Ireland v Pratley

Primary Judgment 27The primary Judge set out (at [20]) the three steps identified by Basten JA in Baker v Towle [2008] NSWCA 73; 31 Fam LR 323, at [43], ordinarily required when applying s 20 of the Act. The three steps are as follows: (1) identification and valuation of the property of the parties; (2) identification and valuation of the respective contributions of the parties, of the types referred to in s 20; (3) determination of what if any order is just and equitable having regard to these contributions. The primary Judge approached the matter by reference to the three steps identified by Basten JA. 28Under the heading "Property of the parties" his Honour set out the property held by the parties at the commencement of their relationship as follows: Asset Value Plaintiff First defendant Rankin Drive Bangalow $260,000 $260,000 Hill Street Bermagui $177,000 $177,000 Savings $40,000 $38,000 $2,000 Toyota Corolla Seca $10,000 $10,000 Holden utility $25,000 $25,000 Total $512,000 $308,000 $204,000 Less liabilities: Mortgage $371,300 $212,000 $159,300 Car lease $21,000 $21,000 Total $392,300 $212,000 $180,300 Net position $119,700 $96,000 $23,700 Superannuation $15,244 $15,000 $244

29His Honour noted that, in accordance with s 47(2) of the Act, he was entitled to have regard to the terms of the Deed, notwithstanding that Ms Pratley had not received a certificate of independent legal advice as required by s 47(1)(d) of the Act. His Honour found that the effect of the Deed was that the Bangalow Property was thereafter held beneficially by Ms Pratley and Mr Ireland in equal shares. 30The primary Judge also set out in tabular form the property held by the parties at the dates of separation and of the hearing. The tables are reproduced below: At the date of separation: Assets Value Plaintiff First defendant Rankin Drive Bangalow $465,000 $232,500 $232,500 Hill Street Bermagui $242,000 $242,000 Savings $139,054 $85,000 $54,054 Holden Vehicle $21,000 $21,000 Total $867,054 $317,500 $546,554 Liabilities nil Superannuation $0,000 $514,120

At the date of the hearing: Asset Value Plaintiff First defendant Rankin Drive Bangalow $610,000 $305,000 $305,000 Peter Street South Golden Beach $495,000 $495,000 Savings $80,000 $80,000 Furniture & household effects $61,000 $5,000 $56,000 Motor vehicle $31,000 $31,000 Total $1,277,000 $390,000 $887,000 Liabilities: Loan from Trust $479,000 $479,000 Other loans $82,000 $82,000 Credit cards $20,000 $ $20,000 Total liabilities $581,000 $ $581,000 Net position $696,000 $390,000 $306,000 Superannuation $154,794 $514,120

31It was common ground that both tables incorrectly recorded Mr Ireland's superannuation entitlements as amounting to $514,120. That error, so it appears, came about because the tables were actually prepared by Ms Pratley's legal representatives and were incorporated into the judgment without alteration. 32The nil figure attributed to Ms Pratley's superannuation at the date of separation was also incorrect. As his Honour subsequently found (at [35]), at the time of separation Ms Pratley's superannuation entitlements amounted to $90,000. 33Under the heading "Financial Contributions" his Honour made the following findings:

