JUDGMENT
1 Burchett AJ: By proceedings commenced in the District Court at Penrith on 2 February 2001, but subsequently removed to this court, Mr Greenwood sued Ms Merkel claiming the sum of $156,975.28. His Statement of Liquidated Claim alleged that, in or about 1994, the parties jointly purchased a restaurant business in Leura which they renamed Gracie's on the Mall, funding the purchase by a joint borrowing of the sum of $150,000 from two individuals, Malcolm Miller and Melita Bugeja; and then, in about late 1995 or early 1996, the Defendant bought the Plaintiff's share in the business for $65,000, on condition that the loan (at that stage standing at $120,000) "was to remain a debt of the Business". It is further alleged that the parties jointly borrowed the sum of $130,000 from the Commonwealth Bank of Australia, the Defendant's half share of this loan being paid to the Plaintiff as the payment due from the Defendant to the Plaintiff in respect of the purchase of the business.
2 Next, the Plaintiff pleaded that in 1998 the parties agreed that the Plaintiff would make repayment of the loan from Mr Miller and Ms Bugeja (that is, $120,000) on condition that the Defendant would "repay the loan on or before 30 June 2000". As a particular of this last allegation, it was alleged that the Defendant signed an acknowledgment of debt dated 4 July 1998, and it was further alleged that the Defendant was required to pay to the Plaintiff interest at the rate of $1100 per month. The Statement of Liquidated Claim went on to allege further claims relating to a Citibank supplementary credit card. The latter claims were abandoned during the hearing, but the claims associated with the partnership are pursued.
3 By Notice of Grounds of Defence, Ms Merkel, while admitting the partnership, and alleging that the Plaintiff abandoned work in it on or about 29 March 1995, pleaded that the parties, "[i]n the course of the partnership", had "instructed an accountant to prepare the partnership returns for the years 1994 - 1995 and the Plaintiff's accountants to prepare partnership returns for the years 1995 - 96, 1996 - 97". The period covered by these returns, it will be appreciated, extends long after the alleged sale of the Plaintiff's interest in the partnership in about late 1995 or early 1996, and their existence is inconsistent with its having been carried into legal effect. Instead of the borrowing from the Commonwealth Bank of Australia in the sum of $130,000 being a means of implementing the alleged sale, the Defendant pleaded it was for the express purpose of paying out the debt owed to Mr Miller and Ms Bugeja, but the Plaintiff took the proceeds of that loan for his own use and benefit to the exclusion of the Defendant. This allegation should be qualified to the extent that Ms Merkel also alleged a purpose of a portion of the loan (the amount of $10,000) was the purchase of a new dishwasher for the restaurant, and in another part of the pleading her case is put on the basis that, with the exception of that sum of $10,000, "the Plaintiff applied the balance of the proceeds of the loan to the Victory Theatre [an antique business, started or purchased by the Plaintiff, at one stage intended to include a café, located in a disused theatre] and Kurrara [a guesthouse], for his own purposes and to the exclusion of the Defendant". The Grounds of Defence denied the debts alleged and that the defendant was bound by the contracts alleged, and in particular it was claimed that the document pleaded as a contract of 4 July 1998 should be set aside under the Contracts Review Act 1980.
4 A Cross-Claim was also filed by Ms Merkel in the District Court, in which it was alleged that the parties had a de facto relationship, and also a partnership which "has ceased to operate as a partnership but has not been formally terminated". Particulars of the last allegation were that no partnership return had been prepared since 1997; that the partnership had not been formally wound up; and that no accounts had been taken of the partnership. In the Cross-Claim, a claim was made under the heading "DE FACTO RELATIONSHIP CLAIM". It was pleaded that between "approximately June 1992 and March 1998 the Cross-Claimant and Cross-Defendant had an emotional and sexual relationship and from time to time lived together as husband and wife on a bona fide domestic basis, although not married to each other, and in a de facto relationship within the meaning of s 3 of the De Facto Relationships Act 1984 as amended". It was alleged that at the commencement of the cohabitation the Cross-Claimant owned a delicatessen business (being Gracie's Gourmet in Katoomba) which she sold in 1994, household goods and effects, a motor vehicle and some savings, all of which she employed for the benefit of the relationship between the parties. The Cross-Defendant then had the Kurrara Guesthouse and a motor vehicle. During the relationship, the pleading alleges, the Cross-Claimant made direct and indirect financial and non-financial contributions to the acquisition, conservation and improvement of the property of the parties including making available the goodwill and proceeds of sale of Gracie's Gourmet, the work which the Cross-Claimant did and the income she earned, payments made in reduction of the loan from Miller and Bugeja, payments made in reduction of the loan from the Commonwealth Bank of Australia, and various forms of household work. The Cross-Defendant did not make a direct contribution to the purchase price of the business of Gracie's on the Mall, but he arranged for the loan from Mr Miller and Ms Bugeja to be obtained. It was also alleged that the Cross-Claimant made a contribution to the welfare of the Cross-Defendant during the relationship, and in this regard entertainment of relatives and friends and purchase of family gifts, as well as the performance of household duties, were relied upon.
