DI v MM [2005] QDC 380

DISTRICT COURT OF QUEENSLAND CITATION: DI v MM [2005] QDC 380 PARTIES: DI Plaintiff v MM Defendant FILE NO/S: BD 1588/04 DIVISION: Civil PROCEEDING: Claim ORIGINATING COURT: District Court of Queensland DELIVERED ON: 7 December, 2005 DELIVERED AT: Brisbane HEARING DATE: 16 September, 2005 JUDGE: Alan Wilson SC, DCJ ORDERS: 1 The Respondent pay the Applicant $45,000 2 The property at Russell Island owned jointly by the parties be sold and the net proceeds of sale divided equally between the parties, save for an adjustment thereof by way of reimbursement to the Respondent of the sum of $1643.29 for outgoings thereon CATCHWORDS: DE FACTO RELATIONSHIPS – property settlement – where relationship short – where applicant made contributions which enabled respondent to reduce the mortgage debt upon a home she owned before the relationship commenced – where her home increased significantly in value during the relationship Property Law Act 1974 E v S [2003] QSC 378 L v H [2004] QDC 152 McMahon v McMahon (1995) FLC 92-606 NFO v PFA [2005] QSC 176 Quinn (1979) FLC 90-677 Norbis v Norbis (1986) 161 CLR 513 S v B [2004] QCA 449 -- 1 of 5 -- 2 COUNSEL: Mr P Hackett for the Plaintiff Mr R I Cameron for the Defendant SOLICITORS: Peter Daley for the Plaintiff Thomas Solicitors for the Defendant [1] The male plaintiff DI and the female defendant MM lived together for a time, without marrying1 . Now, he seeks an order adjusting their property interests in the manner permitted by Part 19 of the Property Law Act (1974), which codified the process by which the court can undertake that exercise. MM agrees there should be some adjustment in DI’s favour, but they cannot resolve the measure of it. A central issue is the extent, if any, to which DI might benefit from the significant increase in the value of a home MM owned when the relationship began, which surged during the recent property boom. [2] A question to be determined first, and one relevant to the issues in the claim, is when a relationship of the kind envisaged by the legislation began. DI pleaded that occurred in and from about April 2000; in his evidence he amended that to June, but agreed that was the date he and MM began keeping company and cohabitation did not commence until August 2001, when he moved into MM’s home. Ss 260 and 261 of the PLA provide that, to achieve status as a ‘de facto relationship’ and attract the use of the legislation, the parties must ‘… live together on a genuine domestic basis’ as a ‘couple’2 . On any view that did not occur until he moved into her home in August 2001. [3] He moved out in October 2003. The relationship deteriorated after the middle of that year, but I did not understand MM to contend for some earlier date of cessation. She also accepted relations remained on foot between April and September 2002 when DI lived and worked in Muswellbrook, but continued to return for visits3 and to deposit his income into an account to which she had access. It follows the relationship, for the purposes of the legislation, subsisted between August 2001 and October 2003. [4] Both parties were in their late thirties when it began. DI is now 43, and MM 44. Little was disclosed about their personal histories, but MM had two children who lived with her. It is not suggested that is an important factor and there was no evidence about the extent, if any, to which they remain dependent. Before he moved into MM’s house DI was living in rented accommodation, employed, and with assets worth $38,812 of which $23,412 was, however, contained in superannuation funds. MM owned her house, worth $125,000, on which she owed about $47,000. Her other assets were worth about $52,000 but, again, much of this was superannuation savings of $33,000. In percentage terms, initial contributions to the asset ‘pool’ of the relationship were 23% from the male applicant DI, and 77% from MM. [5] Earnings during the relationship were virtually equal. At its end, the house had increased in value to $255,000, MM’s mortgage debt on it was largely extinguished, 1 Any publication of these proceedings is subject to the restrictions set out in ss 342 and 343 of the PLA 2 See S v B [2004] QCA 449 3 Or meet MM at some point between Muswellbrook and Brisbane: T15.15 -- 2 of 5 -- 3 and the parties jointly owned another parcel of land on a Moreton Bay island worth $25,000. That land was purchased for $9,750 in mid-2003 with funds obtained by drawing upon MM’s home mortgage. [6] Taken together, their joint and separate assets had, at the end, a combined value of $358,000. Ascribing wealth to each party by reference to pure legal entitlements and dividing the value of the island property equally at separation means, then, that MM then had assets worth $312,000, and DI $46,000; in percentage terms, 87%/13%. The dramatic improvement in MM’s position, in both actual and comparative terms, is the product of the increase in value of her home during the recent property boom, and the reduction of her mortgage debt. [7] The parties are each in good health, and continue to earn. There were no contingencies affecting either which coloured the exercise to be undertaken under Part 19 of the PLA, which requires the court take a number of matters into account and achieve a division of the parties’ property which is just and equitable4 . Those matters include direct and indirect financial and other kinds of contribution to the advancement of the parties’ joint interests, their respective positions at the beginning and end of the relationship, and the effect of the order5 . The exercise involves applying principles imported, unsurprisingly, from the Family Court jurisdiction6 . With short relationships, a preference has been shown for examining each joint and individual asset discretely rather than taking a ‘global’ approach7 . [8] It was clear that, during the relationship, DI was content to let MM manage their joint funds; she wished to do so, and he seems to have accepted she was a better money manager. The evidence also pointed to conclusions