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  • Unreported Judgment

F v H

 

[2006] QSC 100

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

F v H  [2006] QSC 100

PARTIES:

F
(plaintiff)
v
H
(defendant)

FILE NO:

SC No 2744 of 2004

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

Friday, 28 April 2006

DELIVERED AT:

Supreme Court at Brisbane

HEARING DATE:

14 September 2005 to 16 September 2005

JUDGE:

Douglas J

ORDER:

That the property pool be adjusted 70:30 in favour of the plaintiff
Further submissions invited as to the form of the order

CATCHWORDS:

FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – GENERALLY – where de facto relationship ended after four and a half years – where there is a child of the relationship – where one party gave up work to care for child – where other party continued to work – where there is a significant disparity between their assets after dissolution of relationship

FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – RELEVANT CONSIDERATIONS - where de facto relationship ended after four and a half years – where both parties brought assets and liabilities to the relationship

FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – RELEVANT CONSIDERATIONS - where de facto relationship ended after four and a half years – where significant loan given by father of one party to purchase house used during the relationship – where loan charges interest but not on commercial terms – whether the loan is a benefit brought by relevant party to the relationship – whether loan is a benefit enjoyed by both parties

FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – RELEVANT CONSIDERATIONS - where de facto relationship ended after four and a half years – where significant disparity between superannuation entitlements of parties – where one party gave up work to care for child of the relationship – where other party continued to work and accumulate superannuation – whether superannuation entitlements can be redistributed

Acts Interpretation Act 1954 (Qld), s 36

Property Law Act 1974 (Qld), s 263, s 286, ss 291-309

Calverley v Green (1984) 155 CLR 242, distinguished

Chanter v Catts (2005) 34 Fam LR 414, cited

In the Marriage of Clauson (1995) 18 Fam LR 693, cited.

Clifford v Turrell (1841) Y & C Ch Cas 138; 62 ER 826, applied

Copper Industries Pty Ltd (in liq) v Hill & Hill (1975) 12 SASR 292, 297, cited

E v S [2003] QSC 378, cited

In the Marriage of Gosper (1987) 11 Fam LR 601, cited

Gray v Gray [2005] FamCA 498, cited

H v G (2005) 34 Fam LR 35, cited

In the Marriage of Harrison (1996) 20 Fam LR 322, cited

Koch v Hackney [2005] NSWCA 328, cited

Kussey [1994] FLC 92-495, cited

NFO v PFA [2005] QSC 176, cited

In the Marriage of Pellegrino (1997) 22 Fam LR 474, cited

Phillips v Phillips (2002) 29 Fam LR 128, cited

Prentice v Cummins (No 6) (2003) 134 FCR 449, cited

Trustees of the Property of John Daniel Cummins v Cummins [2006] HCA 6, cited

COUNSEL:

D C Spence for the plaintiff

C A Cooper for the defendant

SOLICITORS:

Evans & Company for the plaintiff

Primrose Couper Cronin Rudkin for the defendant

  1. Douglas J:  In this action to adjust the parties’ interests in their property because of the end of their de facto relationship, I am required to identify and value the property, liabilities and financial resources of the parties, identify and assess their respective contributions to their property, financial resources and family welfare taking into account the matters referred to in ss 291-309 of the Property Law Act 1974 and determine, under s. 286 of that Act, what order, if any, is just and equitable having regard to these considerations; cf. Chanter v Catts (2005) 34 Fam LR 414 at [22]; Phillips v Phillips (2002) 29 Fam LR 128 at [66] and NFO v PFA [2005] QSC 176 at [14].

