Mills v Nicholson

SOLICITORS : BM Salmon, Layton & Co for plaintiff Mr M Myers, Cameron & Myers for defendant

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1161/2008 Karan Anne Mills v Jonathan Anthony Nicholson JUDGMENT 1 HIS HONOUR: This is the hearing of proceedings commenced by summons in which the plaintiff sought an extension of time pursuant to s 18 of Property (Relationships) Act 1984 in order to bring proceedings for adjustment of the parties' property interests under s 20 of the Act. At my suggestion the parties also proceeded with the substantive application for the adjustment of property interests so that judgment could be given if I saw fit to extend time. 2 The parties commenced their de facto relationship in August 2000 at a unit at Raglan Street, Mosman. At that stage the parties were employed. The plaintiff was a waitress and the defendant was a supervisor. In September they moved into a larger rented unit in Mosman. 3 In September 2001, the parties agreed to purchase a property at The Round Drive, Avoca Beach, NSW for $257,750. They received a First Home Owner's grant and a loan from RAMS of $234,000. The plaintiff appears to have paid the deposit and stamp duty. 4 After completing the purchase in November 2001, the property was leased to a tenant in December of that year. In November 2002, when a second lease on the property expired, the parties decided to live in the property at Avoca Beach. As the defendant was working in Sydney, he lived at the property on the weekends. The plaintiff would stay with the defendant in Sydney several nights during the week. 5 In December 2003 this arrangement changed and the plaintiff and the defendant lived together at the Avoca Beach property. 6 The relationship between the parties concluded on 27 February 2004 after an incident at the property. As a result of the incident the plaintiff obtained an apprehended violence order against the defendant. She left the property in October 2004 and the defendant has continued to occupy the property up until the time of the hearing before me. 7 On 30 November 2008 a tutor for the defendant was appointed by filing a consent to act on that day with the appropriate certificate from the solicitors. Extension of time 8 The plaintiff did not bring her proceedings within the time limited by s 18(2) of the Act. The summons was only filed on 18 January 2008. Accordingly, it is necessary for the court to consider the question of whether leave should be granted. 9 Section 18 of the Property (Relationships) Act 1984 is in the following terms: "Time limit for making applications (1) If a domestic relationship has ceased, an application to a court for an order under this Part can only be made within the period of 2 years after the date on which the relationship ceased, except as otherwise provided by this section. (2) A court may, at any time after the expiration of the period referred to in subsection (1), grant leave to a party to a domestic relationship to apply to the court for an order under this Part (other than an order under section 27 (1) made where the court is satisfied as to the matters specified in section 27 (1) (b)) where the court is satisfied, having regard to such matters as it considers relevant, that greater hardship would be caused to the applicant if that leave were not granted than would be caused to the respondent if that leave were granted. (3) Where, under subsection (2), a court grants a party to a domestic relationship leave to apply to the court for an order under this Part, the party may apply accordingly."

10 In Selmore v Bull [2005] NSWCA 365 the President had the following to say in respect of the section. "12 The applicable principles were not in dispute. Section 18 does not lay down a general time-limit, giving discretion to the court to extend it. Rather, it makes two different provisions. That found in subs(2) is expressed in terms of power to grant leave to apply, not as a power to extend the primary time limit. As Bryson J pointed out in Beavan v Fallshaw (1992) 15 Fam L R 686 at 687: The section appears...to treat an application for leave to apply as a normal event, calling for the court to consider two stages, a finding relating to hardship and the exercise of a discretion, without any special jealousy for the observance of the time limit or particular concern for it.... In considering whether a court should exercise a discretion conferred by statute to make an order in favour of some course, it is usual to consider whether there is a sound and positive ground or a good reason for making the order. Ultimately however it is not ... legally necessary to define exactly the ground on which a discretion is exercised favourably to an applicant. 