C v S [2004] QDC 163

1 DISTRICT COURT OF QUEENSLAND CITATION: C v S [2004] QDC 163 PARTIES: C Plaintiff v S Defendant FILE NO/S: 270 of 2002 DIVISION: Maroochydore Registry PROCEEDING: Civil Trial ORIGINATING COURT: DELIVERED ON: 1 April 2004 DELIVERED AT: Brisbane HEARING DATE: 12, 13 February 2004 JUDGE: Rackemann DCJ ORDER: I will make orders to give effect to an adjustment of $282,388.50 in favour of the plaintiff. I will invite submissions as to the details of the orders which should be made. CATCHWORDS: DE FACTO RELATIONSHIPS – adjustment of property interests – where relationship of 8 years duration but where parties lived under the same roof for closer to 6 years – where defendant made significant financial contributions initially and during relationship – where non-financial contributions to relationship approximately equivalent – where defendant left relatively rich in property and financial resources compared with the plaintiff Part 19, Property Law Act 1974 In the Marriage of Kennon (1997) 22 FamLR 1 E v S [2003] QSC 378 COUNSEL: Mr RM Galloway for the plaintiff SOLICITORS: Schultz Toomey O’Brien for the plaintiff Defendant self-represented -- 1 of 18 -- 2 This Application [1] The plaintiff seeks an adjustment of property interests pursuant to Part 19 of the Property Law Act 1974. In particular, she seeks an order that the defendant pay her the sum of $200,000 or such greater sum as will represent a 40 per cent division of assets in her favour. By the time the matter came on for hearing the net value of the assets was such that the plaintiff’s claim exceeded the jurisdiction of this court. The parties however consented to the matter proceeding and leave was granted to file the necessary documentation to effect the enlargement of the court’s jurisdiction1. Counsel for the plaintiff confirmed at trial that no remedy other than under part 19 of the Act was sought2. While not conceding that the plaintiff ought to obtain any relief, the defendant submitted that something in the range of 10 per cent to 15 per cent would be more reasonable than the 40 per cent claimed. The Property and Financial Resouces [2] The parties were in agreement in relation to the identity of the property and financial resources which should be taken into account3 and their value as at the date of trial as follows: Defendant’s Assets 1. 12 Sundew Street $400,000.00 2. 34 Nojoor Road $700,000.00 3. Colonial First State Investment $55,000.00 4. Westpac Investment $69,151.00 5. Shares $12,745.00 Defendant’s Financial Resources 1. Superannuation $110,000.00 1 See s 329(4) of the Property Law Act 1974. 2 There was no pursuit of any claim based on a constructive trust. 3 There were some assets of relatively minor value which the parties agreed to exclude. Their inclusion would have made no significant difference. -- 2 of 18 -- 3 Plaintiff’s Assets 1. Jewellery $500.00 Plaintiff’s Financial Resources 1. Superannuation $10,728.00 Liabilities Defendant’s liabilities 1. Mortgage – Sundew Street $143,658.00 2. Capital Gains Tax Liability in $40,000.00 respect of sale of property at Mudjimba Road In the agreed list tendered to the court, the superannuation investments were included as assets, but are more correctly regarded as financial resources for the purposes of the Act4. The Principles [3] The court may make such order as it considers just and equitable5. In deciding what is just and equitable the court must consider the matters mentioned in sub subdivision 36. Sub subdivision 3, in turn, requires the court to consider a range of matters including, relevantly for present purposes, financial and non-financial contributions made directly or indirectly to property or financial resources7 and contributions to family welfare, including homemaking contributions. Sub subdivision 3 also requires the court to have regard to the matters mentioned in sub subdivision 4, to the extent that they are relevant in deciding what order adjusting interests in property is just and equitable8. Sub subdivision 4 sets out a range of specific matters in ss 297-308 and also requires the court to consider any fact or 4 See s 263. 5 See s 286(1) Property Law Act 1974. 6 See s 286(2) Property Law Act 1974. 7 See s 291 Property Law Act 1974. 8 See s 296 Property Law Act 1974.. 