5 This Cross-Claim was filed outside the required two years period, and thus can only be maintained under the De Facto Relationships Act by leave. Leave is sought pursuant to s 18 of the Act.
6 Further claims are made in the nature of claims to enforce constructive trusts and under the Contracts Review Act.
7 By an amended Statement of Liquidated Claim, Mr Greenwood pleaded that on 11 September 2003 he paid out the full amount owing in relation to the Commonwealth Bank of Australia joint loan, that amount being $65,532.47 in respect of which he seeks a contribution from the Defendant of half. The document re-calculates the total sum claimed at $199,641.51, from which must be deducted the amount of $9475.28 abandoned during the hearing.
8 Although Ms Merkel's pleadings seek a taking of accounts, which would normally be necessary for the resolution of a dispute about the financial consequences of partnership activities, Mr Greenwood opposes this, asserting that the contractual claims he sues to enforce are separate from the partnership, and counsel for Ms Merkel in submissions in reply put her position as being:
"Given the extent of the evidence and submissions in this case, a taking of accounts may not be necessary and the claims may be apportioned on the general principles of justice and equity."
In the way the case was fought, it seems to me the matter comes down to a question of the nature and extent of the contractual rights established, or at least put forward in reasonably precise terms, by Mr Greenwood, and whether in answer to those rights, assuming them to have been established, Ms Merkel is entitled to rely to some extent, and if so to what extent, upon the provisions of the De Facto Relationships Act. If that Act provides a complete answer to the claims propounded, it may be unnecessary to consider some other defences that have been raised or, having regard to the attitudes adopted respectively by the parties, to order the taking of accounts and the making of enquiries.
9 It is necessary to take some time to outline the rather tangled history of the matter but, before embarking upon that task, I should say something about the credit of the Plaintiff and the Defendant. For their versions differ at many points, and the Court can only proceed to consider the issues after it has determined the conclusions to be drawn from the conflicting evidence. Both were cross-examined, and I had an opportunity to assess their credit. I formed a very poor opinion of the credit of Mr Greenwood. On his own version, he was a knowing party to a fraud on the Commonwealth Bank of Australia. His assertion that there was complicity on the part of a bank officer is no answer, for there is simply no room to doubt that Mr Greenwood understood the arrangements he claims to have entered into had the purpose of deceiving the bank. On this, and on a number of other matters, I considered Mr Greenwood tailored his evidence in an attempt to gain an advantage. At several points in his evidence, he was unable to explain objective circumstances that were inconsistent with it. In particular, he could not explain the signing of tax returns which plainly asserted that the partnership was still in existence a significant period after he claimed Ms Merkel had bought out his share. Nor could he explain satisfactorily accounting documents showing that money he claimed to be absolutely entitled to had in fact been lent by the partnership, not by him, to a company in which he was the sole shareholder. I shall refer to various specific matters on which his evidence failed to convince me and in relation to which I prefer other evidence. It is sufficient to say here that, apart from such matters, his demeanour left me with the impression that his evidence was not to be accepted unless independently corroborated or, on a particular matter, in accordance with what I thought to be the probabilities.
10 Turning to Ms Merkel, I formed a quite different impression of her. She is a woman of very limited capacity, and indeed psychological evidence was tendered in her case which supported this conclusion. I am not speaking of the psychologist's views about the transactions alleged to have been entered into, to which I have had no regard, but of his specialist evidence about her capacities. Generally, I thought she was reliable within the limitations of her ability to appreciate the issues and recall what occurred with some degree of accuracy. There was one aspect of her cross-examination which certainly embarrassed her. She was challenged on the question of her fidelity to the de facto relationship she alleges existed between her and Mr Greenwood. The challenge was obviously made on instructions, but in re-examination the explanation that emerged (and was uncontradicted) left the substance of her claim to faithfulness over the six years of the relationship intact. At the same time, the incident, which may have occurred before the relationship had become firmly established, while it was discreditable to both of them, was raised in cross-examination (as I have no doubt, upon Mr Greenwood's instructions) in a quite misleading way. Had Ms Merkel, for her part, been less frank than she ultimately was, the Court might well have been misled.
