FO v HAF [2006] QCA 555 [2007] 2 Qd R 138

SUPREME COURT OF QUEENSLAND CITATION: FO v HAF [2006] QCA 555 PARTIES: FO (plaintiff/respondent) v HAF (defendant/appellant) FILE NO/S: Appeal No 4280 of 2006 SC No 2744 of 2004 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 19 December 2006 DELIVERED AT: Brisbane HEARING DATE: 8 November 2006 JUDGES: McMurdo P, Keane JA and White J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDER: 1. Appeal allowed 2. Judgment varied by setting aside paragraphs 2 and 3 of the orders of 28 April 2006 and ordering in lieu that: "2. The respondent receive 70 per cent and the appellant 30 per cent of the net proceeds of sale derived by the operation of paragraph 1 hereof. 3. The appellant shall keep the respondent indemnified against the liabilities of the parties referred to in paragraph 28 of the reasons for judgment of the learned trial judge save for the liabilities to be discharged by the operation of paragraph 1 hereof." 3. The respondent to pay the appellant's costs of the appeal CATCHWORDS: FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS - ADJUSTMENT OF PROPERTY INTERESTS - GENERALLY - Part 19 Property Law Act 1974 (Qld) proceedings - dispute over date at which relationship became a "de facto relationship" under the Act - dispute over value of property which each party brought to joint property pool at commencement of relationship - whether learned trial judge erred -- 1 of 16 -- 2 Acts Interpretation Act 1954 (Qld), s 32DA Property Law Act 1974 (Qld), s 260, s 261, s 286, s 291, s 292, s 305 Beneke v Beneke (1996) FLC 92-698, cited Burgess v King [2005] NSWCA 396; No 40260 of 2005, 18 November 2005, cited Davut and Raif (1994) FLC 92-503, cited Hickey and Hickey (2003) FLC 93-143, cited In the Marriage of Lenehan (1987) 11 Fam LR 615, cited Kardos v Sarbutt [2006] NSWCA 11; (2006) DFC 95-332, cited KQ v HAE [2006] QCA 489; Appeal No 5545 of 2006, 24 November 2006, applied Mao v Peddley [2001] NSWSC 254; No 4011 of 1999, 9 April 2001, cited Norbis v Norbis (1986) 161 CLR 513, cited Pierce v Pierce [1998] FamCA 74; (1998) FLC 92-844, cited PY v CY [2005] QCA 247; (2005) 34 Fam LR 245, applied Thompson v Department of Social Welfare [1994] 2 NZLR 369, cited COUNSEL: C J Forrest, with C R Dick, for the appellant T L Kirk SC for the respondent SOLICITORS: Primrose Couper Cronin Rudkin for the appellant Evans & Company Family Lawyers for the respondent [1] McMURDO P: I agree with Keane JA. [2] KEANE JA: The respondent was born on 4 February 1967. The appellant was born on 5 November 1947. Each had previously been married. They began seeing each other in 1997, and a sexual relationship developed although they lived and worked in different cities. The respondent became pregnant to the appellant in July 1998 and gave birth to a son in April 1999. In December 1998, the parties moved into a home together, giving effect to a decision made in August 1998. Their relationship finally ended in July 2002. Since the parties separated, their son has lived principally with his mother. [3] The respondent brought proceedings for a property adjustment order pursuant to s 286 of the Property Law Act 1974 (Qld) ("the PLA"). The learned trial judge upheld the respondent's claim, making orders the effect of which was to provide to the respondent 70 per cent of the net proceeds of sale of the Hope Island property plus $435,516.81, so as to produce a total sum reflecting 70 per cent of the value of the parties' assets, apart from their superannuation entitlements, and less liabilities apart from the liabilities secured on the Hope Island home. The issues on appeal [4] The appellant challenges the decision of the learned trial judge on a number of grounds which can best be identified in the course of summarising the principal conclusions of the learned trial judge. -- 2 of 16 -- 3 [5] The parties were, and remain, at odds over when their relationship had developed to the point at which it became a "de facto relationship" within the meaning of s 261 of the PLA. The learned trial judge resolved this dispute in the respondent's favour, finding that their relationship had become a relationship of that kind "at least by December 1997".1 The appellant disputes the correctness of this finding, contending that the parties were not in a de facto relationship until 19 December 1998 when the parties began cohabitation. The appellant points, in this regard, to the circumstances that, until December 1998, each party met his or her own financial commitments, and each party maintained a separate home. [6] Associated with the issue as to the date when a de facto relationship commenced between the parties is a dispute as to the value of the property which each party brought to their joint pool of property at the commencement of the relationship. The learned trial judge found that "the [respondent] brought approximately $82,000 and the [appellant] brought approximately $219,000 into their joint pool of property".2 The appellant contends, largely on the basis that the de facto relationship did not commence until December 1998, that the respondent initially contributed $71,500 and the appellant $241,000 to their joint pool of assets. On the appellant's view, this would give rise to initial contributions in the ratio 77/23 in the appellant's favour rather than 73/27 in accordance with his Honour's findings. [7] At the time of trial, the property of the parties included a house at Hope Island, purchased by the parties in September 1999 for $500,000, and a beach unit, purchased by the appellant in mid-1998 in his own name and using his own funds. At trial, the value of the beach unit was $475,000. The appellant contributed approximately $175,000 to the initial purchase price of the Hope Island property. At the time of trial, it was valued at $1,350,000. It is unnecessary for present purposes to set out the detail of the other