Background

  1. There are several factual disputes that need to be resolved relevant to the length of the relationship, their financial resources and their contributions to the property in dispute. There are, however, agreed facts that include a number of matters that can conveniently be recorded at the outset.
  1. The female plaintiff was born on 4 February 1967 and is now aged 39. The male defendant was born on 5 November 1947. He is now aged 58. In mid 1998 the defendant bought a beach unit for $215,000 using his own and borrowed funds. He also then owned a coastal house that was unencumbered except as security for the beach unit. He also owned 10,000 shares in the company now known as Fosters Group Limited.
  1. In June 1999 the defendant took a voluntary redundancy from his former employer and received a net sum of $97,709.46 after tax. In July 1999 he commenced employment with a company formerly associated with and controlled by the plaintiff’s father.
  1. On 16 September 1999 the parties became registered proprietors of an island house bought for $500,000 subject to a mortgage to the plaintiff’s father of $400,000. After selling his coastal house in August 2000 the defendant received $103,346.70 and, on 4 October 2000, paid $50,000 to the plaintiff’s father, reducing the mortgage debt to $350,000.
  1. It is also agreed that, from the time that the defendant vacated the island house, he serviced the debt in relation to his beach unit, paid the rates in relation to the island property and, after late 2004, paid one half of the body corporate levies in respect of that island house. He also paid $1,200 per month as child support and has been paying the rates on the island property, sometimes slowly.
  1. The beach unit was valued on 22 March 2005 on joint instructions from the solicitors for each of the parties at $475,000. Similarly the island house and land was valued at $1.35 million on 31 March 2005.

Length of the relationship

  1. The parties began seeing each other, after the failure of their previous marriages, in 1997. They began to live together permanently in the one household in about December 1998 but only after an extended period of contact during 1997 and 1998 in circumstances that, in many respects, evidenced a relationship consistent with them being committed to each other. I shall refer to that evidence shortly. The relationship ended definitively in July 2002. The male defendant said that it terminated in December 2001 but that he finally left the shared island house in July 2002 after an earlier departure in December 2001. For reasons that will become clear it is my view that his evidence on that issue is unreliable and that the relationship did last until July 2002.
  1. There is a child of the relationship, a boy born in April 1999, who lives principally with the female plaintiff. He was probably conceived in mid July 1998. The plaintiff told the defendant she thought she might be pregnant on 15 August 1998. That was confirmed by an ultrasound examination on 25 August 1998.
  1. The plaintiff had calculated from her diary that she and the defendant lived together during 207 days between July 1997 and December 1998, when they began to live together under the one roof. Until December 1998 they lived in separate cities – a Queensland coastal city for the defendant and another city interstate for the plaintiff. In that month the plaintiff resigned from her position interstate to move to Queensland.
  1. They both worked in the same industry but for competing companies. For that reason they did not want to publicise the nature of their relationship but industry events did allow them to meet regularly during their “courtship”. The figure of 207 days just referred to is, however, rather misleading. It was calculated by the plaintiff including every day or part of a day, during which they saw each other when they were together during a particular period, as a whole day. Many of the meetings were work related and occurred when their jobs kept them busy during the day and sometimes into the night. Nonetheless, it is apparent from the plaintiff’s diary that she and the defendant were seeing each other very regularly. It is also clear that they had a monogamous sexual relationship from July 1997 onwards.
  1. Between 26 December 1997 and 26 January 1998 the plaintiff went on a family holiday with the defendant and his children from his former marriage. They stayed at a one bedroom unit at a coastal resort.
  1. When the plaintiff became pregnant there was a discussion between her and the defendant about their future. The child had not been planned but they decided then, at least, to commence living together. The plaintiff said that their previous conversations had been leading in that direction anyway: “with all the travelling backward and forward, we wanted to end up together”; T108 ll 22-23. That evidence rings true in the context defined by their very regular meetings during that year, starting as it did with the long holiday from 26 December 1997 to 26 January 1998.
  1. During 1998 they also combined their allowances on business trips where they were attending the same events to allow them, for example, to stay in a suite rather than a standard hotel room. The plaintiff also took annual leave on two occasions to allow her to stay in Queensland longer, including the period between 9 and 18 October 1998.
  1. The plaintiff relied on the following evidence, in particular, as suggesting that, at least by December 1997 and January 1998, the two had commenced a defacto relationship:
  • The plaintiff’s evidence in paragraph 18 of her affidavit filed 21 June 2005 that she went to a house warming party a few weeks after the commencement of their relationship because the defendant wanted her to come so she could meet his friends and for them to meet his “new partner”;
  • The family holiday with the defendant’s children from December 1997 to January 1998;
  • The reference by the defendant in his evidence at T264 to the plaintiff “tagging along” when he was inspecting property to purchase in March 1998.  It should be pointed out, however, that the defendant’s evidence on this issue was that the plaintiff did not instigate or have any bearing on whether he bought an investment property, although she did give him her views about properties they inspected;
  • The evidence that upon disclosure by the plaintiff to the defendant of her pregnancy in August 1998 the discussion turned to how shared living arrangements could be implemented. 
  1. To this evidence might be added their joint purchase of a dog on 21 February 1998. They kept it until they moved to their island house in September 1999.
  1. The plaintiff’s case is that the relationship ended about 9 July 2002 when the defendant moved out of the island house. He agrees that he left at that time and then lived at the beach unit that he had been renting out. He probably started living there after the end of July 2002, when a tenancy of those premises expired. He says, however, that he had moved out to the beach unit earlier, for two weeks in December 2001, and that, thereafter, he and the plaintiff lived separately under the one roof at the island house until July 2002.
  1. As Ms Spence submitted, that evidence is inconsistent with evidence showing that the beach unit was fully occupied on casual holiday rentals during December 2001. There was also photographic evidence showing the defendant participating, apparently fully involved, in family celebrations during Christmas and the new year in 2001/2002 and at a party in April 2002.
  1. The probabilities are that the parties’ de facto relationship did commence at least by December 1997 and persisted until July 2002 when he left - a period of approximately four and a half years.

