by the Defendant's parents, and an amount of $40,000 borrowed by the Defendant and his brother. According to the Defendant, his father, who was a licensed builder, commenced construction of a three bedroom brick veneer residence upon that land, and the Defendant and his brother worked as labourers upon that construction. It will be appreciated that the foregoing purchase and any construction work asserted by the Defendant took place before the commencement of the relationship between the parties, and, indeed, before the parties had commenced going out together (which was in 1994). 10 According to the Defendant, by April 1995 (which was still before the commencement of the de facto relationship between the parties) the construction of the residence upon the Gwandalan property had reached lock-up stage. In consequence of family discussions it was agreed that the Defendant and the Plaintiff should purchase the interest of Stephen's brother in the property. For that purpose, the Plaintiff and the Defendant borrowed from Westpac Banking Corporation the sum of $117,615. That sum was disbursed as follows, Discharge of debt to bank $33,419 Payment to Defendant's father $64,695 Further payment to Defendant's father $19,000 11 Although the transfer stated a consideration of $1000, it was not disputed between the parties that there was no such payment made to the transferors, Nicholas Andrew Separovich and Steven Michael Separovich, when the property was transferred by them to Steven Michael Separovich and Paula Cristina Ferrao as joint tenants. 12 According to the Defendant, the final payment to his father of $19,000 was made in August 1994, and thereafter his father installed driveways and landscaping upon the property at no cost to the parties. It was the Defendant's evidence that the Gwandalan property was then used as a holiday house for members of the respective extended families of each of himself and the Plaintiff. Subsequently, from about 2003, the property was rented out, and the income therefrom went towards the mortgage repayments. 13 At the time of the commencement of their de facto the relationship in October 1996, the substantial asset of each party was that party's one half interest in the Gwandalan property. The mortgage debt upon that property at that time was $114,820. The parties were jointly liable for that mortgage debt. The regular payments upon that mortgage debt were made from a joint account established is the names of the parties with Westpac. It was into that joint account that their respective salaries were paid. Subsequently, in February 1998 the parties refinanced the mortgage loan by borrowing $120,000 from Westpac, that sum being repaid from the Westpac joint account. 14 It is essentially the Gwandalan property that is the subject of the dispute between the parties in the present proceedings. At the time of the hearing the estimated value of that property was between $300,000 and $350,000, and it was subject to a mortgage of almost $84,000. 15 By her statement of claim, the Plaintiff seeks an order that the Defendant pay to her the sum of $175,000 (that sum being one half of the upper limit of the range of the present estimated value of the property), in return for the transfer by the Plaintiff to the Defendant of the Plaintiff's interest in the Gwandalan property, subject to the present mortgage encumbrance thereon. 16 The Defendant, however, by his cross-claim seeks an order that the Plaintiff transfer to him her interest in the Gwandalan property, and pay to him the sum of $80,362 (that figure, presumably, representing the Defendant's estimation of the present mortgage debt); or, in the event that the Defendant does not effect the discharge of the mortgage on the property, that the property be sold, and after the discharge of the mortgage and the payment of commission and legal fees, the remaining balance be paid to the Defendants. 17 At (or shortly after) the commencement of the de facto relationship between the parties in October 1996 they resided in a granny flat at the rear of the residence of the Defendant's parents at Old Toongabbie. They resided there until early 2004, when they removed into premises owned by the Plaintiff's parents at Dulwich Hill. That latter abode was the residence of the parties until their separation in June 2008. The parties did not pay any rent to the Defendant's parents while residing in the Old Toongabbie granny flat, or make any contribution towards the outgoings on that property. The Defendant did, however, say that in 1999 his parents effected improvements upon that granny flat, extending it to constitute a three bedroom brick veneer cottage, and that, whilst neither he nor the Plaintiff made any contributions towards the costs of those improvements, the Defendant himself did assist as a labourer upon that construction work. 18 In the period from early 2004 until the termination of the relationship in June 2008, while they were residing in the Dulwich Hill property owned by the Plaintiff's parents, the parties paid to them rent of $350 a week. 19 During the course of the relationship the Plaintiff acquired professional qualifications as a Bachelor of Business from the University of Technology, Sydney. 20 Apart from a period of about six months after the birth of their child Nicholas in June 1997, the Plaintiff was in employment throughout the entirety of the relationship. The birth of Nicholas caused the Plaintiff to defer her studies, which she resumed on a part-time basis in 1998. By then the Plaintiff had become an accounts officer with Schindler Lifts Pty Limited. 21 In December 1998, the Plaintiff commenced work with Hunter Hall International Limited, a company whose business appears to be in investments and funds management. She remained in employment with Hunter Hall throughout the balance of the relationship, and she continues to be currently employed by that company. The Plaintiff was originally employed on a part-time basis as a client service administrator. However, she subsequently was promoted to company accountant, and later to financial controller, and by the end of the relationship was the manager - finance and administration (a position which she holds to the present time). Her salary increased commensurately with those increased responsibilities and promotions. 