9 See s 309 Property Law Act 1974 -- 3 of 18 -- 4 circumstance the court considers the justice of the case requires to be taken into account9. [4] The objectives of the introduction of Part 19 were discussed in E v S [2003] QSC 378 at para 30, which I respectfully adopt. The De Facto Relationship [5] The plaintiff was born on 22 September 1951 and the defendant on 12 July 1949. The two met in 1991 when the defendant moved into the residence at 34 Nojoor Road immediately adjoining the house which had been occupied by the plaintiff and her husband and family. It would seem that a romantic association began to form later that year. Early in 1992 the plaintiff, who was separated from her husband, moved to Noosa. The romantic association with the defendant progressed with each sleeping at each other’s home on a reasonably regular basis. Ultimately the two made a commitment which saw them live together from about August 1993 in a de facto relationship within the meaning of s 261. This ultimately ended almost eight years later in June 2001. I am satisfied that the relationship prior to August 1993, although romantic, was not a de facto relationship within the meaning of the Act. The relationship is not one which ended before the commencement of Part 19 of the Act. It is one in respect of which the court has jurisdiction to make orders under Part 19 of the Act. [6] There were some periods of separation during the relationship. At various times each took jobs which involved physical separation from the other. The plaintiff had -- 4 of 18 -- 5 a job in Melbourne for some five months, while, at a different time, the defendant took a job in Brisbane for six months (while working for Rural Press). There were other periods of separation, some associated with work and some associated with strained times in the relationship. I am satisfied that the relationship continued, notwithstanding these periods but the time the parties spent living under the same roof was closer to six years than eight. SubSubdivision 3 Factors (i) Initial Contributions Each of them brought to the relationship some household furniture, although the defendant’s was perhaps a little more basic than the plaintiff’s. Each also had a motor vehicle. While the defendant’s vehicle was owned by him, the plaintiff had taken over a lease of a vehicle in which there was, in effect, no equity. This vehicle was subsequently traded, for $6,000, on a $15,000 Toyota Celica which was ultimately repossessed in 1997. [7] Significantly, the defendant brought to the relationship the home at 34 Nojoor Road which he had acquired, before meeting the plaintiff, in mid 1990 for about $117,000 and which was unencumbered. The passage of time and expenditure on renovations (which he estimated at $35,000), could reasonably be assumed to have increased its value to some extent by the time the de facto relationship commenced in August 1993, although no expert valuation evidence as at that date was provided. That unencumbered property still represents the single largest asset and, indeed, the majority of the net worth of the property and financial resources. -- 5 of 18 -- 6 [8] The plaintiff brought to the relationship her business, operated under a franchise arrangement, which had commenced the previous year. To commence the business, the plaintiff had expended $15,500 comprising fixtures and fittings at a cost of $7,500 and an $8,000 franchise fee. She claimed however, that the business should be valued at $35,000 having regard to forward bookings and the sale price of other businesses operated under the same franchise name in other localities. I do not accept however, that the business had that value. There was no valuation evidence put before the court in that regard. I do not know the individual circumstances of the other businesses with which the plaintiff sought to draw comparison. The evidence is that the plaintiff’s business failed, and she became a bankrupt as a result. There is no sufficient evidence that the business was ever in such a position as to warrant a $35,000 valuation being put upon it. [9] The initial contributions to property and financial resources therefore were mainly those of the defendant, particularly the home at Nojoor Road. (ii) Contributions during relationship [10] The direct financial contributions made during the period of the relationship were also mainly that of the defendant, a graphic artist, who was employed throughout the relationship. At the start of the relationship he worked three days a week for the Sunshine Coast Daily and one day a week for the Bayside Star earning around $20,000 per year in aggregate. In late 1995 he took a job in Brisbane with Rural Press where he earned approximately $35,000 per year. Later he worked for the Sunshine Coast Daily earning about $40,000 per year and, from 1997 received a package of about $50,000 per year. -- 6 of 18 -- 7 [11] The finances and bank accounts of the plaintiff and the defendant were kept separate during the relationship. [12] In 1996 the plaintiff’s business failed and she was made bankrupt. It would appear that the business had never made a profit of any significance, although some drawings were taken in order for the plaintiff to meet the payments on her vehicle (which was ultimately repossessed in May 1997) and to fund living expenses. In that regard, the plaintiff contributed half the cost of some particular household expenses, particularly petrol, food, electricity and telephone. She also claims to have made some contribution towards holiday savings. All this saw her regularly contributing in the order of $150 per week to the household, although she said she also spent more to purchase