Property of the parties

  1. The property of the parties at the time of the trial included as principal assets the following:
  • The island house valued at $1.35 million;
  • The beach unit valued at $475,000;
  • 10,000 shares in Fosters Group Limited whose market value has varied within the last year within the range of approximately $5 to $6;
  • 1,000 shares in a de-listed public company sold by the defendant in December 2004 for $3,740;
  • 1989 Toyota Surf motor vehicle at an agreed value of $7,000;
  • Furniture and household effects in respect of which an agreement was reached between the parties and which need not be valued;
  • Collection of cricket bats, swords and Persian rug to which no value was attributed by the parties;
  • Plaintiff’s jewellery to which no value was attributed by the parties;
  • BMW motor vehicle of the plaintiff sold in December 2004 at a trade-in value of $3,500;
  • 25,000 shares held by the defendant in Stargames Limited whose value during the last year has varied between $0.855 and $1.63;
  • The defendant had sold a further 25,000 shares in that company during the lead up to the trial of the proceedings and his evidence was that he had received approximately $32,500 for that sale, approximately $27,000 of which he had applied towards his legal costs on top of a further approximate $17,000 in legal fees he had paid previously.  I am disinclined to add these proceeds of the sale back into the pool of assets on the basis that they have been used principally for his legal fees where the plaintiff’s fees have been met by her father;
  • The balance of the defendant’s bank account at the time of trial was $4,876.81.
  1. The total of those assets is more than $1.9 million depending on the value of the publicly listed shares at any given time and on the assumption that the house and unit are still worth the prices at which they have been valued.

