VSC 219 (Smith J)

TRUST AND TRUSTEES - Resulting trust - Domestic relationship - Parties engaged to be married - Whether presumption arising from contributions to purchase price arose - Whether rebutted by contrary intention.

REAL PROPERTY - Domestic relationship - Adjustment of property interests under Part IX of the Property Law Act 1958 - Whether adjustment of property interests just and equitable -Disputed length of relationship - Assessment of contributions - Assumption of liability under mortgage - Work undertaken by party to other's property - Appropriateness of development cost deductions made to valuation of property before subdivision - Whether deductions for capital gains tax required in relation to increases in value of properties - Whether adequate weight given to party's continued residence in family home - Appeal allowed in part.

PRACTICE AND PROCEDURE - Appeal - Effect of party's failure to raise issue during trial.

1 Susan Davis and Ian Tayles were de facto partners. After their relationship ended Mrs Davis brought proceedings against Mr Tayles in the trial division of the Supreme Court under Part IX of the Property Law Act 1958 (the 'Act'). She sought orders adjusting the parties' interests in their real and personal property under s 285 of the Act and various related orders.

2 The learned judge held that the de facto relationship between Mrs Davis and Mr Tayles lasted for a four year period between late September 1999 and September 2003.[1] He made a declaration under s 287 of the Act that Mrs Davis and Mr Tayles each held a half interest in their former home at 31 Howard Street, Glen Iris (the 'Glen Iris property'), in which Mrs Davis is still living.

3 His Honour exercised his jurisdiction to divide the property of the parties on a just and equitable basis by ordering that the defendant transfer one half of his interest in that property to the plaintiff. The effect of these orders was that Mrs Davis acquired a three-quarters interest and Mr Tayles retained a one-quarter interest in their former residence. His Honour ordered that the Glen Iris property be sold and that, subject to various deductions, the proceeds should be divided in those proportions. Mrs Davis was ordered to pay compensation of $32,131.92, together with interest, to the second defendant, Lighthouse Peak Pty Ltd ('Lighthouse Peak'), under s 74P of the Real Property Act 1900 (NSW).[2]

4 His Honour also made orders restraining Mr Tayles personally and in his capacity as director of various companies, from bringing proceedings against Mrs Davis in respect of any cause of action or claim existing against her at the time of

or prior to this order. A similar order was made against the second defendant, Lighthouse Peak, one of Mr Tayles' companies.

5 Mr Tayles now appeals against the orders made against him.[3]

6 The circumstances which gave rise to Mrs Davis's claim are conveniently described in his Honour's judgment as follows:

In September 1999, Susan Davis was the sole registered proprietor of a property at Harrison Avenue Burwood. It had an estimated value of $330,000 and was subject to a registered first mortgage on which was owing some $10,000. She was 39 years old. She had been previously married but was divorced. She was the mother of two children - Sarah aged 11 years and Sam aged 9 years. They were attending Ashburton Primary School. She had completed a Bachelor of Teaching at Deakin University and was doing a Bachelor of Education Sciences degree. She worked as a self-employed education consultant. This involved liaising with schools around Australia about mathematics resources.

Mr Tayles was aged 50 years. He had been previously married but was divorced. He had no children. He was the sole director of a number of companies in which he beneficially held all the issued shares. The companies in turn owned properties of various kinds:

1. Lighthouse Peak Pty Ltd (Lighthouse Peak), the second defendant, owned Stockyard Station, a farming property, at Bringenbrong valued at the time at approximately $1,000,000. Mr Tayles conducted a farming business at Bringenbrong,
2. Taycorp Two Pty Ltd owned vacant land in Laverton valued at the time at approximately $2,000,000,

1. Taycorp Three Pty Ltd owned a building in Millers Street Sydney which was leased out and valued at approximately $3.4M, and

1. Biztek Pty Ltd (Biztek) which operated as a service company for Mr Tayles and his other companies and also owned the livestock, plant and equipment on the farm at Bringenbrong.

Bringenbrong was situated near Corryong and Mr Tayles would divide his time between Melbourne and Bringenbrong.

Mr Tayles also personally owned some land on Andersons Road, Echuca South, the value of which was approximately $340,000. In September 1999, the above properties secured borrowings of approximately $2.12M.

On 25 November 2000, Mr Tayles and Mrs Davis purchased 31 Howard Street Glen Iris for $1.2m. The purchase money and expenses were provided by Biztek pursuant to a facility negotiated by Mr Tayles with the Commonwealth Bank. It comprised a temporary excess of $120,000 for the Biztek overdraft, increasing it to $320,000, and a Variable Rate Bill Facility of $1,155,000, making a total of $1,475,000. They moved into that home in January 2001. In addition to a mortgage over the Glen Iris property, part of the security provided for the purchase money was Mrs Davis's property at Burwood. Subsequently, on 16 December 2001, the Burwood property was sold for $443,000. Issues arise out of those dealings and are discussed below. In September 2004, the property at Bringenbrong was sold for $1.2M. Otherwise, at the time the relationship ended the properties held by the parties and companies were as stated above. Mrs Davis and her children have continued to live at the Glen Iris property. Mr Tayles last lived there in about December 2003.

The parties agree that the present value of the remaining properties are [sic]:

Glen Iris $1,600,000.00

Echuca $ 340,000.00

Miller Street $3,960,000.00[4]

7 There was a dispute between the parties as to the valuation of the vacant land in Laverton North (the 'Laverton property') owned by Taycorp Two Pty Ltd ('Taycorp Two'). In a finding which is challenged by ground of appeal 6, his Honour accepted a valuation of $4,706,000. I discuss this and other factual findings made by his Honour, which are challenged on appeal, later in this judgment.

1. The Trial Judge's conclusion at paragraph [162] of his Reasons for Decision viz that a just and equitable adjustment required that the first defendant transfer half of his interest in the Glen Iris property to the Plaintiff, was excessive in that the Plaintiff had contributed $300,000 to the acquisition of the property costing $1,275,000 approximately and resulted in the Plaintiff receiving approximately three-fourths thereof, representing $1.2 million of the agreed value of the Glen Iris property of $1,600,000.

2. Notwithstanding the absence of evidence to displace the equitable presumption that joint purchasers hold the legal estate in trust for themselves as tenants in common in shares proportionate to their contribution unless their contributions are equal, the Trial Judge held that the plaintiff should have a half interest in the Glen Iris property [87].

3. The Trial Judge erred in taking into account [161] the increase in the value of the assets at Laverton, Miller Street and Bringenbrong because they were assets which pre-dated the relationship of the parties and, on proper analysis, the contribution of the plaintiff, if any, was confined to the acquisition of the Glen Iris property.

4. The Trial Judge, in concluding at [93] that it was just and equitable that the plaintiff's contribution be recognised by receiving an appropriate adjustment related to the increase in value of the Laverton property, a property owned by a company associated with the first defendant, failed to take into account that the increased borrowings secured by the Laverton property provided were for the purpose of acquisition of the Glen Iris property for the benefit of the plaintiff and without which the Glen Iris property could not have been acquired.

5. The Trial Judge, in concluding [101] that the sums of $20,000 and $100,000 [95] pursuant to the bank facility made available to Biztek Pty Ltd (a company associated with the first defendant) to acquire the Glen Iris property were an indirect contribution by the plaintiff [99] and that it was just and equitable that the first defendant's use of her contributions be taken into account in determining an appropriate adjustment, in particular the increase in the value of the farm at Bringenbrong, failed to take into account, properly or at all, that the companies associated with the first defendant and the first defendant had borrowed, and provided the security for, the totality of the purchase price of the Glen Iris property.

6. Further, in assessing the increase in the capital appreciation the Trial Judge failed to explain or give reasons why he accepted the plaintiff's expert valuations to those of the first defendant and failed to take into account that the Laverton property required significant expenditure to achieve the value adopted by the Trial Judge.

7. The Trial Judge failed to give proper or adequate weight to the benefit received by the plaintiff in that she and her children resided in and continue to reside in luxurious circumstances in the Glen Iris property from 2001 and continue to do so.

8. The Trial Judge failed to take into account the increase in value of the plaintiff's Burwood property by at least $80,000 as a result of works carried out by the first defendant on the property in late 2002.

9. Contrary to the evidence the Trial Judge found that a domestic relationship commenced in September 1999 and continued up to September 2003, and made all consequent findings in respect of adjustment of property interests between the parties on the basis of the finding that the relationship had continued for four years.

9 I deal first with ground of appeal 9, which alleges that his Honour erred in finding that the parties lived in a four year de facto relationship which commenced in September 1999 and continued until September 2003. I then discuss ground of appeal 2, which relates to his Honour's declaration that Mrs Davis and Mr Tayles held half interests in the Glen Iris property. I go on to consider grounds of appeal 3 to 8, which relate to the findings made by his Honour in the exercise of his discretion to divide the property of the parties on a just and equitable basis, having regard to the financial and non-financial contributions made by the parties to property and financial resources and to the welfare of the family.

10 I conclude by discussing ground of appeal 1 which alleges that his Honour erred by ordering that Mr Tayles transfer half his interest in the Glen Iris property to Mrs Davis.

11 This ground of appeal contests his Honour's finding that the couple lived together for four years, in a relationship which began in September 1999 and ended in September 2003.[5] In his written submissions counsel for Mr Tayles said that his client's evidence was that although the parties had a relationship from September 1999, it was not a de facto relationship until late January 2001.[6] Mr Tayles also contended that the relationship ended in about June 2002. If the parties' relationship lasted only 18 months, the Court would not have had jurisdiction to adjust their property interests on a just and equitable basis.[7]

12 Both parties gave evidence as to the commencement and ending of the relationship. Counsel for Mr Tayles contends that on the balance of probabilities, his client's evidence should have been accepted by his Honour.

13 I make only brief reference to the evidence of Mrs Davis and Mr Tayles on this matter, because it was extensively described in his Honour's reasons.

14 In her evidence-in-chief Mrs Davis said that she first met Mr Tayles face to face in about August 1999, when they had lunch together. Over the next month or so they saw each other and talked on the phone. She spent the first part of the September school holidays with him on his Bringenbrong farm and they were joined by her children for the second part of the holidays. Their relationship moved very quickly. After the school holidays Mr Tayles lived with Mrs Davis in her Burwood home when he came to Melbourne from the farm. He set up a home office in the family room, installed two telephone lines for his company Biztek Pty Ltd ('Biztek') and began to operate at least part of his business from the Burwood house. In late 1999 the couple went to Wesley College together to arrange for the enrolment of Mrs Davis's daughter for the 2000 school year and Mr Tayles signed a form which described him as the children's guardian and took responsibility for payment of both children's school fees. The whole family went to his farm at weekends.

15 Mrs Davis said that at times during 2002 their relationship was difficult because she was unwell and finding the travel to the farm and the work on it difficult. She was also concerned when she found out in June 2003 that Mr Tayles had increased the amount owing under the loan facility taken out by Biztek on two occasions. She said she had 'come out of the main bedroom' at times in July and August 2003, but maintained that the relationship continued until about December in that year.

16 In cross-examination it was put to Mrs Davis that in 2000 she and Mr Tayles had been 'boyfriend and girlfriend' but not de facto partners. Mrs Davis said that Mr Tayles did not spend all his time at her Burwood home from September 1999, as he continued to travel to and from the Bringenbrong property to maintain the farm located there. However she said that from September 1999 they had spent time together either in her home or at Bringenbrong, where they and Mrs Tayles spent weekends and holidays as a family. She conceded that she had not advised Centrelink that she was living in a de facto relationship until February 2001, though she had filled in Centrelink forms saying that Mr Tayles stayed at her home from time to time during 2000.