11 Ms Merkel was born on 20 May 1953; married and had two sons (now adults); divorced her then husband in about 1984; and met Mr Greenwood about 1991 or 1992, when he came into a delicatessen shop in Katoomba which she was conducting in partnership with a platonic friend. Mr Greenwood was born on 18 May 1950, and had worked for many years with Qantas, rising to a supervisory position in which he trained staff such as stewards. He had also been married, with children, but had been long separated from his wife. In 1991, he used a redundancy payment from Qantas to purchase a two thirds interest in Kurrara Guesthouse in the Katoomba area.
12 From about June 1992, Mr Greenwood and Ms Merkel formed a relationship which involved her spending a substantial number of the nights of the week at his place and him spending some nights at her place at the various addresses in the Katoomba area at which each of them was from time to time resident. This relationship continued, with a few short interruptions (not, I think, exceeding a few weeks) and some changes of living arrangements, to which I shall refer, until March 1998 when Mr Greenwood ended it because he had, a few months before, formed a new relationship with a Ms McGregor. He had not previously told Ms Merkel of this new relationship.
13 Although Mr Greenwood conceded that some kind of relationship existed during much of the period I have mentioned, he was at pains to attempt to present to the Court the impression that this relationship was merely in the nature of repeated but intermittent casual indulgence in sexual intercourse unaccompanied by any mutual emotional dependence, which did not exclude other sexual partners and should not be regarded as a de facto relationship within the meaning of the relevant legislation. Because the relationship ended in March 1998, that legislation was the De Facto Relationships Act 1984, as it stood up until the 1999 amendments by virtue of which it became the Property (Relationships) Act 1984 (see s 6(2) of the latter Act). For many reasons, I do not accept the view of the relationship between the parties put forward by Mr Greenwood. For one thing, I accept the evidence of Ms Merkel that the parties slept together much more frequently than Mr Greenwood conceded, that she was faithful to him and he claimed to her that he also was faithful, that she performed various domestic tasks on his behalf, and that they professed and in different ways sustained the supportive relationship of a couple. They were involved with each other's families and relations to some extent, shared some family Christmases, and she provided to him, and he accepted, much assistance, both in work and in money in matters of business. They entered into a partnership in which it is plain that he relied on her to undertake a part involving a much greater burden than anyone would have been likely to accept in the absence of a relationship going well beyond a mere matter of business. Very tellingly, when Mr Greenwood decided in about December 1994 or January 1995 to apply for a position with Air Seychelles which would involve living in the Seychelles, he invited Ms Merkel to accompany him on a visit to the Seychelles at the end of January, saying:
"We will have to go to the Seychelles first to see if you could live there as well."
They did in fact go together, although ultimately Mr Greenwood decided in March 1995 to take up a position as Training Manager at the Sheraton on the Park in Sydney instead.
14 For a period of approximately seven months up to January 1996, Ms Merkel did not have separate accommodation of her own, but lived in Mr Greenwood's house at Evans Lookout Road Katoomba, paying some rent because Mr Greenwood said it was only fair his sister (who also had an interest in the house) should receive some return. The reason that she moved out in January 1996 was that her two sons, who had previously been with their father, had come to live with her, which had led to some difficulties between them, or one of them, and Mr Greenwood. Ms Merkel has a very dependent personality and very limited business capacity. Mr Greenwood, on the other hand, has occupied positions both with Qantas and with the Sheraton on the Park indicative of the ability to direct others, and I think he has a somewhat dominant personality. I accept Ms Merkel's evidence to the effect that she accepted his direction and trusted him, without understanding matters of business he put before her. He was accustomed to calling her a "dumb blonde" and tended to relegate her to the kitchen. Mr Greenwood, despite the stance he took about the nature of their relationship, admitted in evidence that she was in love with him. In my opinion, the considerable business assistance he was able to obtain from her, which was always to his own advantage, is itself an indication of the depth of the relationship, at least from her side.