assets which his Honour regarded as being included in the pool of the parties' assets at trial. The gross value of the property pool was, as calculated by the respondent, $1,959,642.3 The position of the parties was as follows: Property - $1,959,642 Superannuation Respondent - $ 23,655 Appellant - $ 452,565 Liabilities - $ 635,119 $1,800,743 [8] The Hope Island house was mortgaged to the respondent's father, who had originally lent the parties $400,000 to help them acquire it. That loan was advanced on favourable terms as to interest. The respondent's father wished to benefit his daughter, but did not make a gift of the $400,000 because of the appellant's involvement. The sum of $81,369 was owing by way of interest at the time of trial. The parties had other liabilities. There was, for example, $157,000 owing to a bank secured over the beach unit bought by the appellant in 1998. The total of the liabilities of the parties at trial was approximately $635,119.4 1 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [19]. 2 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [37]. 3 Cf Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [20] – [21]. 4 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [27] – [28]. -- 3 of 16 -- 4 [9] At trial, the respondent's superannuation entitlements were worth $23,655.26 and the appellant's were worth $452,565.83.5 [10] The learned trial judge made what he described as an assessment of the financial contributions made by or on behalf of the parties to their assets based on the approximate values at trial.6 [11] In making this assessment of the financial contributions of the parties to the Hope Island property, the learned trial judge accepted that the appellant had contributed $175,000 directly to the Hope Island property, and a further $175,000, being half of the loan from the respondent's father. His Honour found that the respondent made a direct cash contribution of $20,000 as well as her half share of the liability for the loan from her father, ie $175,000. The learned trial judge decided to treat "the savings in interest payments and the opportunities obtained by the favourable acquisition of the [Hope Island] property … as essentially a contribution made by or on behalf of the [respondent]".7 The value of the interest saving was assessed as being worth $105,000 but this was left to one side in the assessment of contributions to assets as it was "not an asset or resource that is accessible by the parties".8 The Hope Island property had appreciated by approximately $825,000 to the date of trial.9 The respondent's father indicated that he would make the moneys lent in respect of the island property available to her again once the parties have repaid the loan less some expenses he has incurred in respect of the respondent's legal costs.10 [12] His Honour's assessment of the financial contributions of the parties to their assets and resources treated the increase in the value of the Hope Island house as a contribution solely by the respondent to the pool of assets available at the time of trial. His Honour took the parties' superannuation entitlements into account, but excluded the interest saving of $105,000 on the Hope Island loan, to arrive at a combined total of net assets and financial resources of $1,800,743.90 in respect of which his Honour's assessment of the financial contribution by each of the parties was $1,047,055.26 by the respondent and $1,388,807.64 by the appellant, giving a ratio of approximately 45/55 in favour of the appellant.11 [13] The appellant's principal contention on the appeal is that the learned primary judge erred in treating the capital appreciation of the Hope Island property as a contribution solely by the respondent to the pool of assets available for distribution. [14] His Honour did not make a specific assessment of the non-financial contributions of the parties, or of the homemaking and parenting considerations referred to by s 292 of the PLA. His Honour did, however, address these issues generally. In this regard, the respondent gave up her employment when she moved in with the appellant although she has subsequently taken up part-time employment. She was, and remains, the primary carer of the parties' son. His Honour found that the respondent "bore the major share of the homemaking or parenting contributions of the family when she and the [appellant] lived together and even more so in respect 5 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [22]. 6 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [66] – [67]. 7 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [52]. 8 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [68]. 9 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [46]. 10 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [54]. 11 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [69]. -- 4 of 16 -- 5 of her son since the separation".12 While the parties were together, the appellant supported the respondent and their child.13 He currently pays child support of $1,200 per month.14 [15] The learned trial judge accepted that the respondent had made a major contribution to the relationship by giving up her job and relocating to live with the appellant.15 For the near future, the respondent is likely to remain as the primary carer of the child and to have limited employment capacity as a result.16 While the respondent is: "likely to go back to work full time at some stage in the future when the care of their child allows her to do that. Her ability to obtain very remunerative full time work is likely to be much less than if she had continued in the work force consistently through the period she has and will spend bringing up the child."17 His Honour said that the appellant is "likely to continue working for the foreseeable future because of his economic situation".18 [16] There was a significant disparity in the current