Slater v Challenor

COUNSEL : Mr PJ Livingstone for the plaintiff Mr JF Heazlewood for the defendant

SOLICITORS : Alfred J Morgan & Son for plaintiff Stormers Lawyers for defendant

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

5136/05 Peter Henry Slater v Dianne Lorraine Challenor JUDGMENT 1 His Honour: This is the hearing of a claim for adjustment of the parties property interests under section 20 of the Property Relationships Act 1984 (NSW). The parties lived together in a de facto relationship between either July or October 1996 until January 2004. There were no children of the relationship but each party had children from previous marriages. 2 During the course of the relationship the defendant's son, John Anthony Harris, born on 6 February 1983, resided with the parties for most of the relationship. The defendant's daughter also resided there with her family for a period of about two years. The plaintiff's son also resided there for a short time of three months. Background history 3 The plaintiff was born on 29 March 1942 and is aged 64. The defendant was born on 3 November 1951 and is aged 54.

4 On 27 July 1981 the plaintiff was employed at the Australian Broadcasting Commission where he has remained ever since. His present position is Senior Stores and Logistics Officer.

5 The parties first met in 1995 and in 1996 their cohabitation commenced. In cross examination neither party addressed whether it was July or October and the matter was not treated by them as important.

6 On 6 November 1997 contracts were exchanged on the joint purchase of a property at 79 Eastern Valley Way, Castlecrag, for a price of $380,000. The plaintiff contributed $209,355 and the total acquisition cost was $396,893. This equates to 52.54% of the purchase cost. The plaintiff also paid an occupation fee of $1,697.14. The property was registered in the names of both of the parties and both parties were mortgagors for the mortgage of $190,000.

7 On 22 December 1997 there was settlement of plaintiff's family law property matter and he received $216,556.66 which was used mostly for the payment of the balance of the purchase price. 8 In 2001 the plaintiff's son, Phillip, lived with the parties for three months, according to the defendant.

9 On 31 December 2001 the plaintiff injured his neck when he fell over walking home from the club and was off work on "full sick pay". He resumed work during 2002. 10 In September 2002 the plaintiff purchased a Ford Festiva for $6,300 with funds borrowed from Resources Credit Union. The vehicle was used by both parties with the defendant's contribution limited, according to the plaintiff, to occasional petrol purchases.

11 In 2003 there was an incident when the defendant's son, John, deliberately damaged his room at the home.

12 In January 2004 there was a separation under the one roof and John vacated the premises.

13 In February 2004 physical separation occurred with the defendant leaving the premises.

14 On 26 September 2005 the Statement of Claim was filed within time. Property of the parties at the commencement of the relationship

The plaintiff's assets were: Interest in property settlement $216,556.66 1981 Commodore sedan $2,000 Superannuation Lounge suite

His debts were: Credit cards (NAB) $800 Personal loan (NAB) $12,000 $12,800

The defendant's assets were: Mitsubishi Colt $3,000 Household furniture Superannuation

She had no debts that she can recall with any certainty. Property of the parties at the conclusion of the relationship 15 The parties major acquisition was the purchase of 79 Eastern Valley Way, Castlecrag which was purchased in December 1997 with the assistance of a loan of $190,000 from Access Home Loans. The balance of the purchase price, stamp duty and legal purchase costs, a sum of approximately $209,000, was provided by the plaintiff. In addition the plaintiff replaced a deck at the property in about November 2002 at a cost of about $2,000. 16 The position of the parties at separation was as follows:

The joint assets were: 79 Eastern Valley Way, Castlecrag agreed value $700,000 Less mortgage debt $168,000 $532,000

The plaintiff's assets were: Superannuation $84,000 Ford Festiva $4,000 $88,000

The defendant's assets were: Superannuation $4,200 Club Plus (estimated) $17,500 REST Superannuation $21,700

Less defendant's debts AGC (approx) $2,900 Buyers Edge (approx) $1,500 Target $1,500 Tax debt (approx) $10,000 $15,900

17 At the time of the hearing the situation was as follows:

The joint assets were: 79 Eastern Valley Way, Castlecrag, agreed value $700,000 Less mortgage debt $159,000 $541,000

The plaintiff's assets were: $ 96,245.76 Superannuation $96,245.76 Ford Festiva $2,000 $98,245

The defendant's assets were: Furniture and personalty $5,000 Superannuation Club Plus (estimated) $11,000 REST Superannuation $26,000 $42,000

Less defendant's debts AGC (approx) $1,700 Buyers Edge (approx) $1,300 Target $1,400 Tax debt (approx) $14,000 $18,400 Total Assets and resources $662,845.76

