Kardos v Sarbutt

Court of Appeal (NSW)|2005-09-23|Before: Basten JA, Brereton J

CITATION: Kardos v Sarbutt [2006] NSWCA 11 This decision has been amended. Please see the end of the judgment for a list of the amendments.

JUDGMENT OF: Basten JA at 1; Hunt AJA at 2; Brereton J at 3

DECISION: 1. That the appeal be allowed. 2. That the orders of the District Court made on 7 February and 21 February 2005 be set aside and in lieu thereof there be substituted with effect from 21 February 2005:- 2.1 Order that by way of adjustment and settlement of property interests pursuant to the Property (Relationships) Act 1984, s 20 the defendant Tristan Jane Kardos pay the plaintiff Paul Ventris Sarbutt the sum of $36,075. 2.2 Order that the defendant pay the plaintiff's costs of the proceedings. 3. That the respondent Paul Ventris Sarbutt pay the costs of the appellant Tristan Jane Kardos of the appeal. 4. That the respondent Paul Ventris Sarbutt be granted an indemnity certificate under the Suitors' Fund Act 1951 (NSW), s 6. 5. That the parties have liberty to apply to set aside orders 2.2 and 3 and for different costs orders, any such application to be made by written submission to be lodged with the Associate to the Presiding Judge within seven days, any response by the opposing party to be so lodged within a further seven days and any reply by the moving party within a further seven days thereafter.

CATCHWORDS: FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS -adjustment of property interests - appeal - approach to property adjustment - evaluation of contributions - whether trial judge erred in failing to adopt "asset-by-asset" approach - whether trial judge erred in treatment of initial contributions of parties - whether trial judged erred in assessment of ongoing contributions of parties during relationship - whether trial judged erred in allowing for "notional rent" of premises in which parties cohabited - whether trial judge erred in failing to allow interest when award was based on valuations struck at date of separation rather than hearing.

Family Law Act 1975 (Cth), s 79 LEGISLATION CITED: Property (Relationships) Act 1984 (NSW), s 20 Suitors' Fund Act 1951 (NSW), s 6

Black v Black (1991) 15 Fam LR 109; (1991) DFC 95-113 Black v Kellner (1992) 106 FLR 154; (1992) 15 Fam LR 343; (1992) FLC 92-287 Burgess v King [2005] NSWCA 396 Cozanitis v Cozanitis (1979) 34 FLR 523n; (1978) 4 Fam LR 709; (1979) FLC 90-643 D v McA (1986) 11 Fam LR 214; (1986) DFC 95-030 Davey v Lee (1990) 13 Fam LR 688; (1990) DFC 95-084 Dearman v Dearman (1908) 7 CLR 549 Evans v Marmont (1997) 42 NSWLR 70; (1997) 21 Fam LR 760; (1997) DFC 94-184 Foster v Evans (1997) DFC 95-193 Fox v Percy (2003) 214 CLR 118 G & G (1984) FLC 91-582 Hauff & Hauff (1986) 10 Fam LR 1076; (1986) FLC 91-747 Howlett v Neilson (2005) 33 Fam LR 402; [2005] NSWCA 149 CASES CITED: Jones v Grech (2001) 27 Fam LR 711; (2001) DFC 95-234; [2001] NSWCA 208 Lenehan v Lenehan (1987) 11 Fam LR 615; (1987) FLC 91-814 Mallet v Mallet (1984) 156 CLR 605 McDonald v Stelzer (2000) 27 Fam LR 304; (2001) DFC 95-233; [2000] NSWCA 302 Norbis v Norbis (1986) 161 CLR 513, (1986) 10 Fam LR 819; (1986) FLC 91-712 Omacini & Omacini (2005) 33 Fam LR 134; (2005) FLC 93-218; [2005] FamCA 195 Parker v Parker (1993) 16 Fam LR 863; (1993) DFC 95-139 Pierce & Pierce (1998) 24 Fam LR 377; (1999) FLC 92-844 Roy v Sturgeon (1986) 11 NSWLR 454; (1986) 11 Fam LR 271; (1986) DFC 95-031 The Glannibanta (1876) 1 PD 28 Wallace v Stanford (1995) 37 NSWLR 1; (1995) 19 Fam LR 430 Wells v Wells (1977) 29 FLR 383; (1977) 4 Fam LR 57; (1977) FLC 90-285 Wilcock v Sain (1986) 11 Fam LR 302; (1986) DFC 95-040 Williams & Williams (1984) 9 Fam LR 798; (1984) FLC 91-541 Woodland & Todd (2005) 33 Fam LR 177; (2005) FLC 93-217; [2005] FamCA 161

PARTIES: Tristan Jane Kardos (Appellant) Paul Ventriss Sarbutt (Respondent)

COUNSEL: D Alexander (Appellant) E Cohen (Respondent)

SOLICITORS: Maguire & McInerney, Wolllongong (Appellant) Johnson Horsley Lawyers, Wollongong (Respondent)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40142 of 2005

BASTEN JA HUNT AJA BRERETON J

Tuesday 14 February 2006 TRISTAN JANE KARDOS v PAUL VENTRISS SARBUTT Headnote FACTS The (female) appellant and the (male) respondent cohabited in a de facto relationship for just less than three years. They had no children.

The appellant and the respondent made initial contributions, mainly of real property, which at the commencement of cohabitation were worth $289,112 and $241,000 respectively. These had increased to $683,500 and $405,378 respectively at the date of separation, mainly by appreciation of the real property introduced by each at cohabitation, and to a much lesser extent by reduction of the mortgage debts secured on them.

The parties cohabited in one of the appellant's properties, and let the other properties (two belonging to the appellant and one to the respondent) for rent. Both the appellant and the respondent were employed throughout the period of cohabitation and they pooled their incomes and the rents from the three rental properties in a joint account, and applied them to living expenses and mortgage payments. The appellant contributed personal exertion earnings of $127,560 and rents from her properties of $62,365, a total of about $190,000. The respondent contributed personal exertion earnings of $72,833, and net rents from the Otford property of $38,037, a total of about $110,000.

The primary judge adopted the date of separation for determination of the pool of property, which then amounted to $1,088,000, returned to each party their initial contributions at their original value as at the date of cohabitation ($290,000 to the appellant and $240,000 to the respondent), and apportioned the growth in the value of their assets over the period of the relationship between them equally ($280,000 each). This would have resulted in an adjustive order in favour of the respondent of $115,000, which the primary judge reduced to $100,000 on account of an adjustment for "notional rent" for the respondent's occupation of the home in which the parties cohabitated.

(1) The exercise of jurisdiction under s 20 involves three main steps: first, the identification and valuation of the property of the parties, which determines the pool of property of the parties to the relationship or either of them referred to in s 20 which may be the subject of an adjustive property order; secondly, the evaluation and balancing of the respective contributions of the parties of the types referred to in s 20, typically resulting in an apportionment between the parties on a percentage basis of the overall contributions of the types referred to in s 20 of each of them, made to the date of hearing; and thirdly the determination of what order is required sufficiently to recognise and compensate the applicant's contributions, typically resulting in an order which leaves the applicant with that percentage identified in the second step of the divisible property identified in the first step. Evans v Marmont (1997) 42 NSWLR 70; (1997) 21 Fam LR 760; (1997) DFC ¶94-184; Jones v Grech (2001) 27 Fam LR 711; (2001) DFC ¶95-234; [2001] NSWCA 208, followed.

(2) Although the first step - the identification and valuation of the property of the parties - is ordinarily undertaken as at the date of trial, the ultimate task of evaluating the respective contributions of the parties may sometimes be facilitated by adopting the date of separation, particularly when there have not been ongoing contributions since separation by one party which have benefited the other. Omacini & Omacini (2005) 33 Fam LR 134; (2005) FLC ¶93-218; [2005] FamCA 195, followed.

(3) Contributions made before cohabitation commences and contributions made after separation and before trial are relevant contributions for the purposes of s 20. McDonald v Stelzer (2000) 27 Fam LR 304; (2001) DFC ¶95-233; [2000] NSWCA 302; Jones v Grech (2001) 27 Fam LR 711; (2001) DFC ¶95-234; [2001] NSWCA 208, followed.

(4) In proceedings under s 20, the court is not required to undertake a reductionist process analogous to the taking of partnership accounts by examining every alleged "contribution" of the kinds described in the section with a view to putting a monetary value on each in order to reach an accounting balance one way or the other, then to be eliminated by the requisite financial adjustment; rather, the court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind. Davey v Lee (1990) 13 Fam LR 688; (1990) DFC ¶95-084, approved. However, mathematical calculations, while not determinative, are of use in guiding and testing conclusions about what is just and equitable, and in promoting transparency and consistency in decision-making. Howlett v Neilson (2005) 33 Fam LR 402; [2005] NSWCA 149, followed.

(5) While it would have been open to the primary judge to adopt an asset-by-asset approach, whether as the primary approach or as a check method, it was not mandatory and the primary judge did not err in failing to do so. The principal indicator for an "asset-by-asset" analysis is discrepant contributions of the parties to different assets, and such an approach will often be contra-indicated where, as here, there has been a pooling of income. An asset-by-asset approach almost always carries the risk of undervaluing domestic contributions which are not reflected in any particular asset. That the relationship was a short one and that each party substantially retained the property which they had introduced are not themselves indicia which necessarily favour an asset-by-asset approach.

(6) In the context of this short relationship, the primary judge's approach of taking into account the initial contributions by simply returning to the parties the original value at the date of cohabitation of those initial contributions gave manifestly inadequate weight and significance to the initial contributions of the parties - by treating the increments of capital value during the period of the relationship as entirely "fruits of the relationship", when in fact, save for so much of the increased equity as was due to reduction in the mortgage, they were not, and by excessively "eroding" the initial contributions. There is no general rule that initial contributions are to be taken into account only at the value which they had at the date of cohabitation regardless of whether and to what extent they have appreciated since, and such an approach may sometimes result in the serious undervaluation of initial contributions, as it did here. Howlett v Neilson (2005) 33 Fam LR 402; [2005] NSWCA 149, explained; Burgess v King [2005] NSWCA 396, applied. While the "erosion principle" applies in cases under the Property (Relationships) Act, as it does under the Family Law Act, as part of the methodology for weighing and balancing the different contributions, significant factors affecting its application are the length of the relationship and the extent to which there have been other or off-setting contributions which also have to be satisfied from the available pool. Pierce & Pierce (1998) 24 Fam LR 377; (1999) FLC ¶92-844, applied.

