Kenyon v Akeroyd [2008] VSCA 277

Court of Appeal (Vic)|2008-12-19|Before: MAXWELL P, REDLICH JA and FORREST AJA

PROPERTY - De facto relationship - Adjustment of property interests under Part IX of the Property Law Act 1958 (Vic) - How differing contributions to be valued - Global approach - Shared undertaking - Error to value homemaker and present contribution on basis of commercial cleaning rates - Error conceded - Adjustment altered.

1 The appellant, Elizabeth Kenyon, and the respondent, Jason Akeroyd, were in a domestic relationship from 1998 until February 2003. They were 'domestic partners' within the meaning of of the (Vic). The appeal is primarily concerned with the manner which the trial judge assessed the non-financial contributions of Ms Kenyon.

2 Mr Akeroyd brought proceedings in the County Court pursuant to s 279(1) of the Act, seeking orders for the adjustment of their property interests. In particular, he sought an order that Ms Kenyon vacate the Bruthen property in which they had lived together, and an order that he retain his interest in the two titles comprising the property at 170 Chambers Road, Bruthen.

3 By her defence and counterclaim, Ms Kenyon denied that Mr Akeroyd was entitled to any such adjustment. She sought, instead, an order that Mr Akeroyd transfer his interest in the property to her, subject to the existing loan. She also sought an order that he pay her 'such sum as is deemed just and equitable' pursuant to s 285 of the Act.

4 After a trial lasting several days, in the course of which both parties gave evidence, the judge essentially upheld Mr Akeroyd's claims. She declared that he was sole owner of the Bruthen property, the title to which was in his name, and ordered Ms Kenyon to vacate the property within 30 days of the order. Mr Akeroyd was ordered to pay her the sum of $8 386.

5 Ms Kenyon has appealed against those orders. The submissions filed on her behalf accept that the division of assets between parties involves the exercise of a judicial discretion.[1] It follows that an appeal will only succeed if the appellant can

identify an error of the kind referred to in House v The King.[2] As will appear, however, counsel for Mr Akeroyd conceded in the course of the appeal hearing that the judge had committed an error of that kind,[3] such that the orders must be set aside and the discretion exercised afresh. Importantly, it was common ground that this should be done on the basis of the facts and circumstances as at the date of the hearing in the County Court.

Property Law Act s 285: determining what is just and equitable

(1) A court may make an order adjusting the interests of the domestic partners in the property of one or both of them that seems just and equitable to it having regard to -

the financial and non-financial contributions made directly or indirectly by or on behalf of the domestic partners to the acquisition, conservation or improvement of any of the property or to the financial resources of one or both of the parties; and
the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the domestic partners to the welfare of the other domestic partner or to the welfare of the family constituted by the partners and one or more of the following -

7 In Conn v Martusevicius,[5] Vincent J gave the following account of how s 285(1) should be approached:[6]

[T]he Court is vested with a wide discretion and must attempt to arrive at a result which is just and equitable in the circumstances. Accordingly, it must have regard to the whole of the relevant context within which an application is made.

Any assessment of the significance and value of the assistance and support provided by de facto partners which did not place them within a framework provided by all of the circumstances of the relationship, would introduce a measure of unreality into the process and a degree of tension would arise between the adoption of a restrictive approach to the factors to be taken into account, and the duty of the Court to attempt to achieve equity between the partners.

Whilst s 285 imposes an obligation upon the court to have regard to a number of particular kinds of contributions which may have been made, the legislature has not attempted to confine narrowly the concept of "contribution" and there is, in my opinion, no good reason for the courts to do so. The fundamental limitations to the scope of the section in this context, are contained in the expression "de facto partner" which makes it clear that any such contribution to be relevant must have been made by a person who fell within that description at the time of its making and possesses a sufficient nexus with the relationship.