• Mr Ireland made all contributions in respect of the Bermagui Property. The parties' joint contributions were centred on the Bangalow Property (at [27]).
• At the time of the Deed, both parties had contributed equally to the Bangalow Property (at [28]).
• Mr Ireland contributed $42,010 more that Ms Pratley contributed to the second round of renovations (at [28]).
• The renovations resulted in improvements to the Bangalow Property (at [29]).
• During the relationship, Ms Pratley derived a total taxable income of $645,105, while Mr Ireland's taxable income over the same period was about $423,000 (at [30]). His Honour proceeded on the basis that Ms Pratley's contributions from her salary amounted to $220,000 more than Mr Ireland's contributions from his earnings (at [73]).
• Between February and May 2008, Mr Ireland received the lump sum payments to which I have referred (at [18] above).
• At the time of separation, Ms Pratley had superannuation entitlements of $90,000 (at [35]).
• The sums which Mr Ireland received in respect of TPD prior to the separation were used by him to acquire his share in the Bangalow Property and to pay out the mortgage on the Bermagui Property (at [36]).
• After separation, Mr Ireland received a total of $676,768 in respect of the settlement of his common law claim (at [37]).
• The award of damages was substantially in respect of his loss of future income (at [38]). In these circumstances, his Honour considered that the post-separation payments were not to be taken into account, even though they were reflected in the parties' assets at the date of the hearing (at [39]).
• The primary Judge then considered and rejected (at [42]-[44]) a contention by Ms Pratley that Mr Ireland had not accounted for $345,000 of the total amounts he had received during their relationship. His Honour considered it unlikely that Mr Ireland was hiding a large sum of the money. 34Under the heading "Non-financial contributions", the primary Judge recorded the parties' submissions and made these findings: 45 In relation to the homemaker contributions, [Ms Pratley's] submission is that contributions of this nature were more or less equal. [Mr Ireland] did the majority of the cooking with [Ms Pratley] assisting by peeling vegetables, making salads and cleaning up and [Ms Pratley] doing most of the cleaning of their accommodation. I accept this submission. ... 48 It should be noted that apart from a period of part-time work after the birth of [their child], [Ms Pratley] was in full-time employment for the period of the relationship whereas [Mr Ireland] was not working and in receipt of workers compensation payments after the workplace accident in October 2003. He thus had time available when he was fit enough to do some work. ... 53 On a number of occasions [Mr Ireland] was released into [Ms Pratley's] care after having tried to self-harm and [Mr Ireland] was also admitted to hospital for treatment and for anger management. ... 54 [Mr Ireland] did not dispute that he became emotionally abusive towards [Ms Pratley] with the police being called on at least one occasion to subdue him. He did not dispute that [Ms Pratley] took time off work to care for him and that she used up her annual leave each year for four years and all her sick leave so that she could look after him. 55 [Mr Ireland] acknowledged the support [Ms Pratley] provided to him in attending conferences with him and his lawyers, arranging representation of Queens Counsel for him, attending assessments and examinations with him as arranged by his lawyers and the insurers' lawyers. 56 [Mr Ireland] did not dispute [Ms Pratley's] personal effort in contacting and liaising with the officers of [the superannuation fund] in regard to the early release of his superannuation benefits. 57 [Mr Ireland] did not dispute the evidence in [Ms Pratley's] case that she became affected by the changes in his behaviour after the accident in that she was constantly worried and anxious about him. In my view, the care and support which [Ms Pratley] gave [Mr Ireland] was substantial as he was seriously affected by the accident. When one has regard to the homemaking contribution of [Ms Pratley], her non-financial contributions far exceeded those of [Mr Ireland] and should be given appropriate weight in the adjustment process. 35The primary Judge then considered the respective claims made by the parties. He recorded that Ms Pratley had reduced her claim and that she now sought orders that she receive sole ownership of the Bangalow Property and a payment of $45,000 from Mr Ireland. Mr Ireland sought to recover from Ms Pratley the excess of his renovation contributions which, in final submissions, he quantified at $54,022. Mr Ireland also sought an order that the Bangalow Property be sold and the proceeds divided equally between the parties. 36The primary Judge considered at some length the authorities setting out the principles to be applied in an application under s 20 of the Act. His Honour then stated his conclusions as follows: 68 It can be seen that from a financial perspective the parties have both contributed to Bangalow and there has been no contribution by [Ms Pratley] to the Bermagui property, which was owned by [Mr Ireland] before the relationship and was sold by him after the relationship. [Mr Ireland] had met all the mortgage payments on this property up until the time he paid the mortgage off. ... 69 In respect of the Bangalow property, leaving aside the question of the 2008 renovations, the parties contributed equally to this in a financial sense. Their contributions both financial and otherwise were all focused on the Bangalow property. Accordingly it seems to me that the Bermagui property can be put aside and the focus will be on my assessment of the remaining assets of the parties in approaching the matter on a global basis. 70 [Ms Pratley] seeks to justify her claim in receiving the whole of the Bangalow property and $45,000 upon her non-financial contributions which included her support and help for [Mr Ireland] in the course of his illness throughout nearly all of the relationship. 71 On the financial side, there is the large difference in the parties' salaries. [Ms Pratley] brought to the relationship $220,000 more than [Mr Ireland] in this regard. There is no suggestion in this case that funds were spent on matters separate to their joint endeavours. There was also [Mr Ireland's] contribution of his inheritance of $103,378.90. 72 Given that I accept that Bangalow is owned equally this takes account of [Mr Ireland's] use of his funds received in 2008 of $232,500 to acquire the interest. He also used these funds to pay out the mortgage on Bermagui of $145,378 which I put to one side. The total of this is $377,878. In 2008 he received $518,098 and thus he also contributed about $140,220 of these funds to their joint endeavours and to the payment of mortgage instalments on Bermagui for 18 months when it was vacant of about $12,000. The amount for their joint endeavours is thus $128,220. 73 One thus has [Ms Pratley] on the salary side contributing $220,000 more, and [Mr Ireland] from his receipts contributing $230,000, with Bangalow owned equally. 74 Any further adjustment of this interest in the only relevant property will require a consideration of the non-financial contributions and the parties' superannuation resources. [Mr Ireland's] superannuation has been used by him in the [parties'] joint endeavours and [Ms Pratley] still retains her superannuation resource of $154,794. 75 Bangalow has lost value and is now worth $610,000. Bearing in mind all the relevant matters, it seems to me that an appropriate adjustment is for the Bangalow property to be held as to three-quarters for [Ms Pratley] and to one quarter for [Mr Ireland]. It may be that [Ms Pratley] would seek to buy [Mr Ireland's] one quarter interest and the orders should provide for this contingency. 37Finally, the primary Judge dealt with costs. He said that the issue had to be resolved by reference to Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.1, which provides that costs follow the event unless it appears to the court that some other order should be made. It was therefore necessary to determine what constituted the relevant "event" (at [79]). This required an evaluation of the outcome of the proceedings, the positions adopted by the parties during negotiations and their relative success in the matter. 38The primary Judge referred to the positions adopted by the parties in their respective pleadings. He continued: 84 ... [Ms Pratley] had a far higher starting point at the commencement of the proceedings. She maintained this throughout the hearing until final submissions after evidence. Her then claim was for her to have the whole of the Bangalow [Property] and $45,000. [Mr Ireland's] claim was to have half of Bangalow and $42,000. The parties were then almost the same distance apart from the result by the time of submissions. 85 This indicates [Ms Pratley] taking a far higher position than [Mr Ireland] from the result for almost all of the proceedings. In these circumstances, there should be an order for costs in [Mr Ireland's] favour. The amount of that order should reflect that [Mr Ireland] still maintained a higher claim than he ultimately obtained. It would be appropriate for [Ms Pratley] to pay three-quarters of [Mr Ireland's] costs on the ordinary basis.