Superannuation

  1. The plaintiff’s superannuation at the time of the trial amounted to approximately $23,655.26, as much as one can value a superannuation fund at a particular date. The defendant’s superannuation in a variety of funds totalled $452,565.83 at the time of the trial, again, taking into account the limitations of valuing such funds at a particular date.
  1. There was a disagreement between the parties about how I should treat these rights to superannuation when assessing the rights of the parties to a division of the property. The defendant’s case was that I had no power to adjust the parties’ interests in their funds because s. 286 created a power to adjust interests in property, and property under the Act should be treated as something distinct from the financial resources also referred to in ss 263 and 291. The plaintiff’s argument was that ss 310-313, allowing adjournment of proceedings because of a likely change in financial circumstances that might include the vesting of a superannuation entitlement, was a statutory indication that the Court could deal with superannuation at least when it vested in the person entitled to it. Her counsel’s principal submission was, however, that the pool of funds was sufficiently large to allow me to make a property adjustment based on the disparity in superannuation entitlements, taking them into account as a financial resource for that purpose. The defendant’s solicitor did not dispute that this approach was available. It is often an appropriate way to deal with the similar issue in the Family Court and seems the logical approach to take here; cf. In the Marriage of Harrison (1996) 20 Fam LR 322.
  1. Superannuation rights are treated as a financial resource under s. 263(a) of the Act. Section 291 requires me to consider the financial and non-financial contributions made directly or indirectly by or for the de facto spouses to the acquisition, conservation or improvement of their property and to their financial resources. There is an argument that superannuation is capable of being treated as property for the purposes of s. 291(1)(a) because of the broad definition of that word in s. 36 of the Acts Interpretation Act 1954; generally see Chanter v Catts (2005) 34 Fam LR 414 at [20], [90] and [122], but the differing treatment of the two concepts in this Act may suggest that, for these purposes, they should be treated separately. 
  1. The decision in Chanter v Catts is also authority for taking a more expansive view of the property that can be affected directly by an order under similar New South Wales legislation, and as to the property that can be taken into account in determining what order is appropriate, than may have been the case earlier in that State; see at [20]-[25], [83]-[90] and [120]-[122].  There seems no reason why the Queensland legislation should produce a different result, at least in respect of determining what property and financial resources can be taken into account when determining what order is appropriate, especially when one considers the broad language of s. 309 of our Act in particular. 
  1. There is also every reason to take the view that the plaintiff’s adoption of the role of homemaker and carer for their child led to an indirect contribution by her to the defendant’s continued ability to accumulate superannuation during the time they lived together and since, because of his limited role in bringing up their son. Of course, the bulk of the defendant’s superannuation is likely to have been accumulated earlier than the period when he lived with the plaintiff. It seems to me, therefore, that these entitlements are ones that I should take into account as a financial resource when identifying and valuing the parties’ property, their respective contributions to that property or those financial resources and in determining what order is just and equitable, having regard to their contributions.

Liabilities

  1. The parties’ liabilities were:
  • The liability to repay a loan from the plaintiff’s father used to help purchase the island house amounting to $350,000 with interest of approximately $81,369 to the time of trial.  That figure will need adjustment at the time of settlement of the proposed sale of that property;
  • A mortgage over the defendant’s beach unit of approximately $157,000 owed to a bank;
  • A bank Visa card debt of approximately $18,000 relating to a credit card used by the parties during their relationship.  The defendant blames the plaintiff for incurring that debt but it seems, on the whole of the evidence, to have been used for the benefit of both parties;  
  • Another bank credit card with a debt of approximately $3,500 in the defendant’s name.  The plaintiff argues that this debt was incurred since the relationship ended and that, also because of the defendant’s high income, it should not be treated as a liability arising out of their relationship;   
  • The defendant borrowed $18,750 from a female friend and applied savings he had otherwise to acquire the balance of share options available to him in Stargames Limited. The plaintiff accepted that this should be counted as a debt of $18,750;
  • Half of the Stargames Limited shares have been sold. They are included in the pool for division. In the event that they are subject to capital gains tax, which the plaintiff accepts would be the case, that tax would be payable at roughly              $6,500.
  1. The total liabilities are, therefore, approximately, $635,119, subject to the debate about the bank credit card with $3,500 owing and further adjustments for interest. In my view I should treat that credit card debt as a liability of the defendant for the purposes of adjusting the rights of the parties. It affects the resources available to him and is relevant because of s. 298(a) of the Act.  

Matters for consideration in deciding what is just and equitable

  1. The Act requires an examination of several matters set out in ss 291-309, some of which are more significant here than others. The first major consideration is the contributions of the parties to their property or financial resources.