(7) The conclusion that the contributions of the parties during the relationship were equal was not reasonably open: the slight balance of the non-financial contributions during the relationship in favour of the respondent could not possibly so offset the imbalance of income contributions and the slight disparity in favour of the appellant of the domestic contributions, as to produce an overall result of equality of contribution during the relationship.

(8) The benefit of occupation of one party's property to the other should be taken into account in the overall evaluation of the contributions during the relationship, and not as a final separate adjustment for notional rent, which gives disproportionate prominence to a single contribution. Where a saving arises because cohabitation results in the partners needing only one home instead of two, it should make no difference whose home they chose to occupy and whose they let for rent: the rents so generated are a result of a property being freed for that purpose by their decision to cohabit, and are properly seen as a joint contribution of the parties.

(9) Where the relatively uncommon course is adopted of valuing the property as at a date earlier than the date of hearing, and evaluating the parties' entitlements according to that pool of property, it will ordinarily be appropriate to award interest from the date at which the entitlement is struck. ORDERS

That the appeal be allowed.
That the orders of the District Court made on 7 February and 21 February 2005 be set aside and in lieu thereof there be substituted with effect from 21 February 2005:- 2.1 Order that by way of adjustment and settlement of property interests pursuant to the Property (Relationships) Act 1984, s 20 the defendant Tristan Jane Kardos pay the plaintiff Paul Ventris Sarbutt the sum of $36,075. 2.2 Order that the defendant pay the plaintiff's costs of the proceedings.
That the respondent Paul Ventris Sarbutt pay the costs of the appellant Tristan Jane Kardos of the appeal.
That the respondent Paul Ventris Sarbutt be granted an indemnity certificate under the Suitors' Fund Act 1951 (NSW), s 6.
That the parties have liberty to apply to set aside orders 2.2 and 3 and for different costs orders, any such application to be made by written submission to be lodged with the Associate to the Presiding Judge within seven days, any response by the opposing party to be so lodged within a further seven days and any reply by the moving party within a further seven days thereafter.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40142 of 2005

BASTEN JA HUNT AJA BRERETON J

Tuesday 14 February 2006 TRISTAN JANE KARDOS v PAUL VENTRISS SARBUTT Judgment 1 BASTEN JA: I agree with the reasons of Brereton J and the orders proposed by his Honour. 2 HUNT AJA: I agree with Brereton J. 3 BRERETON J: The appellant Tristan Jane Kardos and the respondent Paul Ventriss Sarbutt cohabited as de facto partners for just less than three years from November 1999 until October 2002. They had no children. Ms Kardos introduced to the relationship property which the primary judge found to be worth $289,000 when cohabitation commenced, and Mr Sarbutt introduced property to the value of $241,000. Ms Kardos left the relationship with property worth $683,000 at separation, and Mr Sarbutt with $405,000. Mr Sarbutt applied for an adjustive property order under the Property (Relationships) Act 1984 (NSW), s 20, and Ms Kardos cross-claimed for an adjustive property order in her favour. At trial in the District Court, Quirk DCJ made an order to the effect that by way of alteration of property interests, Ms Kardos pay Mr Sarbutt $100,000. The effect of her Honour's judgment was to return to each party the original value (as at the date of commencement of cohabitation) of the property that that party had initially contributed, and then to apportion equally between them the increment in the value of their net property during the relationship, subject to an adjustment for "notional rent" for Mr Sarbutt's occupation of the home in which they cohabited, which was the property of Ms Kardos. 4 Against that order, Ms Kardos appeals to this court, seeking that the primary judge's order be entirely set aside. Ultimately, her grounds of appeal challenge the primary judge's evaluation of the respective contributions of the parties under s 20 - both in respect of contributions made during the relationship (in respect of which it is said that her Honour wrongly concluded that the contributions of the parties were equal), and overall having regard to the disparate initial contributions of the parties (in respect of which it is said that the primary judge ought to have adopted an asset-by-asset, rather than a global, approach to evaluation of the contributions, or at least, "quarantined" certain assets from the divisible pool): Ms Kardos contends that Mr Sarbutt's contributions were overvalued, and hers undervalued. But before those ultimate issues can be resolved, it is necessary to address other grounds of appeal, which challenge the primary judge's valuation as at the date of cohabitation of one of the properties (at Williamstown, Victoria) introduced by Ms Kardos, her Honour's treatment of the evidence of two witnesses whose affidavits were read in Ms Kardos' case, and her Honour's general preference of the evidence of Mr Sarbutt over that of Ms Kardos. 5 An appeal of this nature is by way of rehearing [Fox v Percy (2003) 214 CLR 118, [21]]. On such an appeal, within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and of the judge's reasons, and is not excused from the task of weighing conflicting evidence and drawing its own inferences and conclusions, though it should always bear in mind that it has neither seen nor heard the witnesses, and should make due allowance in this respect [Fox v Percy, [25], citing Dearman v Dearman (1908) 7 CLR 549, 564 and The Glannibanta (1876) 1 PD 283, 287].