13 It is not mandatory that there be an explanation for delay ( Carlon and Carlon (1982) FLC 91-272)." 11 Later at paragraph 20: "The Master correctly recognised that s18(2) required him to consider the preponderance of hardship and also whether the residual discretion ought to be exercised in the applicant's favour. His reasons for a favourable exercise of discretion are found at 58-67 and 80" 12 The time within which the application should have been made was two years from 27 February 2004. The plaintiff gave evidence that in April or May 2004 she received advice from a solicitor who said that she could make an application under the Act and that she could await her return from England later in that year to make the application. This was, of course, correct because the time limit did not expire until February 2006. The plaintiff swore that she was not advised at that stage that there was a time limitation. 13 The plaintiff also gave evidence that at Christmas 2004 when she confronted the defendant about the selling the house he threatened to commit suicide if she did try to sell it. Subsequently in November or December 2006 she consulted JP Lawyers and received advice from a Mr John Pacchiarotta. She says that he did not advise her of the time limit for making an application and he encouraged her to settle the matter with a cash payment to the defendant. The correspondence seems to have occurred from November 2006 between Mr Pacchiarotta and the defendant's solicitors. In the course of that correspondence Mr Pacchiarotta's attention was drawn to the two year time limit which by then had lapsed. That was in June 2007 and it was at this time that the plaintiff first knew that there was a time limit. The correspondence concluded in August 2007 with an inconclusive result and the plaintiff sought another solicitor. He eventually obtained the file from JP Lawyers on 1 November 2007. Apparently the plaintiff had consulted him on 25 October 2007. Thereafter the matter progressed with the summons being filed on 18 January 2008. 14 The plaintiff's explanation indicates that she was not aware of the time limit until it had expired. However, it does give little information as to why she could not do anything from Christmas 2004 until November 2006. I have earlier referred to the defendant's threats to commit suicide which he made to the plaintiff. She says this happened on a number of occasions but she does not detail these incidents. The best that can be said about this period is that she did not know at that stage that there was a time limit. 15 One of the problems with this matter is that a tutor has been appointed to the defendant and it is difficult for the tutor to obtain proper instructions as to past matters. However, the evidence before me does not suggest that this difficulty was present before the proceedings commenced. This may be a situation where if the plaintiff had brought the proceedings within time that the defendant would have been in a better position to deal with the claim. I think that is one of the matters I should take into account when deciding whether to allow the application. 16 Before deciding this aspect, I will consider whether, if I extended time it would be appropriate to make an order in the plaintiff's favour. This is necessary so that I can evaluate any hardship that might be suffered by the plaintiff if I did not extend time. 17 The factors which the Court must consider are set out in Section 20 of the Property Relationship Act 1984 as discussed by Basten JA in Baker v Towle [2008] NSWCA 73, " [43] It has been said in a number of cases that the application of s 20 involves three steps, which were identified in Howlett v Neilson [2005] NSWCA 149 (Hodgson JA, Ipp and McColl JJA agreeing) in the following terms at [25]: (1) identification and valuation of the property of the parties; (2) identification and valuation of the respective contributions of the parties, of the types referred to in s 20; (3) determination of what if any order is just and equitable having regard to these contributions. [44] What questions arise will, of course, depend to some extent on the circumstances of the individual case. For example, in some cases there will be an antecedent question as to whether the applicant is a party to a "domestic relationship" as defined in s 5 of the Act: see, eg, Delany v Burgess [2007] NSWCA 360. Otherwise, each of the three steps referred to above may require some further elucidation.