earning capacity of the parties. The appellant's 2005 gross earnings were $172,168 per annum, but this figure reflected the receipt of commissions from previous years; and his maintainable annual salary was said to be more of the order of $100,000.19 The respondent's gross income from part-time work in the year ended 30 June 2005 was $12,000 per annum.20 When the respondent gave up her job in 1998, she was earning approximately $51,000 per annum.21 [17] At the time of trial, the appellant contributed $1,200 per month to child support while the respondent was responsible for about $1,725 per month. It does appear that the respondent's father, who is a wealthy man, is bearing the cost of the education of the child at a private school.22 [18] In his reasoning toward his decision in relation to the adjustment of the parties' rights, his Honour referred particularly to the appellant's "significantly greater earning capacity and superannuation entitlements, which continue to be contributed to by the [respondent's] role as the main carer for their child" as well as to the respondent's "continuing obligations as the parent of their child and their effects on her earning capacity".23 [19] His Honour did not, the appellant complains, adequately explain the ramifications of these considerations for the exercise of adjustment which his Honour performed in that his Honour did not, for example, explain what effect these considerations had upon the 45/55 ratio of financial contributions to which his Honour referred. As a 12 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [56]. 13 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [40]. 14 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [53]. 15 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [56]. 16 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [58]. 17 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [61]. 18 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [61]. 19 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [40]. 20 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [41]. 21 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [41]. 22 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [43]. 23 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [72]. -- 5 of 16 -- 6 result, his Honour's reasoning is opaque so far as the extent of each party's non-financial contributions, and contributions under s 292 of the PLA, are concerned. In relation to the process of adjustment, the appellant also complains that his Honour did not take into account the circumstance that the appellant was 58 years of age at the date of trial and nearing the end of his working life when he will be entirely reliant upon his superannuation. The appellant argues that the quantum of the appellant's superannuation entitlements do not reflect any substantial contribution by the respondent. Finally, and in summary, the appellant contends that the 70/30 division of the property pool, excluding superannuation, is not just or equitable. The respondent was 39 years of age at the date of trial with positive employment prospects in the future: she has time to generate superannuation credits in the future. The appellant also complains that his Honour did not take into account the child support being paid by the appellant to the respondent for their son. [20] I turn now to discuss in greater detail the issues raised by the contentions advanced by the appellant. The commencement of the relationship [21] The commencement of the legal relationship of marriage is readily established by the solemnities and formalities by which the parties declare that relationship to each other and to the world. By contrast, questions as to whether and when a relationship has become a de facto relationship may be attended with considerable uncertainty. [22] Section 261 of the PLA provides that "[a] de facto relationship is the relationship between de facto partners". The term "de facto partner" is defined by s 32DA of the Acts Interpretation Act 1954 (Qld) as follows: "(1) In an Act, a reference to a 'de facto partner' is a reference to either 1 of 2 persons who are living together as a couple on a genuine domestic basis but who are not married to each other or related by family. (2) In deciding whether 2 persons are living together as a couple on a genuine domestic basis, any of their circumstances may be taken into account, including, for example, any of the following circumstances— (a) the nature and extent of their common residence; (b) the length of their relationship; (c) whether or not a sexual relationship exists or existed; (d) the degree of financial dependence or interdependence, and any arrangement for financial support; (e) their ownership, use and acquisition of property; (f) the degree of mutual commitment to a shared life, including the care and support of each other; (g) the care and support of children; (h) the performance of household tasks; (i) the reputation and public aspects of their relationship. (3) No particular finding in relation to any circumstance is to be regarded as necessary in deciding whether 2 persons are living together as a couple on a genuine domestic basis. (4) Two persons are not to be regarded as living together as a couple on a genuine domestic basis only because they have a common residence. -- 6 of 16 -- 7 (5) For subsection (1)— (a) the gender of the persons is not relevant; and (b) a person is related by family to another person if the person and the other person would be within a prohibited relationship within the meaning of the Marriage Act 1961 (Cwlth), section 23B, if they were parties to a marriage to which that section applies. (6) In an Act enacted before the commencement of this section, a reference to a spouse includes a reference to a de facto partner as defined in this section unless the Act expressly provides to the contrary." [23] Section 260 of