Contributions of the parties to property or financial resources – s. 291

  1. The plaintiff at the commencement of the relationship had rights to a property settlement and accumulated employment leave entitlements worth approximately $82,000 in addition to her superannuation entitlements and some furniture. The defendant had an interest in his coastal house which was sold in October 2000 realising approximately $186,392, his Fosters shares then worth approximately $74,700, some furniture and his superannuation entitlements, which fall within the description of a financial resource under s. 263 of the Act. They were then worth approximately $312,000. He also had some cash at the bank which, on the available documents, was approximately $8,000.
  1. Leaving aside their respective superannuation rights, the plaintiff’s counsel estimated the convertible assets of the parties at the commencement of the relationship were, therefore, approximately $82,000 for the plaintiff and $219,000 for the defendant, a ratio of 27% to 73%.
  1. The defendant’s solicitor’s approach to this calculation was different. He adopted the figures for the plaintiff’s direct financial contributions as being at their best $82,000, says that the plaintiff used $20,000 of that to buy a BMW motor vehicle for herself, refers to her evidence that she contributed $20,000 towards the purchase of the island property and argues against her evidence that the balance of the $82,000 was spent by her on living expenses for the family. In respect of the island property the defendant says that he contributed $99,735.75 at the date of its acquisition, $50,000 approximately 13 months later and $73,400 on improvements to that property, totalling $223,135.75.
  1. The amount spent by him on improvements to the property is disputed by the plaintiff, and the documentary evidence that is available supports payment only of $24,856. He also refers to supporting the family from his salary and from the balance of the proceeds of the sale of the coastal house amounting to $67,646.77, after allowing for payment of $50,000 to the plaintiff’s father in part repayment of his loan of $400,000 to assist the purchase of the island property.
  1. The beach unit which was purchased by him before they commenced cohabiting was bought with no financial contribution from the plaintiff then or during the time they cohabited. He also submits that he held the Fosters shares before the commencement of cohabitation, that his options in Stargames Ltd were of no value until he borrowed funds to exercise them in June 2005 and should be excluded from the pool because he used them to pay part of his legal costs and were only acquired by him borrowing money and applying his earnings post separation to realise that asset.
  1. The defendant’s solicitor’s calculation of the respective contributions of the parties to the purchase of the island property is that he contributed $149,735.75 by direct cash payment. He acknowledges the plaintiff’s claim to have contributed $20,000 of her own funds to that purchase, with some apparent scepticism, and then refers to the loan advanced by the plaintiff’s father of $350,000 without bringing it or any part of it into account in favour of the plaintiff. His submission then was that the direct contributions of the parties to the acquisition of the island property were in the proportion of 11.8% and 88.2%. His submission, drawn from that process, was that the island property should be held in shares proportionate to the parties’ contributions, relying on the decision of the High Court in Calverley v Green (1984) 155 CLR 242, an issue to which I shall return. 
  1. Because of the lack of documentation to support the defendant’s claims in respect of the amount he says he spent on improving the island property, and because of the need to look at the parties’ contributions overall, it is also helpful to analyse this issue in the manner submitted by the plaintiff. It seems likely to me that the plaintiff’s evidence that she spent the money she brought into the relationship on living expenses of the family, understood broadly, is inherently credible. In my view that should include the sums identified as having been used to purchase a car for herself or for contributions to the purchase of the island property. There was nothing in the evidence, beyond assertion by the defendant, to justify a contrary conclusion. The same applies to the proposition that the expenses incurred on their credit card were incurred solely for the plaintiff’s benefit. I do not accept that, and find that she applied those sums also to living expenses of the family.