Relationship History 6 Mr Sarbutt, who was born on 6 November 1962 and at the trial was 42 years of age, and Ms Kardos, who was born on 2 August 1966 and at trial was 38 years of age, first met in about 1996. Ms Kardos was then married to her former husband Peter Kardos, with whom she resided in a property owned by them at 23 Stephen Drive, Woonona. Mr Sarbutt was living in a home owned by him at Otford. 7 Ms Kardos separated from her husband in 1997, and a relationship between the parties commenced in about May 1999, six months before they began to live together in November 1999. In that interval prior to the commencement of cohabitation, some building works were completed at Mr Sarbutt's Otford property, which was at lock up stage and in which Mr Sarbutt was then living. Ms Kardos provided some assistance to him with those works, though the extent of her contribution in that respect was in dispute. 8 At the commencement of cohabitation, Mr Sarbutt was a self-employed plumber. Ms Kardos was an office manager at the Technology Learning Centre, earning $45,379.00 gross and $33,297.00 net from that employment. 9 When the parties commenced cohabitation, Mr Sarbutt owned 62 Station Road, Otford (then worth $303,000), subject to a mortgage (then of $82,000). Through Paul Sarbutt Plumbing Pty Limited, he had a plumbing business worth $20,000. Thus his net asset position (including his superannuation entitlement) was $241,000. [He also had a superannuation interest, the surrender value of which was about $13,000, but as he presumably retained this at separation, and it was not included in the divisible property, it is of no particular significance]. 10 Ms Kardos owned a half share (the other half being held by her former husband Mr Kardos) in 23 Stephen Drive, Woonona (worth $275,000 in all, her half share being $137,500); an apartment in Williamstown, Victoria (which the primary judge accepted to be then worth $200,000), subject to a mortgage (of $186,083); a Honda Prelude motor vehicle (which the primary judge seems to have accepted was worth $5,000); savings in a joint account with her former husband of $29,500 (of which her half share would have been $14,750), and savings in her own name in a Westpac account of $28,000. She had accumulated a long-service leave entitlement of some $11,000. The total value of her interests in these assets was $210,167. 11 Mr Alexander, who appeared for Ms Sarbutt, contended that her Honour erred in adopting $200,000 as the value of Williamstown as at the commencement of cohabitation, and ought to have adopted a figure of at least $220,000, with the consequence that Ms Kardos' initial contributions were, to that extent, undervalued. The Williamstown property had been purchased by Ms Kardos in November 1998 for $198,000. It was agreed that as at separation in November 2002, it was worth $280,000. There was no expert valuation evidence. Ms Kardos asserted that at the time of commencement of cohabitation in November 1999 its value was $250,000, and that at separation it was worth $280,000. Mr Sarbutt contended that its value at the commencement of cohabitation was $200,000. In the absence of any expert evidence of value, her Honour reasoned that the Melbourne property had not appreciated to the same extent as the New South Wales properties, and that the more appropriate valuation as at November 1999 was $200,000 as submitted by Mr Sarbutt. 12 The only evidence of value of the Williamstown property, other than its agreed value of $280,000 as at November 2002, was its purchase price in November 1998 of $198,000. In the absence of any evidence that there had been an increase in value over the ensuing twelve month period, the primary judge was entitled to reason that the best evidence of value as at November 1999 was a purchase price only twelve months old. Mr Alexander argued that, having regard to the agreed value at November 2002, the judge should have attributed a share of the increase from $198,000 to $280,000 to that twelve month period. It may well be that her Honour would not have erred in doing so. But equally, given the paucity of evidence on the subject, it was open to her Honour to conclude that no increase above $200,000 had been established, although others might have reached a different conclusion. Accordingly, her Honour did not err in adopting a value of $200,000 for the Williamstown property as at the commencement of cohabitation. But as will become apparent, in my opinion it was its value at separation, and not at the commencement of cohabitation, which is of importance, and adoption of a higher valuation at the commencement of cohabitation would not affect the ultimate outcome. 13 In addition to the assets already mentioned, by the commencement of cohabitation, Ms Kardos had negotiated with her former husband a matrimonial property settlement, which was implemented on or about 16 April 2000. The effect of that settlement was that Mr Kardos transferred to Ms Kardos his interest in the Woonona property, and Unit 8, 9-11 Linda Street Hornsby (worth $240,000 but subject to a mortgage debt of $179,000), in return for a payment to Mr Kardos of $110,000. 14 Ms Kardos proposed a rearrangement of the parties' finances, to the effect that they pool their income into one account and refinance using Otford, Williamstown, Woonona and Hornsby, to raise funds for the payment to Mr Kardos of the $110,000, together with a "floating loan" of $45,000. The significance of this transaction is that Ms Kardos' introduction of the second half of the Woonona property (worth $137,500) and the Hornsby unit (worth $61,000 net) was funded in part by the borrowing of $110,000 on the security of Mr Sarbutt's Otford property as well as Ms Kardos' properties. Thus it is not correct to suggest, as was submitted on behalf of Ms Kardos, that the parties did not jointly or individually acquire additional property (other than motor vehicles) during the relationship: together they acquired, in the name of Ms Kardos, a half interest in the Woonona property, and the Hornsby unit, by together incurring a liability of $110,000. At that time, the Woonona property was worth $330,000, and the payment of $110,000 represented one-third of its value. The proper analysis is that Ms Kardos introduced five-sixths, and Mr Sarbutt one-sixth, of the Woonona property, each being responsible for one-half of the borrowing of $110,000. 15 During the relationship, the parties cohabited in Ms Kardos' Woonona property, the benefit of occupying which was rent free to Mr Sarbutt. As a result, Mr Sarbutt's Otford property was let for rent. The parties pooled their incomes and the rents derived from the Otford property, the Williamstown property and the Hornsby property in a joint account with the National Australia Bank. They operated a Visa card in Ms Kardos' name which facilitated the accumulation of frequent flyer points. Over the three years of the relationship, Mr Sarbutt contributed personal exertion earnings of $72,833.27 and net rents from the Otford property of $38,037.71, a total of $110,870.98; and Ms Kardos contributed personal exertion earnings of $127,560.05 and rents of $62,365.63, a total of say $190,000. From the joint account, $15,626 was applied to repayments of the Otford mortgage, and $93,939.88 (or, according to Mr Sarbutt, $105,956) to repayments of mortgages affecting Ms Kardos' properties. From the floating loan, a total of $58,943.87 was applied to repayments of loans on Ms Kardos' properties, and $11,943.87 to repayments of loans on Mr Sarbutt's Otford property. 16 In addition to his contributions to the joint account, Mr Sarbutt also paid some of the joint living expenses from his business account; these payments amounted to between $4,000 and $12,000. 17 Mr Sarbutt undertook various works on Ms Kardos' Woonona property, including renovations to the laundry, paving of the driveway, renovation of the kitchen, installation of a home safe, installation of a new toilet, installation of a sprinkler system on the roof, installation of a stormwater pipe, and the purchase of sleepers for landscaping work and the building of retaining walls. The primary judge found that the value of the labour and materials involved was $20,000, and that the improvements had an impact on the value of the property which was "somewhat higher than the $5,000" suggested by Ms Kardos' valuer. 18 Ms Kardos assisted Mr Sarbutt in these works, as Mr Sarbutt had conceded to be the case in cross-examination. On this topic, Ms Kardos' evidence was corroborated, to some extent, by affidavits of two neighbours. Of their evidence, the primary judge said:- However those witnesses were not called to give evidence and, as it was the plaintiff's evidence that he spent two or three weeks full time on landscaping projects in the back yard, at which time the defendant was at work, I accept that, although the defendant did assist the plaintiff with the gardening and landscaping, I prefer the plaintiff's evidence as to the extent of the work that he performed. In respect of the internal work, such as tiling and plumbing, I accept that the plaintiff carried out that work mostly unassisted by the defendant, except for some painting, which the defendant carried out. 19 Mr Alexander submitted that her Honour was in error in discounting the evidence of the neighbours because they were not called to give oral evidence, arguing that the circumstance that they were not required for cross-examination meant that their evidence was unchallenged and should have resulted in acceptance of their evidence. To that extent, the submission is correct: the circumstance that the two witnesses were not required for cross-examination would ordinarily result in acceptance of their evidence, not its discounting. But when the evidence given by those witnesses is examined, they advance the case very little. True it is that both say that they saw Ms Kardos do some work, one on the Otford property, and the other in the backyard of the Woonona property, but Mr Sarbutt did not deny that; what was at issue was the extent of her work vis-à-vis his, and the evidence of the neighbours said nothing which would assist in resolving that issue: as one would expect of neighbours other than the most intrusive, it does not appear that they were in a position to describe the relative efforts of each of the parties. Accordingly, although her Honour's reasons for discounting the neighbours' evidence were not appropriate, acceptance of their evidence would have made no difference. The error was not a material one, in that it did not affect the result. 20 Ms Kardos, as well as assisting Mr Sarbutt with works on the Otford property before the commencement of cohabitation, also assisted in the reorganisation of Mr Sarbutt's business, and attended to bookkeeping and related functions in respect of it. The primary judge accepted that she was "the driving force in the reorganisation" of his business administration. It was accepted that she reorganised his superannuation funds, and each month reconciled the financial records of the business on a computer. 21 Mr Sarbutt accepted that during the relationship Ms Kardos did most of the shopping and cooking. The primary judge found that otherwise responsibilities for work in and around the house were fairly equally divided. 22 The parties separated in November 2002, when Mr Sarbutt resumed occupation of the Otford property. He retains the Otford property. Ms Kardos retains the Woonona, Williamstown and Hornsby properties. After the separation, she re-partnered and, with her new partner, has purchased a property at Caringbah. 23 The primary judge generally preferred the evidence of Mr Sarbutt to that of Ms Kardos where they differed. Her Honour said:- Although [Mr Sarbutt] may have underestimated to an extent the work carried out by [Ms Kardos] on his Otford property, and also the assistance that she gave him in the work that he undoubtedly carried out on her property at Woonona at a later stage, my impression of [Mr Sarbutt] was that he was a straight-forward witness who, although undoubtedly had, at times, imprecise recollections of all of the events, including moneys paid by each of the parties, was a witness of truth, who made concessions freely in cross-examination. On the other hand [Ms Kardos] I found to be, at times, self-serving and unsatisfactory. Her evidence, as contained in her affidavit and also during her oral evidence, underestimated, in my view, the extent of the work carried out by [Mr Sarbutt] on his own property, and at the property at Woonona, into which the parties moved at the time of cohabitation. She also disparaged the work performed by [Mr Sarbutt] and in my view, was intent on underestimating or denying any contribution made by [Mr Sarbutt] to the relationship. Where the evidence of [Mr Sarbutt] and [Ms Kardos] differs, I prefer the evidence of [Mr Sarbutt] in most cases. 24 Mr Alexander contended that her Honour was wrong to prefer the evidence of Mr Sarbutt to that of Ms Kardos. But an appellant, in connection with such a submission, must do more than merely submit that a trial judge erred generally in preferring one witness to another: it is necessary to show error of fact by identifying one or more material findings which are said to be erroneous by reason of the (incorrect) preference of one witness over the other. In this case, Mr Alexander identified only two: the respective non-financial (physical) contributions made by the parties to the improvements at Otford and Woonona; and the alleged acquisition by Mr Sarbutt of assets for which he was said not to have accounted. 25 As to the first, as is common, the perspective of the parties as to the relative significance of their physical efforts differed. As I have said, the evidence of the neighbours, if accepted, does not assist in resolving that difference. There were no objective facts which were plainly inconsistent with Mr Sarbutt's version. Nor was it glaringly improbable. Her Honour's preference for his version over that of Ms Kardos depended on a trial judge's impression, drawn from the evidence of each of them as a whole, that whereas he made concessions readily and did not overstate his case, she was determined to minimise his contributions; accordingly his perspective was more likely to be reliable. No appellable error is apparent in that conclusion. 26 As to the second, her Honour brought to account against Mr Sarbutt "other assets" to the value of $20,000 - which was the value contended for by Ms Kardos - in any event. Accordingly, general preference for Mr Sarbutt's evidence did not in fact ultimately aid him on this issue, and a different view as to his credit would not have affected this finding of fact. Nor does this finding itself demonstrate error in her Honour's general assessment of credit. 27 I am therefore not persuaded that any error of fact, resulting from preference of the evidence of Mr Sarbutt over that of Ms Kardos, is established.

Discretionary Property Adjustment 28 The jurisdiction invoked in the present proceedings is that created by the Property (Relationships) Act, s 20(1) which provides as follows:- (1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to: (a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and

(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:

(i) a child of the parties, (ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties. 29 The exercise of jurisdiction under s 20 involves three main steps. The first is the identification and valuation of the property of the parties, which determines the "divisible pool of property" - that is, "the property of the parties to the relationship or either of them" referred to in s 20 which may be the subject of an adjustive property order under that section. The second is the evaluation and balancing of the respective contributions of the parties of the types referred to in s 20, and typically though not invariably results in an apportionment between the parties on a percentage basis of the overall contributions of the types referred to in s 20 of each of them, made to the date of hearing. The third is the determination of what order is required sufficiently to recognise and compensate the applicant's contributions, and typically results in an order which leaves the applicant with that percentage identified in the second step of the divisible property identified in the first step. This is a simplification of the four step approach first formulated by Powell J in D v McA (1986) 11 Fam LR 214; (1986) DFC ¶95-030 [see also Roy v Sturgeon (1986) 11 NSWLR 454; (1986) 11 Fam LR 271; (1986) DFC ¶95-031; Wilcock v Sain (1986) 11 Fam LR 302; (1986) DFC ¶95-040; Evans v Marmont (1997) 42 NSWLR 70; (1997) 21 Fam LR 760; (1997) DFC ¶94-184; Jones v Grech (2001) 27 Fam LR 711; (2001) DFC ¶95-234; [2001] NSWCA 208]. 30 As to the first step, the exercise of the identification and valuation of the property of the parties is undertaken typically, though not invariably, as at the date of trial [see Parker v Parker (1993) 16 Fam LR 863; (1993) DFC ¶95-139; Wells v Wells (1977) 29 FLR 383; (1977) 4 Fam LR 57; (1977) FLC ¶90-285], though sometimes as at the date of separation [Cozanitis v Cozanitis (1979) 34 FLR 523n; (1978) 4 Fam LR 709; (1979) FLC ¶90-643]. The starting point is that ordinarily property is valued as at the date of trial [Williams & Williams (1984) 9 Fam LR 798; (1984) FLC ¶91-541; Hauff & Hauff (1986) 10 Fam LR 1076; (1986) FLC ¶91-747]. The primary reason for this is that the jurisdiction under s 20 is to adjust interests with respect to "the property of the parties to the relationship or either of them" and speaks from the date at which the jurisdiction is exercised, so that what is in issue is the property of the parties and each of them at the date of trial. Establishing the divisible pool at any other date may lead to failure to have regard to relevant assets available for division, or to the bringing into account of property no longer available. Thus in Woodland & Todd (2005) 33 Fam LR 177; (2005) FLC ¶93-217; [2005] FamCA 161, in which the property of the parties - which had been worth $873,000 when the husband and wife divided it between them in 1997 under an informal agreement which did not deprive the court of jurisdiction - had increased in value to $2.5 million when the matter came to trial years later, the Full Court of the Family Court held that the primary judge had erred in treating the case as concerning an asset pool as at the date of the informal agreement in 1997, and was required to address an asset pool that existed at the time of the hearing, not at the time of the prior agreement.