the PLA provides: "Extended meaning of de facto partner for pt 19 (1) A reference to a de facto partner is a reference to either 1 of 2 persons who— (a) are, under the Acts Interpretation Act 1954, section 32DA (section 32DA), de facto partners of each other; or (b) have been, or would have been had section 32DA been in force, de facto partners of each other, but who are no longer living together as a couple on a genuine domestic basis within the meaning of section 32DA. (2) Subsection (1)(b) applies despite the Acts Interpretation Act 1954, section 32DA(6)." [24] It can be seen that the legislation does not provide any great assistance in resolving the uncertainty which attends the identification of the point at which a de facto relationship can be said to have commenced. None of the matters listed in s 32DA(2) of the Acts Interpretation Act 1954 is necessarily of decisive significance in this regard: those matters are identified as relevant considerations. The ultimate issue to which they are relevant, however, is whether the parties "are living together … on a genuine domestic basis". This phrase necessarily draws attention to whether the parties are living, or have lived, together to maintain a household in a relationship which exhibits the characteristics of the relationship of marriage, save for the solemnities involved in the formal exchange of wedding vows. That this focus is correct is confirmed by the reference in s 292(1)(b) of the PLA to "the family constituted by the de facto partners …". [25] In PY v CY,24 this Court confirmed that continuing cohabitation in a common residence is not necessary to establish the continuation of a "de facto relationship" where the parties have lived together as a couple, and have not effected a permanent separation. Nevertheless, the definition of "de facto relationship" suggests that, usually, the parties should have, at some stage, been "living together as a couple on a genuine domestic basis". It must be shown that "the parties have so merged their lives … that they [were], for all practical purposes, living together as a married couple".25 The fact that the parties have never lived together in a common abode must be acknowledged to be a strong indicator that they have not "lived together as 24 [2005] QCA 247 at [7]. 25 Thompson v Department of Social Welfare [1994] 2 NZLR 369 at 374; Mao v Peddley [2001] NSWSC 254 at [54] – [57]; [2002] D.F.C. 95-249 at 77,522; KQ v HAE [2006] QCA 489 at [16] – [20]. -- 7 of 16 -- 8 a couple on a genuine domestic basis". This indication will be especially significant where the parties have not shared the burden of maintaining a household. [26] The circumstances of human affairs are so various that the courts should refrain from attempts to define more precisely than the legislature the kind of relationship regulated by Pt 19 of the PLA. Nevertheless, as this Court said in KQ v HAE,26 it will be an exceptional case where two people who have not lived in a common residence, and who have not made actual provision for their mutual support, can be said to have been "living together as a couple on a genuine domestic basis". A case is not rendered exceptional in this context merely because the parties intend, eventually, to live together as a couple. That is simply a case where an existing courtship has not matured into the kind of commitment in which the parties have so merged their lives that they were, for all practical purposes, a married couple. Just as people who are affianced cannot be confused with people who are married, so people who intend to live together as a couple should not be confused with people who do live together as a couple. [27] With these considerations in mind, I turn to consider the appellant's criticism of the finding of the learned trial judge that "[t]he probabilities are that the parties' de facto relationship did commence at least by December 1997".27 [28] In the present case, the respondent calculated from her diary that she and the appellant had lived together for 207 days between July 1997 and December 1998.28 The learned trial judge described this figure as "rather misleading" because it treated every day on which the parties saw each other for some time as a whole day.29 In fact, until December 1998, the parties had resided in different cities. For the most part, they met when their work commitments brought them together. Further, because they worked for competing companies in the same industry, they did not publicise their "courtship" as his Honour described it.30 [29] The respondent also relied upon the fact that the parties had been in a monogamous sexual relationship from July 1997, and the fact that she had attended a housewarming party a few weeks after they had met so that the appellant's friends could meet his "new partner".31 His Honour rightly did not regard these facts as warranting the conclusion that the relationship which was then developing between the appellant and respondent had matured to the point where they could be said to be de facto partners. [30] The parties went on a holiday together with the appellant's children in December 1997 and January 1998. They stayed in one bedroom at a coastal resort. In February 1998, they jointly purchased a dog.32 In March 1998, the respondent accompanied the appellant when he inspected a property which he was considering purchasing.33 When the appellant broke his leg in March 1998, the respondent looked after him for a few days. When the respondent told the appellant that she was pregnant in August 1998, they then discussed "how shared living arrangements 26 [2006] QCA 489 at [20]. 27 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [19]. 28 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [10]. 29 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [11]. 30 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [11]. 31 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [15]. 