some household goods such as bed linen. The defendant however, met the remainder of the household expenses, including those to which the plaintiff made no contribution such as home insurance, rates, firewood, plumbing, electrical and other repairs, motor vehicle registration and insurance. [13] Following the failure of her business, the plaintiff obtained employment in a number of different positions over time, mainly in the modelling and fashion industries. This put her in a better financial position, in terms of income (earning, for the most part, around $500 per week net – although the earnings varied from about $400 per week to about $600 per week in the different positions) than when she had her own business, but it does not appear to have been reflected in personal savings or any substantial increase in the financial contributions made to the relationship. This in part was no doubt due to her understandable desire to assist her daughters, although it probably also reflects, to some extent, her ability to manage money. -- 7 of 18 -- 8 [14] During the course of the relationship, some improvements were effected to the Nojoor Road property. These included renovation of an area initially built as an art studio (which the plaintiff said was funded by the sale of about $12,000 worth of shares10), a new kitchen (funded from moneys given to the defendant by his parents) and some work on the drains or waterholes on the property. This work was not funded by the plaintiff, although she obviously had input as to how things would be done (particularly in relation to the renovation and new kitchen). [15] The parties also cooperated in taking steps to lobby the Council against what they saw as inappropriate development which might have impacted upon the amenity of the area in which their property was situated. [16] During the relationship further assets were acquired. These included some shares which, in effect, were bought and sold by the defendant albeit that some were put in the plaintiff’s name. The shares currently held by the defendant are shares in his previous employer to which he became entitled by reason of his employment. [17] More significantly, two investment properties were purchased and tenanted. The ongoing financial obligations in relation to those properties were met by the defendant, but were offset, to a significant extent, by the rental income (and the defendant had the opportunity to claim a tax deduction on the shortfall). [18] Approximately one year before the end of the relationship, the defendant received a gift of money from his parents. The Colonial First State investment currently held by the defendant represents money gifted to him by his parents late in the relationship together with monies he has added to it and growth through investment. The plaintiff did not contribute to that investment. 10 as is noted later, shares were effectively bought and sold by the defendant, although some were put in the -- 8 of 18 -- 9 [19] Each made other contributions, including non financial contributions. [20] The defendant has artistic skills and was encouraged and assisted by the plaintiff in endeavours to sell his artwork. This included (but was not limited to) helping him prepare for an exhibition and transporting artwork. While the plaintiff’s efforts in this regard were probably underestimated by the defendant, they did not bear much fruit in substantially adding to the property or financial resources of the couple. The exhibition was a failure and returns from subsequent endeavours, produced only modest returns in the order of $7,000 (being about 10 paintings at $500 each together with $2,000 being a half share of a commissioned piece 11). There was also evidence of the plaintiff encouraging the defendant to conduct lessons in cartooning and lending some assistance in that regard, however there was no evidence of such activities contributing, in any substantial way, to property or financial resources. [21] The defendant, on the other hand, gave the plaintiff some assistance with her business by attending graduations, loading, unloading and transporting materials and the like. This was probably to a lesser degree than the assistance which the plaintiff had given the defendant in his artistic endeavours. Similarly, however, it produced little in terms of increasing the property or financial resources of the couple, since the business failed. [22] The defendant also assisted the plaintiff in attending her subsequent employment by providing transport when she did not have her own car. Following the repossession of her own car, the plaintiff also had the use of the defendant’s car more generally, including for trips to the Gold Coast to visit her daughter and granddaughter. plaintiff’s name. 11 There was also evidence of a friend of the plaintiff purchasing a number of paintings for $1,000 in aggregate. -- 9 of 18 -- 10 [23] A significant area of dispute pertains to the two investment properties bought during