31 Although usually the preferable approach is to value property as at the date of trial, giving where appropriate separate and special consideration to contributions to value made between separation and trial, nonetheless the ultimate task of evaluating the respective contributions of the parties may sometimes be facilitated by adopting the date of separation for identifying and valuing the property, particularly when there have not been ongoing contributions by one party which have benefited the other since separation. Thus the Full Court of the Family Court has said (in respect of proceedings under the Family Law Act, s 79, which for present purposes are akin to proceedings under the Property (Relationships) Act, s 20) that although ordinarily the parties' property is to be valued at the date of trial, in a particular case there may be reasons to justify another date, which might be the date of separation [Omacini & Omacini (2005) 33 Fam LR 134; (2005) FLC ¶93-218; [2005] FamCA 195].

32 As to the second step, a number of principles have been established relating to the evaluation and balancing of the respective contributions of the parties of the types referred to in s 20.

33 First, where there is a division of roles in the relationship between the homemaker and parent on one hand and the breadwinner on the other, contributions of a de facto partner as a homemaker and parent are not to be regarded as inferior in any way to the financial contributions made by the other partner [Black v Black (1991) 15 Fam LR 109; (1991) DFC ¶95-113; Evans v Marmont]. The approach endorsed by the High Court to the evaluation of contributions under the Family Law Act 1975 (Cth) in Mallet v Mallet (1984) 156 CLR 605 is applicable to the evaluation of contributions under the Property (Relationships) Act [Jones v Grech, [33]-[35] (Davies AJA)]:- In Mallet v Mallet (1984) 156 CLR 605 at 635-636, Wilson J, after referring to a number of judgments of the Family Court of Australia in which that Court had adopted the notion of "equality is equity" as a convenient starting point to s79(4)(b) of the Family Law Act , 1975 (Cth), went on to say:- "In the earliest of these cases, Rolfe [(1977) 5 Fam LR 146 at 148] ..., Evatt CJ referred to s79(4)(b), saying: 'The purpose of s 79(4)(b), in my opinion, is to ensure just and equitable treatment of a wife who has not earned income during the marriage, but who has contributed as a homemaker and parent to the property. A husband and father is free to earn income, purchase property and pay off the mortgage so long as his wife assumes the responsibility for the home and the children. Because of that responsibility she may earn no income or have only small earnings, but provided she makes her contribution to the home and to the family the Act clearly intends that her contribution should be recognized not in a token way but in a substantial way. While the parties reside together, the one earning and the other fulfilling responsibilities in the home, there is no reason to attach greater value to the contribution of one than to that of the other. This is the way they arrange their affairs and the contribution of each should be given equal value.' With all respect, I agree with her Honour's exposition of the purpose of the paragraph subject to one reservation. The Act requires that the contribution of a wife as a homemaker and parent be seen as an indirect contribution to the acquisition, conservation or improvement of the property of the parties regardless of where the legal ownership resides. The contribution must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets. However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as homemaker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. … Similarly, the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree. What the Act requires is that in considering an order that is just and equitable the court shall 'take into account' any contribution made by a party in the capacity of homemaker or parent. It is a wide discretion which requires the court to assess the value of that contribution in terms of what is just and equitable in all the circumstances of a particular case. There can be no fixed rule of general application." The general thrust of his Honour's exposition found support in the observations of other members of the Court: Mason J at p623-p625, Deane J at p639-p641 and Dawson J at p645-p646. One point that their Honours made in relation to matrimonial relationships was that the relationship ordinarily involves "a practical union of both lives and property" and that the acquisition of assets, such as a matrimonial home, can be seen as representing "the fruits of a totality of efforts of wage earning, homemaking and mutual support" (per Deane J at p640-p641). At p625, Mason J pointed out that there may be an equality of contribution if "the efforts of the wife in her role were the equal of the husband in his". However, the facts of the particular case must always be examined. The passage from the reasons of Wilson J set out above shows how this examination may be made. The same general considerations apply to a de facto relationship, for that is a relationship of living together as husband and wife on a bona fide domestic basis. Such a relationship also ordinarily involves a practical union of lives and property. The two factors specified in s 20(1), financial and non-financial contributions and contributions made in the capacity of homemaker or parent, reflect the considerations to which their Honours gave weight in Mallet v Mallet . 34 It is to be observed that, insofar as it was said in Mallet that the Family Law Act requires that the contribution of a wife as homemaker and parent be seen as an indirect contribution to the acquisition, conservation, or improvement of the property of the parties, that is no longer necessary since the 1983 amendments to the Family Law Act; nor has it ever been necessary for the purposes of the Property (Relationships) Act, s 20(1)(b), which does not require that the contributions there referred to be contributions to the acquisition, conservation, or improvement of property.

35 Secondly, contributions made before cohabitation commences are relevant contributions for the purposes of s 20 [McDonald v Stelzer (2000) 27 Fam LR 304; (2001) DFC ¶95-233; [2000] NSWCA 302, [28]-[32] (Sheller JA), [34]-[36], [39] (Priestley JA); Jones v Grech, [24] (Davies AJA), [81]-[82] (Ipp AJA)], as are contributions made after separation and before trial [Foster v Evans (1997) DFC ¶95-193, 77,681; see also Jones v Grech, [79] (Ipp AJA)].

36 Thirdly, in proceedings under s 20, the court is not required to undertake a reductionist process analogous to the taking of partnership accounts by examining every alleged "contribution" of the kinds described in the section with a view to putting a monetary value on each in order to reach an accounting balance one way or the other, then to be eliminated by the requisite financial adjustment; rather, the court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind [Davey v Lee (1990) 13 Fam LR 688; (1990) DFC ¶95-084 (McLelland J)]. 37 Some contributions are readily capable of evaluation in monetary terms. Others - such as those made in the capacity of homemaker and parent - are not. Because some assets depreciate in value, and because parties incur living expenses, the pool of property available for division will usually be less than the sum of the financial contributions, and more so when allowance is made for the value of the non-financial contributions. This means that the type of accounting approach which McLelland J discouraged in Davey v Lee runs the risk that, by focussing on the valuing of individual contributions item by item, not only will the overall picture be lost, but serious injustice can be done, particularly by devaluing those contributions which are not readily capable of evaluation in monetary terms. On the other hand, the "fruits of a totality of efforts of wage earning, homemaking and mutual support" referred to by Deane J in Mallet do not usually encompass property which each party had before the relationship, or which either party introduced not by way of their mutual efforts at wage earning, homemaking and mutual support, but independently through gift or inheritance from third parties.

38 As to the third step - the determination of what order is required in order sufficiently to recognise and compensate the applicant's contributions - the court is concerned with what is just and equitable having regard to, and only to, the respective contributions of the parties of the type referred to in s 20, and there is no warrant for regard to other factors such as the respective means and needs of the parties, which are made relevant to equivalent applications under the Family Law Act by s 79(4)(e) of that Act, an equivalent of which is conspicuously absent from the Property (Relationships) Act, and the omission of which was deliberate, as appears from the Law Reform Commission's report of June 1983: Report on De Facto Relationships, No 36 of 1983, to which the draft Bill was an appendix, and from which the policy underlying the legislation appears [Wallace v Stanford (1995) 37 NSWLR 1; (1995) 19 Fam LR 430; Evans v Marmont, 81]. The divisible pool of property 39 The primary judge accepted that the pool of divisible property at the date of separation was as follows, in accordance with a table of assets submitted on behalf of Ms Kardos:- Property Title Value $ Woonona Kardos 450,000 Hornsby Kardos 335,000 Williamstown Kardos 280,000 Joint Account Kardos 500 Honda CRV Motor Vehicle Kardos 19,000 Otford Sarbutt 415,000 Plumbing Business Sarbutt 30,000 IAG Shares Sarbutt 7,378 Other Sarbutt 20,000 Total Property 1,556,878

Less Liabilities: Title Value $ Woonona Kardos 82,000 Hornsby Kardos 159,000 Williamstown Kardos 160,000 Otford Sarbutt 67,000 Total Liabilities 468,000 Net Divisible Property 1,088,878

40 The relevant reservations and qualifications were that the value stated for Ms Kardos' Honda CRV was an underestimate [it had been purchased only a year earlier for $30,000], and the list did not include savings of $5,000 which Ms Kardos had at separation, nor assets purchased by her during the relationship from the joint account, including a barbeque and jewellery.

41 Her Honour accepted the submission made on behalf of Ms Kardos that, rather than the usual course of valuing the property at the date of trial, it was appropriate to value it as at the date of separation. Her Honour thought that, given that Ms Kardos had continued to make mortgage repayments in respect of her three properties after separation, it would be very difficult without further evidence to deal with the assets as at the date of trial, there having been limited commingling of assets after separation, and more complex financial arrangements as a result of Ms Kardos' new relationship.

42 On the appeal, neither the values which her Honour accepted, nor the date of valuation, were the subject of challenge. There is no reason for this Court, for the purpose of re-exercising the discretion to make an adjustive property order, to depart from the valuations accepted by her Honour, and for the reasons advanced by her Honour I would not differ from her Honour's decision, in accordance with the submissions made on behalf of Ms Kardos, that the date of separation was the appropriate date in this particular case for ascertaining the pool. However, as will become apparent, this has implications for the award of interest on any adjustive property order.

43 Accordingly, as her Honour found, the Net Divisible Property as at the date of separation was $1,088,878, but this omits cash and jewellery of Ms Kardos and understates the value of her motor vehicle. The contributions: judgment of the primary judge 44 Her Honour found that Ms Kardos' net assets at the commencement of cohabitation amounted to $289,112, and at separation to $683,500; and that Mr Sarbutt's net assets at commencement of cohabitation were $241,000, and at separation $405,378. Her Honour reasoned that Ms Kardos had increased her net assets over the period of the relationship by $394,388, whereas Mr Sarbutt had increased his by $164,378, a difference of $230,000.