17 She also conceded she had written to Wesley College on 23 December 2002 to advise them that 'due to the circumstances I now find myself in, that is separating from Ian', she could not afford to pay the school fees and would be removing the children. She said she was very concerned when she discovered that the proceeds of the sale of her home had not been used to reduce the mortgage on the Glen Iris property and thought that if these financial issues could not be resolved she would consider ending the relationship.

18 However she said that the separation did not eventuate at that time. The family had gone on holiday together in January 2003 and she and Mr Tayles had enrolled her daughter at Korowa for that year. They had also agreed to keep her son at Wesley College. She had sought legal advice about her liability to the Commonwealth Bank of Australia (the 'Bank') in June 2003, after the Bank had contacted Mr Tayles about the failure to comply with the terms of the loan facility. She said they had continued to have 'beautiful times' until August 2003 and lived together until December 2003, when there was an assault.

19 Mr Tayles initially contended that the de facto relationship did not begin until they moved into the Glen Iris property together in January 2001. He said that he had lived mainly at the farm in 1999 and was seeing three other women in September and October 1999, though at the request of Mrs Davis he was working at 'putting out other fires'. In cross-examination he ultimately conceded that the phone lines for Biztek were installed in Mrs Davis's home in October or November 1999. He also conceded that their relationship began in January 2000, but said that it had ended in June 2002.

20 Before discussing the learned judge's findings on this issue I refer to his findings about the credit of Mrs Davis and Mr Tayles. His Honour took a very unfavourable view of Mr Tayles' credibility, and gave detailed reasons for doing so. He said that:

Mr Tayles is a man of great drive, enthusiasm and passion. Unfortunately for him those qualities have adversely affected his evidence.

Throughout [Mr Tayles'] evidence he appeared to want to fight the case at any cost. He constantly chose to be unco-operative and difficult in responding to cross-examination. He was evasive, quibbled with questions and gave non-responsive answers. He fought the cross-examiner and argued his case.

He plainly is extremely angry with Mrs Davis. He appears to hold her responsible for the fact that he had to sell the farm at Bringenbrong. He claims that this followed from her contacting the Commonwealth Bank in the middle of June 2003 to seek information about her position and the state of the accounts. He described this on several occasions as like throwing a 'hand grenade'. I am satisfied that his view is incorrect. The need to sell the farm arose because of cash flow problems identified 12 months earlier. The Bank was very concerned about Mr Tayles' financial situation before Mrs Davis contacted the Bank. Part of the explanation for his anger and hostility may lie in the acute sense of loss he has felt with the termination of the relationship. On more than one occasion he became extremely emotional in dealing with questions about Mrs Davis's two children. He plainly not only fell in love with Mrs Davis but fell in love with her children. The photographic evidence points to a very warm relationship between them all for much of the period of the relationship. He is plainly still grieving for that loss.

His obsession to win the case and deprive Mrs Davis of any adjustment in her favour resulted in him going to absurd lengths to deny the existence of a de-facto relationship and any relationship of a domestic nature for the relevant time of two years. The question of the nature and duration of the relationship is discussed further below. I find it difficult to understand how anybody could say (as he initially attempted) that he and Mrs Davis did not commence a de-facto relationship in late 1999 when he moved into her home, set up his office in her home and commenced a sexual relationship with her. In addition, he assisted her in late 1999 by holding himself out to be the step-father of her children for the purpose of seeking entry for them into Wesley College. As discussed below, his changes of position during the trial on the duration of the relationship were tortuous. Unarguably, it seems to me, Mr Tayles and Mrs Davis formed what is normally called a de-facto relationship in late 1999 and yet he refused to concede that this was so. In the end he was driven to explain his position on the basis that he has sexual relationships with women and he marries women but he never has de-facto relationships. By applying his definition of reality, he was not in a de-facto relationship with Mrs Davis because 'I don't do de-facto relationships'.

I am satisfied that his hostility towards Mrs Davis and his desire to win the

case has been so extreme that he has also attempted to mislead the court in a number of areas.[8]

21 By contrast, his Honour found that Mrs Davis was an honest witness, commenting that:

Mrs Davis in her evidence provided a complete contrast. She attempted to co-operate, she attempted to answer the questions, she rarely if ever argued her case and she understated her position. She revealed no hostility towards Mr Tayles and on occasion praised him. Her care at times resulted, however, in answers that were non-specific or complex.[9]

22 His Honour discussed the matters relied upon by Mr Tayles' counsel to impugn Mrs Davis's credibility and explained why he considered that only one of these matters had any significance.[10] He noted her statement to Wesley College that she was separating from Mr Tayles, but accepted the evidence of a witness, Mrs Potocky-Pacay, who said that Mrs Davis was in a distressed state at that time, because she suspected that Mr Tayles was having a relationship with another woman. However, Mrs Potocky-Pacay said that Mrs Tayles wanted the relationship to continue. His Honour also said that it was necessary to consider Mrs Davis's evidence with care because of her failure to tell Centrelink of her de facto relationship until February 2001. However ultimately he concluded that 'as a witness, she was conscientious' and that her evidence was 'honest and credible'.[11]

23 The trial judge had the advantage of seeing and hearing the parties give evidence and his findings as to credibility must accordingly be given considerable weight.[12] Having read almost the whole of the evidence, I would agree that Mr Tayles was evasive and quibbling in his answers to questions and appears to have tailored his evidence to suit his case.

24 His Honour's factual findings as to the duration of the relationship were as follows:

I am satisfied that from late September 1999 to September 2003, Mrs Davis and Mr Tayles lived in what would normally be described as a de-facto relationship. Initially, for some 16 months they lived together at her home in Burwood when he was in Melbourne. By the end of 1999 Mr Tayles had had installed two Telstra business lines for his purposes and had his home office in the family room which formed his Melbourne office and was keeping business records on the premises. Mrs Davis fulfilled the traditional role of home maker in addition to attempting to conduct a business from home as a consultant. Mr Tayles assisted her in setting up a company and helped her by bringing up to date her financial records and six years of tax returns. They lived as a couple and presented to their friends, family and the public as a couple. They slept together whenever Mr Tayles was in Melbourne until at least mid 2003. When Mrs Davis joined him at the farm, they lived there as a couple with her again fulfilling the home maker role. In addition, however, she worked hard on the property performing tasks in relation to the cattle, fencing, vineyard and nursery. She received no payment at the time for this work and there is no evidence of any contemporaneous discussion about payment for that work.

In August 2000, Mrs Davis and Mr Tayles agreed to marry. They discussed purchasing a home together instead of extending the house at Burwood. The engagement was announced in October 2000 at a party at the home of Ian Tayles' sister Helen. The occasion was the celebration of Susan Davis' 40th birthday, Ian Tayles' 50th birthday (he having turned 50 the previous year) and his sister Helen's 50th birthday.

Initially, they were very happy and a close bond was formed between Mr Tayles and Mrs Davis and her children. The children started to call him 'Dad' in about September 2000. He spent a considerable amount of time with her and the children; in Melbourne,[13] at the farm and on holidays. This changed in 2002 for a number of reasons and the relationship came under stress.

In 2002 the farm was in difficulty because it became affected by drought conditions which began that year and which worsened in 2003. Mr Tayles thought it necessary to give more personal attention to the farm and long separations resulted. At the same time, by the end of 2002, Mrs Davis was exhausted, in particular, by the travelling to and from Bringenbrong (a five hour journey) and the domestic and farming work at Bringenbrong. In addition her health was not good. She had been experiencing back pain (for which she wore a brace) and at times her lungs were causing her difficulty. Thus, from near the end of 2002 through 2003 she made few visits to the farm - there would appear to have been two visits, one in early January and the other in the Easter period. Another problem was financial issues about which she had legitimate concerns. They are discussed in more detail below.

The relationship continued into 2003, however, although it was experiencing difficulties. Mr Tayles tried to maintain it. In September 2002, for example, Mr Tayles spent at least $8,000 purchasing equipment for a home theatre. Mrs Davis and Mr Tayles spent Christmas day together, at her parents' home, and New Year's Eve together. They had a holiday early in January 2003 as a family as well as spending time at the farm. The children went back to school at Korowa and Wesley. In April or May 2003 Mr Tayles purchased a replacement speaker for the home theatre. Mr Tayles writing to the Bank in July 2003 described the relationship as ebbing and flowing with his absences. Eventually they separated in September 2003. They both continued to live at Glen Iris, until there was an assault in December 2003.

In my view a de facto relationship, and therefore a domestic relationship, existed for close to four years between Mr Tayles and Mrs Davis.[14]

25 Section 276 of the Property Law Act 1958 defines the matters which must be taken into account in determining whether a domestic relationship exists or has existed. Although his Honour did not specifically refer to this section in his reasons, he took account of all of the matters listed in it.

26 Having regard to his Honour's findings as to the respective credibility of the parties, and the objective evidence, there is no basis for the claim that he wrongly accepted Mrs Davis's evidence that the relationship began in late September 1999.

27 Mrs Davis sought legal advice on her financial position in June 2003. In an email to her lawyer she referred to her concerns about her 'involvement in the Bill facility' and asked whether the Bank should be advised about her 'financial claim against Ian'. That query could be read as relating to her payment of the $300,000 to Mr Tayles, which he used to reduce his level of indebtedness or could have related to a future Part IX claim. If it meant the latter it would support the view that the couple's relationship had ended before that date. Mrs Davis was cross-examined about her reason for consulting a lawyer and said that: 'In June 2002 [presumably she meant 2003] I was very concerned about the financial matter, very, very concerned, and felt that if it couldn't be resolved then certainly I would consider finishing the relationship'. Despite that concern, she said that the relationship had not ended at that time.

28 At the trial Mr Tayles' counsel conceded that the couple's sexual relationship continued until September 2003.[15] That is not determinative of the existence of a de facto relationship. However, when combined with the other matters to which his Honour referred,[16] I do not consider that his Honour erred in finding that the relationship continued until September 2003. The evidence was more than sufficient to support the view that the parties lived together as de facto partners for approximately four years.

30 Ground of appeal 2 alleges that his Honour should not have found that Mrs Davis and Mr Tayles owned the Glen Iris property equally.

31 That property was purchased for $1.2 million on 25 November 2001, as a home for the parties and Mrs Davis's children. Mr Tayles' counsel submitted that the fact that the property was transferred to the parties as joint registered proprietors did not determine the extent of their equitable interests. He contended that Mrs Davis's equitable interest in the Glen Iris property was proportionate to the amount of $300,000, which was paid to the Bank after the sale of her Burwood property, for the purpose of reducing the amount of the mortgage over the Glen Iris property. In support of that claim counsel relied on the presumption of resulting trust which arises where persons purchasing real property in joint names contribute unequally to the purchase price.

32 Counsel for the respondent submitted that his Honour had correctly held that the presumption of resulting trust was displaced by the parties' common intention that each should take a half share in the property.

33 In equity there is a rebuttable presumption that joint legal owners of real property who have contributed unequal amounts to its purchase price, hold in proportion to their respective contributions.[17]

34 The presumption arises where purchasers make unequal (but direct) contributions to the purchase price of real property (for example by contributing to the purchase price or the deposit[18] paid to the vendor) or where they assume unequal liability to repay a loan which has been taken out to finance the purchase of the property. In Calverley v Green[19] the High Court held that where the purchase of real property is financed by a mortgage, under which both the purchasers are jointly liable to repay the loan, the assumption of liability is to be treated as equivalent to a direct contribution to the purchase price. In the absence of any other direct contribution to the purchase price by one of the parties, they will be treated as having contributed equally to the purchase price and will be presumed to hold equally in equity as well as at law, in these circumstances.