18 Shortly after separation, a property was purchased by the defendant and her son at 50 Sunflower Drive, Claremont Meadows, for $365,000 using borrowed funds of $333,000. The plaintiff says that she has no beneficial interest in the property and her name was put on the title in order to support the borrowings, as her son was only 21 at the time and had no borrowing history. The evidence is that the son makes all the mortgage payments. The remainder of the funds necessary for the purchase came from the son whose child maintenance had been saved by his mother over the years as a nest egg for him when he grew up. He also had been working for sometime and apparently had saved a sufficient amount to pay the balance and stamp duty. 19 There is no evidence to suggest that the defendant contributed to the purchase of the property and I am satisfied that the defendant has no interest in the Claremont Meadows property. Much was made in submissions of the fact that the defendant did not disclose the purchase of this property and her liability under the mortgage. In addition, a subpoena to produce documents had been served on her and she failed to produce any documents relating to the property. Whether she had any such documents was not established on the evidence. I am satisfied that the plaintiff's failure arose from the fact that she believed that she had no interest in the property and, accordingly, it did not occur to her that she had to produce documents. 20 The purchase by her after separation of the property in these circumstances is not relevant because it is only the property of the parties acquired before or during the relationship in respect of which I have to make an adjustment. The only possible relevance to the adjustment process concerns the property of the defendant which has now been applied to provide the cash component of the purchase. 21 The amount of the nest egg, which the defendant had accumulated for her son, derived from payments of $130 per month for the period from when her son was six until he was sixteen. This was a sum of $15,600. The plaintiff's son needed to have another $15,000 and stamp duty of $11,000 in order to meet the cash payments necessary. He claimed that he had earned this amount as he had been saving since the age of 12 when he started doing odd jobs and he had worked after leaving school. 22 There was no documentary evidence concerning this aspect of the matter and accordingly I am not satisfied that the defendant had any amounts that she failed to disclose other than the amounts which she was accumulating in the maintenance payments, made in respect of her son. Plainly for two years during the period of the relationship she did receive payments of maintenance which she did not apply to the maintenance of her son but instead accumulated them for his benefit. This will have to be taken into account when considering the matter overall. Non-financial contributions 23 It seems that the defendant did the majority of the housework including cooking, washing, ironing and cleaning. The plaintiff would occasionally cook a barbecue or iron a shirt if he needed one before the ironing was done at the end of each week. The plaintiff and the defendant mowed the lawns from time to time. It seems that the defendant did the majority of the gardening and landscaping around the house. 24 There was some painting of the house and the defendant did a fair proportion of this, although the plaintiff assisted with one room. The plaintiff did repairs to the defendant's car and also did some upholstery work which was a benefit for the household. The parties did not have any children as a result of their relationship although they did have their own children staying there. I am satisfied that the defendant provided the majority of the home making contributions. Financial contributions 25 Both parties were in paid employment during the course of the relationship. The respective earnings during the period of the relationship were follows. Year Plaintiff's Defendant's taxable income taxable income

1998 $31,209 $30,294 1999 $31,848 $36,133 2000 $32,617 $40,325 2001 $34,438 $39,346 2002 $34,815 $44,240 2003 $36,855 $42,121 2004 $42,807 $40,528

26 Both parties contributed to the repayment of the mortgage during the period of the relationship. The plaintiff has met all contributions after the conclusion of the relationship and the total payments made to the mortgage since purchase of the house to the present time is $82,782 by the plaintiff and $40,108 by the defendant. These figures have been calculated by the plaintiff using his bank records. The defendant made her estimate of $60,000 without providing the basis upon which it was calculated. It seems that the defendant handed over her share for the repayments in cash to the plaintiff who put them in the bank. I think he was in the best position to make the most accurate assessment of the amount of each person's contributions and I accept his denial that he appropriated some of these payments to himself. 27 During their relationship the parties kept their finances separate from each other and did not share with the other details about their financial arrangements. The defendant's children paid amounts of board to her which she retained. The defendant paid all of the power and telephone accounts of the property. Although there was an agreement that they would share the council and water rates it seems that the plaintiff paid such of those as were paid. Over the years council rates accumulated and those now amount to approximately $2,000, which the plaintiff is paying by instalments. 28 The defendant paid household expenses such as food from her income. From time to time she would purchase clothes for the plaintiff. Discussion 29 The parties have their individual superannuation benefits and it would be appropriate for each of them to retain those benefits. For many years the only case which gave guidance on the matter was Green v Robinson (1995) 36 NSWLR 96. Although there is some dispute about what the majority said, one view seems to be that the comments of Powell JA and Cole JA were that there had to be demonstrated some factual matter which would enable one to form a view that there had been a contribution to a spouse's superannuation entitlement. The matter was dealt with recently by the Court of Appeal in Chanter v Catts [2005] NSWCA 411. Bryson JA dealt with the matter at paragraphs 82 to 90 and his views were adopted by Hunt AJA and substantially agreed with by Hodgson JA. The views of Powell JA and Cole JA in Green were rejected and the approach of Kirby P, who had dissented, was adopted. Accordingly, superannuation entitlements are not to be viewed as belonging to the parties separately but as financial resources of the parties which need to be adjusted having regard to contributions "made directly or indirectly" to them. Normally, the court will take a global view of the matter. 30 In this case both parties worked and made contributions to their own superannuation. In these circumstances, it is appropriate to treat them as separate assets. I will note that these entitlements will be retained when considering the amount of the final adjustment. 31 It was the plaintiff's submission that an appropriate adjustment would be for him to retain the house and for him to make a payment to the defendant of $25,000. It was submitted that this was appropriate having regard to the following matters which were referred to in written submissions. "1. The Defendant had no initial property of significance save for furniture and a car which were each improved by the Plaintiff and some superannuation, which she will continue to hold;