45 Her Honour found that although the contribution to the joint account by Ms Kardos from personal exertion earnings and rents exceeded that of Mr Sarbutt, "there were other contributions made by [Mr Sarbutt] of a financial nature which did not derive from the joint account - being his payment of certain expenses and the purchase of materials through his business account and by the improvements made and renovations he effected to [Ms Kardos'] property", and accordingly was satisfied "that there were equal contributions by each party to the relationship". Accordingly, her Honour concluded that, subject to an adjustment for notional rent, the $230,000 difference should be adjusted so that they shared equally the increment in their net assets over the relationship.

46 Her Honour thought that some further adjustment (though not the full rental derived from the Otford property) should be made on account of the benefit received by Mr Sarbutt from residing rent-free in the Woonona property. The reason for not adjusting the whole was "as the income from the rent on [Mr Sarbutt's] property went into the joint account". The net rents were $38,000. The adjustment which would have been required but for the notional rent would have been $115,000, which her Honour reduced to $100,000 having regard to the notional rent. The effect of that was to treat the pool as having been diminished by $30,000 by non-payment of rent.

47 So ultimately, her Honour concluded that an adjustment of property in favour of Mr Sarbutt in the sum of $100,000 was appropriate. The orders of the primary judge resulted in Ms Kardos retaining Woonona, Hornsby, Williamstown, the joint account and the Honda motor vehicle, together with the associated debt, less $100,000 adjustment payable to Mr Sarbutt, leaving her with $583,500 net. Mr Sarbutt retained Otford, his plumbing business, his IAG shares and his other assets together with the associated debt, plus the adjustment of $100,000, a net total of $505,378. This was, overall, a division of property 53.5:46.5 percent in favour of Ms Kardos.

48 Ultimately, it is necessary to consider the following aspects of the primary judge's decision relative to the evaluation of the contributions:-

· Whether, as was contended for Ms Kardos, her Honour erred in failing to adopt an asset-by-asset approach to the evaluation of the contributions of the parties; · Whether, as was contended for Ms Kardos, the approach adopted by her Honour in any event gave insufficient regard to the initial contributions of the parties; · Whether, as was contended for Ms Kardos, her Honour erred in concluding that the contributions of the parties during the relationship were equal; and · Whether her Honour erred in making the "notional rent" adjustment. 49 In order to determine whether her Honour fell into error in the assessment of the contributions, and if so what assessment I would substitute, I have, like Hodgson JA in Howlett v Neilson (2005) 33 Fam LR 402; [2005] NSWCA 149, [39], found it helpful to set out the way I would resolve this matter, which involves some mathematical calculations. Of course, that I would resolve it differently from the primary judge does not necessarily demonstrate appellable error. But as Hodgson JA said, "While I do not think that these matters can be determined on such mathematical calculations, I think mathematical calculations are of some use in guiding and testing conclusions about what is just and equitable, and also in promoting transparency and consistency in decision-making".

The contributions: global or asset-by-asset approach 50 Mr Alexander submitted that, having regard to the length of the relationship and the initial contributions, her Honour erred in failing to adopt an "asset-by-asset" approach or, at the least, to quarantine certain assets from the process of adjustment.

51 The legislation does not dictate the employment of any particular method in the formulation of an appropriate order for the adjustment under s 20 of property interests, and it is not desirable to attempt to formulate principles or guidelines designed to constrain judicial discretion within a predetermined framework [cf Norbis v Norbis (1986) 161 CLR 513; (1986) 10 Fam LR 819; (1986) FLC ¶91-712 (Wilson and Dawson JJ). Although, in the majority of cases, the global approach is likely to be more convenient than an asset-by-asset approach, the application of the asset-by-asset approach does not of itself amount to an error of law (Mason and Deane JJ). In Norbis, Mason and Deane JJ cited with approval observations of Nygh J in G & G (1984) FLC ¶91-582, to the effect that (at 79,697) it cannot be required of the Family Court that it assesses contributions with mathematical precision with respect to each item, and (at 79,697) that while the Family Court was divided between those who favoured the so-called global approach and those who seek to achieve some degree of precision, both approaches were legitimate provided that those who take the global approach heed the warning that the origin and nature of the different assets ought to be considered, and that those who favour the more precise approach do not mistake the trees for the forest and add up their individual items without standing back at the end to review the overall result.

52 In Lenehan v Lenehan (1987) 11 Fam LR 615; (1987) FLC ¶91-814, the Full Court of the Family Court (Fogarty, Maxwell and Gun JJ) said:- The judgments of the High Court in Norbis v. Norbis (1986) FLC ¶91-712 demonstrate the very wide discretion which a trial Judge has in the approach that he may adopt under sec. 79. In particular the judgments in that case discuss the global'' and the asset by asset'' approaches, and demonstrate that this is largely a matter for the trial Judge to determine in the exercise of his discretion. However Norbis' case is not a carte blanche to adopt either view irrespective of the circumstances of the individual case. There are cases where one approach or the other is clearly appropriate and a failure by the trial Judge to adopt that approach may demonstrate error. We think this is one such case. His Honour's initial approach of treating the parties' contributions to the home as separate from their contributions to the other (largely business) assets was, we think, a proper approach in the circumstances. 53 To this might be added that, in the necessarily inexact exercise involved in discretionary matrimonial property adjustment, judicial reasoning can be aided by the use in any case of more than one approach, so that one serves as a check method for the result reached by the other.

54 Curiously, Mr Alexander did not in fact offer an asset-by-asset analysis. Although, as will appear, I have undertaken such an analysis, which I have found to be of assistance as one way of evaluating the contributions to derive a result, I do not accept that such an approach was mandatory in this case, nor therefore that her Honour erred in declining to adopt such an approach. As Lenehan shows, the principal indicator for an "asset-by-asset" analysis is discrepant identifiable contributions of the parties to different assets: in that case, the proportionate contribution of the parties to the acquisition conservation and improvement of the matrimonial home on the one hand, and to the business assets on the other, were quite different. Such an approach will often be contra-indicated where, as here, there has been a pooling of income. Moreover, as the 1984 amendments to the Family Law Act, which require domestic contributions to be taken into account whether or not they are traceable into property, have been reflected in the Property (Relationships) Act from its inception, an asset-by asset approach almost always carries the risk of undervaluing domestic contributions which are not reflected in any particular asset, although that is of less than usual concern in this case.

55 The matters advanced in this respect by Mr Alexander as supporting adoption of an asset-by-asset approach - that the relationship was a short one and that each party substantially retained the property which they had introduced - are not themselves indicia which necessarily favour an asset-by-asset approach. While it was open to her Honour to adopt such an approach, whether as the primary approach or as a check method, it was not mandatory and her Honour did not err in failing to do so. The contributions: Howlett v Neilson 56 Although Mr Alexander submitted that the evidence did not support the conclusion that the contributions of the parties were equal, it is important to appreciate that her Honour did not find that the contributions overall were equal. In substance, her Honour found that the ongoing contributions during the relationship - but not the initial contributions - were equal. The effect of her Honour's judgment was to return to each party the value (as at the date of commencement of cohabitation) of the property that that party had contributed initially, but to apportion equally between them the increment in the value of their net property since then.

57 In Howlett v Neilson - which was decided after the judgment at first instance in this case - Hodgson JA, with whom Ipp and McColl JJA agreed, suggested that such an approach was an appropriate one. His Honour, (speaking in the context of initial contributions of respectively $110,000 and $2,000, including the value of real property at the date of commencement of cohabitation, and total assets of the parties at trial around $320,000), said that it would be a fair assessment of how the various contributions comprised the present asset pool and of how it would be just and equitable to divide it to return to each party his and her initial contribution valued at the date of commencement of cohabitation and divide the balance equally (at [42]):- [42] If one takes the appellant's initial contribution as $110,00.00, and the respondent's as $2,000.00, and deducts those figures from $320,000.00, this gives $208,000.00. Half that amount would be $104,000.00. If one then adds the respondent's initial contribution of about $2,000.00, and deducts the assets retained by the respondent of $8,779.00, one arrives at a figure to be paid to the respondent which can be rounded off to $97,000.00. This approach would return the initial contributions, without any adjustment to increase them either by CPI indexing or an interest allowance. It would be on the basis that the contributions made during the relationship are roughly equal, which seems an appropriate assumption. It would value the contributions of each party during the 17-year relationship at $104,000.00, and value the contributions to the present asset pool of the original asset contributions at $110,000.00 and $2,000.00 respectively. It would make no allowance for any possible greater cost to the respondent of her contribution; but that was not a matter about which there was significant evidence, and not a matter relied on in submissions. [43] In cases such as this, mathematical precision is not attainable; but in my opinion, this result would be a fair assessment of how the various contributions make up the present asset pool, and of how it would be just and equitable, having regard to the contributions of the parties, to divide that asset pool. 58 That is the approach which the primary judge took in this case, and Mr Alexander accepted that to succeed, he had to persuade this court that the approach adopted in Howlett v Neilson ought not have been adopted in the instant case. That involves two elements: first, use of the date of commencement of cohabitation for valuing the initial contributions of the parties, and secondly, the assumption that contributions during the relationship are approximately equal.