35 In Calverley v Green, the couple were joint mortgagors, but agreed that the de facto husband would be responsible for making the mortgage loan repayments. The High Court held that the equitable interests of the parties were determined when the property was purchased. The fact that later mortgage loan repayments were made by the de facto husband did not affect the extent of the equitable interests presumed[20] to arise under a purchase money resulting trust.[21]

36 In this case the trial judge noted the submission of Mr Tayles' counsel that a purchase money resulting trust arose in his favour, but held that any presumption that the parties held proportionately to their contributions was rebutted by evidence that the parties intended to take equally in equity as well as at law.[22]

37 There are two reasons why the presumption of resulting trust may not have arisen in this case. First, both Mrs Davies and Mr Tayles assumed personal liability under the mortgage. There is no evidence that Mr Tayles made any other direct contribution to the purchase price of the Burwood property. On the basis of Calverley v Green his Honour could therefore have held that the couple contributed equally to the acquisition of the Glen Iris property.[23]

38 The fact that Mrs Davis later paid off $300,000 of the Bank loan to Biztek and Mr Tayles made interest repayments on the mortgage would not affect the extent of their equitable interests arising by way of resulting trust.

39 Secondly, the presumption of resulting trust does not apply where the relationship gives rise to a presumption of advancement.[24] As Gibbs CJ said in Calverley v Green:

... the general rule that ...it is presumed that a resulting trust arises in favour of the purchaser, or in favour of two purchasers in the proportions in which they contributed the purchase money, is subject to the exception created by the presumption of advancement. 'It is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose or in other words that the equitable right is not at home with the legal title'.[25]

40 The presumption of advancement probably does not apply in favour of a de facto wife.[26] However it is well-established that it arises when a man purchases property in the name of a woman to whom he is engaged to marry.[27]

41 On the facts of this case, it therefore appears that the presumption of resulting trust did not arise. The parties had agreed to marry in August 2000 and their engagement was announced in October 2000 at a party at Mr Tayles' sister's home. Thus Mrs Davis could have relied on the presumption that any contribution to the purchase price of her half share of the property made by Mr Tayles was made for her benefit.[28]

42 Mrs Davis's counsel at the trial did not rely on the presumption of advancement in support of the claim that she was entitled to a half interest in the property. However, on appeal, counsel for Mr Tayles conceded that this did not prevent Mrs Davis relying on that presumption on appeal. Since the operation of the presumptions of resulting trust and advancement is a matter of law and it was not claimed that there was additional evidence relating to this matter which could have been called, there would be no unfairness to Mr Tayles if the presumption of advancement was applied on this appeal.

43 It is trite law that the presumption of resulting trust will be rebutted if the party who has made the greater contribution did so with the intention of benefiting the other party. His Honour's decision that Mrs Davis was entitled to a half interest in the Glen Iris property was not based on the presumption of advancement. Instead the judge held that any presumption of resulting trust which might otherwise arise

in favour of Mr Tayles was rebutted by his intention that Mrs Davis should acquire a half interest in the Glen Iris property.

• an authorisation by Mrs Davis nominating Mr Tayles to bid for the property on her behalf 'on the basis that the property is to be purchased by us jointly';[29]
• the nomination document signed by both parties under which they assumed joint and several liability for the performance of the obligations of the purchaser under the contract;[30]
• Mrs Davis's agreement to sell her Burwood property, her sole asset, and to use the proceeds to reduce the debt on the Glen Iris property; it would strain credibility that she did so without intending to obtain a joint interest in the property, having given up her own home; [31]
• Mrs Davis's acceptance of personal liability for an amount of $700,000, an amount which represented more than half of the purchase price of the Glen Iris property, and her entry into a mortgage as a third party, to secure the loans to Biztek;[32] and
• Mr Tayles' failure to ensure that any document prepared made it clear that Mrs Davis was to have a lesser interest in the Glen Iris property, despite his familiarity with that fact that such a provision could be made. This was illustrated by agreements made with his mother and siblings under which they received unequal shares in other property which they intended to purchase.[33]

45 Acts done or statements made by the parties when the property is acquired are admissible as evidence of intention as to how the beneficial interests should be held.[34] All of the above evidence supported his Honour's finding that Mr Tayles intended that Mrs Davis, the woman with whom he was living and intended to marry, would acquire a half interest in the family home that they were purchasing together.

46 Thus, even if the presumption of resulting trust did apply, I consider that his Honour correctly held that there was:

... strong contemporaneous evidence supporting the conclusion that the intention of both parties was that they would hold the property as joint proprietors, both in law and in equity.[35]

It should be remembered that Mr Tayles himself said that he saw the action of Mrs Davis in making her property available as a loving gesture on her part. It was the act of someone placing her entire trust in the other for her financial future and financial security. In those circumstances, it is hardly surprising that Mr Tayles would respond and intend that they would be equal beneficial owners of the property.

Finally, on the evidence it would be surprising if Mr Tayles had not intended that Mrs Davis should receive an equal beneficial interest in the property. They were very much in love. They had announced their engagement to be married approximately one month prior to the purchase. Mr Tayles had formed a very strong bond with Mrs Davis and her two children. In September 2000, as noted above, they began calling him 'Dad'. They had provided him with the family that, as he himself said, he had craved from his late 20s but thought he could not have. I am satisfied that at the time of the purchase of the property Mr Tayles and Mrs Davis had committed themselves to the marriage. What occurred was a pooling of resources in the context of a commitment between them for the future.[36]

48 In my opinion that conclusion is unassailable. Ground of appeal 2 is therefore not made out.

49 An appeal against the exercise of the discretion to adjust the property rights of de facto partners is governed by the principle in House v The King.[37] As the High Court said in Norbis v Norbis[38] (which dealt with the division of spouses' property on a just and equitable basis):[39]

It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.[40]

50 Grounds of appeal 3 to 5 argue that the property adjustment orders made by his Honour were based on incorrect factual findings. They seek to challenge his Honour's reasons for holding that Mrs Davis made a 'modest contribution' to Mr Tayles' financial resources, and in particular, contributed to the increase in value of the properties owned by him and his companies before the couple began to live together.

51 In essence they claim that his Honour should not have held:

• that Mrs Davis contributed to the increase in value of the Laverton property owned by Taycorp Two, the building in Miller Street, North Sydney (the 'Miller Street property') owned by Taycorp Three Pty Ltd ('Taycorp Three') or of the farming property at Bringenbrong owned by Lighthouse Peak (the 'Bringenbrong property') (ground of appeal 3).
• that Mrs Davis was entitled to a share of the increased value of the Laverton property because that property provided security for the loan to purchase the Glen Iris property, from which Mrs Davis benefited (ground of appeal 4); and
• that the additional loans to Biztek after the Glen Iris property was purchased were to be treated as a contribution by Mrs Davis to the increase in the value of the Bringebrong property, because Mr Tayles and his companies provided the security for the whole of the purchase price of the Glen Iris property (ground of appeal 5).

52 Because the grounds are inter-related and somewhat repetitive, I discuss them together.

Evidence of Mrs Davis's contributions to the properties owned by Mr Tayles' companies

53 I have referred above to his Honour's findings as to the value of the properties owned by Mr Tayles and his companies when he and Mrs Davis began living together.

54 Before the Glen Iris property was purchased in November 2000, Biztek had an overdraft of $150,000. On 20 December 2000, the Bank agreed to increase Biztek's overdraft by $50,000 to $200,000, to grant a temporary additional overdraft of $120,000 and to provide the sum of $1,155,000 by way of a variable bill facility. This created a total debt of $1,475,000, owed by Biztek to the Bank. The letter from the Bank stated that the purpose of the loan was to assist the purchase of the Glen Iris property.

55 The terms schedule attached to the Bank's approval letter said that '[t]he maximum period of the Temporary Excess is to 1 December 2001, the limit will be reduced should the sale of 24 Harrison Avenue, Burwood occur before this date'. The schedule relating to the variable rate bill facility noted that the maximum loan term was 24 months, that Mrs Davis was to repay her mortgage loan (of approximately $10,000) over her Burwood property and that the bill facility was to 'gradually reduce via the sale of the following assets': the Burwood property, subdivided land located at Echuca South (the 'Echuca property'), belonging to Mr Tayles and the Laverton property owned by Taycorp Two. Guarantees unlimited as to amount were required from Lighthouse Peak, Taycorp Two, Taycorp Three, and were required to be secured by first mortgages over the Bringenbrong property, the Miller Street property, the Laverton property, and the 'whole of [their] asset(s) and undertaking(s)'. Mr Tayles also provided such a guarantee, secured by the Echuca property.

56 Mrs Davis and Mr Tayles also mortgaged their fee-simple interest in the Glen Iris property and Mrs Davis mortgaged her Burwood property. Mrs Davis signed a 'guarantor's declaration' indicating that she was aware of the implications of providing a third party mortgage. On 11 January 2001 the Bank wrote to Mrs Davis indicating that her liability was limited to $700,000.

57 On 21 December 2001, Mr Tayles, in his capacity as sole director of Biztek, wrote to the Bank indicating that Mrs Davis's Burwood property had been sold for $443,000 and requesting a $20,000 increase in the Biztek overdraft to $340,000 until settlement.

58 On 17 January 2002 the Bank wrote to Mr Tayles informing him that 'his overdraft had been temporarily increased by $20,000 until 16 February 2002'. This took the total loans to Biztek to $1,495,000. Mr Tayles had been earlier informed that the overdraft limit would revert to $200,000 when the proceeds of Mrs Davis's property became available and that the annual review of his loan facilities was due.

59 The Bank wrote to Mrs Davis on the same day as the communication of its approval to Mr Tayles, seeking an acknowledgement that:

... as security provider for the Debtor ... my present maximum liability to the Bank under those documents is $1,495,000 plus all interest and amounts payable for discounts, costs, charges and expenses ...

60 Mrs Davis did not return the signed acknowledgement of that letter. It may be noted that the statement in the 17 January 2002 letter was inconsistent with the Bank's previous acknowledgement that her liability was limited to $700,000. Mrs Davis's evidence was that she did not know that the loan facility had been increased.

61 When the sale of the Burwood property was settled, $320,000 was paid to the Bank. His Honour described the effect of the release of the proceeds of the Burwood sale as follows:

● the Biztek bill discount facility was reduced by $180,000 to $975,000 face value,

● the Biztek overdraft limit was reduced back to $200,000 and the overdraft itself reduced from $281,545.37 to $153,833.90,

● Mrs Davis, having contributed $320,000[41] to the reduction of the Biztek debt, remained personally liable for its debt to the extent of $700,000 for the next 12 months, secured by the mortgage over the Glen Iris property.[42]

(3) The result of these transactions was that by the end of February 2002, the indebtedness of Biztek to the Commonwealth Bank had been reduced and the debt was now secured by the Glen Iris, Laverton and Echuca properties. Of those properties, the loan agreement, reflecting the agreement between Mrs Davis and Mr Tayles, required Mr Tayles to sell the Laverton and Echuca properties within the next 12 months to pay out the Bill facility. [43]

62 His Honour found that despite his extensive assets, Mr Tayles had a problem with cash flow in the latter half of 2001 and in 2002. Mr Tayles sought additional credit from the Bank in order to upgrade the Bringenbrong farm. A report prepared by his Bank Relationship Manager, Rees Attwood, on 26 July 2002 noted that Mr Tayles' group of companies was 'strapped for cash largely due to the performance of the farm,' but that sale of the farm would improve the overall position and 'should also improve servicing of our remaining debts. The sale will also result in a reduction of the Bank's overall exposure'. He said:

Our security is fully interlocking and there is a good spread of assets supporting the Bank's exposure. This connection has been with us for many years and facilities are generally trouble free.