  1. Accordingly, it seems useful to me to start from the basis that, at the commencement of the relationship, the plaintiff brought approximately $82,000 and the defendant brought approximately $219,000 into their joint pool of property, setting to one side for the moment their respective superannuation entitlements. It is still necessary, however, to identify how those funds were used in acquiring, conserving or improving the parties’ property or how it was contributed to their financial resources. It seems correct to accept that the plaintiff contributed $20,000 to the purchase of the island property, and that the defendant contributed $149,735.75 plus something, probably in the region of $24,856 or perhaps a little more, towards improvements to that property, say about $175,000 in total. The absence of documentation to support anything more than $24,856 as having been spent on the improvements discourages me from accepting the defendant’s assertions about the amount he actually spent. Normal experience suggests that there should have been some records from bank statements or cheque books to support the further sum of almost $50,000 claimed, even if the relevant invoices are no longer available.
  1. Around the time of the birth of their child the defendant left his managerial position for a company that sold and distributed a particular type of machine. He left that position by seeking a redundancy payment. He received $124,677.25 gross which included an “ETP” payment of $85,611.25, long service leave of $13,150 and a tax free redundancy component of $25,916. He had to pay tax of $26,967.54 and received net the sum of $97,709.71, which he banked with some other funds totalling $100,261.77.
  1. He then obtained employment with a company I shall call DPL. His previous superior at the company he had just left had gone to work there as national sales manager. DPL was then majority owned by the plaintiff’s father but he sold his interest in that company to another company at about the time the defendant was looking for a new position. I accept the evidence that the plaintiff’s father indicated his willingness to assist the defendant to obtain a position with DPL but, by the same token, it seems likely to me that the defendant would have been able to obtain that position based on his own demonstrated experience with his previous employer, especially where his previous superior had also moved across to work for DPL. The plaintiff’s father agreed that he put the defendant’s name forward for the position but did nothing to influence the decision that he be employed; T179 ll 18-21. In the circumstances that evidence about how he obtained the position with DPL is only marginally relevant as an indirect contribution made for the plaintiff to the financial resources or property of either her or the defendant.
  1. During the time they lived together the defendant used his income to support the plaintiff and their child. His income was significant, totalling $90,875 for the year ended 30 June 2001, $96,435 for the year ended 30 June 2002 and $92,990 for the year ended 30 June 2003. For the year ended 30 June 2004 his gross income increased significantly to $122,738. There was another significant increase for the year ended 30 June 2005 to $172,168. In respect of that, the defendant’s evidence was that his salary was $100,000 but that he received commission payments and bonuses depending upon the profitability of his employer during the year. Some of the commissions he received during that year related to previous years’ entitlements.
  1. The plaintiff, when she moved to Queensland to live with the defendant and to have their child and help raise him, gave up the employment she then had with DPL. Her taxable income for the financial year ending 30 June 1998 was $50,942. She also received a fully maintained company car, a company mobile telephone, a large entertainment expense account and overseas travel paid for by the company and bonuses. For the year ended 30 June 1999 she received $35,623, nothing in the next three years, and then $6,468 for the year ended 30 June 2003 and $11,774 for the year ended 30 June 2004 from casual work since the separation. In about September 2004 she commenced working part-time for another company in the same industry as DPL. She was paid on an hourly basis for the time she worked and earned a gross income of approximately $12,000, (net approximately $9,800), for the year ended 30 June 2005 from that employer. She has applied for full time positions at a variety of establishments at the coastal city where she lives.
  1. The money lent by the plaintiff’s father that was secured by a mortgage over the island property created a controversial issue in the context of whether it should be treated as a contribution made indirectly for the plaintiff to the acquisition, conservation or improvement of any of the property of either of the parties. The defendant’s submission was that by committing themselves to a mortgage the plaintiff and the defendant jointly contributed the amount of the mortgage funds at $350,000. The plaintiff’s case was that the loan terms were anything but commercial. The father thought initially of the loan as a gift because he had made a gift to his other daughter, but decided that it should be a mortgage loan because he did not want the defendant to receive any of the sum of $350,000 as a gift; see T181-182. The mortgage itself was $400,000 lent on 16 August 1999, $50,000 of which was repaid by the defendant on 4 October 2000. It was repayable on demand subject to the provision of six months prior written notice. The interest was payable as annual compound interest calculated at the percentage equivalent to the consumer price index for the city of Brisbane from 16 August 1999, substantially less than commercial interest rates. There has been no demand made nor any request for payment of interest so far.