Ground 1 39Mr Anderson, who appeared for Mr Ireland, accepted that the correct approach to an application for adjustment of property interests made under s 20 of the Act is that stated by Basten JA in Baker v Towle, at [43]; see also Chanter v Catts [2005] NSWCA 411; 64 NSWLR 360, at [22] per Hodgson JA. Mr Anderson also accepted that Bryson JA in Chanter v Catts, although in dissent as to the result, correctly explained the nature of the discretion conferred by s 20. Bryson JA said this: 65 The discretion while wide is not unlimited; the perception of what is just and equitable relates to the contributions referred to in par (a) and par (b) and not to some other or wider view of just and equitable adjustment of interests in property. ... 66 What I understand to be established by the majority view in Evans v Marmont [(1997) 42 NSWLR 70] is to this effect: (a) The factors referred to in par (a) and par (b) of s 21 are fundamental factors influencing the judgment of the Court. (b) Considering contributions and nothing else cannot lead to any view on what is just and equitable in the circumstances. (c) Factors other than contributions can have no independent bearing on what is just and equitable: they have only such relevance as they may have to the question: what is just and equitable having regard to the contributions of the parties? (d) Factors other than contributions mentioned in s 20(1)(a) and s 20(1)(b) may be relevant to answer the question whether the contributions of one party have been sufficiently compensated. (e) The financial circumstances of the parties are relevant to ascertain the property of the parties at the time of the hearing, to which any adjustments of interest are to be made. (f) The needs and means of the parties have general relevance as subsidiary factors to the question of what is just and equitable having regard to the contributions of parties; but otherwise the needs and means of the parties have no relevance, and a disproportion in their assets is not a reason why it is just and equitable to make an adjustment. (g) It would be unrealistic to attempt to evaluate contributions of the kinds referred to in s 20(1)(a) and s 20(1)(b) for the purpose of determining what is just and equitable having regard to those contributions in isolation from the nature and incidents of the relationship as a whole. (h) Often it may be found that contributions of the kind referred to in s 20(1)(b) would involve shared activities or reciprocal benefits which do not give rise to any disproportionate burden which it would be just and equitable to satisfy by an adjustment of interests in property. 40In his oral submissions, Mr Anderson referred the Court to observations of Beazley JA (with whom McColl and Macfarlan JJA agreed) in Separovich v Ferrao [2011] NSWCA 180: [36] There are, as might be expected, a plethora of authorities as to how the court should approach an adjustment of property under s 20. It is sufficient for the purposes of this case to refer to the following. In Manns v Kennedy [2007] NSWCA 217, Campbell JA (Santow JA and Bryson AJA agreeing) observed, at [62], that under s 20, the court was required to make a holistic value judgment in the exercise of a discretionary power of a very general kind ... [37] However, that "holistic value judgment" is the final step in the process of arriving at an order, being the just and equitable adjustment of property, having regard to the contributions identified in s 20. Before the court can make that final determination, it is necessary to identify and value the property in respect of which it is open to the court to make an adjustment and to identify and value the contributions that are being taken into account ... [38] The authorities recognise that notwithstanding that the court exercises a wide discretion under s 20, a mathematical calculation of the contribution of the parties is of assistance in finding and testing conclusions as to what is just and equitable and in promoting transparency and consistency in decision-making ... [39] The discretionary considerations that may influence and/or determine the ultimate order made depend upon the particular circumstances of the case. As Ipp JA observed in Bilous v Mudaliar [2006] NSWCA 38; 65 NSWLR 615 at [63]: Determinations as to what orders should be made under s 20 are to be made solely on the grounds of the justice and equity of the case. The justice and equity of the case may derive from the fact that the party who owns the family home or other property was able to retain that property, while the market value increased, because "of joint efforts of wage earning, homemaking and parenting, and mutual support". In some instances the non-financial contributions of one party may result in property of the kind in question not having to be sold. In other instances, the non-financial contributions of one partner may allow the other to advance his or her career and earn a high income that enables the property in question to be maintained and retained. Thus, an increment in capital value may well result, indirectly, from "joint efforts of wage earning, homemaking and parenting, and mutual support. 41The primary Judge quoted each of these passages in his judgment. Nonetheless, Mr Anderson submitted that his Honour had failed to give separate consideration to whether it was just and equitable to make an order varying the parties' respective interests in the Bangalow Property as settled by the terms of the Deed. Since his Honour had failed to identify why it was just and equitable that Mr Ireland should be deprived of a quarter interest (half of his own interest) in the Bangalow Property, he had committed an error of law. 42This submission does less than justice to the primary Judge's reasoning. His Honour did not merely set out the three step process outlined by Basten JA in Baker v Towle; he used it as the framework for his judgment. His Honour identified, in order:

• the property held by the parties at the commencement of the relationship, the date of separation and the date of the hearing;
• the financial contributions made by the parties to the acquisition, conservation and improvement of their property;
• the parties' respective non-financial contributions to the welfare of the family; and
• whether any order should be made adjusting their respective interests in property, particularly the Bangalow Property. 43The primary Judge made a careful mathematical calculation of the parties' respective financial contributions. He concluded that Ms Pratley's contributions from her salary exceeded those of Mr Ireland by about $220,000, but that this was offset by the fact that Mr Ireland had contributed about $230,000 more than Ms Pratley to the parties' joint assets from his capital (his inheritance of $103,378 and $128,220 paid out of the amounts he received in 2008: see at [72]). However, he also concluded that the care and support which Ms Pratley gave to Mr Ireland justified a finding (at [57]) that her non-financial contributions "far exceeded those of [Mr Ireland] and should be given appropriate weight in the adjustment process". 44It is quite clear that the primary Judge gave consideration to whether the parties' existing interests in property should be varied. He found that Ms Pratley's disproportionate non-financial contributions to Mr Ireland's welfare justified the adjustment of interests in property that he ordered. It may be that not every decision-maker would have exercised the discretion conferred by s 20(1) of the Act in the same way, but that does not establish that his Honour erred. 45The primary Judge did not make the error attributed to him in Ground 1 of the notice of appeal.