The report noted Mrs Davis's involvement as co-mortgagor of the Glen Iris property, as well as the limitation of her liability to $700,000. Under the heading 'Comments on repayment capacity' it said that '[s]ervicing has been calculated on the basis that the Lighthouse Peak BDF [i.e. bill discount facility] and the Biztek BDF will be cleared'.

63 On 1 August 2002 the Bank wrote to Mr Tayles saying that it would agree to vary the Biztek bill facility terms and conditions, at his request, by increasing the facility by $100,000 and extending the term for repayment to 28 February 2003, when it was to be repaid in full.

64 On 26 May 2003 the Bank wrote to Mr Tayles noting that the loan facilities extended to Biztek, Taycorp Three and Lighthouse Peak had expired and that documents relating to the previous increase of the loan to Biztek had not been returned. He was asked what he intended to do about repaying the loan. Although the Bank expressed further concerns about the debt in July 2003, Mr Tayles obtained a further extension of the bill facility until the Bringenbrong farm was sold. Throughout this period Mrs Davis continued to be liable to the Bank to the extent of $700,000.

65 Mrs Davis met with Mr Cowie on 22 August 2003. In a letter written three days after the meeting she confirmed that she had not authorised the January and August 2002 increases to the Biztek bill facility and thanked him for his assurance 'that the Bank will most likely realise the commercial property at Laverton should this be necessary given the sale of the farm, and not the residential property at 31 Howard Street, Glen Iris'.

66 His Honour described subsequent events as follows:

On 5 September 2003 a meeting occurred between Mr Cowie and Mr Tayles at which Mr Tayles stated he had received an offer on the Laverton property that would clear the Biztek Bill and that he had changed his mind on selling the farm. Mr Tayles asked the Bank if it would allow the overdraft limit of $200,000 to continue while releasing the security property at Glen Iris (that was said to be causing a dispute between him and Mrs Davis). The notes record Mr Cowie's view that the Bank would consider the proposal because the remaining security of the Sydney property and the farm property had sufficient value to meet the Bank's lending margins against a reduced debt of $2.25M. The companies still had to be re-registered, however, and the Bank had to be satisfied as to the income streams.[44]

Ultimately, however, the farm was sold in late 2003 with settlement due on 12 February 2004. On 8 January 2004 it was agreed between Mr Tayles and the Bank's officers that the proceeds would be disbursed in the following manner:

● Lighthouse Peak Pty Ltd - Bill $525,000

It was also agreed that any excess funds could be used by Mr Tayles to pay outstanding creditors of the farm and any other commitments he needed to clear. The document recording the agreement noted:

'This was subject to the Bank obtaining an updated valuation of the North Sydney property, however, on the current valuations on file the Bank is comfortable that there is sufficient security in the remaining properties to meet the Bank's security requirements for the debts of Taycorp Three Pty Ltd and Biztek Pty Ltd ...'

Mr Tayles agreed to provide the Bank with a copy of the latest leases of the North Sydney property so that the Bank could obtain an updated valuation. It was also agreed that the Bank would require a Statement of Financial Performance of Biztek as soon as possible but was prepared to allow him time to resolve his dispute with Mrs Davis before the financial statement requirement was to be satisfied.[45]

The Bank noted that Mr Tayles had undertaken to reduce the Biztek bill discount facility to $100,000.

67 His Honour examined the direct and indirect contributions of the parties to the Glen Iris property and to Mr Tayles' other financial resources in considerable detail. He found that the effect of Mrs Davis's contribution of $300,000 from the sale of her home and her assumption of liability in relation to the mortgage to Biztek was not limited to reducing the loan to Biztek to assist the purchase of the Glen Iris property, but went some way towards providing comfort to the Bank in relation to the debts owed by Mr Tayles and his other companies.

68 His Honour found that, although it was originally agreed that the Burwood, Laverton and Echuca properties would be sold in order to pay off the loan on the Glen Iris property over the two year period of the bill facility, Mr Tayles had not complied with the agreement. He had, in fact, used $300,000 of the $443,000[46] Mrs Davis received from the sale of the Burwood property to pay off the $120,000 temporary overdraft extension and to reduce the Biztek bill facility, rather than repaying the whole of the facility by selling the Laverton and Echuca properties. Although Mrs Davis was reluctant to sell the Burwood property Mr Tayles pressured her to do so and this was a factor which enabled him to avoid selling his own properties.

69 For that reason his Honour held that during the first 12 months of the relationship Mrs Davis's contribution to Mr Tayles financial resources prior to the sale of the farm was not limited to the use of the $300,000 proceeds of her property sale. His Honour said that:

The critical obligation of Mrs Davis and Mr Tayles under the loan agreement during this period was the reduction of the temporary overdraft extension given to Biztek. They had agreed that the Burwood, Laverton and Echuca properties would be sold to pay out the Biztek debts over the two year period of the loan facility. To reduce the temporary overdraft, one of the properties needed to be sold. The agreement with the Bank did not require that the Burwood property be sold for that purpose. But it provided that in the event that it was sold in the first 12 months, its proceeds would first go to reduce the overdraft extension. If Burwood had not been sold, in the first 12 months, the choice would have been between the Laverton and Echuca properties for reduction of the temporary extension. It is clear that, as between those two properties, Laverton was an easier property to sell and it is, therefore, more likely that it would have been the one sold. By selling Burwood, however, the need to sell Laverton (or Echuca) before December 2001 was avoided. In addition, selling the Burwood property had the benefit for Mr Tayles that it placed him in the position that he and Biztek had complied with the terms of the agreement with the Bank and the Bank's requirements. This would have continued his apparently good record with the Bank.

Mr Tayles maintained that it was never necessary to sell Burwood but that Mrs Davis had agreed. I am satisfied, however, that one of the three properties had to be sold and that he in fact pressured Mrs Davis to sell her property so that he did not have to sell his. If it had not been necessary then why was it sold particularly when Mrs Davis was very reluctant to do so? Selling one of his properties would have been inconsistent with Mr Tayles' strategy of not selling his assets. If the Burwood property had not been sold what would he have sold? The conclusion that should be drawn is that in late 2001 and early 2002, by selling the Burwood property, the need to sell Laverton or Echuca, but more probably Laverton, was avoided.

In my view, it follows that Mrs Davis' contribution of the $300,000 of the Burwood property proceeds enabled Mr Tayles to avoid selling, and so retain the Laverton property in December 2001 and enjoy the benefit of its subsequent capital appreciation. It would, therefore, be just and equitable that her contribution be recognised by receiving an appropriate adjustment related to the increase in value of the Laverton.[47]

70 His Honour held that in the second 12 months of the relationship Mrs Davis's assumption of liability for the debts of Biztek under the personal covenant in the Glen Iris mortgage and the earlier payment made from the proceeds of the Burwood sale, continued to contribute to the conservation of Mr Tayles' properties. These contributions assisted Mr Tayles to obtain a temporary increase in credit and an extension of time to repay the Biztek bill facility, beyond the original expiry date of 1 December 2002, at a time when the financial position of both Mr Tayles and Mrs Davis was precarious, because Mr Tayles and his companies were asset rich, but cash poor.

71 Once the Bringenbrong farm was sold in early 2004 Mr Tayles was in a stronger financial position. His Honour noted that:

At this point, it may be said that the presence of the Glen Iris asset as a security was not critical so far as the continued funding of Mr Tayles and his enterprises by the Bank was concerned. How important it was previously is unclear. But the fact remains that it was at all times part of the good spread of interlocking assets relied upon by the bank. It may also be said that the treatment of Mr Tayles, in all the circumstances, was extremely generous and patient. It is fair to draw the conclusion that the presence in the portfolio of a first class appreciating residential property, the Glen Iris property, then worth more than $1.2M, significantly added to the comfort of the Bank, even though not critical, and so helped it to agree to allow Mr Tayles, to delay the sale of assets, to receive some of the proceeds of the sale of the farm and to delay producing a statement of financial performance of Biztek while the dispute with Susan Davis was on hand and so avoid embarrassing Mr Tayles.

After the sale, an internal review prepared on 15 April 2004 recorded that settlement had taken place and the Lighthouse Peak Bill of $525,000 had been repaid. It also recorded that the Bank had released the security over the property at Bringenbrong. As to the balance of the proceeds, the document notes that Mr Tayles had undertaken to reduce the Taycorp Bill by $100,000, as previously agreed. It also notes that the Biztek Bill was to be reduced by $100,000 and overdraft by $30,000 on or before 22 April 2004. Thus, Mr Tayles had managed to persuade the Bank to reduce the previously agreed repayment figure for the Biztek debt of $230,000 to $130,000 and the Biztek overdraft was to be reduced by $30,000 not $230,000. The document then turned to the issue of the securities held and the debt to be covered by that security. The debt was identified as totalling $2,787,494 and the value of the securities provided, including Howard Street Glen Iris, $3,307,000. Howard Street Glen Iris was included at a value of $700,000 on the basis that consents were only held to $700,000. The document noted that, when Mr Tayles had reduced the other debts with the amount of $230,000 released to him, the total debt to the Bank would be $2,557,490 leaving a satisfactory relationship between the debt and security provided.

The history shows that the Bank regarded all assets and securities, including the Glen Iris property and the mortgages given over it, as part of the assets and securities available to protect it and considered that it was entitled to consider action in respect of all of them in protecting its interests. The history also shows that the Bank was remarkably patient with and generous to Mr Tayles. It is reasonably clear that this was in large measure due to the previous history of dealings which was good and the good spread of interlocking property assets. The dealings in 2001 and 2002 over the Burwood property and the then compliance with the terms of the loan facility contributed to the picture of a good record as well as reducing the debt. The purchase of the Glen Iris property also added to the quality of the spread of interlocking property assets - introducing a high-quality appreciating residential property. It cannot be said, however, that in and between 2002 and early 2004 the presence of any one asset was critical or that, but for the provision of a particular asset, Laverton or any other property would have had to be sold. But Mr Tayles because of his history and interlocking asset spread, including the Glen Iris property, was able to obtain time and able to chose which asset he sold. He chose the farm not Laverton. If he had not been able to do so, he and Mrs Davis were in the position that the Bank was entitled to sell up Laverton and Echuca and exercise its rights as mortgagee over the Glen Iris property to pay out the Biztek Bill pursuant to the original agreement. Mr Tayles was also able to persuade the Bank to let him have over $400,000 of the proceeds of sale of the farm with which to pay his creditors.

Mrs Davis may be said to have played a part, albeit modest, in maintaining that good past history and improving the spread of property. While modest compared to that played by Mr Tayles it was nonetheless of benefit to Mr Tayles and was real and he used her assets to his benefit. From the perspective of Mrs Davis' situation, her contribution was very significant. For, through this latter period, she remained heavily committed and in a situation where she could have lost everything.