32 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [16]. 33 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [15]. -- 8 of 16 -- 9 could be implemented".34 They decided that the respondent would give up her job and move in with the appellant. [31] Until December 1998, each party met his or her own financial commitments and maintained separate homes until they commenced living together in December 1998. The purchase of a Palm Beach unit which the appellant bought in mid-1998 was entirely financed by the appellant and was bought in his name only. [32] The appellant submits that the circumstances relied upon by the respondent suggest a characterisation of their relationship as one of "courtship" until August 1998. Thereafter, the respondent's pregnancy focussed the parties' intentions on progressing to make a substantial commitment to each other. It was at that time that the parties decided that the respondent should become the primary caregiver for their child and that they take up residence together with the appellant as the primary breadwinner for the household. Their decision in this regard was not consummated until December 1998. [33] In my respectful opinion, these submissions are compelling. It was apt to describe the developing relationship between the parties as a process of "courtship" during the period between July 1997 and December 1998. The parties' activities together, during that period, are explicable on the basis that, as the respondent said of their discussions after she found that she was pregnant in August 1998, "with all the travelling backward and forward, we wanted to end up together".35 But the circumstance that the parties wanted to "end up together" is, in truth, an acknowledgment that they were not yet "together". Whatever the intentions of the parties may have been as to whether or when they might actually get together, those intentions had not been given effect when the respondent became pregnant. It was then she and the appellant began making plans for their future together, but those plans did not actually take effect in a practical "merger of their lives" until December 1998. The conclusion that the parties commenced living together as a couple on a genuine domestic basis before December 1998 cannot be sustained. [34] I conclude that the de facto relationship between the parties did not commence until December 1998. This conclusion is said to be relevant in two respects. First, the appellant contends for different findings as to the initial contributions of the parties at that later time: the appellant contends that his initial contribution was $241,000 rather than $219,000 as determined by his Honour, and that the respondent's contribution was $71,500 rather than $82,000 as found by his Honour. Secondly, the term of the relationship is reduced by a year, this being a consideration relevant to an adjustment of property rights under s 286 of the PLA.36 I shall revert to the second of these points in the context of the ultimate adjustment of the parties' rights. I turn now to discuss the first of these points in the context of a discussion of the arguments relating to the contributions of the parties. The contributions of the parties [35] In relation to the respondent's initial contribution, it has not been demonstrated that it was not open to his Honour to conclude that the respondent's initial contribution 34 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [15]. 35 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [13]. 36 See s 305 of the PLA. -- 9 of 16 -- 10 to the relationship was not $82,000, whichever date is taken to mark the commencement of the relationship.37 [36] As to the amount of the appellant's contribution, the appellant's evidence was that, as at December 1998, the assets he brought to the relationship included $30,000 which was partly in an account with the Colonial Bank. The appellant was not cross-examined in relation to this evidence. His Honour did not expressly reject this evidence, nor did he give any reason which might suggest that he had tacitly rejected it. [37] Accordingly, in my respectful opinion, it should have been held that the parties' initial financial contributions to their relationship were $241,000 by the appellant and $82,000 by the respondent. [38] The dispute between the parties which is most significant in financial terms relates to the learned trial judge's conclusion that the entirety of the interest saving in relation to, and the capital appreciation of, the Hope Island property should be treated as a contribution by the respondent to the pool of the parties' assets. In this regard, the learned trial judge made a number of relevant findings. They were that: • "but for his relationship with the [respondent], the [appellant] would not have received such a benefit from her father which was quantified as a saving of not less than $105,000 for interest, the provision of subsidised, luxury, residential accommodation for the parties and their child, his retention of the ownership of the Fosters shares yielding in excess of $30,000 capital growth, his retention of the Beach unit allowing capital appreciation in excess of $250,000 and the acquisition and retention of the island property with capital growth of at least $500,000 and possibly significantly more."38 • "[t]he evidence of the [appellant's] capacity to service his existing debts suggests strongly that he would not have been able to service this $350,000 loan also, had it been provided on normal commercial terms".39 • "it seems appropriate … to treat this advance as one made principally on behalf of the [respondent] even though in form it was a loan to both parties."40 [39] The principal focus of the appellant's criticism of the judgment is that the loan by the respondent's father was "in substance" a loan to both appellant and respondent, and that, while the