The initial contributions 59 As to the first, I do not think that, in Howlett v Neilson, Hodgson JA was purporting to state a rule of general application. His Honour was describing a method of evaluation of the contributions which was appropriate to the facts of that particular case [see, for example, at [41]]. That it was not intended to be a rule of general application is evident from his Honour's later judgment in Burgess v King [2005] NSWCA 396 (18 November 2005). Ms King in 1989 at the commencement of a relationship which lasted for thirteen years had a 50% interest in a home then worth $120,000 and subject to a mortgage of $20,000. A year into the relationship she purchased her former husband's interest for $50,000. Debts in respect of the property were paid off using Mr Burgess' savings of $32,000 and the proceeds of a joint loan of $25,000 which was repaid by Mr Burgess, and the proceeds of another loan of $20,000 repaid by Ms King. At the end of the relationship, the property was unencumbered and worth $780,000; renovations performed mainly by Mr Burgess and paid for by both parties had contributed $120,000 to that value. The primary judge had found that Mr Burgess had contributed $40,000 to the increased value of the property, and $57,300 to the repayment of debt, a total of $97,000, but reduced this to $65,000 on account of the offsetting benefit of Ms King's care for him and because he had been able to live less expensively than he had before the relationship. 60 On the appeal, the main complaint was that he had been given no share in the capital appreciation of the property. Hodgson JA held that, as Mr Burgess had put into the property money amounting to nearly one quarter of its value, and thereby saved it from being sold at the commencement of a relationship which lasted 13 years, he should have some benefit from the increase in value (which was about $420,000), being proportionate to his contribution of $57,300 to the initial value of $240,000. Accordingly his Honour concluded that Mr Burgess should receive $100,000 of the increase in value (although his Honour subsequently discounted that sum for other reasons not presently relevant). There was no suggestion that the increment in value should be apportioned according to the contributions of the parties during the relationship, let alone 50:50.

61 The approach which was adopted in Burgess v King is one which gives due weight to the time value of money, and recognises that capital gains are the product of the initial introduction of the property, rather than of ongoing contributions. On the other hand, the approach adopted in Howlett v Neilson, in my respectful opinion, may, in at least some cases, result in the serious undervaluation of initial contributions. It treats any increment in capital value of an asset held at the outset of the relationship as if it were part of the fruits of the relationship, when it is not: it is the result of the asset having been held by one of the parties at the commencement of the relationship, and not the result of joint efforts of wage earning, homemaking and parenting, and mutual support of the type described by Deane J as producing "fruits of the relationship". It disregards the "time value of money". It is likely to produce erratic results, because under it the significance of any particular asset in the ultimate evaluation will depend on its value when it was introduced. If one party has a house worth $250,000 at the outset, and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 - not of money worth $250,000.

62 The total value, as at separation, of the properties introduced by Ms Kardos (attributing one-sixth of Woonona to Mr Sarbutt) was $990,000 [$375,000 (five-sixths of Woonona) plus $335,000 (Hornsby) plus $280,000 (Williamstown)]; and of the properties introduced by Mr Sarbutt $490,000 [$450,000 (Otford) plus $75,000 (one-sixth of Woonona)]. Had there been no reduction in the mortgages, the respective equities of the parties would have been Ms Kardos $571,000 [$375,000 minus $55,000, plus $335,000 minus $179,000, plus $280,000 minus $185,000], and Mr Sarbutt $353,000 [$415,000 minus $82,000, plus $75,000 minus $55,000)]. That is, in my opinion, the best reflection of the separate initial real property contributions of the parties, being the initial equity each contributed plus the capital appreciation during the relationship. In terms of the ultimate divisible pool, Ms Kardos initial real property contribution, at its present value of $571,000, represents 52.5% and Mr Sarbutt's of $353,000 represents 32.5%.

63 In addition to their real property contributions, the present pool of assets also reflects other initial separate contributions of the parties. Ms Kardos introduced her savings, her long service leave entitlement and her Honda Prelude; together these totalled $44,000 in value, but all there is now to show for them is $19,000, being her Honda CRV. Mr Sarbutt introduced his plumbing business, then worth $20,000. Although it has increased to $30,000, I infer that has not been simple appreciation but the result of his efforts, supported by those of Ms Kardos, during the relationship, so as an initial contribution it should be treated as $20,000, with the increment being dealt with under contributions during the relationship. On account of these matters, his initial contributions, expressed as a proportion of the currently available pool, increase by about 2% to 35%, and hers by about the same to 55%. [That is a relative proportion of 61:39]. The remaining 10% represents the fruits of the relationship.

64 The approach adopted by her Honour, of using values at commencement of cohabitation, resulted in her Honour treating Ms Kardos' initial contributions as worth $290,000 and Mr Sarbutt's as worth $240,000. That is a proportion of 54:46, so that it does not reflect the significance which Ms Kardos' initial contributions had assumed by separation. It meant that her Honour treated her initial contributions as representing only 26%, and his 22%, of the presently available pool. This effectively includes the capital appreciation of the properties in the "fruits of the relationship", and represents a very considerable "erosion" of the significance of the initial contributions over what was a short relationship.

65 In Pierce & Pierce (1998) 24 Fam LR 377; (1999) FLC ¶92-844, the Full Court of the Family Court (Ellis, Baker and O'Ryan JJ) explained the significance of initial contributions and their "erosion" in a way which makes clear that, with the passage of time in the course of a relationship, substantial initial contributions may in an appropriate case be eroded by the offsetting and ongoing contributions which result more and more in there being a totality of contributions, including of a non-financial kind, not all of which can be satisfied in full out of the available pool. As a result, all contributions, including those made at the outset, are "eroded", in the sense that they cannot all be satisfied in full:- [25] In addition to referring to a short passage from the judgment of Fogarty J in In the Marriage of Money (1994) 17 Fam LR 814; FLC ¶92-485, the trial judge noted that the passage was cited with approval by the Full Court (Nicholson CJ, Baker and Tolcon JJ) in In the Marriage of Bremner (1994) 18 Fam LR 407; (1995) FLC ¶92-560. [26] In Way and Way (1996) FLC ¶92-702, the Full Court (Barblett DCJ, Finn and Butler JJ), said at 83,404: In the subsequent Full Court decision in Bremner all three Judges expressly preferred the approach taken by Fogarty J in Money over that taken by Lindenmayer J in the same case. Thus, and notwithstanding the attempts by Counsel for the husband in this case to demonstrate that there was some inconsistency between what Fogarty J said in Money and what was actually said in the joint judgment of the Full Court in Lee Steere , we regard the law in this area as now settled by the statement by Fogarty J in Money (and subsequently accepted by all members of the Full Court in Bremner ) that "… an initial contribution by one party may be `eroded' to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party". [27] However, it is important to put that quotation in its correct context. Fogarty J in In the Marriage of Money said at Fam LR 816; FLC ¶81,054: I am unable to agree with the criticism by his Honour in the passage in his judgment immediately after that quotation or of his analysis of the issues involved. In an appropriate case, in my view, an initial substantial contribution by one party may be "eroded" to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party. I feel, if I may say so with respect, that his Honour's formulation to the contrary is unrealistic and does not correspond with common experience in the court in many of these cases. I think it is legitimate for me to say, as I was a member of the Full Court in In the Marriage of Lee Steere (1985) 10 Fam LR 431; FLC ¶91-626, that His Honour has read too much into the passage to which he refers and that the term "off-setting contribution" does not necessarily mean "greater contribution". It simply reflects the circumstance that the respective contributions of the parties over a long period of marriage "offset" the significance which might otherwise be attached to a greater initial contribution by one party. This is, in my view, made clear by the Full Court in White (1982) 8 Fam LR 512; FLC ¶91-246 where that court pointed out that the principle in Crawford (1979) 5 Fam LR 106; FLC ¶90-647 is that the original contribution should not be carried forward as a mathematical proportion; ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be later factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution. [28] In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home: see also Campo and Campo (Full Court, Sydney, 19 May 1995, unreported) at pp 21-2 of the joint judgment of Ellis, Lindenmayer and Finn JJ and Zahra and Zahra (Full Court, Sydney, 3 October 1996, unreported) per Ellis J at p 10. 66 In Howlett v Neilson, Hodgson JA referred to that passage and, observing that there was no clear statement concerning the "erosion principle" in cases under the Property (Relationships) Act, suggested that it was by no means clear that it would apply to the same extent as under the Family Law Act where matters other than contributions can be taken into account and where the relationship involves a public commitment to mutual support for life [Howlett, [34]]. However, as the Full Family Court pointed out in the passage just cited, it is really a matter of weighing initial contributions with all other relevant contributions. In a short marriage, the other contributions may be relatively insignificant. In a long marriage, ongoing income contributions and contributions as a homemaker and parent, if they have not resulted in the acquisition of assets sufficient to recognise them, may warrant the "erosion" of initial contributions so that all contributions can be satisfied to some extent, though not in full, out of the available property. There is no reason why this approach would apply to any less extent under the Property (Relationships) Act than under the Family Law Act; it does not involve taking into account matters other than contributions, but is part of the methodology for weighing and balancing the different contributions.

67 Significant factors affecting the application of the "erosion principle" are the length of the relationship and, in particular, the extent to which there have been other or off-setting contributions which also have to be satisfied from the available pool. It is to accommodate those contributions that the initial contributions are "eroded".

68 In the present case, while there were some other and offsetting contributions, their significance is relatively slight. This was a short relationship. There were no children. Both parties were in employment and contributing personal exertion earnings, which were offset by their living expenses. Some account will have to be made for Mr Sarbutt's labour on improvements to Ms Kardos' property. Some account should also be made for the ongoing income contributions of both parties. But the total financial contributions (from earnings and rents) during the relationship were in the order of only $300,000, whereas the total initial contributions represent about $900,000 (or 90%) of the pool ultimately available for division. Even giving the income contributions equivalent weight, dollar for dollar, with the initial contributions, could not justify reducing the significance of the initial contributions to less than 75% of the pool. But the income contributions are not entitled to equivalent weight, because they were not productive of asset growth, save to the extent that they were applied to mortgage reduction, and were expended largely on living expenses, which the parties would have incurred separately had they lived apart. Thus, while some discount from carrying forward the initial contributions at full present value might be warranted, this is not a case in which sufficient weight was given to the parties' disparate initial contributions by returning them at their initial value, dividing equally any increment. Her Honour effectively eroded them to less than 50% of the pool. In my opinion, for these reasons, and for the additional reasons mentioned in [61] above, the approach adopted by her Honour involved, in the context of this relationship (and would involve in many cases), a very substantial undervaluing - or manifestly excessive erosion - of the initial contributions, such as to amount to error.