The risk to her was considerable but the extent of the risk is difficult to determine because much depended on how much money Mr Tayles was spending during the drought in 2002 and 2003 to try to save his farm business. But he was plainly in financial difficulty and creditors were forced to sue. Despite the Bank's numerous earlier requests and the commencement of these proceedings in 2004 no financial statements were available during the hearing of evidence in this matter setting out the financial position in 2002 to 2004. Some purported statements for some companies were produced between the conclusion of evidence and the commencement of submissions over a period of four days but they were incomplete. Thus, during the years 2002 and 2003 Mrs Davis' financial position was seriously at risk and neither then nor now is it possible to determine precisely how serious that was.[48]

72 The mortgage over the Glen Iris property was discharged during the course of the trial.

73 Counsel for Mr Tayles submitted that his Honour had understated the extent of his client's contributions, whilst over-estimating the extent of Mrs Davis's contributions to the parties' property and financial resources.

74 So far as the purchase of the Glen Iris property was concerned, counsel for Mr Tayles submitted that his Honour had failed to take account of the fact that, apart from the $300,000 proceeds of the sale of the Burwood property, the Glen Iris property purchase was totally funded by the Biztek loan. Mrs Davis had obtained a substantial benefit as a result of acquiring a half share in that property and his Honour should not have ordered that she receive an additional quarter share of the Glen Iris property.

75 In relation to Mrs Davis's contribution to Mr Tayles' financial resources, counsel submitted that his Honour had erred in finding that Mrs Davis made a modest contribution to the conservation or improvement of the Laverton property, the Miller Street property or of the farm at Bringenbrong. Mr Tayles' companies had owned these assets before the parties began to live together and Mrs Davis had made no contribution to any increase in their value. His Honour had wrongly held that Mr Tayles was able to retain these properties and benefit from their increase in value because Mrs Davis had made herself liable to the extent of $700,000 under the mortgage over the Glen Iris property and had contributed $300,000 to the reduction of the Biztek debt.

76 Counsel contended that that there was no evidence that the Bank would have refused to make the original loan to Biztek, or to increase the amount or term of that loan, if Mrs Davis had declined to assume liability under the Glen Iris mortgage, to mortgage the Burwood property, or to agree that it might be sold to pay off part of the Biztek debt. The Bank had only required the parties to mortgage the Glen Iris property out of an excess of caution. In support of that submission counsel relied on the evidence of Mr Cowie that in 2003 there would have been sufficient security to cover the Biztek loan even if the Glen Iris property had been excluded. Counsel said that there was no evidence that supported his Honour's conclusion that the Laverton property or one of the other properties would have had to be sold, if Mrs Davis had not sold Burwood.

77 Counsel submitted that his Honour had wrongly taken the view that the mortgage of the Glen Iris property 'significantly added to the comfort of the Bank'[49] and had exaggerated the extent of the risk undertaken by Mrs Davis by assuming liability under the mortgage. The other properties owned by Mr Tayles' companies provided adequate security for the loan made to Biztek, and as a matter of commercial reality there had never been any risk that Mr Tayles (or Biztek) would default on the loan and that Mrs Davis would become liable to repay $700,000 to the Bank. Counsel submitted that there was only one technical default in relation to the Bank loans, which occurred when three of Mr Tayles companies was de-registered. Mr Tayles had kept up all the interest payments he was required to make under the terms of the loans. Further, even if Mrs Davis had been called upon by the Bank to repay some part of Biztek's debt she would have had a right of recourse against Biztek and/or Mr Tayles.

78 The written submissions made on behalf of Mr Tayles also contended that his Honour had wrongly found that Mrs Davis had contributed to Biztek's finances by offering her Burwood property as security for the loan to Biztek. It was submitted that none of the amount borrowed by Biztek at the time of the Glen Iris purchase was used to finance Biztek's operations.

79 For the above reasons counsel submitted that his Honour should not have found that Mrs Davis had made a 'modest'[50] contribution to Mr Tayles' financial resources and that any contribution which she did make was very modest indeed. Counsel also contended that the judge failed to take account of the ongoing contributions, in the amount of approximately $73,000 per year,[51] made by Mr Tayles as interest payments on the Biztek loan.

80 Counsel for Mrs Davis submitted that there was no basis for any attack on his Honour's factual findings as to her client's contributions. Section 285 of the Act requires the court to take account of direct and indirect contributions to the financial resources of the parties and is not limited to contributions to property or financial resources which were acquired during the relationship.

81 Accordingly his Honour was required to give weight to Mrs Davis's financial and non-financial contributions (if any) to the acquisition, conservation or improvement of properties owned by Mr Tayles' companies, or otherwise to his business interests. Counsel submitted that his Honour had correctly held that Mrs Davis's assumption of liability under the mortgages over the Burwood property and the Glen Iris property and the contribution of the $300,000 to reduce the Biztek debt in December 2001 had assisted Mr Tayles to acquire the Glen Iris property and to retain the properties owned by his companies at a time when the terms of the Biztek loan required their sale, in order to repay the loan by the specified date. Counsel further submitted that it was not open to Mr Tayles to argue that Mrs Davis would have had a right of recourse against Mr Tayles if she had been called upon to repay the loan by the Bank, because this matter was not argued at trial.

82 In my opinion his Honour correctly treated Mrs Davis's assumption of liability under the mortgage of her Burwood property, and under the Glen Iris mortgage, as a direct financial contribution to the acquisition of the couple's home.

83 There is no doubt that Mrs Davis acquired a valuable asset as the result of acquiring a half share in the Glen Iris property. Mrs Davis would not, herself, have been able to borrow a sum sufficient to purchase the Glen Iris property and the security offered by the properties owned by Mr Tayles' companies and his personal guarantee played a significant role in the Bank's decision to lend $1,475,000 to Biztek to finance the Glen Iris purchase. On the other hand neither Mr Tayles, nor any company owned by him, made any capital contribution to that purchase. Mr Tayles' contribution took the form of the provision of security sufficient to persuade the Bank to lend the purchase money of Glen Iris to Biztek. Mrs Davis also contributed to the acquisition of Glen Iris property by providing security and assuming liability under the personal covenant in the mortgage.

84 Section 285 of the Act does not require the court to be satisfied that the property owned by one de facto partner could not have been acquired 'but for' the contribution of the party who seeks a division of property. It is sufficient if the claimant party makes a contribution which it is 'just and equitable' to take into account in adjusting the parties' interests in property.

85 Further, I consider that his Honour correctly found that the Bank would not have made a loan of $1,475,000 to Biztek without taking security over the Glen Iris property. When Mr Cowie was cross-examined as to why the Glen Iris property was included as security for the Biztek loan, he said that he did not know. The objective evidence provided by the Bank documents support the view that Mrs Davis's assumption of liability played some part in the making of the loan.

86 Although Mr Tayles was the director of other companies which owned valuable assets, as at November 2000, the debit balance of Biztek's Bank account was $111, 253.16 and as at 6 December 2000 it was $240,965.98. The Bank's letter of approval dated 20 December 2000 was conditional on the grant of the mortgages over Burwood and Glen Iris and the provision as to the sale of Burwood to which I have referred above.[52]

87 In these circumstances it was just and equitable for his Honour to recognise Mrs Davis' contribution to the acquisition of the Glen Iris property. The question whether adequate account was taken of Mr Tayles' contribution to the acquisition of that property is considered under Ground 1 below.

Mrs Davis's indirect contributions to Mr Tayles' financial resources.

88 I also consider that his Honour correctly found that Mrs Davis made a modest contribution to the conservation or improvement of Mr Tayles' financial resources.

89 As I have said, counsel for Mr Tayles argued that the whole of the original loan to Biztek was used to finance the purchase of the Glen Iris property and that therefore Mrs Davis had made no other contribution to Mr Tayles' financial resources. Mr Tayles' evidence on that matter was equivocal. In his evidence-in-chief Mr Tayles said that none of the amount borrowed by Biztek was applied to its working capital and that the difference between the Glen Iris purchase price of $1.2 million and the total loan of $1.475 million was used to pay expenses incurred after the purchase of the property, such as stamp duty.

90 In cross-examination Mr Tayles said that 'whatever was left over' was working capital and was a continuation of Biztek's previous loan. Later in cross-examination he denied that Biztek had sought additional funds to those required for the Glen Iris purchase 'in order to keep the farming enterprise afloat' but said that 'possibly' some of the benefit of some of the funds provided was that they could be used for the farm at Bringenbrong.

91 It may be that the whole of the $1.275 million originally borrowed by Biztek for the purchase of Glen Iris was, as Mr Tayles contends, applied towards the purchase price and expenses of acquiring the Glen Iris property,[53] and that none was used as working capital by Biztek. Contrary to the assertion of counsel his Honour did not make a direct finding on the matter. However the sum of the stamp duty, buyer's advocate fee and other expenses did, in fact, exceed the difference between the purchase price and the total sum borrowed.[54]

92 But even if all of the sum originally borrowed by Biztek was applied to the purchase of the Glen Iris property and related expenses, it does not follow that Mrs Davis made no indirect contribution to Mr Tayles' financial resources. In my opinion his Honour correctly found that she did so:

• by assuming liability under the mortgage over the Glen Iris property to secure the loan to Biztek;[55]

• by enabling Mr Tayles to postpone the sale of his other properties when the Bank was pressing to reduce his debt; and

• by contributing to his good credit record which led to the Bank

extending his loan facilities, despite his cash flow position in late 2002 and early 2003.

93 It does not follow from the argument that the security provided by Mr Tayles was more than sufficient to meet the debts owed to the Bank, that Mrs Davis's contributions were limited to the $300,000 paid to the Bank following the sale of the Burwood property. The evidence supports his Honour's finding that in late 2001 and early 2002, Mr Tayles was able to buy time with the Bank, and avoid selling his own properties, because he had a good record of meeting his obligations. The payment of the $300,000 proceeds of sale contributed to that record.

94 Mr Tayles relied on Mr Cowie's evidence that the Bank would have been prepared to release the mortgage over Glen Iris, in 2003, if Mr Tayles' other legal entities had consented to this being done. However they did not actually do so. As I have said, the Bank wrote to Mr Tayles in July 2003, referring to the expiration of the bill facility, and expressing concern about the de-registration of three of his companies, Taycorp Three, Taycorp Two and Lighthouse Peak. Mr Tayles failed to provide the financial information requested.

95 In cross-examination Mr Tayles said that the companies had been de-registered by ASIC because they had failed to file annual returns, but were later re-registered. He denied that his businesses were in any financial difficulty.

96 While the Bank's position may have been that it would usually realise 'direct securities before third party securities',[56] the Bank did not promise to do so. After the $300,000 was applied to reduce the level of Biztek's debt, Mrs Davis remained personally liable for an amount in excess of half the value of the Glen Iris property and risked having the parties' home sold to meet Mr Tayles' business debts if he defaulted. As his Honour stated:

A different difficulty in assessing the risk arises because we have the benefit of hindsight and, as events transpired, the risks Mrs Davis was facing did not eventuate. On the other hand the immediate risk to her should not be exaggerated. Mr Tayles' other assets were more likely to be sold - as transpired. But throughout the relationship and afterwards, her financial future was locked into his business future. She remained at risk of having to produce a further $700,000 and so lose everything. Mr Tayles cannot avoid responsibility for this situation. Mrs Davis' risks had continued and worsened because Mr Tayles had not adhered to the original agreement. If he had, Laverton would have been sold and the Biztek debt paid out. Instead, he put his own interests ahead of her interests and, without her agreement, continued to use her assets and her personal covenant to the Bank secured over the Glen Iris property while he tried to keep his business enterprises afloat.

If Mr Tayles had honoured the original agreement with the Bank and Mrs Davis, as from early 2003, he and Mrs Davis would have each had an unencumbered 50 percent share in the Glen Iris property and Mrs Davis would have been free of her liability for the debts of Biztek and the risk of losing everything. Instead, Mr Tayles for his own business reasons, managed to keep the loan arrangement alive and it was, therefore, he who kept Mrs Davis involved in his business affairs.