favourable terms on which the respondent's father lent the money was a factor to be considered under s 291 of the PLA, the appellant's cash contribution was $175,000 plus his notional share of the liability for the principal of $175,000 plus his liability for a half-share of $81,400 for interest. While the loan may have been made available by reason of the benevolence of the respondent's father towards her, that is no reason to ignore the circumstances that the appellant made an initial cash contribution of approximately $175,000 as against $20,000 by the respondent, and the appellant will have contributed, by the time of the sale of the property, cash of $545,000 as against $195,000 by the respondent. The circumstance that the loan was motivated by the benevolence of the respondent's father towards her rather than the appellant is not a reason to deny the appellant any benefit of the capital appreciation of the property which he has actually paid for. The respondent's point that the gain could not have been made without the loan 37 Cf Beneke v Beneke [1996] FLC 92-698 at 83,361 – 83,362. 38 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [46]. 39 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [47]. 40 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [48]. -- 10 of 16 -- 11 from the respondent's father is, I think, effectively answered by the appellant's response that the loan would also not have been made without the appellant's assumption of a liability to repay it.41 [40] The effect of his Honour's order is to divide the available property pool of $1,305,022 as approximately $913,515 to the respondent and approximately $391,506 to the appellant. When one reflects that the original overall financial contributions to the relationship were $82,000 by the respondent and $241,000 by the appellant, that outcome is one which plainly calls for clear and strong justification in terms of the other considerations relevant to the adjustment of rights effected by his Honour's order. The process of adjustment [41] The appellant argues that the absence of more explicit justification for an outcome so disproportionate to the parties' respective initial financial contributions42 is itself an error of law in the reasons of the learned trial judge. It is tolerably clear, however, that his Honour arrived at the 70/30 split in favour of the respondent by virtue of the appellant's "significantly greater earning capacity and superannuation entitlements, which continue to be contributed to by the [respondent's] role as the main carer for their child" and the respondent's "continuing obligations as the parent of their child and their effects on her earning capacity".43 [42] In my respectful opinion, the circumstance that the appellant's superannuation entitlements were much greater than the respondent's had, and has, in truth, little to do with the relationship between the parties: the appellant's superannuation entitlements are the product of a working life which was nearing its end when the appellant and the respondent had a relatively brief relationship. The basis for concluding that the relationship had any substantial effect on the extent of the appellant's superannuation entitlements is, in my respectful opinion, too flimsy to lend substantial support to the radical adjustment of entitlements effected by a 70/30 division in favour of the respondent. [43] It may also be accepted that the respondent's earning capacity has been adversely affected by reason of her parenting responsibilities. On the other hand, she is considerably younger than the appellant. He is nearing the age at which a working life normally concludes. His Honour seems hardly to have taken this into account. [44] Moreover, his Honour proceeded on the footing that the relationship had lasted for four and a half years rather than three and a half years. For the reasons given above, I consider that his Honour was in error in this regard. The difference of one year is significant in the case of this short term relationship. The respondent argues that the respondent's contributions as primary carer of the child continue, and will continue, into the future. That is true, but it is not a reason to ignore the fact that the respondent's contributions to the welfare of the appellant have ceased. Nor is it a reason to deprive the appellant of any benefit in the capital appreciation of the Hope Island house. 41 Cf Pierce v Pierce [1997] FLC 92-844 at 85,881 [28] – [30]; Burgess v King (2005) 64 NSWLR 293 at 298 [24] – [26]. 42 Cf Burgess v King (2005) 64 NSWLR 293 at 298 [25]. 43 Primary Court Reasons, unreported, SC No 2744 of 2004, 28 April 2006 at [72]. -- 11 of 16 -- 12 [45] Further, while the loan, and consequent acquisition of the Hope Island house, were advantages in respect of which the respondent was entitled to substantial recognition, that is not a reason to treat the contributions made by the appellant as dead money, that is to say, as having little or no effect upon the increase in the value of the property of the parties over the course of their relationship. That approach was, I think, apt to distort the ultimate adjustment of property rights in a way which is contrary to the scheme of pt 19 of the PLA. It is necessary to refer to the provisions of the legislation in order to explain this observation. [46] Section 286 of the PLA provides: "(1) A court may make any order it considers just and equitable about the property of either or both of the de facto partners adjusting the interests of the de facto partners or a child of the de facto partners in the property. (2) In deciding what is just and equitable, a court must consider the matters mentioned in subsubdivision 3. (3) It does not matter whether the court has declared the title or rights in the property. (4) In this section – adjust, for interests of persons in property, includes give an interest in the