Property at the commencement of the relationship 18 At the commencement of the relationship neither party had any property of note. Property at the conclusion of the relationship 19 At the conclusion of the relationship the only property owned by the parties, apart from some minor personalty, was the property at Avoca Beach. The property had been valued on 23 March 2007 at $380,000. Miss Mills was prepared to concede that the property would still be valued at $380,000 at the present time for the purpose of allowing her to purchase the Mr Nicholson's interest. She noted that there were no up-to-date valuations and the property may have fallen in value. 20 As at 31 December 2008, the amount outstanding on the loan to RHG Mortgage Corporation Ltd was $202,102.88. 21 There is little evidence of household contributions. The parties did not have a child of the relationship and they both worked at times during the relationship. The defendant began to suffer from alcohol related problems towards the end of the relationship. 22 The main financial contributions are in respect of the purchase of the property and repayments of the mortgage after the purchase. Cash payments 23 Before moving to the adjustment process it is necessary to consider what is each party's interest in the subject property. 24 The contract price for the property was $257,750. The purchase price on settlement was $257,906.86. There were expenses of purchase including mortgage insurance for $4,974.91. There was stamp duty on the contract and mortgage of $5,650.23. This makes a total purchase price of $268,532. The amount made available by the mortgagee was $231,975. The balance of $36,557 was contributed as follows: Item Plaintiff Defendant Deposit 25,775.06 Contract Stamp Duty 5,195.73 Mortgage Stamp Duty 444.50 F.H.O. Grant 3,500.00 3,500.00 Less refund from Solicitor on settlement ________ 1,858.23 $34,915.23 $1,641.77

25 There was a dispute as to whether the refund went to the plaintiff or the defendant. It was paid into a Commonwealth Bank account. At the time the plaintiff drew a cheque for payment of stamp duty and deposit on her account with AMP. She denied she received the refund from her solicitor and I accept her evidence. Thus the cash contributions were to the plaintiff $34,915.23 and the defendant $1,641.77. Proportionate ownership of property 26 In the plaintiff's affidavit of 18 January 2008 she deposed in paragraph 8 to a conversation she had at the time of the purchase of the property. She discussed with the defendant what they could borrow from RAMS and the purchase price and she indicated that they would need additional funds. The defendant suggested that he had no money for the deposit and the plaintiff agreed to pay the deposit and stamp duty and other expenses from her savings. To this the defendant replied that he would pay a larger proportion over the mortgage over the following five years. The plaintiff responded that after five years they would review their respective contributions. 27 At a later time the plaintiff returned to the subject of those discussions. In her affidavit of 7 May 2008 she deposed to a conversation in which she suggested to the defendant that all contributions including funding of the deposit and stamp duty should be taken into account in the division of the sale proceeds if they decided to separate. She said he agreed to this. This seems an unlikely conversation to have happened at that stage. The plaintiff also referred to another conversation where she and the defendant discussed the mortgage repayments of $1,500 a month and that the rent would be $900 a month. According to the plaintiff the defendant said, "As you will be funding the deposit and stamp duty I will pay the additional $600 a month in respect of the mortgage instalments." 28 The defendant did not reply to these assertions. Such information as the Court has in respect of his mental problems, which led to the appointment of a tutor on 30 November 2008, indicate that his problems dated back to at least June 2008. Therefore, the defendant may not have been in a position to respond to the plaintiff's later affidavit. 29 If I were to disregard the later conversations, it seems to me, that the conversations referred to in the first affidavit are not sufficient to rebut the equitable presumption which arises on the unequal contributions to the purchase price. Given the plaintiff's response which was to review both their contributions, the conversations would not record a binding agreement. 30 Applying the principles in Calverley v Green (1984) 155 CLR 242 at 252 the mortgage advance should be shared equally making the proportionate contribution as to the plaintiff $150,902.73 and as to the defendant $117,629.28. This is a proportion of 56.18% to the plaintiff and 43.82% to the defendant. 31 It appears the parties received a total of $10,800 in rent from December 2001 to November 2002 inclusive. This money was used towards the repayment of the mortgage. 32 An amount of $8,334 is owing to the New South Wales Department of Housing Mortgage Assistance Scheme. This debt became due when the parties could not meet their mortgage repayments.