It should be concluded that throughout this latter period, Mrs Davis also contributed materially to Mr Tayles' financial position and interests and it would be just and equitable that this contribution be recognised by an appropriate adjustment in her favour out of his assets. Having used her assets, he should in that way be appropriately held to account for any consequent benefit. Again, assessing the value of that contribution requires consideration of any increase in value of other relevant assets - in this context, the other assets are those in the interlocking spread, other than Glen Iris, any one of which might have been sold but was not.[57]

97 A similar situation arose in Atkins v Atkins,[58] where the wife sought a property adjustment under s 79 of the Family Law Act 1975 (Cth). In assessing the contributions made by the parties, Ryan J considered the value of personal guarantees provided by the wife securing money lent for business purposes (where the wife was involved in the business). His Honour said:

The wife provided personal guarantees to financial institutions in relation to borrowings advanced to M Pty Ltd for the purchases of the real estate upon which NT and ST businesses operate. Without the wife's acceptance of joint personal liability for the various advances made following M Pty Ltd's incorporation, it is unlikely that the husband would have been able to provide sufficient security for the various advances raised to fund business acquisitions and real estate. When one appreciates that each business and retail business freehold acquired during

cohabitation was purchased with entirely borrowed funds, it is clear that the wife's contribution as director and shareholder of M Pty Ltd is significant.[59]

98 Mrs Davis's contribution in assuming liability to the extent of $700,000 for the Biztek loan was not as significant as the contribution of the wife in Atkins because Mr Tayles' companies owned valuable assets, which were part of the security for the amount of the Biztek loan. However unlike the wife in Atkins, the security was provided by Mrs Davis in circumstances where she was not involved in Mr Tayles' business interests and did not directly benefit from them. As his Honour said:

Further, while Mr Tayles through Biztek paid the interest payable on the borrowings, at no time during the relationship did Mr Tayles make a personal capital contribution to match that of Mrs Davis as noted above. After Mrs Davis paid $300,000 to the Bank, both she and Mr Tayles stood to lose very similar amounts if the Bank chose to enforce the mortgage against them both.[60]

99 Accordingly his Honour correctly took account of Mrs Davis's direct and indirect contributions to the increases in the value of the property owned by Mr Tayles' companies, over the period of their relationship.

100 I consider whether his Honour gave sufficient weight to the account of the substantial contributions made by Mr Tayles under ground 1 below.

Taking the properties other than the Glen Iris property, the capital appreciation in the remaining properties was Laverton, $2.746M, Miller Street $400,000, and Bringenbrong $200,000 making a total of $3.3M to $3.4M. For half of that period, from the end of 2002 when the Laverton property should have been sold, an increase of the order of $1.7M occurred in the above properties, assuming the increase in value was spread evenly over the six year period.[61]

102 Mr Tayles counsel submitted that his Honour failed to give reasons for relying on the valuation of the Laverton property provided by the expert witness called by Mrs Davis, Peter Lawrence, in preference to that of Anthony Falvo, who was called by Mr Tayles. He also submitted that Mr Lawrence's valuation was 'fundamentally flawed' because it did not take account of the development costs which would be incurred in preparing the subdivided lots of that property for sale. He claimed that his Honour failed to take account of those development costs and had also failed to allow for the capital gains tax that would be payable on any sale of the properties.

103 Mrs Davis's counsel submitted that the judge's findings were consistent with the evidence given by Mr Lawrence and that Mr Lawrence's valuation evidence had not been challenged in counsel for Mr Tayles' closing address. She relied upon the following paragraph in his Honour's reasons:

As to the Laverton property, Mrs Davis has relied upon a current valuation provided by her valuer Mr Lawrence of $4,706,000. While Mr Tayles provided valuations from another valuer they have not been relied upon by his counsel. I am not surprised. That valuer was less than persuasive. In any event, in cross-examination of that valuer, counsel for Mrs Davis demonstrated that applying his approach to determining the value of the Laverton property in 2000 and comparing that with his valuation of the Laverton property in 2005, the increase in site value was $1.8M. The valuation of Mr Lawrence appeared to me to be realistic and should be relied upon. It demonstrated an increase of $2.706M from the commencement of the relationship.[62]

104 Assuming that Mr Lawrence's evidence is to be accepted (an issue to which I return) there is an error in the statements made by his Honour as to the increase in the value of the Laverton property over the six year period between September 1999 and October 2005. Mr Lawrence in fact valued the Laverton property at $4,776,000 (not $4,706,000) as at October 2005, and at $2,060,000, as at September 1999. This would produce an increase in the capital value of the Laverton property of $2,716,000 rather than a capital appreciation of $2,706,000 as his Honour stated in paragraph 125 of his reasons.[63] On the other hand, he referred to an increase of $2,746,000 in paragraph 161 of his reasons. The first error favoured Mr Tayles, whilst the second error favoured Mrs Davis.

105 In Mr Lawrence's valuation, he noted that as at September 1999 the land had a permit for a nine lot subdivision, whilst at October 2005 a permit for a 12 lot subdivision had been granted by the council. All authorities except Telstra had consented to the subdivision. His valuation set a value for each of the lots but did not include any deduction for development costs. It set out figures for comparable sales in 2005 in the same area.

106 Mr Falvo's valuation was based on a 'hypothetical development approach'. He estimated the gross realisation value of the land as $4,706,000, based on the prices realised on sale of lots of what he said was comparable industrial land. He then deducted estimated amounts including 25 percent for 'profit and risk', 'selling costs', 'estimated development costs', 'public open space contribution', 'rates and taxes for six months' and 'holding costs on land for 6 months at 7.5%'. Based on those deductions he said that the net value of the land was $2,437,000 in November 2005 and $1,685,000 in September 2003, both figures being exclusive of GST. Mr Falvo conceded during his evidence-in-chief that the allowance of $129,000 for development of public open space should not have been included.[64]

107 It will be noted that Mr Falvo's gross realisation figure for the property was $4,706,000 as at October 2005. This was about $76,000 less than Mr Lawrence's valuation and was the amount relied upon by his Honour in some parts of his Reasons, although his Honour attributed that valuation to Mr Lawrence.[65]

108 As I have said, Mr Falvo's estimate was based on what was described by him as a 'hypothetical development approach', which assessed the value of the property as being the combined selling price of the lots minus the various development costs that would need to be incurred to develop and sell the property.

109 Mr Lawrence's estimate, on the other hand, was based on the combined selling price of the lots without any deductions for development costs. According to him, the hypothetical development approach was misguided because '[the development is] not hypothetical, it's actually approved less the cost of putting the services to the blocks'. When asked by Mrs Davis's counsel whether he had attempted to calculate the cost of installing those services, he responded that he had not because this was 'beyond [his] field'. However he was critical of the deductions made by Mr Falvo for holding cost, rates and taxes. He said that these should not be made when there was a permit to subdivide and it was contemplated that the land would be sold in individual lots. Those amounts would be factored into the sale price of the lots. In cross-examination he conceded that there would be some road development costs, but did not accept the overall development costs of $83,000 per lot calculated by Mr Falvo. It was put to Mr Lawrence in cross-examination that the value of the property could only be calculated by making the relevant deductions and he did not agree.

110 Mr Tayles could have chosen to sell the Laverton land as a whole with the benefit of the subdivision permit.[66] However, both the experts assumed that the subdivided lots would be sold individually. The appropriate method to be adopted in valuing a property depends on the circumstances of each case, namely, the nature of the property (in this case industrial land), the purpose for which it was acquired, and the need to realise the value of the property.[67] Where the property must be sold to meet the orders of the court or otherwise, the appropriate method of valuation is its realisable value.[68] In assessing the realisable value of the property, account should normally be taken of the costs that would need to be incurred to realise the property.[69]

111 Without going into the detail of the deductions made by Mr Falvo, his cross-examination suggests that a number of them were excessive. (For example, Mr Falvo's $129,000 deduction for a proposed public open space contribution was abandoned and he could not clearly justify the deduction of 25 per cent for 'profit and risk'.)[70] As he conceded in cross-examination, his approach would also have resulted in a lower valuation of the land in 1999. He also conceded that in drawing on comparable prices for land in the same area he had relied on at least one sale of industrial property that did not have a permit to subdivide. For these reasons I consider that his Honour was entitled to conclude that Mr Falvo's evidence was 'less than persuasive'.

112 On the other hand Mr Lawrence accepted in cross-examination that deductions for risk and infrastructure related to gas, electricity, water, sewerage and telephone connections would need to be made. His evidence was that these services were close by and it would be a matter of 'tapping into' them. He also accepted that there would be some costs associated with road development. In light of the cross-examination of Mr Lawrence on these issues I do not consider that Mr Tayles is precluded from arguing that some costs of development should have been taken into account, though no reference was made to this matter in the closing address of Mr Tayles' trial counsel.

113 Based on that evidence I consider that the learned judge should have deducted an amount for the costs of service provision and road development in assessing the value of the Laverton property. In the Supreme Court of New South Wales the development costs of subdivision, including allowances for rates and taxes and profit and loss were regarded as relevant in assessing the value of land for the purposes of property division between de facto partners in Watt v Watt[71] and in

Molina v Fajwul.[72] It should be noted however that in neither of those cases had any permit for subdivision had been obtained.

114 Unfortunately there is insufficient evidence to estimate the deductions that should have been made for development costs. However if Mr Lawrence's evidence is accepted a deduction of approximately $20,000 per lot would be appropriate. This amounts to a deduction of $240,000 from Mr Lawrence's valuation of the property as at October 2005. That is an increase in value since 1999 of $2,476,000, rather than the figure of $2,706,000, on which his Honour relied.[73]

115 Because his Honour did not deduct any development costs in determining the value of the Laverton property, this part of ground 6 is made out.

116 Counsel for Mr Tayles submitted that his Honour over-estimated the increase in value in these properties because he did not make any allowance for the capital gains tax which would have been payable when the properties were sold.

117 Counsel for Mrs Davis submitted that Mr Tayles had not raised this issue in his defence or during the trial. No evidence about capital gains tax liability was led from Mr Falvo, and Mr Tayles' counsel at the trial made no submissions to the judge on this issue.

118 In my opinion it is not open to Mr Tayles to raise this issue on appeal, it not having been raised at the trial.[74] As the High Court said in Coulton v Holcombe:[75]

It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena or the settlement of disputes would move from the court of

first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.[76]

119 In the absence of any evidence as to whether capital gains tax would be payable and as to the amount of that tax, it is not possible for this Court to make an accurate assessment of whether any proper deduction should have been made, or as to the amount of that deduction.

120 Even if I have wrongly held that this issue cannot now be raised on appeal, it is doubtful whether capital gains tax should have been deducted from the increased values of the Bringenbrong property, the Miller Street property and the Glen Iris property in the circumstances of this case. The principles were comprehensively summarised by the Full Court of the Family Court[77] in In the Marriage of M R and K A Rosati.[78] That case concerned an application for the adjustment of property pursuant to s 79 of the Family Law Act 1979 (Cth). Their Honours stated that:

... although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s 79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:

(a) Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.

(b) If the court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.

(c) If none of the circumstances referred to in (b) applies to a particular asset, but the court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the court, while not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.

(d) There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incident of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.[79]

121 Paragraph (c) of that passage in Rosati does not apply because it refers to future needs and other factors which must be taken into account under s 75(2)(c) when property is divided between the parties to a marriage under s 79 of the Family Law Act. No equivalent provision exists in Part IX of the Act.