property to a person who had no previous interest in the property." [47] The reference in s 286(2) to subsubdivision 3 includes s 291 to s 296 of the PLA. By reason of s 296, the matters mentioned in s 297 to s 309 of the PLA must be considered by the court "to the extent they are relevant in deciding what order adjusting interests in property is just and equitable". [48] Section 291 of the PLA provides relevantly: "(1) The court must consider the financial and non-financial contributions made directly or indirectly by or for the de facto partners … to – (a) the acquisition, conservation or improvement of any of the property of either or both of the de facto partners; and (b) the financial resources of either or both of the de facto partners. …" [49] Section 292 of the PLA provides relevantly: "(1) The court must consider the contributions, including any homemaking or parenting contributions, made by either of the de facto partners … to the welfare of – (a) the de facto partners; or (b) the family constituted by the de facto partners and 1 or more of the following – (i) a child of the de facto partners; …" [50] A court must also consider, to the extent that they are relevant in deciding what order adjusting interests in property is just and equitable: -- 12 of 16 -- 13 • "the age and state of health of each of the de facto partners";44 • "the income, property and financial resources of each of the de facto partners", and "the physical and mental capacity of each of them for appropriate gainful employment";45 • "whether either de facto partner has the care of a child of the de facto partners who is under 18 years";46 • "the contributions made by either of the de facto partners to the income and earning capacity of the other de facto partner";47 • "the length of the de facto relationship";48 • "the extent to which the de facto relationship has affected the earning capacity of each of the de facto partners";49 and • "any fact or circumstance the court considers the justice of the case requires to be taken into account".50 [51] It has frequently been emphasised that the judicial discretion conferred by s 286(1) of the PLA and its analogues in other statutes should not be constrained by pre- determined guidelines.51 It is essential, however, that the matters referred to in the provisions set out above be taken into account, and that they are "seen, in the reasons for judgment, to have been taken into account".52 To this end, the four step approach explained by the Full Court of the Family Court in Hickey v Hickey53 provides a useful discipline to ensure clarity of thought and transparency of judicial reasons. [52] The Full Court of the Family Court explained in Hickey and Hickey,54 in relation to the Family Law Act analogue of pt 19 of the PLA, that the first step in making a property adjustment order is the identification and valuation of the property, resources and liabilities of the parties. The second step is the identification and assessment of the contributions of the parties to their pool of assets and the determination of their contribution-based entitlements in accordance with s 291 to s 295 of the PLA. The third step is the identification and assessment of the factors in s 297 to s 309 of the PLA to determine the adjustment to the contribution-based entitlement. The fourth step in the process is consideration of the result of these earlier steps to determine whether that result is just and equitable in accordance with s 286 of the PLA. While this approach should be understood as a guide to the exercise of the statutory discretion, it also serves to focus attention upon the 44 Section 297 of the PLA. 45 Section 298 of the PLA. 46 Section 299 of the PLA. 47 Section 304 of the PLA. 48 Section 305 of the PLA. 49 Section 306 of the PLA. 50 Section 309 of the PLA. 51 Norbis v Norbis (1986) 161 CLR 513; In the Marriage of Lenehan (1987) 11 Fam LR 615; Kardos v Sarbutt [2006] NSWCA 11 at [51]; (2006) 34 Fam.L.R. 550 at 564. 52 Davut and Raif [1994] FLC 92-503 at 81,237. 53 [2003] FLC 93-143 at 78,386, cf Kardos v Sarbutt [2006] NSWCA 11 at [28] – [29]; (2006) 34 Fam.L.R. 550 at 558. 54 [2003] FLC 93-143 at 78,386. -- 13 of 16 -- 14 importance attached by the legislature to the identification of the contributions of the parties to the parties' assets as the basis from which the process of adjustment is to proceed. That process is distorted if one party's financial contribution to the assets of the parties is treated to a large extent as dead money having little or no bearing upon the increase in value of the parties' assets. [53] Substantial adjustments in the respondent's favour are, no doubt, necessary to recognise that the capital appreciation of the Hope Island property was an advantage which would not have enured to the parties in the absence of the loan made by the respondent's father, and the greater, and enduring, non-financial contribution of the respondent as well as her contributions under s 292 of the PLA. Nevertheless, the 70/30 division in favour of the respondent assumes the proportions of an expropriation of the appellant's financial contributions, and his equity in the Hope Island house, rather than a just and equitable adjustment of the parties' rights in accordance with the requirements of the PLA. [54] In summary, for the reasons set out above, I consider that the learned trial judge's decision has miscarried. The discretion reposed in the court by s 286 of the PLA must be exercised afresh. What should this Court do? [55] There must, as I have said, be a substantial recognition of the respondent's contributions, under s 291 of the PLA, both financial and non-financial, as well as her contributions under s 292. There must also be a substantial recognition of the adverse effects of the relationship upon her earning capacity by reason of her role, including her ongoing role, as the primary carer of their child. Neither