The parties'contributions to the mortgage 33 The evidence on this aspect was not clear due to the fact that some payments were made by one party giving funds to the other party that they could make payments. The plaintiff put forward her best evidence and she swore to the fact that the contributions she made to the mortgage up to April 2008 were $73,145.36. She did not give sworn evidence as to her contributions after April 2008 but there was some evidence which went to support her having made further contributions since that time. There is evidence of payment of contributions from October, November and December 2008. There is a statement from the mortgagee showing payments being made for that period but it does not indicate who made the payments. 34 The plaintiff's first affidavit clearly set out what she claimed were her mortgage payments and what were the defendant's mortgage payments. In his affidavit in reply the defendant did not disagree with those figures. The allegations in the plaintiff's affidavit was that the defendant only made contributions up until 2006. Accordingly, on the evidence it seems that the plaintiff must have continued to pay the mortgage, leaving aside questions of extra assistance they received from the State Government's Assistance Scheme. 35 In these circumstances, I infer that the plaintiff continued to make the mortgage payments until shortly before the hearing in February 2009. This would be an additional sum of $19,000. 36 Accordingly, the total contributions by the plaintiff from the commencement of the mortgage up until February 2009 was $92,145.36. As I have mentioned, the plaintiff conceded that the defendant did make some payments to the mortgage. Later when the defendant was incapacitated she sought to withdraw some of those concessions in her affidavit of 7 May 2008. I do not think I should allow the withdrawal. She conceded in her first affidavit that the defendant made mortgage repayments between 2001 and 2002 of $660 a month totalling $7,200, between 2002 and 2003 $520 a month totalling $6,240, between 2003 and 2004 $600 a month totalling $7,200. The later payments which she sought to withdraw were from January 2004 to June 2004 $600 a month totalling $3,600, June 2004 to December 2004 $800 a month totalling $4,800 and 2005 to 2006 $800 a month totalling $9,600. They total $38,640. 37 This amount is about $10,000 less than what appears might be the approximate total of mortgage repayments after taking into account the rent paid over the period of the loan. If I take into account the failure to make payments, represented by the amount owing of $8,344, most of the repayments are accounted for. It is the best available evidence and probably gives a close approximation to the proportion of contributions by the parties. An accounting between the parties for payment of the mortgage instalments would result in the defendant paying the plaintiff by way of adjustment a sum of $26,752.68. 38 The tenants paid rent of $10,800 for the first year of their occupation of the property. However, this should be apportioned equally between the parties and will make no difference to the adjustments made for the difference in mortgage contributions. Defendant's occupation of the property 39 After separation the plaintiff remained in the property until October 2004 when she vacated the property and the defendant took possession. He has occupied the property since then. As discussed, in December 2004 when the defendant was asked to sell the house he threatened to commit suicide if the plaintiff tried to sell the house. The negotiations between the parties prior to the proceedings endeavoured to reach some agreement but this did not happen. It is plain that the plaintiff wished to sell the house at that stage. 40 There is evidence of the rent that might have been obtained for the property. Adopting the figures which were in evidence, the rent from October 2004 to December 2007 would be $44,552.20. There is no evidence of possible rent in 2008 or 2009 but, assuming the December 2007 figures were available, the total rent to February 2009 would be $61,628.20. That figure excludes agent's commission, land tax and management fees. Some deduction would need to be made to reflect some downturn in the rental market rather than a continuance of the December 2007 figure. I will, therefore, adopt $50,000 for the period to February 2009. 41 What should the Court do when taking into account the defendant's occupation of the property to the exclusion of the plaintiff? Usually the occupation of a property by one joint owner does not give rise to any obligation to pay and occupation fee to the other co-owner. I am considering the relationship in my statutory duty under s 20 of the Act. The circumstances of the relationship require me to make some adjustment to the parties' property interests. 42 When Bryson J in Ryan v Hopkinson (1990) 14 Fam LR 151 at 160 considered the significance of the general discretion available under s 20 to make an adjustment the parties' rights available under the general law, his Honour looked at the property of the parties when the relationship began and when it ended, and took a broad view of their financial and non-financial contributions, treating them as roughly equal on the basis that that was the interpretation the parties had themselves made during the relationship. In making the necessary adjustment his Honour also took regard to, "the fact that Mr Ryan with his children has continued in occupation of the lower storey since the relationship ended, without incurring any rental cost and without in fact having any right to live there. In this form he has already received a significant benefit." 43 Bryson J decided that notwithstanding the plaintiff's contributions during the relationship Mr Ryan should re-transfer his joint interest to the defendant. This decision was upheld on appeal (Ryan v Hopkinson (1993) 16 Fam LR 659) where Priestley JA (with Sheller and Cripps JJ in agreement) stated at 668, "In the present case, the facts indicate, as Bryson J found, that the parties each had capital assets when the relationship began, that throughout the relationship all earnings of each of them were pooled and that all activities were joint, but that Mr Ryan took away from the relationship when it ended, what then represented the capital asset he had begun with and that Mrs Hopkinson had never intended to and did not part with any beneficial interest in the capital asset with which she had begun the relationship. What Mr Ryan was claiming was an equal share in Mrs Hopkinson's capital asset. The facts did not justify such a claim once Bryson J's broad finding that the parties had made an equal contribution(financial and non-financial) was accepted"