Ground 2 46I have referred (at [29] above) to the error concerning Mr Ireland's superannuation entitlements in the tables reproduced in his Honour's judgment. As Mr Anderson conceded in oral argument, a reading of the judgment as a whole makes it plain that the primary Judge was well aware that by the time of the separation, Mr Ireland had withdrawn his superannuation entitlements: see at [74]. The error in the tables came about because his Honour incorporated the tables provided by Ms Pratley's legal representatives. The errors identified in Ground 2 were not material to the outcome.

Ground 3 47The complaint that the primary Judge erroneously found that homemaker contributions favoured Ms Pratley rests on a misreading of the judgment. It is true, as Mr Anderson submitted, that his Honour found that the parties' homemaker contributions were approximately equal. His Honour distinguished, however, between homemaker contributions and other non-financial contributions, in particular Ms Pratley's role as Mr Ireland's carer, which his Honour detailed in the judgment, at [52]-[56]. 48Mr Anderson read the last sentence of [57] of the judgment as containing an internal contradiction. In context, however, it is clear enough that his Honour was intending to say that homemaker contributions were approximately equal (as he had previously found at [45]), but that there was a considerable disparity in other non-financial contributions. There was no internal contradiction. 49In his oral submissions, Mr Anderson added an argument that was not covered by any ground of appeal and was not referred to in his written submissions. He contended that although the primary Judge referred to the Deed, he did not take it into account when deciding that it was just and equitable to alter the parties' interests in the Bangalow Property. Mr Anderson pointed out that the Deed had been entered into only six months before the relationship ended, at a time when Ms Pratley had already made most of her non-financial contributions to the relationship. Yet the Deed provided for the parties to have an equal share in the Bangalow Property. 50Ms Gleeson SC, who appeared on behalf of Ms Pratley, did not object to Mr Anderson raising the argument, but she pointed out that Mr Ireland made no submission to the primary Judge that the Deed should be given significant weight on the question of the adjustment of the parties interests' in property. She also pointed out that the Deed was concerned only with the parties' financial contributions to the acquisition, maintenance and improvement of the Bangalow Property. It did not purport to address the parties' non-financial contributions to the relationship or their respective claims to other property or to monetary payments. 51Section 47(2) of the Act permitted the primary Judge to have regard to the terms of the Deed but did not oblige him to do so. In the absence of a submission that he should give the Deed particular weight and in view of the limited scope of the Deed, his Honour was not obliged to do more than he did. No error has been demonstrated in the way in which his Honour dealt with the Deed.