the relationship. In 1997 a property was purchased in Mudjimba Road and in 1998 another at Sundew Street. Both were purchased in the name of the defendant who raised 100 per cent of the purchase price by mortgage finance. Both properties were tenanted. The Sundew Street property was capable of being let to two tenants. Since the parties’ separation, the Mudjimba Road property has been sold. The defendant’s capital gains tax liability relates to the sale of that property. The net proceeds of the sale of that property are reflected in the Westpac investment and in approximately $80,000 of the approximately $110,000 in the defendant’s superannuation account. [24] The plaintiff was inclined to characterise the purchase of these properties as a joint decision made in the course of a mutual course of action designed to secure their financial futures. I am satisfied that overstates the plaintiff’s role. The defendant had past experience in property investment and acted on the advice of investment advisers. The plaintiff conceded that she did not offer investment advice to the defendant, although she maintained that her advice was sought with respect to the properties. I am satisfied that the investment strategy was that of the defendant’s although, as one would expect, it was a matter of interest to the plaintiff and the subject of discussion between the two. [25] I am also satisfied however, that the defendant somewhat under-estimates the assistance which the plaintiff gave him in maintaining and tenanting the properties during the relationship. The properties were tenanted mostly without the assistance of a managing agent and accordingly, the plaintiff assisted the defendant in matters such as interviewing prospective tenants (although there was only approximately five or so changes of tenancy), collecting rent, undertaking inspections, condition -- 10 of 18 -- 11 checks, some cleaning and maintenance (where required), letting tradesmen in and undertaking some limited “renovations”, particularly helping to paint the walls of the Sundew property and making some curtains. [26] There was also evidence of the plaintiff assisting the defendant in the earning of a modest amount of money ($5,000 for one transaction and an unspecified amount – probably of a similar order – for another) by helping find two properties for purchase by friends in Hong Kong. [27] Contributions to family welfare are, of course, relevant. Each made contributions in this case. The plaintiff did most of the cooking and was responsible for looking after the house. The defendant concedes that she looked after it well. The defendant, on the other hand, looked after the garden which was on a property of some significant size. There was, of course, no strict demarcation. The defendant assisted by cooking some meals, whilst the plaintiff also assisted around the property. [28] The parties offered each other support and encouragement, in the way that one would expect of a couple in such a relationship. [29] Overall, the non financial contributions to family welfare were relatively equivalent, as the plaintiff seemed to accept in cross-examination, although I was left with the impression that she probably underestimated her contribution a little in that regard. The fact that the defendant made contributions of this nature does not, of course, cancel out the significant contribution made by the plaintiff.12 (iii) Overview of Sub subdivision 3 contributions 12 See In the marriage of Kennon (1997) 22 Fam LR 1 at 29. -- 11 of 18 -- 12 [30] Looking at the contributions under ss 291 and 292 overall, it is evident that the defendant made the substantive initial contribution. Indeed, the single largest asset (representing some two thirds of the net value of the property and almost 60 per cent of the value of the property and financial resources) is that which he purchased, unencumbered, before ever meeting the plaintiff (although, some limited improvements were made during the relationship and the plaintiff contributed to its upkeep as a home maker). He also made the larger direct financial contribution during the relationship. Further, one of the substantial investments (the Colonial First State investment) was started with a gift to the defendant from his parents towards the end of the relationship. The current shareholding is the result of an entitlement of the defendant’s previous employment. Indirect contributions were made on both sides, but, at least in relation to the plaintiff’s business and the defendant’s artistic endeavours and conducting classes, were not very productive. The defendant was responsible for the strategy of investment in rental properties which has also been productive of a substantial proportion of the current property and financial resources. He was responsible financially for those investments (albeit that rental revenue offset those responsibilities to a significant degree). The plaintiff however, made indirect contributions by assisting