122 Matters relevant to paragraphs (a), (b) and (c) in that passage from Rosati can be ascertained from the detailed history of Mr Tayles' business dealings set out in his Honour's reasons.[80]

123 As I have said, the Bringenbrong property was sold in September 2004 for $1.2m, $755,000 of which was applied towards the various debts Mr Tayles owed to the Bank.[81] It is not clear from the evidence how much, if any, capital gains tax was paid following that sale. Since that information would have been readily available to Mr Tayles' legal representatives at trial, his Honour may very well have assumed that the amount relied on by Mr Tayles included the relevant deductions. Mr Tayles should not now be permitted to contend that capital gains tax deductions should have been made in relation to the value of the Bringenbrong property.

124 There was no evidence as to the likelihood of the Miller Street property being sold. The rental from that property was an important source of income for Mr Tayles and assisted him to service his debts. It is presumed therefore that the property was part of the bundle of Mr Tayles' assets which he intended to retain rather than sell. It would be inappropriate to deduct capital gains tax from the value of that property.

125 Although his Honour ordered that the Glen Iris property be sold and the proceeds distributed between the parties, there is no evidence as to whether Mr Tayles will be liable to capital gains tax on the profit on the sale of the home which Mrs Davis continues to occupy.

126 If Mr Tayles raised the issue on appeal, it would have been appropriate to make deductions for capital gains tax from the increased value of the Laverton property. Mr Tayles purchased the Laverton property as an investment and intended that it would ultimately be sold for profit. At the date of the trial, a planning permit had been granted over the property, which allowed its subdivision subject to a number of conditions. The competing valuations relied on by the parties were both based, to some extent, on the value of the subdivided lots when they were sold. No evidence was given as to the likely date when this would occur. Both valuations failed to provide an estimate on the amount of capital gains tax that would be payable following a sale of the property. Given the likelihood of the Laverton property being sold in the future, deductions for capital gains tax may have been appropriate, although it would also have been appropriate to discount the deductions to some extent to take account of the fact that the property might not be sold for some time.

127 Ultimately, Mr Tayles' failure to raise the issue at trial means that the complaint relating to his Honour's failure to take account of capital gains tax is not made out.

128 Counsel for Mr Tayles submitted that the judge failed to give proper or adequate weight to the benefit received by Mrs Davis in being able to reside and continue to reside in 'luxurious circumstances' in the Glen Iris property from 2001. Since 2003 she and her children have had sole use of the property, while the appellant has continued to pay interest on the mortgage.

129 Mrs Davis relied on the following passages of his Honour's judgment to contend that the benefits conferred on Mrs Davis were not as great as Mr Tayles contended:

Turning to the homemaker area, I am satisfied that, apart from attempts by Mr Tayles earlier on in the relationship, he and Mrs Davis settled quickly into a fairly traditional relationship in which Mrs Davis was the homemaker doing most of the domestic things such as cooking and cleaning and washing and ironing. At Burwood, Mr Tayles spent a lot of time working from his home office. Mrs Davis took the children to school, came home and cooked him breakfast, lunch and dinner. A similar pattern continued at Glen Iris. In the latter part of 2002 and in 2003, Mr Tayles was frequently away from Melbourne at the farm and accordingly the domestic benefits he obtained directly from Mrs Davis playing the role of homemaker decreased. But she continued to maintain his Melbourne home. I am satisfied, also that when at the farm she continued to perform that homemaker role. His absences at the farm meant that she carried the immediate responsibility and burden of looking after the house at Glen Iris..[82]

130 Counsel for Mrs Davis also referred to the submission made for her client below that:

While the purchase of the Glen Iris property in early 2001 conferred benefits it being a bigger house with garden and swimming pool and tennis court, it meant a bigger job for her as home maker.[83]

131 In my opinion this ground is not made out. Mr Tayles benefited by living with Mrs Davis in her home for about 16 months between September 1999 and January 2001, when they moved to Glen Iris. She benefited from the assistance he gave her with her business affairs and the other payments he made for the benefit of the family.[84]

132 After the couple moved to Glen Iris they enjoyed their new home as a couple. As Mrs Davis acknowledged, she benefited from what she described as a large increase in space and the 'fantastic facilities' available to her two children. Mr Tayles benefited from the work she did in caring for the home while he was away and having a well maintained and pleasant home when he returned from the farm. I do not accept that all the benefits of the Glen Iris property went one way.

133 Mrs Davis is not to be treated as if she was a lodger or tenant in the couple's Glen Iris home; while the relationship continued she and Mr Tayles were part of a family. Both parties contributed to their joint enterprise; Mrs Davis by assuming liability under the mortgage, paying $300,000 to reduce the Biztek debt and working on the farm; Mr Tayles by using the borrowing capacity derived from his other assets to raise the purchase money, by paying the interest on the loan and by working on the farm.

134 However from the time that the relationship broke down, the benefits received by Mrs Davis and her children as a result of living in the Glen Iris home should have been taken into account as a contribution by Mr Tayles. To that extent, I consider that ground of appeal 7 is made out. I deal below with Mr Tayles' payment of the mortgage interest.

135 Counsel for Mr Tayles submitted that the judge failed to take account of the increase in value of the Burwood property which resulted from work Biztek and Mr Tayles carried out on the property in late 2002. It was argued that the net value of the property before the works were carried out was approximately $320,000 to $330,000. Given the selling price of $443,000, Mrs Davis is said to have reaped a benefit from Mr Tayles' efforts which was not taken into account by the judge.

136 Mrs Davis's counsel submitted that the judge gave appropriate consideration to Mr Tayles' works but simply did not consider them to be very significant. Mrs Davis relies on the following passage from his Honour's reasons:

Mr Tayles contributed to the improvement of Harrison Avenue. Work was arranged through his company Biztek Pty Ltd but he did not charge for his labour. $20,000 was paid to Biztek out of the proceeds of sale but $9,000 remains unpaid. There is a dispute about the amount, Mrs Davis asserting that she had a contra credit of $6,000 relating to school fees. In the end it is not necessary to resolve these connected issues. Mr Tayles claims that this work was the reason for the increase in market value of the property - the benefit of which Mrs Davis received. There is no evidence, however, that the improvements contributed to the value of the property. Also property values were increasing over the relevant period. Nonetheless, it is reasonable to proceed on the basis that some increase in value was attributable to the improvements.[85]

137 The amount invoiced by Biztek to Mrs Davis for the works was $29,197.79. Mr Tayles, who had experience working as a builder, did not charge Mrs Davis for his own labour. The works included upgrading cupboard doors, removing carpet and polishing floor boards, minor gardening work and the conversion of a cupboard into a second shower.

138 As his Honour found, Mrs Davis paid Biztek $20,000 for this work. Mrs Davis contends that a further payment of approximately $6,500 was made by her, by way of a set-off for school fees Mr Tayles had agreed to pay but which were instead paid by her.

139 The judge correctly stated that there was no evidence which proves, on the balance of probabilities, that the increase in the sale price of the property was due to Mr Tayles' works. While it may be presumed that the works had some effect on the value, there is no way of determining, without expert evidence, whether the increase was substantially due instead to the general increases in property values during that period. Nevertheless, the work was a contribution to the improvements of Mrs Davis's property. His Honour recognised it as such. Given the payment made by Mrs Davis to Biztek, the lack of evidence regarding the effect of the works on the value of the property and the dispute regarding the $6,500 payment, his Honour was entitled to regard that contribution has having little significance. Ground of appeal 8 is not made out.

140 Finally it is necessary to consider ground of appeal 1 which alleges that his Honour's order that Mr Tayles transfer half of his interest in the Glen Iris property was not just and equitable. Counsel for Mr Tayles submitted that it was not just and equitable that Mrs Davis should receive three-quarters of the sale price of a property valued at $1,700,000 at the time of the trial, in return for a contribution of $300,000.

141 In exercising his discretion under s 285 of the Act, the learned trial judge was required to:

• ascertain the extent and value of the property of the parties;

• take account of the financial and non-financial contributions made by each of the parties to the acquisition, conservation or improvement of their property and financial resources;

• have regard to contributions, including homemaker or parent contributions, made by either of the partners to the welfare of the other partner or to the welfare of the family; and

• adjust the parties' property interests on a just and equitable basis.[86]

142 At the trial the total value of the properties held by Mr Tayles and his companies was approximately $9,806,000, (consistently with my findings on ground 2, this assumes that both parties held a half interest in Glen Iris). As I have said, the valuation of the Laverton property accepted by his Honour did not take account of development costs of approximately $240,000, but he also understated Mr Lawrence's evidence of its increase in value by $70,000. The parties agreed that the Court should make an estimate as to the value of Laverton, rather than remitting this issue for re-hearing.

143 Having discussed the expenditure made by each party to domestic items and their contribution to work in the home and on the Bringenbrong farm, his Honour said that:

In the end, I have come to the conclusion that Mrs Davis cannot prove that her farming, homemaker and other domestic contributions amounted to more than those of Mr Tayles. At the same time, he cannot prove that his were greater. In those circumstances, the contributions of Mrs Davis and Mr Tayles of a domestic nature will not affect the outcome of the proceedings.[87]

144 So far as the parties' other contributions are concerned, his Honour commented on Mr Tayles' payment of interest on the loan used to purchase the Glen Iris property as follows:

It is common ground, so far as the Glen Iris property is concerned, that Mr Tayles, through Biztek, has been paying the interest payable on the loans to purchase the property which totals approximately $60,000 per annum. This need not have been incurred, however, after 1 December 2002 if he had complied with the agreement with the Bank and Mrs Davis. In addition, paying that interest has enabled him to benefit from the substantial capital appreciation in the Laverton property. Nonetheless, it has been a cost he has borne and, in doing so, has enabled Mrs Davis and her children to remain in the Glen Iris property. .[88]

This contribution has included something like $300,000 ($180,000 since 2003) in interest payments on the borrowings that gave him and the Davis family the opportunity to live in a substantial home with pool and tennis court.[89]

145 In my opinion his Honour under-estimated the amount of the financial contribution made by Mr Tayles in paying interest on the loan, particularly after the couple separated. He should also have given greater weight to the contribution Mr Tayles made to the acquisition of the Glen Iris property, by borrowing its purchase price through his company Biztek and securing that loan through a personal guarantee and guarantees by his companies and first mortgages over his and his companies' properties.

146 Having held that Mrs Davis had made a modest contribution to the increase in the value of the property owned by Mr Tayles and his companies his Honour concluded that:

Taking the properties other than the Glen Iris property, the capital appreciation in the remaining properties was Laverton, $2.746M, Miller Street $400,000, and Bringenbrong $200,000 making a total of $3.3M to $3.4M. For half of that period, from the end of 2002 when the Laverton property should have been sold, an increase of the order of $1.7M occurred in the above properties, assuming the increase in value was spread evenly over the six year period. To value Mrs Davis's contribution as being of the order of $400,000 would be just and equitable in light of those figures. It would represent approximately 12% of the total increase in value and approximately 25% of the increase in value over the last three years. It is, I suggest, a just and equitable figure having regard to the opportunity Mrs Davis gave Mr Tayles to retain the Laverton property and the use and benefit derived by Mr Tayles from being able to retain his asset portfolio during the relationship and to have Mrs Davis continue to share the liability and risks of the loan facility through the money and securities she gave in support of that loan facility.