15 By s 3 of the De Facto Relationships Act, a de facto relationship "means the relationship between de facto partners, being the relationship of living or having lived together as husband and wife on a bona fide domestic basis although not married to each other". This definition, of course, underwent some remoulding in the 1999 amendments, but the parties were agreed that relevantly for present purposes the changes made little difference. The particular arrangements pursued by husbands and wives may vary very greatly, and the same is true for de facto partners. Although the relationship between the parties in the present case did not pursue the course that the majority of marriages pursue, except perhaps for the period of six months I have mentioned and in relation to the Seychelles, in my opinion they lived together as husband and wife on a bona fide domestic basis in the way that suited them, and such breaks as there were were too brief to destroy the continuity of their de facto relationship within the meaning of the statute over the period between 1992 and 1998. Many a normal marriage may suffer the occasional disturbance of similar intermissions. They certainly lived together in a de facto relationship for a period of not less than two years within the meaning of s 17 of the Act; and, in any case, as will appear later in these reasons, I am satisfied Ms Merkel has made substantial contributions of the kind referred to in s 20(1)(a) and (b) for which she would otherwise not be adequately compensated if no order were made by the Court; and that the failure to make an order would result in serious injustice to her. Thus I find both branches of s 17 of the Act satisfied.
16 S 18 provides a time limit for the making of an application under the Act of two years after the day on which the de facto partners ceased to live together as husband and wife on a bona fide domestic basis. In this case, the cross-claim was filed over three years after March 1998. However, the section empowers the Court in its discretion to grant leave "where the court is satisfied, having regard to such matters as it considers relevant, that greater hardship would be caused to the applicant if that leave were not granted than would be caused to the respondent if that leave were granted". The nature of the issue expressly raised by this provision requires that I defer consideration of it until I have dealt with the matters bearing on the relevant hardship relating to each of the parties.
17 At the time the relationship between Ms Merkel and Mr Greenwood commenced, in the months following May 1992, Ms Merkel was conducting a delicatessen business known as Gracie's Gourmet in Katoomba in partnership with one Colin Dunford. He was very ill in 1993 and died on 14 March 1994. He had no family, and during his illness Ms Merkel took over the business. In the early days of her relationship with Mr Greenwood, Ms Merkel also did cleaning and cooking in connection with his guesthouse, Kurrara. He disputed her evidence about this, and produced some records to show that Gracie's Gourmet had actually charged him for catering at the guesthouse. I do not think too much should be made of this particular dispute, as I think it is likely that Gracie's Gourmet would have charged for catering it did, at least during the lifetime of Colin Dunford, and I note that Ms Merkel's affidavit of 10 September 2002 refers to such a payment; however, I also accept her evidence that there were occasions after the commencement of the relationship between Ms Merkel and Mr Greenwood when she cooked meals at the delicatessen and brought them home for him and guests and friends at Kurrara without payment. Also, I do not think Mr Greenwood's records were particularly reliable - in at least one instance cross-examination provided good ground to think falsification had occurred, very possibly to reduce taxation.
18 Late in 1993, the parties learned that a restaurant or café in Leura was on the market, and they decided that Ms Merkel would sell the delicatessen and they would buy the restaurant business and run it together. I am satisfied it was Mr Greenwood who was able to arrange finance by way of a loan of the sum of $150,000 from Mr Miller and Ms Bugeja who were old friends of his. They took a mortgage over Kurrara to secure the loan, but Mr Greenwood made no contribution in cash. Ms Merkel's ability to contribute the value of the delicatessen business was, on Mr Greenwood's own account, a factor in the obtaining of the loan. For when he was negotiating it, Ms Bugeja asked him:
"How long would you want it for?"
and he replied:
"About six months; we should be able to repay it when Fiona sells the deli."
In the event, the delicatessen business was sold in about the middle of 1994 for a return to Ms Merkel of about $35,000, which she contributed to the capital of the restaurant business. She conceded that some part of this may have off-set wages paid to keep the delicatessen business going until its sale when she was working in the restaurant, but it was not shown that a large amount was involved in that, and in any case the work done by her in the operation of the restaurant by the partnership far exceeded the work done by Mr Greenwood. The evidence shows that Ms Merkel also contributed some items from the equipment of the delicatessen and successfully diverted some of its goodwill to the restaurant at nearby Leura. It was not in dispute that she had acquired a reputation, in particular, for certain tandoori chicken pies which she supplied from the delicatessen, and which were in great demand from customers at the restaurant who remembered her. Thus it was not for nothing that the parties chose to rename the restaurant so as to take advantage of the goodwill of the delicatessen which had traded under the name Gracie's Gourmet. They called the restaurant Gracie's on the Mall.