69 As the contributions during the relationship did not result in the accumulation of significant assets, but only the reduction of the mortgage balances, and the parties presumably expended their incomes on their living expenses, as they would have had they not been in a relationship, so that the only significant fruit of their joint endeavours was the reduction of the mortgage balances, I would only erode the initial contributions slightly - by increasing the "fruits" from 10% to 15%, and correspondingly reducing the total weight of the initial contributions from 90% to 85%, of which 52 percentage points would represent Ms Kardos' initial contributions, and 33 those of Mr Sarbutt [cf para [63]]. The contributions: during the relationship 70 The next issue is the primary judge's conclusion that the contributions during the relationship were equal. Her Honour's approach, in apportioning the total increment of $460,000 equally between the parties, reflects her Honour's view that the ongoing contributions of the parties during the relationship were equal. Other than the submissions, which I have already rejected, to the effect that her Honour made findings of fact which underpinned the conclusion that the contributions were equal which were not available on the evidence, Mr Alexander submitted that in any event a conclusion of equality of contribution during the relationship (apart from the initial contributions) was not reasonably open. I agree, for the following reasons.

71 As is apparent from the passage cited above from Mallet, equality of contribution during a relationship is not to be assumed, although in some cases it may readily be inferred from evidence of the contributions of each party. Her Honour did not assume equality, and rightly examined the evidence. But in my respectful opinion, that evidence does not permit a conclusion that the ongoing contributions during the relationship were equal.

72 First, on the approach and analysis adopted by the primary judge, that conclusion overlooked that part of the increment of $460,000, which her Honour apportioned equally, reflected the introduction, as a result of Ms Kardos' property settlement with Mr Kardos, of the second half of Woonona, worth $165,000 but at a cost to the parties of only $110,000. The difference of $55,000 was a significant contribution, by Ms Kardos alone. In other words, the contribution of the second half of Woonona was far from equal; it was made in proportions 2:1 in favour of Ms Kardos. While, on the approach which I have adopted above, that discrepancy has been taken into account in my assessment of the initial contributions, it was not in her Honour's methodology, and as a result either her Honour's assessment of the initial contributions, or of the ongoing contributions, if not both, is flawed.

73 Secondly, the total contributions of Mr Sarbutt from personal exertion earnings and rents as found by her Honour amounted to $110,000, and those of Ms Kardos to about $190,000, which represents 67.33% by Ms Kardos and 36.66% by Mr Sarbutt. [As will become apparent in the discussion of "notional rent", this in fact overstates the contribution of Mr Sarbutt and understates that of Ms Kardos]. Both parties were in employment; this is not a case in which the domestic labours of one party freed the other to earn income for the benefit of both. Even allowing that Mr Sarbutt also paid from his business account $12,000 towards joint expenditure, that increases his proportionate share only to 39%.

74 Thirdly, as has been noted, Mr Sarbutt contributed to the housework about equally with Ms Kardos, but Ms Kardos did most of the shopping and cooking. While there may not be much in it, especially in the absence of children, the overall balance of the domestic contributions slightly favours Ms Kardos; it does not point to equality.

75 Fourthly, while Mr Sarbutt, with some assistance from Ms Kardos, undertook physical work on the Woonona property, which increased its value to the extent of about $10,000, and also did some work on the Hornsby property, against that must be weighed contributions by Ms Kardos, before the relationship, to improvements to the Otford property, and, during the relationship, to the administration of Mr Sarbutt's plumbing business, although the increase in its value over the relationship by $10,000 was much more his responsibility than hers. Although, on balance, these matters weigh in favour of Mr Sarbutt, and, having resulted in an increase in the value of the Woonona property and of the plumbing business, are entitled to some additional significance (when compared to those contributions which were productive of no "fruits"), when their quantum is weighed against the much greater discrepancy in favour of Ms Kardos of the ongoing income contributions which total more than $300,000 and her slightly superior domestic contributions, it is impossible to see how a conclusion of equality of contribution during the relationship could be reached. Together, the Woonona improvements and the business enhancement increased the value of the divisible property by about $20,000, of which Mr Sarbutt might have been responsible for 80%, or $16,000. This represents just over 10% of the fruits of the relationship of about $150,000, and cannot support an adjustment of more than about 5% of those fruits in his favour: an adjustment of 5% would effect a full return to him of the value of those contributions, which would afford them disproportionate and excessive weight, since all other financial contributions have been, at least to some extent, eroded.

76 Fifthly, any adjustment for notional rent can only serve to increase Ms Kardos' and reduce Mr Sarbutt's proportionate contribution during the relationship. Notional Rent Adjustment 77 As has been seen, the primary judge, after determining what would be an appropriate adjustment of property interests, made a further adjustment on account of "notional rent", which was intended to reflect the rental value of Ms Kardos' Woonona property which the parties occupied as their home during the relationship. Mr Alexander submitted that notional rent should have been allowed at $40,000, and not the $30,000 adopted by her Honour.

78 There are several difficulties with the adjustment which her Honour made for notional rent, and equally with the increase proposed by Mr Alexander. First and foremost, it is redolent of the "accounting" approach eschewed by Davey v Lee. Secondly, performed as it was not in the course of evaluating the whole of the contributions, but as an additional adjustment after that overall assessment, it gives undue weight and significance to this single contribution. Its practical effect is that, although slightly discounted from $38,000 to $30,000, it was returned to Ms Kardos. Yet there was no suggestion that the other actual rent contributions made on behalf of each of the parties were returned in total; they were simply weighed in the balance to reach an overall apportionment of the contributions. The proper way to account for it, if at all, was in the overall evaluation of the contributions during the relationship, and not as a final additional adjustment. The third difficulty is that Mr Sarbutt was, because of his contribution to the acquisition of Mr Kardos' former interest in the Woonona property, beneficially entitled to a one-sixth interest in it and accordingly entitled to occupy it free of rent. For these reasons, I consider that her Honour's treatment of the "notional rent" was inappropriate.

79 While it is true that in a sense Ms Kardos provided the Woonona home as accommodation for the parties, a relationship has to be conducted from some place of cohabitation. The practical effect of her providing the Woonona property for that purpose was that the Otford property could be let for rent, and the rents produced by it were contributed to the joint pool and spent on mortgage repayments or living expenses. While by providing that accommodation, Ms Kardos did make a contribution by enabling the generation of rental income from the Otford property, she was one of the two occupants of Woonona, and she was one of the two beneficiaries of the receipt of the rents from Otford.

80 In principle, the position can be analysed through the simpler scenario of a relationship between partners who previously each owned and occupied their own home. Upon cohabitation, one of those homes becomes vacant and available to be let for rent. That is a saving which arises because cohabitation results in the partners needing only one home instead of two. It should make no difference whose home they chose to occupy and whose they let for rent: the rents are a result of a property being freed for that purpose by their decision to cohabit, and are properly seen as a joint contribution of the parties.

81 In my opinion, the proper treatment of this issue was not to allow some notional rent for Mr Sarbutt's occupation of Woonona, but to treat the Otford rents, which amounted to $38,000, as jointly contributed rather than solely contributed by Mr Sarbutt. If Ms Kardos were treated as having contributed in effect half of those rents, her proportionate income contributions would increase to $209,000 of $300,000 (70%). Even allowing Mr Sarbutt's payment of relationship expenses from his business at the upper limit of $12,000 would reduce Ms Kardos' share only to 67%.

82 Mr Sarbutt's greater non-financial contribution during the relationship to the improvement of properties, particularly Woonona, and to the improvement of the plumbing business, and the circumstance that the imbalance in domestic contributions, while favouring Ms Kardos, was only slight, warrants a further shift towards Mr Sarbutt. For reasons already advanced, a shift of something less than 5% - which reflects a return of a contribution of twice that - is appropriate for his non-financial contributions to improvements of the properties and business. In addition, although there was a slight preponderance of contributions by Ms Kardos domestically, it was less than 60:40 and warrants a further shift, albeit a very slight one, in favour of Mr Sarbutt.

83 Overall, having regard to the discrepancy in financial contributions during the relationship (67:33 when allowance is made for "notional rent", and for the payment of personal expenses of the parties from Mr Sarbutt's business), and to the slight preponderance in favour of Ms Kardos of domestic contributions (but in circumstances where there were no children and both parties worked, so that they are of limited significance), and to the imbalance of other non-financial contributions which warrants an adjustment of perhaps 4% (which applied to the "fruits" of $150,000 reflects a return of $12,000 on the value of his contributions of $16,000), I think 62.5:37.5 in favour of Ms Kardos is a fair approximate apportionment of the contributions during the relationship.

The appropriate adjustment 84 The foregoing analysis would result in an overall evaluation of the contributions of Ms Kardos at 61% [52 + (15 x 62.5%)] and those of Mr Sarbutt at 39% [33 + (15 x 7.5%)] [see paras 69 and 83]. However, one further matter requires to be taken into account, and that is the circumstance that the divisible pool omits the cash savings of $5000, barbeque and jewellery accumulated by Ms Kardos, and understates the value of her Honda CRV motor vehicle.

85 One way in which the Court can take into account assets, the value of which is not disclosed by the party who holds them, is to increase the other party's share of the disclosed assets [Black v Kellner (1992) 106 FLR 154; (1992) 15 Fam LR 343; (1992) FLC ¶92-287]. In this case, a slight adjustment of the percentages - 1% of the pool, which is equivalent to about $10,000, would reflect an assumption that the total understatement of Ms Kardos' assets was in that order, which seems reasonable - would suffice. This results in an increase of Mr Sarbutt's share of the pool from 39 to 40%, and a corresponding reduction in Ms Kardos' share from 61 to 60%.

86 Accordingly, this approach indicates an apportionment of the divisible property 60% to Ms Kardos and 40% to Mr Sarbutt, which would leave Ms Kardos with assets to the value of $652,800, and Mr Sarbutt with $435,200, and would require an adjustive payment to him of $29,900.

Check method: asset-by-asset 87 As foreshadowed, it is useful to check this result reached on a "global" approach by an asset-by-asset assessment.