the findings of the trial judge nor the evidence, nor principle, permit or require mathematical precision in the assessment of the respondent's contributions. It is clear, however, that the respondent's contributions were such as to warrant a radical departure from what was described in Burgess v King55 as the prima facie position that the parties should participate in the capital appreciation of an asset of the relationship in accordance with their initial contributions to the relationship. [56] The respondent should, in my opinion, receive as large a share of the capital appreciation of the Hope Island house as is consistent with a recognition that the appellant's financial contribution to the relationship, and to the acquisition of the Hope Island house in particular, was not dead money. [57] Leaving the Hope Island house to one side, the assets which now reflect the appellant's initial contribution were worth approximately $587,000 at trial. The debts associated with the appellant and his assets were approximately $200,000. It would be appropriate that, as between himself and the respondent, he should bear the burden of these debts. [58] The parties' equity in the Hope Island house was approximately $920,000, with $430,000 being owed to the respondent's father. A 70/30 division of the equity in the Hope Island property in favour of the respondent would give her $644,000 from that asset. She should retain the other assets which now reflect her initial contribution to the relationship. It should be made clear that she should have no further responsibility for the debts of the relationship as between herself and the appellant. 55 (2005) 64 NSWLR 293 at 298 [25]. -- 14 of 16 -- 15 [59] If such a division of the proceeds of the Hope Island property were ordered, the appellant would receive $276,000 which, when added to his assets of $587,000 less his debts of $200,000, would leave him with $663,000 from the net property pool of approximately $1,305,022. [60] That outcome, it seems to me, provides sufficient recognition of the respondent's financial and non-financial contributions under s 291 and s 292 as well as the adverse effects upon her earning capacity due to the interruption in her career as a result of the birth of their son, and her responsibilities as primary carer. It also recognises that, with the likelihood being that the respondent's father will make a gift to her of what is left after expenses of the $400,000 loan, the appellant will have borne very much the lion's share of the debt burden on the Hope Island house. On the other hand, this division recognises the financial reality of the appellant's ongoing responsibilities for the support of the child and the likelihood that he is approaching the end of his working life, and avoids casting an unduly onerous burden on him. [61] The division which I propose approximates a 50/50 division of the total pool of the parties' assets. It provides the appellant with a little more than half of the net property pool of $1,305,022 while the respondent would receive a little less than half. The appellant will, however, have to bear the burden of the parties' debts apart from the mortgage debt on the Hope Island property. This consideration tips the balance of advantage in favour of the respondent. Checking the overall fairness of the proposed division in this way tends, I think, to confirm that the adjustment which I propose is one which is just and equitable as between the parties. [62] The focus of the appeal was on paras 2 and 3 of the orders made by the learned trial judge. These were the paragraphs by which the 70/30 division was effected. The adjustment which I consider should be made could be given effect by deleting paras 2 and 3 of the orders made by the learned trial judge and inserting, in lieu thereof, an order that the parties share the net proceeds of sale of the Hope Island house on a 70/30 basis in favour of the respondent, and an order confirming the obligation of the appellant, as between himself and the respondent, to meet the liabilities primarily associated with the appellant. Conclusion and orders [63] In my opinion, the appeal should be allowed. The order of the Court should be: 1. Appeal allowed. 2. Judgment varied by setting aside paras 2 and 3 of the orders of 28 April 2006 and ordering in lieu that: "2. The respondent receive 70 per cent and the appellant 30 per cent of the net proceeds of sale derived by the operation of paragraph 1 hereof. 3. The appellant shall keep the respondent indemnified against the liabilities of the parties referred to in paragraph 28 of the reasons for judgment of the learned trial judge save for the liabilities to be discharged by the operation of paragraph 1 hereof." 3. The respondent should pay the appellant's costs of the appeal. -- 15 of 16 -- 16 [64] WHITE J: I agree with all that Keane JA has written but would mention particularly my agreement with his analysis of the facts and his conclusion about the commencement of the de facto relationship between the parties. [65] There will be cases where the parties to an existing de facto relationship separate, sometimes for lengthy periods, for example, members of the defence forces on deployment away from home or a teacher undertaking country service, and the relationship survives the separation, at least for a time. But it will require quite exceptional facts to conclude that parties, who have not lived together as a couple merging their lives so “… that they [were], for all practical purposes, living together as a married couple”, Thompson v Department of Social Welfare [1994] 2 NZLR 369 at 374, could be described as “persons who are living together as a couple on a genuine domestic basis” as required by s 32DA of the Acts Interpretation Act 1954 (Qld). See also the discussion in KQ v HAE [2006] QCA 489. [66] I agree with the orders proposed by Keane JA -- 16 of 16 --