The Plaintiff's assets were applied and formed 51% of the acquisition cost of Castlecrag;

The Defendant's earnings were about $33,622 gross per annum, but for the Plaintiff's initial and ongoing contributions the lifestyle which she enjoyed over the relationship would not have been available to her. The Defendant concedes that she did not account to the Plaintiff for such income as she did receive from her family by way of board during the relationship. The ability to house her family members and keep the income is an advantage that the Defendant enjoyed. The Plaintiff received no commensurate or offsetting benefit. The one member of the Defendant's family who goes into evidence on this topic says that when he did pay board he paid $30 a week, a very modest contribution;

As the Defendant's assets were of limited market value she was not, compared with the Plaintiff (who risked his whole deposit), placing anything of substance at risk when she became a mortgagor in respect of the Castlecrag property. For example, virtually none of her initial assets would have fallen into her bankrupt estate;

The Plaintiff made superior contributions to the mortgage;

The Plaintiff, by his Statement of Claim, proposes that the Defendant be adequately compensated for her contributions. A payment roughly commensurate with a year's net income for the Defendant is appropriate in circumstances where a number of people benefited from the Defendant's homemaker contribution including the Defendant herself, as well as the other members of her family invited by her to join the household." [Submissions 3/10/06] 32 This was amplified in oral submissions by reference to the fact that the plaintiff had previously lived in rented accommodation and now she had the benefit of accommodation without the need to pay rent. I do not think that this is a relevant consideration. This case has been an illustration of a practical union of both lives and property. The parties jointly purchased the property and both of them committed themselves to the repayment of the mortgage. Admittedly, the plaintiff contributed a large share. However, the defendant's contribution by accepting a liability under the mortgage and being an owner of the property should not be dismissed. See Billous v Mudaliar [2006] NSWCA 38 at [114] to [128]. 33 It is true that the defendant had the benefit of accommodation for her children in the house, which was only a three-bedroom house. In respect of her son, John, the plaintiff knew of this when the relationship commenced and the house purchased. It seems fairly clear that there was friction between the plaintiff and the defendant's son and the plaintiff did not approve of the son having his de facto partner living at the house. This friction was, no doubt, compounded by the fact that it seems that the plaintiff drank fairly substantially and was, from time to time, affected by alcohol. 34 I have difficulty in seeing how one should regard the ability to accommodate one's children as a benefit to the parties, as the arrangement between them was that this should happen. It would seem to be part of the natural flow of the family affairs. 35 It can be seen that there has been a substantial increase in the value of the property from $380,000 to $700,000 over the course of the relationship and up until the hearing. This raises the usual problem of how one apportions that increase in value. Current Court of Appeal authority is to the effect that the erosion principle, as a rule, plays no part in a determination under section 20. See Bilous at [68]. In this case one has a relatively short relationship and there has not been a substantial reduction in the amount of the mortgage because of the shortness of the period. In the present case it seems to me that the benefits of the increase in capital appreciation of the property should flow in a way which is commensurate with the contributions to that property. 36 The plaintiff contributed 52.75% of the purchase price and thus should be credited with the capital appreciation on that proportion of the property. It was the plaintiff and the defendant who by their payments of the mortgage were jointly responsible for the house. The reflection of the increase in value attributable to the part of the house that resulted from the provision of mortgage funds should be credited to both the plaintiff and the defendant. The contributions during the period of the relationship to this mortgage were in respect of the sum of $52,897 by the plaintiff and the sum of $40,108 by the defendant. 37 The plaintiff made all mortgage payments after separation and he has had the benefit of occupation of the property since separation.

38 If one applies the proportions of the repayments of the loan by each of the parties to the borrowed share of the property then the proportion that the defendant contributed was approximately 20%. This leaves the plaintiff's contribution at 80%. If one applies the contributions over the whole of the period of the relationship up to and including the trial, the defendant's contribution was 15%. I think the appropriate proportion to adopt is the figure of 20% and this should be applied to the increase in value of the property, which is $320,000. 39 The parties will be retaining their other property such as superannuation and items of personal property and, given that they kept their financial affairs separate, they should retain their own separate liabilities. Accordingly, the final assessment of an appropriate sum has to take into account the non-financial contributions by each party and the other matters to which I have referred in my judgment. 40 In my view, an appropriate amount to be paid by the plaintiff to the defendant on the basis that the plaintiff retains the house, the mortgage and procures a discharge of that mortgage in favour of the defendant, is a sum of $80,000. The parties should keep their own remaining personalty and debts and should also be entitled to their own superannuation. I direct the parties to bring in short minutes and if necessary argue costs. **********

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