88 At separation, the Woonona property was worth $450,000, and subject to a mortgage debt of $82,000, the equity being $368,000. While Ms Kardos introduced the first half of that property, the second half was acquired as a result of the property settlement to which the parties jointly contributed $110,000 borrowed in the refinancing. That $110,000 was equivalent to one-third of the value of the property at the date of the matrimonial property settlement with Mr Kardos in April 2000, when it was worth $330,000. Mr Sarbutt should be seen as having contributed $55,000 (half of $110,000) towards the property's value as at April 2000 of $330,000: in effect, he contributed one-sixth of the property. Proportionately to its value at separation of $450,000, that would be $75,000. From that must be deducted one half of the mortgage debt which funded the $110,000, the balance of which was at separation $82,000, that half being $41,000. To it should be added the value which the improvements effected by Mr Sarbutt added to the property, which I would take to be $8,000. That would suggest that Mr Sarbutt's contributions to the Woonona property are worth about $42,000.

89 The Hornsby property was worth $335,000 at separation, subject to a mortgage of $159,000. Mr Sarbutt made no contribution to its acquisition, over and above the refinance which has already been reflected in the $55,000 contribution to the Woonona property. However, during the relationship the mortgage was reduced from $179,000 to $159,000. That was the product of the joint earnings and efforts of the parties, for which I have found Mr Sarbutt was responsible to the extent of 37.5%. In that way, Mr Sarbutt has contributed $7,500 to the present equity in Hornsby. That equity is also reflected, to some extent, in the capital appreciation of Hornsby. Given that his notional equity of $7,500 represents about 4% of the total equity, and has been acquired progressively over the three years of the relationship, a 2% share of the increment in the capital value Hornsby of $95,000 - which is $1,900 - would reflect this. Accordingly, Mr Sarbutt's contributions to Hornsby are worth about $9,400.

90 Williamstown had a value at separation of $280,000, subject to a mortgage of $160,000. That mortgage had been reduced from $186,000 over the period of the relationship, reflecting a contribution to its current equity of about $6,000 by Mr Sarbutt. Given that his notional equity of $6,000 represents about 5% of the total equity, and has been acquired progressively over the three years of the relationship, a 2.5% share of the increment in the capital value of Williamstown of $80,000 - which is $2,000 - would reflect this. Accordingly, Mr Sarbutt's contributions to Williamstown are worth about $8,000.

91 Mr Sarbutt's contributions to Ms Kardos' real properties may therefore be seen as amounting to $42,000 plus $9,400 plus $8,000, a total of $59,400.

92 On the other hand, at separation the Otford property was worth $415,000 and subject to a mortgage of $67,000. That mortgage had been reduced from $82,000 during the relationship, a reduction of $15,000. Ms Kardos' contribution to the equity in that property was 62.5% of the reduction in the mortgage, or $9,375, which represents about 2.5% of the equity at separation, and which has been acquired progressively over the relationship. 1.25 percent of the increment in capital value is $1,400, so that the value of Ms Kardos' contributions to Otford is about $10,775.

93 Allowance must also be made for the circumstance that during the relationship, Mr Sarbutt's plumbing business grew in value from $20,000 to $30,000. He worked in that business with the support of Ms Kardos and she has, to an extent, contributed to that enhancement of value of $10,000, of which I would allow her $2,000.

94 Further, during the relationship Mr Sarbutt has accumulated shares and other assets to a value of about $27,000: he has accumulated IAG shares of $7,378 and other assets of $20,000. Ms Kardos has contributed to this growth through her contributions to the income pool, to the extent of 62.5%, or $16,875. However, Ms Kardos did not include in her table of property various assets acquired by her during the relationship, including jewellery, and cash of $5,000. Assuming the total of these was about $10,000, Mr Sarbutt would have been entitled to $3,750 from them. The net balance in favour of Ms Kardos is $13,125.

95 Ms Kardos' contributions to Mr Sarbutt's property may therefore be seen as amounting to $10,775 plus $2,000 plus $13,125, a total of $25,900. When offset against Mr Sarbutt's contributions to her properties of $59,400, there is an imbalance of $33,500, before making any provision at all for "erosion" of the initial contributions.

96 The apparent precision of the figures which I have used should not be misunderstood as pretending that precision is attainable. Their utility is in providing guidance in making a "holistic value judgment in the exercise of a discretionary power of a very general kind". They satisfy me that an adjustive property order in favour of Mr Sarbutt of $30,000 - reflecting an overall apportionment of the divisible pool 60% to Ms Kardos and 40% to Mr Sarbutt - is just and equitable having regard to the respective contributions of the parties of the type described in s 20. Conversely, they satisfy me that the primary judge's order was manifestly excessive.

Interest 97 The primary judge rejected an application for interest on the amount of the adjustment awarded. Mr Alexander suggested that her Honour may have had regard to the benefit of valuations of property at the date of trial which satisfied her that the effect of not granting interest would not prejudice Mr Sarbutt.

98 Where, as here, the relatively uncommon course is adopted of valuing the property as at a date earlier than the date of hearing, and evaluating the parties' entitlements according to that pool of property, it will ordinarily be appropriate to award interest from the date at which the entitlement is struck. That is because the adjustment is calculated at the date of valuation, and the award of interest reflects the fact that the applicant has been kept out of his or her money, the benefit of which the respondent has enjoyed, during the period from then until to judgment. When the property is ascertained and valued as at the date of hearing, then the judgment will strike the entitlements according to current values, and in that way take into account appreciation of property since separation. But if the values used are as at separation, an award of interest will be appropriate. Ultimately, Mr Alexander did not argue to the contrary.

99 In my opinion, Her Honour erred in failing to award interest, and the sum of $30,000 which I would substitute should bear interest from the date of separation when the values were struck and the adjustment notionally calculated. Conclusion 100 The approach adopted by her Honour, of simply returning to the parties at their original value at the date of cohabitation of their initial contributions and dividing the growth in assets between them equally, and then making an adjustment for "notional rent":- · gave manifestly inadequate weight and significance to the initial contributions of the parties in this short relationship, by treating the increments of capital value during the period of the relationship as entirely "fruits of the relationship", when in fact, save for so much of the increased equity as was due to reduction in the mortgage, they were not;

· involved a conclusion that the contributions of the parties during the relationship were equal, which was not reasonably open: having regard to the disparity of the income contributions of the parties (which, allowing for the indirect contribution made by Ms Kardos to the rents derived from Otford, were about 67:33 in her favour), and the slight disparity in favour of Ms Kardos of the domestic contributions, the balance of the non-financial contributions during the relationship, though it somewhat favoured Mr Sarbutt, could not possibly have so offset the imbalance of income contributions to produce an overall result of equality of contribution during the relationship; and

· gave excessive weight and prominence to the benefit of occupation of the Woonona property. 101 On a global approach, the initial contributions were 60:40 in favour of Ms Kardos, and the on-going contributions 62.5:37.5 in her favour. The short duration of the relationship, the circumstance that save for reduction in the mortgages, assets were not accumulated as a result of the on-going contributions, and the circumstance that the initial contributions represent about 90% of the property available for division at separation, means that although those initial contributions must be slightly eroded, they are entitled to very much greater weight than the ongoing contributions. This result chiefly recognises his contribution to the acquisition (in part) and improvement of Woonona, and to a lesser extent his contribution to the acquisition and conservation of Williamstown and Hornsby, offset by Ms Kardos' contributions to the acquisition and conservation of Otford and the plumbing business. A slight adjustment against Ms Kardos is required to take account of the assets which she omitted to bring to account. An overall apportionment of 60:40 is reasonable, which requires a payment of $30,000 to Mr Sarbutt, together with interest from the date of separation until judgment.

102 The order of the primary judge should be set aside, and in lieu thereof there should be an order that Ms Kardos pay Mr Sarbutt the sum of $30,000, together with interest from the date of separation (November 2002) to the date of judgment (which was 21 February 2005), a period of two years and three months. I would allow interest in the sum of $6,075, which produces a total award of $36,075 as at the date of the judgment below.

103 The primary judge ordered that Ms Kardos pay Mr Sarbutt's costs, including on a solicitor/client basis from 27 October 2004, which was the date of an offer of compromise. As we did not hear argument on costs I would reserve leave to the parties to apply for a different costs order, but prima facie the respondent Mr Sarbutt should pay the appellant Ms Kardos' costs of the appeal. If the amount of the substituted order which I propose is less than the offer of compromise which resulted in the solicitor/client costs order, while Mr Sarbutt remains entitled to the costs of the proceedings at first instance, the order that they be on a solicitor/client basis from 27 October 2004 should also be set aside.

104 I propose the following orders: 1. That the appeal be allowed. 2. That the orders of the District Court made on 7 February and 21 February 2005 be set aside and in lieu thereof there be substituted with effect from 21 February 2005:- 2.1 Order that by way of adjustment and settlement of property interests pursuant to the Property (Relationships) Act 1984, s 20 the defendant Tristan Jane Kardos pay the plaintiff Paul Ventris Sarbutt the sum of $36,075. 2.2 Order that the defendant pay the plaintiff's costs of the proceedings. 3. That the respondent Paul Ventris Sarbutt pay the costs of the appellant Tristan Jane Kardos of the appeal. 4. That the respondent Paul Ventris Sarbutt be granted an indemnity certificate under the Suitors' Fund Act 1951 (NSW), s 6. 5. That the parties have liberty to apply to set aside orders 2.2 and 3 and for different costs orders, any such application to be made by written submission to be lodged with the Associate to the Presiding Judge within seven days, any response by the opposing party to be so lodged within a further seven days and any reply by the moving party within a further seven days thereafter. **********

16/02/2006 - Remove track changes - Paragraph(s) Entire document

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Suitors' Fund Act 1951(NSW)

(1991) 15 Fam LR 109

(1992) 15 Fam LR 343

(1986) 11 Fam LR 214

(1990) 13 Fam LR 688

(1997) 21 Fam LR 760

(1986) 10 Fam LR 1076

(2005) 33 Fam LR 402

(2001) 27 Fam LR 711

(1987) 11 Fam LR 615

(2000) 27 Fam LR 304

(1986) 10 Fam LR 819

(2005) 33 Fam LR 134

(1993) 16 Fam LR 863

(1998) 24 Fam LR 377

(1986) 11 Fam LR 271

(1995) 19 Fam LR 430

(1986) 11 Fam LR 302

(2005) 33 Fam LR 177

(1994) 17 Fam LR 814

(1994) 18 Fam LR 407

(1985) 10 Fam LR 431

At a glance

Court

Decision date

Before

Source

Judgment (97 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (43)