that under her management she looked after joint expenses but, also, used pooled funds to almost extinguish her mortgage; that it was primarily at her initiative, and through her efforts, that the island property was purchased; that she drew against that mortgage to pay for the island property; and, that both financial and non-financial contributions were effectively equal. [9] The fact that the relationship was of relatively short duration is an important consideration8 . Nevertheless, it was contended for the applicant DI that the significant increase in joint, net worth during this short cohabitation of about $190,000 should, fairly (and notwithstanding much of it was a windfall accruing to a property owned by MM), be divided equally between the parties so that he received the Bay island property, and MM paid him $81,650. [10] MM also wished to keep the island property; otherwise, her contention was that DI’s actual contribution to the reduction of her mortgage debt was capable of calculation and amounted to about $28,000, and his entitlement should be limited to reimbursement in that sum, plus half the value of the island land: in total, about $40,000. 4 As to the meaning of this phrase in the legislation, see L v H [2004] QDC 152, per Robin QC, DCJ at para [46]. 5 PLA ss 291-295, 297-309 6 E v S [2003] QSC 378, per Mullins J at [30]; NFO v PFA [2005] QSC 176 7 eg, McMahon v McMahon (1995) FLC 92-606; and, see Norbis v Norbis (1986) 161 CLR 513, per Wilson and Dawson JJ at 532-33 8 The short duration of the relationship – 15 months – was described by Mullins J as an ‘overriding consideration’ in E v S (supra) at [67] -- 3 of 5 -- 4 [11] MM’s mortgage debt had only diminished in a small way in the two years before cohabitation. Her purported allocation of the parties’ respective earnings, in Ex 13, to reduction of the mortgage debt in a way which allegedly supported her calculation of DI’s contribution was at her discretion and, it was conceded, essentially arbitrary. The evidence compels the conclusion that DI’s earnings were a major factor in the substantial reduction, and the distribution of the pool must reflect that. [12] Nor could the parties agree about the way the windfall increase in the value of her home should be addressed, each taking predictable positions. On DI’s part, it was said that but for his concurrence with MM’s suggestion that they defer any further purchases of real estate until she had paid off her mortgage, he (or both, together) might have bought more land so he would also have had the chance to profit during the boom. This would have been more persuasive had he shown some history of, or propensity for, investment in real estate. I do not know how or why it happened that he owned none when the relationship began, only that he did not. This contention is also undercut, too, by the purchase of the island property, principally at MM’s behest. These circumstances are not strongly persuasive that he has, on the balance of probabilities, foregone a good chance to profit in the same way. [13] Windfalls are not amongst those things to which the PLA directs attention, save indirectly in ss 2919 , and 309, which requires consideration of ‘… any fact or circumstance the court considers the justice of the case requires to be taken into account’. Cases in the Family Court indicate that, in short marriages, windfalls may largely be left to lie in the hands of the party who possessed the asset at the outset10 , a notion which accords, I think, with justice and equity when the relationship is a short one, and the increase is not attributable to any act on the part of the non- owner, and is simply coincidental. The converse proposition – that one party should, at the end of a short relationship, bear an equal share of any significant loss in the value of an asset owned by the other at the outset – would no doubt be stoutly resisted, and for good reason, there being no implied term in these kinds of de facto marriages that things are for worse, as well as better. [14] The Bay island property, which both wants, is at base a matter of adjustment. Aspects of justice and equity relevant to it are not vivid. Neither has an overwhelming claim and the fairest result is its sale, and distribution of the proceeds equally with some adjustment for MM’s payments since separation towards its rates and upkeep. [15] Otherwise, DI has a claim for fair recompense for his contribution to the pool from which MM’s mortgage so dramatically reduced. Between October 2001 and October 2003 over $53,000 was paid against it, some of which was used to fund the purchase of the Bay parcel. During their time together DI received, by arrangement with MM, an allowance for his own purposes which was not munificent. It is clear he lived relatively frugally, and made sacrifices which helped MM reduce her mortgage. The absence of any large reduction in the two years before his contributions began compels the conclusion that it is appropriate to attribute the greater part of the reduction to his contributions. 9 ‘Contributions to property or financial resources’ 10 Quinn (1979) FLC 90-677 (Full Court of the Family Court) -- 4 of 5 -- 5 [16] Other relevant factors include that DI enjoyed the advantage of living in MM’s home for most of the period of the relationship, and there is a possibility she may have reduced the mortgage to some extent without his contribution. Giving some weight to these and like contingencies, an order that she pays him $45,000 reflects a just and equitable resolution of their intermingled finances. [17] MM paid rates for and maintained the Bay land, and should be reimbursed in the agreed amount of $1643.29. There is no basis for any other interference with the parties’ respective assets. The orders then will be (a) that the Bay island property be sold and the net proceeds be distributed equally, save for an adjustment to reimburse her for that agreed expenditure; and, (b) that she pay him $45,000. [18] I will hear further submissions about costs. -- 5 of 5 --