Mrs Davis has a half interest in the Glen Iris property. The ultimate question is what adjustment of Mr Tayles' property would be just and equitable having regard to her contributions. It seems to me that a just and equitable adjustment of the assets of Mr Tayles would require that he transfer half of his half interest in the Glen Iris property to Mrs Davis. I should add that I have come to the conclusion that to require an adjustment greater than that to any material degree would enter into the field of compensation of Mrs Davis for the actions of Mr Tayles. I am also satisfied that no other adjustment of his assets should be required.[90]

147 This Court is not entitled to overturn the exercise of his Honour's discretion, simply because it may have given slightly lesser weight to Mrs Davis's contributions.[91] However in my opinion his Honour undervalued Mr Tayles' contributions and over-valued the increase in the value of the Laverton property.

148 I consider that his Honour's valuation of Mrs Davis's contribution to Mr Tayles' business interests during their four year relationship was unduly

favourable to her. It is therefore necessary to consider the order required to achieve a just and equitable adjustment of the parties' property.

149 In evaluating the respective contributions of the parties, the Supreme Court of New South Wales has said that:

... 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 it in order to reach an accounting balance one way or the other, which is to be then 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.[92]

This statement was endorsed by the New South Wales Court of Appeal in Kardos v Sarbutt.[93]

150 Doing the best I can, I would order that Mrs Davis receive 65 per cent of the value of the Glen Iris property, rather than the 75 per cent ordered by his Honour.

151 I agree that the appeal should be allowed substantially for the reasons given by Neave JA. I wish only to make these further observations.

152 The respondent contributed to the purchase price of the Glen Iris property by her joint participation in obtaining the balance of the purchase price via the mortgage. Whether on this basis or on the finding of a common intention made by the trial judge - which was but faintly challenged on appeal - the respondent acquired a substantial beneficial interest in the property. The appellant's submission that the respondent received her share by way of a gift is unsustainable.

153 The submission that there was no causal connection between the mortgage and extension of credit facilities to Biztek and the appellant's other activities which required cash flow assistance must also be rejected. The 'mortgage' in fact consisted of two mortgages, the first being the mortgage over the 24 Harrison Avenue, Burwood property in respect of Biztek's indebtedness to the bank. This was a property owned by the respondent in her own right and she alone incurred liability under this mortgage. The second was the mortgage over the Glen Iris property in respect of Biztek's indebtedness to the bank. Both mortgages contributed to the security package which supported the borrowings of Biztek, and by this means, to the other companies in the appellant's group. The mortgage of the Burwood property can also be seen as an individual 'contribution' by the respondent who by executing it reduced the value of her interest in her property and subjected herself to a liability in accordance with the terms of the mortgage.[94] When the Burwood property was later sold and the Burwood mortgage discharged, the proceeds of the sale were then applied to the account of Biztek.

154 The Laverton property was over valued by the Trial judge as the valuer's assessment did not take account of development costs. This error was readily understandable as the appellant did not identify that oversight in closing submissions. In closing the appellant had contended that the respondent had no entitlement to share in his other assets.

155 The precise value of the Laverton property was not established but the evidence tendered demonstrated that there was a significant increase in its value. The parties encouraged the Court to make an estimate of its value rather than remit the matter for further hearing. Based upon the conclusion that the respondent has

only a modest entitlement to a share of that increase it is appropriate that the Court estimated its value.

156 The trial judge in my view misconceived the nature and degree of risk to which the respondent was exposed in providing the guarantee. The evidence did not suggest that the appellant's entities were at risk of failing. The asset base of the appellant's companies were sound. Their gearing did not exceed 50 percent of their assets. The evidence disclosed that financial institutions had no concerns and would in any event have realized the appellant's other assets before recourse to Glen Iris. Furthermore, the respondent's risk, whatever its extent, was offset by the fact that the appellant had undertaken an equivalent risk. This did not appear to have been given any or adequate weight by the trial judge.

157 The trial judge's orders should be varied in the manner Neave JA proposes.

158 I agree with the reasons of Neave JA and the orders which her Honour proposed to make.

[1] Part IX of the Act applies to 'domestic partners' and 'domestic relationships', rather than 'de facto partners': see ss 275 and 278. That provision applied to the parties, although their relationship commenced before the amendment came into operation: s 276. I have described the couple as 'de facto partners' for the sake of convenience.

[2] This related to the lodging of a caveat by Mrs Davis over the Bringenbrong farm owned by Lighthouse Peak.

[3] [2006] VSC 219. Hereafter reference is made to 'Reasons'.

[4] Ibid [2]-[6]. His Honour noted that '[d]ifferent information was conveyed by counsel as to the agreed values. For example $3.4 million in 1999 and $3.8 million in 2005, a rise of $400,000. But it was also said that the current agreed valuation of the North Sydney properties was $3.96 million. I will proceed with the lesser figure of $400,000 as the increase'.

[6] This was despite Mr Tayles' concession during cross-examination that a form of domestic relationship began in January 2000.

[7] Section 281(1) of the Act requires the parties to have lived together in a domestic relationship for two years, except where s 281(2) applies.

[8] Reasons, [23]-[27]. His Honour then referred to a number of matters, including Mr Tayles' denial of his knowledge of the nature of mortgages and his initial evidence in cross-examination as to the arrangements he made with the Bank.

[12] Fox v Percy [2003] HCA 22; (2008) 214 CLR 118.

[13] By his calculations, 59 per cent in 2000, 63 percent in 2001, 36 percent in 2002 and 18 percent between January and September 2003. I am satisfied that these figures are conservative. In addition they do not include time spent together at the farm or on holidays.

[16] For example, the invitation to Mr Tayles' birthday party dated 19 July 2003, which was to be held at 'Ian and Sue's'.

[17] HAJ Ford and WA Lee, Principles of the Law of Trusts ('Ford and Lee'), [21.100]-[21.120].

[18] Pearson v Pearson [1961] VicRp 108; [1961] VR 693, 695 (Gavan Duffy, Sholl and Adam JJ). In Pearson the title was taken in the name of the husband and the question was whether the wife had contributed to its purchase.

[19] [1984] HCA 81; (1984) 155 CLR 242, 246-7 (Gibbs CJ), 257-8 (Mason and Brennan JJ). See also Ingram v Ingram [1941] VicLawRp 20; [1941] VLR 95.

[20] [1984] HCA 81; (1984) 155 CLR 242, 246 (Gibbs CJ), 257-8 (Mason and Brennan JJ), 267-8 (Deane J). See also Milne v Kaipalexis (1990) DFC 95-083.

[21] Although in certain circumstances they could have given rise to a constructive trust. Such a trust may arise when one party has acted to his or her detriment on the basis that he or she will acquire an interest in the property (see Ford and Lee [22.4020]) or because it would be unconscionable for one party to retain benefits conferred on the basis of a common endeavour which subsequently fails see Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583; Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137.

[23] This assumes that the presumption could apply even though the loan was made to Biztek, which then advanced the amount for purchase of the home. Although this issue was not argued, it is not clear that the presumption would apply in these circumstances.

[24] [1984] HCA 81; (1984) 155 CLR 242, 246 (Gibbs CJ).

[26] Calverley v Green [1984] HCA 81; (1985) 155 CLR 242, 260 (Mason and Brennan JJ), 250 (Gibbs CJ assuming but not deciding this point), 268-9 (Deane J) and see also Napier v Public Trustee (WA) (1980) 32 ALR 153; Ford and Lee, [21.170].

[27] Wirth v Wirth [1956] HCA 71; (1956) 98 CLR 228; see also Moate v Moate [1948] 2 All ER 486; Tory v Jones (1990) DFC 95-095, 76, 230.

[28] There is some doubt as to the application of Calverley v Green when the mortgage liability is not incurred directly as part of the transaction of purchasing the property. In this case, Biztek, not Mr Tayles, borrowed the whole of the purchase price from the Bank and, in turn, Biztek lent that amount to the purchasers, Mr Tayles and Mrs Davis.

[34] Ford and Lee, [21.130]; Shephard v Cartwright [1954] UKHL 2; [1955] AC 431.

[37] [1936] HCA 40; (1956) 55 CLR 499, 504-5 (Dixon, Evatt and McTiernan JJ).

[38] [1986] HCA 17; (1985) 161 CLR 513.

[39] Under Family Law Act 1975 (Cth), s 79.

[40] [1986] HCA 17; (1985) 161 CLR 513, 517-8 (Mason and Deane JJ, citing the principle in House v The King).

[41] $20,000 in reimbursement for work done at the Burwood property and used to reduce Biztek's debt to the Bank.

[42] This was the Bank's position referred to in Neil Cowie, the Bank's Credit Manager's, evidence and accepted by the parties.

[44] Three of his companies had been de-registered. See [95] below.

[46] Agent's fees were approximately $30,000. The remainder was deposited by Mrs Davis.

[51] The $73,000 figure appears to be roughly calculated on the basis of a interest rate of 6 per cent and line fee of 1.3 per cent applied to a $1m facility**.**

[52] See [55]-[56] above.

[53] However as I have said, Mr Tayles appeared to concede during cross examination that the loan was partly to be used as working capital by Biztek.

[54] A dispute arose at trial as to whether the net proceeds of the bill facility were $1.136m or $1.155m. The correct amount is immaterial for the purposes of determining this ground of appeal as the increased borrowings appear to have been wholly applied towards stamp duty and the buyer's advocate and other fees.

[55] Forster v Outred & Co [1982] 1 WLR 86.

[56] The judge did not accept Mr Tayles' allegation that there was an agreement that the Bank would call on all of his other assets ahead of the Glen Iris property. See Reasons, [25].

[58] [2007] Fam CA 656.

[64] Counsel also abandoned any reliance on this figure.

[66] Mr Tayles' exhibits included a draft Contract of Sale of the whole of the property for $1,615,000.

[67] In the Marriage of Antmann (1980) 6 Fam LR 560, 565 (Evatt CJ, Bulley and Nygh JJ); In the Marriage of Kelly (No 2) (1981) 7 Fam LR 762, 768 (Evatt CJ, Emery SJ and Nygh J).

[68] In the Marriage of Shaw (1989) 12 Fam LR 806, 817-8 (Lindenmayer, Nygh and Bulley JJ) ('Shaw').

[70] He explained this as partly based on the fact that the developer might choose to pay the whole of the road development costs, rather than the amount apportioned to the developer by reference to frontage.

[71] (1988) 12 Fam LR 589, 598.

[72] (1994) 17 Fam LR 512, 516.

[73] The figure of $2,476,000 is calculated by deducting $240,000 from $2,716,000.

[74] Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447, 46-1 (Gleeson CJ, McHugh and Gummow JJ).

[75] [1986] HCA 33; (1986) 162 CLR 1.

[76] Ibid 7 (Gibbs CJ, Wilson, Brennan and Dawson JJ).

[78] [1998] FamCA 38; (1998) 23 Fam LR 288 ('Rosati').

[84] I refer to those contributions below.

[86] Property Law Act 1958, s 285. See also Kardos v Sarbutt [2006] NSWCA 11; (2006) 34 Fam LR 550; Giller v Procopets [2008] VSCA 236; (2008) 40 Fam LR 378, 447-8 (Neave JA).

[91] Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513, 519-20 (Stephen J).

[92] Davey v Lee (1990) 13 Fam LR 688, 689 (McClelland J).

[93] [2006] NSWCA 11; (2006) 34 Fam LR 550, 561 (Brereton J, with whom Basten JA and Hunt AJA agreed).

[94] Forster v Outred & Co [1982] 1 WLR 86, 98-100; cited with approval in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 528-9 (Mason CJ, Dawson, Gaudron and McHugh JJ).