8 As Vincent J noted, the conventional approach to the task of determining what is 'just and equitable' involved four steps, as follows:

3. Determine whether those contributions have been sufficiently 'recognised and compensated for'.

4. Determine the orders to be made to ensure that the applicant's contributions are sufficiently recognised and compensated for.[7]

More recent decisions have tended to view this as a three-step process, the last two steps being treated as one.[8]

9 As the conceded error relates to the assessment of contributions, we turn first to that issue.

10 It has been accepted since Norbis v Norbis[9] that there are two possible approaches to assessing contributions. The first is the so-called 'asset by asset' approach, whereby the respective contributions to individual assets are assessed separately and where, as a result, the proportionate contributions may differ from one asset to the other. The second is the so-called 'global' approach, whereby the identified assets are treated as a 'pool' and a global assessment of respective contributions is applied to the whole of the pool, often on the basis of percentages. Which of these approaches is to be adopted in the particular case is a matter for the Court, having regard to the circumstances of the case.[10]

11 The judge in the present case opted for the global approach. She concluded that the respective contributions were as follows: Mr Akeroyd - 66.61 per cent, Ms Kenyon - 33.39 per cent.[11] Argument on the appeal was principally directed at what were said by Ms Kenyon - and in part conceded by Mr Akeroyd - to be errors in the method by which her Honour arrived at these percentages.

12 During the period of the relationship, Mr Akeroyd worked as a logger. The judge found - and it is not disputed - that his earnings during the period 1998-2003 totalled approximately $135 000. Her Honour found that Mr Akeroyd 'paid for all the expenses of family living, entertainment and loans and outgoings.'[12]

13 Her Honour found - and again, this is not disputed - that Ms Kenyon's major contribution was 'as mother to the children and homemaker'.[13] We deal later with the approach adopted to the valuation of this contribution. Ms Kenyon made other contributions, the background to which was as follows.

14 The Bruthen property was bought in mid-2000. It comprised three pieces of vacant land, being a main property and two further allotments. Following settlement, a subdivision of the land was effected (in December 2000) and one block was sold for $55 000, resulting in a reduction in the mortgage debt. A house was moved on to the remaining land and renovated. It was used as the family home until the separation in February 2003.

15 The evidence was that it had been Ms Kenyon's idea to acquire the land and subdivide it, in order to offset some of the money borrowed for the purchase. She had done all of the work necessary to effect the subdivision, including many phone calls. As the judge noted, Ms Kenyon estimated that she had spent about 15 per cent of each day, over two or three months, working on the subdivision. Her Honour's finding as to this contribution was that:

[It] was of limited duration, and it is not realistic to attribute to it a financial value, even though it was of fundamental assistance to [Mr Akeroyd] when the farm was purchased. However, I do not agree with [Ms Kenyon's] submission that such contribution should be apportioned as equal to the financial contributions made by [Mr Akeroyd].[14]

16 From 1998 until 2001, Mr Akeroyd worked for a logging company. He then established his own company, Akeroyd Logging Pty Ltd, and purchased a logging business, on vendor terms, for $238 000. Forty-eight payments of $4 622 were made between November 2001 and late 2004. Of these, 15 payments were made before separation, and 33 after.

17 It was common ground - and the judge found - that Ms Kenyon did the bookwork for the company and carried out other administrative duties. Having undertaken a two-day course in bookkeeping, Ms Kenyon did the books 'on a weekly basis for about two years'. Mr Akeroyd proposed - and the judge accepted - that this contribution should be valued at $100 per week over the two years, giving a total of $10 400.

18 As the judge recorded, Mr Akeroyd also accepted in evidence that Ms Kenyon had

created and implemented an Occupational Health and Safety policy. She liaised with Tambo Logging in respect of this, and also WorkCare. She bought and delivered parts for the logging machinery. He said she gave him good support in the business. He agreed that without her assistance he could not have done everything alone.[15]

No allowance appears to have been made in her Honour's computation, however, for any contribution by Ms Kenyon to the logging business, apart from the bookkeeping.

19 It was also common ground that Ms Kenyon had done part-time work - with Mr Akeroyd - pruning trees, and had managed the agistment of stock during the relationship. Her Honour valued both of these contributions on the basis of an assumed rate of pay of $80 per day for the relevant period, giving a total of $8 000. When this was added to the allowance of $10 400 for the bookkeeping work, the total was $18 400. On this basis, her Honour concluded, Mr Akeroyd had contributed approximately 86.4 per cent of the total income, while Ms Kenyon had contributed approximately 13.6 per cent. These constituted the starting percentages which, in her Honour's view, required adjustment 'in the light of other considerations'.