with the management and maintenance of those properties during the relationship. Non financial contributions to family welfare were fairly evenly divided although the plaintiff’s contributions were probably a little underestimated and were significant. [31] Whilst the contributions could not be said to be equal in respect of each of the assets, I was invited to take a global, rather than an asset by asset approach to the assessment of the contributions. I agree that is an appropriate approach in this case. I was invited to arrive at an appropriate percentage figure by reference to the value of the property and the financial resources. -- 12 of 18 -- 13 [32] The Act requires consideration of contributions to both the property and the financial resources in arriving at appropriate orders adjusting the property interests. That is what I have done. It is unnecessary in this case to enter upon a separate detailed analysis of the contributions to financial resources, particularly since, to a substantial degree, the defendant’s superannuation reflects the proceeds of sale of property (a rental property) which has otherwise been discussed. It probably matters little then whether the global contribution is expressed as a percentage of the value of the property, regard having been also given to the contribution to financial resources, or whether, it is expressed as a different percentage by reference to the value of the net value of the property and the financial resources. The result is the same in this case. [33] On any view, the assessment of contributions is heavily in favour of the defendant. Counsel for the plaintiff suggested that his client’s contributions under sub subdivision 3 should be assessed in an amount equivalent to 25 per cent of the net value of the property and financial resources. While I accept that the plaintiff was a “worker” who conscientiously made contributions, I am also satisfied that the percentage suggested by her Counsel is overly generous in the particular circumstances of this case. I consider that her contribution, expressed in that way, should be assessed at less than 20 per cent but more than 15 per cent. I have adopted 17.5 percent as the appropriate assessment. The Sub subdivision 4 Factors (i) Age and health (s 297) [34] The parties are each in their fifties and, for their age, are in a reasonable state of health. Although the plaintiff complained of some back pain, it does not, on the -- 13 of 18 -- 14 evidence, appear to be something of great significance. Her Counsel did not urge to the contrary and no medical evidence was called. (ii) Resources, employment capacity and government assistance (ss 298,302) [35] The parties each have the physical and mental capacity to obtain appropriate gainful employment, but neither is currently earning to the maximum of that potential. [36] The defendant, a graphic artist, lost his position as supervisor of the Art Department at his previous employer in June 2003. Having been effectively “demoted” he felt humiliated and left. He has not been in employment since and believes that his demotion by the largest employer in his field on the Sunshine Coast will make finding employment in the future difficult in a competitive field. He plans to try again to make money from his paintings and thereby earn a modest living. [37] The plaintiff, on the other hand, has become the full time carer for a disabled man whom she has known for 30 years. She and one of her daughters live in his comfortable three bedroom unit on the 33rd floor of River Place Apartments in Brisbane. She pays a modest $55 per week for her room (as does her daughter for her room) and receives a carer’s allowance of a little over $200 per week. I was informed by the plaintiff’s Counsel that the allowance is of a kind which must be considered pursuant to s 302(1). She denied playing any part in the disabled man’s business affairs. [38] The property and financial resources of the defendant are overwhelmingly greater than that of the plaintiff. The plaintiff has no significant assets and has only modest financial resources by way of superannuation. -- 14 of 18 -- 15 (iii) Caring for children, necessary commitments and others and responsibility and support others or pay for maintenance (ss 299, 300(b) 301, 309) [39] Although each of the parties had children, there were no children of the relationship and it was not suggested that either have the care of children under the age of 18 years. Similarly, it was not suggested that the parties have any duty to maintain or support any other person other than themselves. (iv) Commitments to support self and appropriate standard of living (s 300(a) and 303) [40] While the plaintiff has a relatively low income at present, her standard of living is reasonable given her access to low cost but high standard accommodation and lack of liabilities. Indeed, she conceded that her circumstances have been more comfortable since the relationship ended. Nevertheless, she