19 At a very early stage, the sum of $30,000 was repaid in respect of the loan from Mr Miller and Ms Bugeja from the business; no doubt the receipt or impending receipt of the monies provided by Ms Merkel from the sale of the delicatessen business contributed to the ability of the parties to achieve this.
20 The purchase of the restaurant business was settled on 14 March 1994 at a price of $110,000, including over $70,000 for goodwill. The sum of $40,000, part of the borrowing from Mr Miller and Ms Bugeja was thus not required for the purchase price, although it is clear that some of it was expended in refurbishment. However, the existing stove was kept; the restaurant refrigerator was replaced by the utilisation of the refrigerator from the delicatessen; and new equipment for the kitchen (such as a dishwasher which became the subject of dispute in the evidence) was acquired over time. Having regard to the evidence, including the relevant depreciation schedule of the partnership, I accept Ms Merkel's statement that about $25,000 was spent on equipment. That still leaves $15,000, and I also accept Ms Merkel's evidence to the effect that from time to time Mr Greenwood withdrew amounts of cash, only some of which he repaid. This continued to occur long after the purported sale of Mr Greenwood's interest in the business to Ms Merkel in about January 1995, and the fact that it did so is another matter inconsistent with the carrying into effect of any sale at that time.
21 I also accept Ms Merkel's evidence that she assisted Mr Greenwood with the purchase of furniture for a later business enterprise of his and provided cash on more than one occasion in 1996 at his request, the amounts totalling several thousand dollars. In the nature of the relationship, and after this lapse of time, it is not possible to be precise about the net amount obtained from the restaurant business in cash by Mr Greenwood and not returned (some monies were returned), but I am satisfied the amount was substantial.
22 It is important to appreciate that although Mr Greenwood continued to benefit from the restaurant business in these and other ways to which I shall refer, he played no significant part in its day to day operations after 29 March 1995, when he went to work for the Sheraton on the Park, except at some weekends and for a period of about six weeks in early 1996. It was actually in December 1994 that he indicated that he was now bored with the restaurant and wanted to do something else. The investigation of the possibility of their moving to the Seychelles followed, and then the job with the Sheraton on the Park.
23 As at 29 March 1995, the joint account of the business had a credit balance of about $1,189, and the amount of the borrowing from Mr Miller and Ms Bugeja stood at approximately $139,000. There was some inconclusive mention between the parties of the possibility of selling, but the restaurant was not placed on the market. At some stage, Mr Greenwood referred to the possibility of Ms Merkel buying him out. It is common ground that the parties saw a Mr Poulos, a real estate agent, who "said he thought the business could fetch a price of $280,000", but the evidence does not disclose what Mr Poulos was told, whether he ever saw the restaurant, or whether he was shown any of the accounts of the business. If he had been shown the books on the basis of which the tax return and accounts were prepared for the financial year ending 30 June 1995, they would have revealed that there was an excess of liabilities over assets of $3,206.53. Depending just when Mr Poulos was spoken to, it is also relevant that upon the partnership tax return for the year ended 30 June 1996, which was signed by Mr Greenwood, being prepared, it showed an excess of liabilities over assets of $52,080. In Mr Greenwood's own return for that year, he showed a loss of $9,286 from the partnership of Gracie's on the Mall. There was no suggestion, in cross-examination or otherwise, that this loss represented any inappropriate treatment of receipts or expenditure by Ms Merkel, or was other than a genuine reflection of the performance of the business. Indeed, the indication in the evidence is that the business had actually been struggling for some time, for Mr Greenwood and Ms Merkel were sued by the Commissioner of Taxation upon the basis that, from 1 July 1994 to 31 July 1996, they had deducted tax from wages of employees but failed to remit it to the Commissioner under the relevant section, nearly all of the amount being alleged to be due for the period to 30 June 1995, when Mr Greenwood admits that he was a partner and during most of which he was fully engaged in the business. Consistently with the conclusion that the difficulties of the business at that time were not a mere hiccup, the taxation problems have continued and multiplied, and are still the subject of litigation. Apart from all these matters, it is relevant to observe that 1995 was only the very next year after the purchase of the business for $110,000, and it would be somewhat remarkable if the money and effort put into it had so quickly increased its value by two and a half times.