20 For reasons set out below, we respectfully consider that this approach was incorrect.

Valuing the contribution of Ms Kenyon as homemaker and parent

21 As her Honour noted, Mr Akeroyd conceded that Ms Kenyon's contribution as mother and homemaker -

was above reproach: she was a good mother and ran the household well, much of the time in the absence of [Mr Akeroyd] when he was working away from home. I find that her contribution to the business was within the constraints that her role as mother permitted, and she seemed to be able to combine these roles successfully.[16]

22 Her Honour referred to a decision of O'Bryan J in Bennett v Parker,[17] in which his Honour considered the contribution of the plaintiff as homemaker in a relationship over about 11 years. O'Bryan J said that it was 'impossible to place a financial value' on that contribution, and continued

A casual employee earns about $10 per hour doing housework. A global approach must be taken into the calculation. In my opinion, a contribution of $5,000 per annum would be reasonable over 11 years, the calculation produces $55,000.[18]

It is not clear whether his Honour in fact based the figure of $5 000 on an hourly rate of $10 per hour. At that rate, an allowance of $5 000 per annum would have equated to approximately 10 hours per week at $10 per hour. Counsel for the appellant submitted that such an approach invites error and that a global approach to non-financial contributions is required.

That hourly rate of $10 is very low, by comparison with the earnings of a casual cleaner in 2006, and is now more likely to be about $18. By this reckoning, on a global approach and allowing for approximately five hours a week over five years, the calculation produces $23 400.

This amount, when added to [Ms Kenyon's] financial contribution of $18 400, produces a total of $41 800. The percentage contributions therefore become 22 per cent by [Ms Kenyon] and 78 per cent by [Mr Akeroyd].[19]

There was no indication in the reasons as to why the figure of five hours per week was seen as an appropriate measure of the work done by Ms Kenyon as parent and homemaker. With great respect, we are unable to see any rationale for that figure. The starting-point, we would think, is that the task of homemaker and parent in a relationship such as this is to be regarded as a full-time job.

24 Counsel for Mr Akeroyd conceded that it was 'an error of a fundamental kind' to call in aid a notional rate of pay for a casual cleaner for the purpose of valuing the contribution of one party to a relationship as parent and homemaker. The concession was properly made.[20] On the basis of this error, it was conceded that the appeal must succeed. Counsel submitted, however, that there was no error in seeking to attribute a dollar figure to the parent/homemaker contribution and that, in re-exercising the discretion, this Court should determine a lump sum amount as representing the value of that contribution.

25 Counsel submitted that the appropriate amount was $50 000 and that, if that figure were substituted for the figure of $23 400 used by the judge in this part of the calculation and the percentages were adjusted accordingly, the calculation was otherwise entirely correct. Subject to that adjustment, the outcome was just and equitable.

26 We disagree. In our view, the entire endeavour to attribute a dollar figure to Ms Kenyon's parent/homemaker contribution is misconceived. Not only is such a contribution, by its nature, insusceptible of valuation in money terms,[21] but the very attempt to compute such a value ignores the critical fact that many - perhaps most - domestic relationships operate as a shared undertaking where the maintenance of the family unit depends in equal measure on each contribution. Typically, one partner bears a disproportionate share of the burdens of homemaker and (where there are children) parent; the other partner is thus left free to earn a disproportionate share - if not the entirety - of the household income.

27 Neave JA, with whom Maxwell P agreed, observed in Giller v Procopets:

As discussed earlier, s 285(1)(b) required the Court to assess the homemaker or parent contributions made by either of the de facto partners to the welfare of the other de facto partner or to the welfare of the family. This provision must be given a beneficial construction. Contributions to the welfare of the family must be recognised 'not in a token way but in a substantial way'. The contributions of a de facto partner as homemaker and parent should not be regarded as inferior to the corresponding contributions of a spouse, nor should contributions as homemaker or parent be valued by reference to the commercial value of those services. Family Court decisions dealing with the assessment of homemaker and parent contributions under s 79 are also of assistance in assessing the value of such contributions, although they cannot be applied uncritically given that s 79 requires reference to factors (in s 75(2) of the Family Law Act) which have no equivalent in the Act.

I respectfully adopt what the New South Wales Court of Appeal said in Kardos v Sarbutt about the approach which should be taken in evaluating the respective contributions of the parties:

... [T]he court is not required to take 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 (McLelland J).

Some contributions are readily capable of evaluation in monetary terms. Others - such as those made in the capacity of homemaker and parent - are not.[22]

28 As the origins and nature of particular assets must also be taken into account[23] the circumstances of particular cases may warrant a different approach , but it will often be an appropriate starting point to treat the contributions of the partners, though different, as reciprocal - and equal.