22 In her affidavit evidence the Plaintiff compared her pre-tax income throughout the period of the relationship, in amounts totalling $1,560,000.88, with the Defendant's pre-tax income throughout the same period, in amounts totalling $163,378. For part of the relationship the Defendant was not in employment. During the periods when he was in employment, his earnings were comparatively small, in relation to the earnings of the Plaintiff. For example, in 2001, when the Plaintiff's pre-tax income was almost $60,000, the Defendant's pre-tax income was about $22,000 and in 2002 when the Plaintiff's pre-tax income was $86,600, the Defendant's pre-tax income was about $14,200. 23 The Defendant suffered an injury to his left knee while playing soccer in 2002, which prevented him from working for a period of about six months. In 2006, the Defendant (who for some time previously had been experiencing back pain) gave up work completely, in order to devote himself entirely to being a full-time homemaker and parent to their son Nicholas. 24 There was considerable evidence given regarding the arrangements of transportation of Nicholas to school, and the arrangements for his care after school, when his mother (or at times both his parents) were in employment. 25 Nicholas has been attending a private school at Stanmore since 2004. The Plaintiff has paid the entirety of his school fees, and all other costs and expenses relating to his education, and continues to do so. 26 A very considerable quantity of evidence was given concerning the present financial and material circumstances of the parties, especially of the Plaintiff, and concerning the arrangements for the custody of Nicholas, who is now residing full-time with his father, with access to his mother. The Plaintiff pays to the Defendant child support for Nicholas. 27 There was also a very considerable quantity of evidence given concerning the asserted gambling activities of the Defendant, which, according to the Plaintiff, were operated from the joint bank account by the parties. 28 Not only was the Plaintiff at the termination of the relationship receiving a very substantial income from her employment (in the 2008 financial year that pre-tax income was $329,281), but the Plaintiff also in the course of that employment was enabled to receive options for the acquisition of shares in Hunter Hall Limited. She subsequently took up those options and purchased 68,000 shares in that company. Although 12,378 of those shares were sold by her during the course of the relationship (at a profit of almost $61,000), the Plaintiff still retained more than 55,000 shares (valued at about $605,000) in Hunter Hall at the termination of the de facto relationship. The Plaintiff received dividends upon her shareholding during the course of the relationship. 29 By the time the Defendant completely gave up his employment in 2006, the parties and their son were able to live more than comfortably upon the income of the Plaintiff alone. 30 At the termination of the relationship each of the parties owned a one half interest in the Gwandalan property. In addition, the Plaintiff held shares in Hunter Hall, to an estimated value $605,000, and savings of about $20,000, as well as furniture and personal effects. The Defendant's assets at the termination of the relationship did not differ significantly from what they had been at its commencement. His present motor car was purchased in 2004. 31 It is in the light of the foregoing facts and circumstances that the Court must proceed to a consideration of the claim of the Plaintiff. I have had the benefit of receiving a written outline of submissions and a chronology from Counsel for the respective parties. Those documents will be retained in the Court file. 32 The jurisdiction invoked by the Plaintiff in the present proceedings is founded upon section 20 of the Property (Relationships) Act, subsection (1) whereof, provides, 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.

33 In approaching a claim for adjustment of the interests of parties in property pursuant to section 20(1) of the Property (Relationships) Act the Court must make a holistic judgment and must not attempt to evaluate the respective contributions of the parties as if it were undertaking a reductionist process analogous to the taking of partnership accounts (notoriously one of the most time consuming of litigious exercises). (See Davey v Lee (1990) 13 FamLR 688; see also Bilous v Mudalia [2006] NSWCA 38, at [43], where Ipp JA said that some situations do not lend themselves to either a pure global approach or a pure asset by asset approach in determining what orders should be made.) 34 In considering the claim of the Plaintiff and the cross-claim of the Defendant the Court should not be diverted from the clear words of the statute, where, by section 20 (1), the Court is required to have regard to the respective contributions of the parties of the nature referred to in that subsection. 35 I have already observed that there was considerable evidence given concerning events and matters which occurred after the termination of the relationship. I regard that evidence as totally irrelevant to a consideration of the respective contributions of the parties of the nature referred to in section 20(1). 36 At the outset of the relationship the financial and material circumstances of the parties were more or less equal. During the course of the relationship the financial and material circumstances of the Plaintiff far outstripped those of the Defendant. The Plaintiff swiftly became the primary (ultimately, the sole) breadwinner of the relationship. 37 For the last two years of the relationship, the Defendant was not in employment, and any slight income received by him was in negligible amounts. 