Ground 4 52It follows from what I have said that the primary Judge gave adequate reasons for his decision. He explained the basis of the "holistic value judgment" he was required to make.

Costs 53Neither party disputed that his Honour correctly stated the principles governing the award of costs in proceedings under s 20 of the Act. His Honour quoted from the judgment of Beazley JA in Baker v Towle, where her Honour considered the approach to determining the relevant "event" for the purposes of UCPR, r 42.1. The passage quoted by the primary Judge is as follows: [22] ...on the approach adopted by the court on the leave application in [Vollmer v Davidson [2006] NSWCA 79], "the event" may be identified in a variety of ways in the one case. It would be odd and, indeed, unfortunate, if the identification of "the event" in one way resulted in an order for costs, on the basis of "costs follow the event" whereas a different, but equally appropriate identification of "the event" meant a different application of the rules. The oddness in there being different possible applications of the rule (in this respect I am not referring to the exercise of the discretion under the rule) depending on the identification of "the event" raises in my mind the question whether this is the correct approach. In most cases, the costs order will almost invariably depend upon the exercise of the discretion. [23] The real question is what is the appropriate order for costs. An obvious starting point is the pleadings. However, the identification of the issues in the pleadings is likely to be only one of several considerations relevant to the costs order that ought to be made. The considerations may include whether any offers of settlement have been made and if so what those offers were. The discretionary considerations may also include the manner in which the proceedings are conducted. These are but two examples. There may be a whole range of relevant circumstances depending upon the particular case. [24] ...I would therefore prefer to treat the identification of the issues that arise on the pleadings as part of the consideration of matters relevant to the court's discretion. In my opinion, that gives proper effect to r 42.1 and is consistent with the authorities... [25] ...It will be apparent from what I have said, that where an order for adjustment is made, the costs order made will rarely, if ever, depend simply upon which party commenced proceedings. The question of costs needs to [be] assessed in accordance with the facts and circumstances in each case and as the analysis undertaken by the court in Vollmer indicates, no principles or general guidelines have emerged in cases under the Property (Relationships) Act. 54Ms Gleeson submitted that the orders achieved a result that was more or less mid-way between the respective positions adopted by the parties in their final submissions and that his Honour had failed to take that outcome into account in ordering Ms Pratley to pay three-quarters of Mr Ireland's costs. But his Honour expressly recognised (at [84]) that, by the time of final submissions, the parties were almost the same distance apart from the result. His Honour took into account that Ms Pratley's starting point in the proceedings was far higher than that of Mr Ireland and that she maintained her position until final submissions. His Honour had in mind that Ms Pratley had unsuccessfully contended that Mr Ireland had not accounted for $345,000 in assets and had initially sought orders entitling her to 45 per cent of the "total net property" (presumably including the Bermagui Property). Ms Pratley's pleaded case also included a claim to set aside Mr Ireland's gift of $479,000 to the Ireland Family Trust, but she ultimately did not pursue that claim. His Honour no doubt took that unsuccessful claim into account in making the costs order. 55In these circumstances, I see no error in the exercise of his Honour's discretion as to costs. The orders reflected the greater, but not complete success achieved by Mr Ireland in the litigation. It is true, as Ms Gleeson submitted, that a costs order in a case such as this may have serious consequences for a party, but that is a necessary consequence of the costs regime that is in place under the UCPR where parties engage in hard-fought litigation. 56For similar reasons, Mr Ireland's appeal against the costs order must be dismissed.

Orders 57I propose the following orders:

1. Appeal dismissed.
2. Cross-appeal dismissed.
3. The appellant pay the respondent's costs of the appeal.
4. The respondent/cross-appellant pay the appellant/cross-respondent's costs of the cross-appeal.

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