29 In our view, the present is just such a case. Ms Kenyon and Mr Akeroyd made reciprocal contributions to the family unit, he (principally) as the breadwinner, she (principally) as the homemaker. Each worked long and hard in aid of the shared

undertaking. It would be neither just nor equitable to view one's contribution as more valuable than the other's. The difficulty faced by a court in weighing up and comparing the different kinds of contributions was described by the Full Court of the Family Court in Ferraro and Ferraro:[24]

The task of evaluating and comparing the parties' respective contributions where one party has exclusively been the breadwinner and the other exclusively the homemaker, is a most difficult one to perform because the evaluation and comparison cannot be conducted on a "level playing field". Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family. Secondly, whilst a breadwinner contribution, can be objectively assessed by reference to such things as that party's employment record, income and the value of the assets acquired, an assessment of the quality of a homemaker contribution to the family is vulnerable to subjective value judgments as to what constitutes a competent homemaker and parent and cannot be readily equated to the value of assets acquired. This leads to a tendency to undervalue the homemaker role.

30 Having regard to their equal contributions, we have adopted a global approach[25] and concluded that the former partners are equally entitled to the assets. We proceed on that basis.

31 The parties to the appeal accepted that the assets and liabilities should be valued as at the date of the trial. Senior counsel for Ms Kenyon informed the Court in the course of the hearing that she accepted that Mr Akeroyd should retain the title to the farm and that any adjustments to be made should be made on that basis.

32 Although the asset pool was not substantial, there was considerable debate, both at trial and on appeal, as to the value to be attributed to particular items. We deal with the disputed items in turn.

33 At trial and before this Court, the value of the farm at Bruthen was agreed at $335,000. As at the date of the hearing, the mortgage debt was $137 291. The net value of the farm for present purposes is, accordingly, $197 709.

34 At trial, and again in the written submissions filed for the appeal, Mr Akeroyd contended that Akeroyd Logging Pty Ltd should be excluded from the asset pool. In the course of argument, however, his counsel accepted that the value of the company should be brought to account, at a figure of $38 467.[26]

35 There was significant contest at trial about the value of the chattels retained by Ms Kenyon. She argued that they should be valued at $2 500. Mr Akeroyd, for his part, contended that their true value was $33 000. He relied on an assessment made by Ms Kenyon in 2003, which she had committed to writing.

36 Unfortunately, the trial judge had no expert evidence to assist her in dealing with these wildly differing estimates. Her Honour noted that Ms Kenyon claimed

to have overstated their value in that list, owing to her state of mind at the time and her desire to be spiteful towards [Mr Akeroyd], who considers the values are accurate. Indeed, [she] admitted in cross-examination that she had wrongly attempted to revise the purchase price of the trailer to suit her case.[27]

37 In the end, her Honour formed the view that the values attributed to many of the appliances and items of furniture were unrealistic and that the value according to Ms Kenyon's list should be reduced to $16 500.[28] On appeal, counsel for Ms Kenyon attacked the trial judge's conclusion but no new material was adduced. This was on any view a difficult task for the trial judge and her Honour was simply obliged to do the best she could, with a paucity of evidence.[29] We would not depart from Her Honour's valuation.

38 At the commencement of the relationship, Mr Akeroyd's superannuation was worth approximately $5 000. By the date of the hearing, however, it had increased to $22 000. The trial judge allowed a figure of $17 000.

39 On appeal, Ms Kenyon challenged this figure, but we think it was, in the circumstances, a sensible and practical allowance. Given the relatively small sums involved, it was neither possible nor appropriate to engage in a sophisticated analysis of particular aspects of superannuation investment. We would adopt the trial judge's valuation.

40 The trial judge allowed $18 335 for stock, sheep, and cattle which had been run on the property and then sold by Ms Kenyon. On appeal, Ms Kenyon attacked this allowance on the basis that it was only a notional asset, with no proper basis for inclusion in the asset pool.

41 We reject this submission. The animals were part and parcel of the joint enterprise conducted by the parties, which included the logging business and the farm. Any proceeds from the sale of stock necessarily had to be brought to account. We would rely on the same figure as did the trial judge.

42 The trial judge concluded that Mr Akeroyd's father had lent the couple $15 613 to enable the house to be relocated onto the farm land. Ms Kenyon said she knew nothing about the debt. Mr Akeroyd's father gave evidence that the amount was still outstanding, and the trial judge accepted that evidence.