38 Contrary to his denials under cross-examination, I am satisfied that the Defendant expended considerable amounts of money from the joint account of the parties upon his gambling activities, betting on horse racing with the TAB, and on poker machines in hotels. Documentary material produced on subpoena by TAB Corp Holdings for the period 25 January 2001, to 28 January 2006 discloses that there were 3776 bets made upon the Defendant's TAB Corp account, involving the expenditure of $63,522. 39 I was most unfavourably impressed by the Defendant's answers under cross-examination regarding those withdrawals from the joint account, and the Defendant's attempted explanation that on many occasions at pubs a friend from work asked the Defendant to lend him money, and that that was the reason for such withdrawals. I did not believe the Defendant's evidence when he said that he did not know the location of the Hotel Victoria, from which he made a number of withdrawals from the joint account of the parties. If it was true (as he asserted) that the Defendant's friends and work colleagues were all gamblers, and that he would have lent them money, it was, in any event, money earned by the Plaintiff which he was lending to them. 40 I have already recorded that for the last two years of the relationship the Defendant was not in employment and he was a full-time homemaker for the family unit and parent to Nicholas. Those roles were significant and important, and the Defendant's contributions in those roles should not be regarded as being merely token or perfunctory. However, it should not be overlooked that the Plaintiff also, within the practical constraints imposed by her employment, also made significant contributions to the relationship as a homemaker and parent. 41 It was the financial contributions of Plaintiff, through her employment and the high salary which her qualifications and ability enabled her to earn, which financially and materially maintained the family throughout the entirety of the relationship. Her earnings not only provided the sole financial source during the last two years of the relationship for the maintenance of the family, and for meeting the totality of the mortgage payments on the Gwandalan property, but also enabled the Defendant to resort to the proceeds of the joint account (into which the Plaintiff's salary was paid) for indulgence in his gambling activities. 42 The housing loan secured by mortgage, which the parties obtained from the Westpac Banking Corporation in February 1998, was possible only because of the Plaintiff's salary. The Defendant's taxable income for that year was only $5,512. His very small earnings would not have enabled such a loan to have been obtained by him alone, or to have been repaid by him alone. 43 The Plaintiff's successful business career was achieved by her own industry and diligence. The Defendant was not involved in the Plaintiff's professional success, beyond his contributions as a homemaker and parent. The shares and options which the Plaintiff achieved by virtue of her professional accomplishments and her employment were not acquired in consequence of any conduct or contribution on the part of the Defendant. 44 The Defendant asserted that significant contributions were made by his parents, especially by way of childcare and transportation of Nicholas. The extent of the involvement of the Defendant's parents in those activities was disputed by the Plaintiff. No evidence was presented from the Defendant's parents, and there was no explanation for the absence of such evidence. In any event, those activities of his parents (even if the Defendant's evidence in this regard be accepted) do no constitute contributions of the nature referred to in either paragraph (a) or paragraph (b) of section 20 (1) of the Act. 45 In regard to the Defendant's gambling activities, an attempt was made on his behalf to diminish the significance of those activities, and to explain the absence of any reference in his affidavit evidence to his considerable expenditure on those activities. It was submitted that gambling was such a small part of the relationship, that it was not necessary for the Defendant to refer to it in his affidavit evidence. 46 In failing to refer to his gambling activities and to his dissipation in the course of those activities (without either her knowledge or her consent) of funds earned by the Plaintiff, I consider that the Defendant failed in his obligation to place before the Court as fully and as frankly as possible all information concerning his financial and material circumstances during the relationship. That failure was the more serious in the situation where, as here, the Defendant is seeking substantive relief by way of his cross-claim. 47 The expenditure of the Defendant on gambling was, as I have observed, largely the expenditure of money earned by the Plaintiff. It occupied time and energy of the Defendant. His attempted explanation in the witness box that withdrawals from the joint account were for loans to his workmates was an explanation which I totally reject. He did not suggest that repayment of those alleged loans was ever sought or made. 48 I am satisfied that the overwhelming contributions to the relationship were the financial contributions of the Plaintiff, and that it is appropriate in all the circumstances of this case that the Plaintiff, as she desires, should transfer to the Defendant her interest in the Gwandalan property, subject to the present mortgage upon that property, and that, in return, the Defendant should pay a monetary sum to the Plaintiff. I am satisfied that the appropriate monetary sum should be the amount of $160,000 (that figure, which is somewhat less than the amount sought by the Plaintiff in her statement of claim, being one half of an amount which is about mid-way in the range of the present estimated value of the property). 49 I make the following orders: 1. I order that, simultaneously upon payment to the Plaintiff by the Defendant of the sum of $160,000, the Plaintiff transfer to the Defendant her right, title and interest in the property situate at Quinalup Street, Gwandalan, subject to the mortgage thereon.

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Judgment (14 paragraphs)

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