44 However, at 670, the Court of Appeal decided to take into account "a degree of acquiescence; of Ms Hopkinson in allowing Mr Ryan to remain in continued occupation pending the court hearing, in this regard, Priestly JA stated, "These considerations reduce the significance of Bryson J'S comment that Mr Ryan had no right to live in the house. It was therefore, in my opinion, wrong to say that Mr Ryan had received a significant and unpaid for benefit by his continued occupation in the Matcham house of a kind to be taken into account against him in refusing him interest on the moneys found by Bryson J to have been advanced by him to Mrs Hopkinson in connection with their living together in the Matcham house." 45 In Davey v Lee (1999) 13 Fam LR 688 at 689, the relationship in question had been relatively short and the defendant had continued occupancy of the property for about four years after separation. A problem before McClelland J was that while the plaintiff made a significant financial contribution to the original acquisition of the property, post-separation the defendant had completed substantial renovations to that home, which appears to have had the effect of almost doubling its value. In light of these facts, his Honour took a holistic view, stating, "Since the parties did acquire the property as joint tenants, and did use it for a period as their joint home, and since its value has almost doubled since its acquisition, it would not be just or equitable to make an adjustment measured merely by these respective proportionate contributions to the cost. To reflect these matters I would vary the proportions to: Plaintiff - 60% Defendant - 40%" 46 In late 2006 the parties first consulted their solicitors to try and resolve their problems and nothing came of these endeavours. It was also from that time, that on my findings, the defendant ceased to pay any contributions to the mortgage. It seems to me that it would be appropriate for an adjustment to be made for the years 2007, 2008 and to February 2009. I would therefore allow an amount of $25,000 by way of adjustment. 47 For the purpose of the plaintiff's desire to buy out the defendant's share of the property it is necessary to know the present value of the property. As I have commented earlier, the plaintiff is prepared to accept a figure of $380,000 which is probably more than the property is worth. The present amount owing on the mortgage at 31 December 2008 was $202,102.88. This results in an equity in the property of $177,897.12. 48 Further minor contributions between the parties have been referred to in evidence such as the odd payment of rates or a loan or purchase of a computer. However, the evidence on this aspect is far from complete on these contributions and it seems to me that these contributions are not such that they call for any adjustment. I have earlier referred to the non-financial contributions. 49 The appropriate adjustment of the parties' interests in my view is that the figure for the plaintiff to buy out the defendant's interest in the property is the proportionate sum based upon the parties' proportionate interest in the property of the net equity in the property less amounts due to the plaintiff by the defendant for mortgage adjustments and amounts due for rental adjustments. This would result in the sum of $26,201.83 being payable by the plaintiff to the defendant. The parties should equally bear the outstanding amount of $8,334. 50 This order would only be on the basis that the plaintiff was able to discharge the defendant's liability under the mortgage by refinancing the mortgage. The alternative would be that the property should be sold and the net proceeds divided between the parties in the appropriate proportions with the same allowances. 51 This means that the plaintiff would receive substantially more if an order were made than if she were left to her rights at law to acquire a half share of the sale proceeds. In these circumstances I am satisfied that greater hardship would be caused to the plaintiff if leave were not granted than would be caused to the defendant if leave were not granted and he received a windfall benefit. 52 Earlier in this judgment I referred to a number of other factors, including the explanation for delay and prejudice to the defendant. Although the explanation for delay on some aspects is not explained this is not a hurdle that must be overcome. It is to be considered in conjunction with all other matters. So far as prejudice is concerned, I think there is minimal prejudice to the defendant as he had an opportunity to traverse and deal with the substantive issues. 53 In the circumstances I propose to give the plaintiff leave under s 18(2) of the Act. At the conclusion of this hearing I directed the plaintiff to lodge her written submissions and the defendant to reply to her submissions. I did not grant leave to the plaintiff to file submissions in reply to the defendant's submissions. The parties complied with my directions and then the plaintiff lodged submission in reply. The defendant complained about this course. I gave notice to the defendant that if he had any complaint he was to make it in open court or respond to the plaintiff's submissions in reply. I record that neither course was adopted. Notwithstanding this I have not had regard to the plaintiff's reply submission. 54 I direct the parties to bring in short minutes to reflect my judgment. **********

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