43 Ms Kenyon challenged the finding on the appeal, but advanced no basis for disturbing the trial judge's conclusion. Once again, we consider that the sum was properly brought to account as a liability and we would replicate the judge's finding in that regard.

44 Taking these amounts together, the total pool of assets is a net figure of $272 398[30] after deduction of the two joint liabilities, being the mortgage and the loan from Mr Akeroyd's father. On the basis that Mr Akeroyd retains the title to and benefit of the farm,[31] a course agreed to by Ms Kenyon during the hearing of the appeal, and then accounts to Ms Kenyon for the balance of her share of the equal distribution of the net value of the assets, the following allocation is appropriate on a 50/50 basis:

Less value of assets retained by Ms Kenyon[32] $ 34 835

45 Mr Akeroyd is therefore to account to Ms Kenyon in the sum of $101 364. Upon payment of this sum, the parties will retain for their own benefit all items of real and personal property in their own names including, in Mr Akeroyd's case, the titles to the farm and land, the superannuation entitlements and the shares in the company. Conversely, it is Mr Akeroyd who will be responsible for the liabilities, being the mortgage and the debt to his father.

[1] Cf Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513.

[2] [1936] HCA 40; (1936) 55 CLR 499, 504 (Dixon, Evatt and McTiernan JJ). See, for example, Black v Black (1991) 15 Fam LR 109, 114-5 (Clarke JA, with Kirby P and Handley JA in agreement).

[4] Note that s 285 was repealed on 1 December 2008 by virtue of s 72 of the Relationships Act 2008 (Vic) (similar provisions to s 285 are now contained in Division 3 of the Relationships Act).

[6] Note that s 285 was amended as at 8 November 2001, where the term 'domestic' replaced 'de facto'.

[7] Conn v Martusevicius (1991) 14 Fam LR 751, 754, applying D v McA (1986) 11 Fam LR 215, 228 (Powell J).

[8] See Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550, 558 (Brereton J, with Basten JA and Hunt AJA in agreement); Giller v Procopets [2008] VSCA 236, [314] (Neave JA).

[10] See now Giller v Procopets [2008] VSCA 236, [283] (Neave JA).

[11] Akeroyd v Kenyon [2006] (Unreported, County Court of Victoria, 2 October 2006), [161].

[17] (2000) Fam LR 8; (2000) VSC 401.

[19] Akeroyd v Kenyon [2006] (Unreported, County Court of Victoria, 2 October 2006), [141]-[142].

[20] See Black v Black (1991) 15 Fam LR 109, 117 (Clarke JA, with Kirby P and Handley JA in agreement); Giller v Procopets [2008] VSCA 23, [330] (Neave JA).

[21] See Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550, 561 (Brereton J, with Basten JA and Hunt AJA in agreement); Giller v Procopets [2008] VSCA 236, [331] (Neave JA).

[22] [2008] VSCA 236, [330]-[331] (Footnotes omitted).

[23] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, 522-3 (Mason and Deane JJ).

[24] [1992] FamCA 64; (1993) FLC 92-335, 79,572 (Fogarty, Murray and Baker JJ).

[25] Cf Davis v Tayles [2006] VSC 219, [159] (Smith J).

[26] This was the value attributed by the trial judge, although her Honour excluded the company from the asset pool: see Akeroyd v Kenyon [2006] (Unreported, County Court of Victoria, 2 October 2006), [150].

[27] Akeroyd v Kenyon [2006] (Unreported, County Court of Victoria, 2 October 2006), [150].

[28] Her Honour referred to it as a reduction by one third, but that appears to be in error.

[29] See State of NSW v Moss [2000] NSWCA 133; (2000) 54 NSWLR 536, [72] (Mason P, with Handley JA in agreement); Bowen v Blair [1933] VicLawRp 65; [1933] VLR 398, 402; Fink v Fink [1946] HCA 54; (1946) 74 CLR 127, 143 (Dixon and McTiernan JJ); Naylor v Yorkshire Electricity Board [1968] AC 529, 548 (Lord Devlin).

[30] Being the sum of the values of the livestock, farm, chattels, company and superannuation.

[31] And assumes sole responsibility for the joint debts.

[32] Being the value of the livestock and chattels.

[33] This accords with the schedule provided to the Court by the appellant during the hearing of the appeal.

(1990) 13 Fam LR 688

(1991) 15 Fam LR 109

(1991) 14 Fam LR 751

(1986) 11 Fam LR 215

(2006) 34 Fam LR 550

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