has little to fall back on to support an appropriate standard of living in the future. The defendant, while currently unemployed, enjoys a reasonable standard of living and has significant property and financial resources (in the form of superannuation) to fall back on, notwithstanding that he has some liabilities. (v) Contributions to income and earning capacity (s 304) [41] It was submitted that the plaintiff made contributions to the defendant’s earning capacity by her contributions towards the defendant’s property and financial resources, particularly the investment properties. That is a matter with which I have dealt earlier. Otherwise the parties current income and earning capacity is not referrable, in any significant way, to contributions from each other. (vi) Length of relationship (s 305) -- 15 of 18 -- 16 [42] The length of the relationship is not equivalent to a lengthy marriage but neither was it particularly short term by current standards. (vii) Effect of relationship on earning capacity (s 306) [43] I refer to the observations in relation to the consideration of s 304. Both parties continued to work during the relationship. Their earning capacity was not significantly affected by the relationship. (viii) Financial circumstances of co-habitation [44] The plaintiff lives in the apartment of the person for whom she is a carer. She rejected suggestions that the relationship was other than plutonic. She described herself as a friend and an employee. The financial circumstances of her position have been dealt with earlier. There is no evidence of the defendant cohabiting with another person. (x) Overview of Sub subdivision 4 factors [45] Looking at the relevant sub subdivision 4 considerations overall, the parties are similar in age, state of health, physical and mental capacity to attain appropriate gainful employment, do not care for children or have a duty to maintain or support other persons and each has an acceptable standard of living. However, at the end of the relationship, the defendant has emerged relatively rich in property and financial resources compared with to plaintiff. She has nothing to fall back on. While the defendant’s superior position is due, in no small part, to his own endeavours, nevertheless I accept the plaintiff’s submission that the circumstances call for some further adjustment to the interests in achieving an outcome which is just and equitable. -- 16 of 18 -- 17 [46] The plaintiff seeks a further adjustment equivalent to 15 per cent of the net value of the property and financial resources. I consider such an adjustment would be excessive, however I am prepared to make a further adjustment of 7.5 per cent. The Adjustment of interests [47] Accordingly, there should be a distribution so that the plaintiff is left with $293,616.50 being equivalent to 25 per cent of the net value of the property and financial resources. Given that she has property (jewellery) of $500 and financial resources (superannuation) of $10,728, there would need to be an adjustment in her favour of $282,388.50 to achieve the appropriate distribution in this case. I do not consider that such an adjustment would adversely affect the earning capacity of the de facto spouses within the meaning of s 293. [48] I consider that the above adjustment is just and equitable in the circumstances. [49] I do not consider that to achieve a just and equitable adjustment in this case, the adjustment should necessarily put the plaintiff in a financial position to purchase and live comfortably in an unencumbered house of her own. In any event, evidence was not called as to what that might cost. [50] I reject the defendant’s submission that such an adjustment unfairly gives the plaintiff the benefit of the rise in the value of his real estate since the conclusion of the relationship. That might be of significance if the increase in value was reflective of works or improvements carried out since the relationship terminated. In this case however, the increase is said to be due to the property boom in the last few years. The defendant submits that the plaintiff ought not be entitled to share in that increase in the value. There are difficulties with that proposition. -- 17 of 18 -- 18 [51] Firstly, while the fact of a boom is well known, the extent to which it may have increased the value of the property in this case is not a matter about which I have any expert evidence. [52] Secondly, if, as I have determined, the plaintiff became entitled to an adjustment of property interests, I see no reason why she should not also share, in proportion to that adjustment, in any increase in value due to market conditions. An order which, in the usual way, effects an adjustment to property interests as at the date of trial, will have that effect. [53] I will make orders to give effect to an adjustment of $282,388.50 in favour of the Plaintiff. I will invite submissions as to the details of the orders which should be made. -- 18 of 18 --