  1. The plaintiff’s father has also continued to assist her with gifts of money since the separation. He also pays for the education of his grandson at a private school. It was submitted that, because of his loan of these funds, significant benefits flowed to both plaintiff and defendant including the retention by the defendant of assets whose value appreciated, namely the shares in Fosters Group Limited, his beach unit and his former coastal house. It was also submitted that the absence of any need to repay the mortgage by monthly repayments of principal and/or interest led to the couple having a significantly higher disposable income allowing the defendant to offset losses generated by the negative gearing of his beach unit from his other income and allowing that income to be used to reduce the mortgage on that unit and to be spent on improvements to that property, as any income derived from holiday rentals of that unit could also be applied.
  1. The plaintiff’s case was also that the provision of the loan allowed the parties to settle earlier than would otherwise have been the case and to take advantage of a very significant reduction in the purchase price of the island property from an asking price of $750,000 to the price they paid, $500,000. The evidence about the date of settlement was not particularly clear, but it was also submitted that the interest rate linked to the consumer price index resulted in a substantial saving to the parties. Finally it was submitted that the lack of a requirement for periodic repayments under the loan, and the lack of any demand for payment in spite of the separation and subsequent litigation, have enabled the parties to retain the property and receive a windfall capital gain of at least $500,000 and perhaps up to $1 million if the property were able to be sold for an amount in excess of its valuation of $1.35 million.
  1. The defendant’s calculation of interest owing at the rate applied on the mortgage was $81,400 at the time of trial, which it is intended should be paid from the proceeds of sale of the property. An accountant retained on behalf of the plaintiff calculated that interest at bank home loan rates would have been more than $186,000, resulting in a saving of $105,000. That calculation was attacked on the basis that the interest calculated as payable was capitalised and it was argued that banks would not have allowed interest to capitalise for six years. The defendant’s accountant calculated that the difference would have been $48,281.85 under a mortgage applying normal bank interest rates that were not capitalised. The former amount is still a useful figure to have, however, as it is some measure of the opportunity available to the parties from not having to pay regular instalments of interest to a financier. In other words, they have had available to them over the period of the loan the opportunity afforded by having the use of the money that they would otherwise have had to pay out as interest, and that opportunity may be worth more than just the value of the regular instalments that would have been payable to a bank. There is also value in having the opportunity to use such (notional) funds before the obligation to repay arises. These benefits are comparable to and overlap with the other benefits already referred to of retention of assets that have increased in value but which would have been realised without the benefit of this loan.
  1. It is clear, in my view, that the favourable nature of this loan did, at least indirectly, contribute to the acquisition, conservation or improvement not only of the island property but of the other property owned by the defendant for the reasons submitted on behalf of the plaintiff. They were that common sense dictated that, but for his relationship with the plaintiff, the defendant 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. On the valuation agreed between the parties the capital appreciation was about $825,000, taking into account the value of the improvements stemming from the defendant’s payments referred to in the documents.
  1. The evidence of the defendant’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; see, e.g., T248-254.
  1. In the circumstances of this case, and in reliance upon the evidence of the plaintiff and her father in particular, it seems appropriate to me to treat this advance as one made principally on behalf of the plaintiff even though in form it was a loan to both parties. To reach such a conclusion does not seem to me to be inconsistent with the terms of the mortgage document such as to add to, vary or contradict it in breach of the parol evidence rule. Rather, it is to examine the reason for the advance or the consideration for the grant of the loan as an additional consideration to that expressed in clause 5 of the mortgage, namely the lending of the principal sum “to the borrower at the request of the mortgagee”. The additional consideration would, in my view, consist of the promise to advance the money, on the advantageous terms of the mortgage, to assist the lender’s daughter in particular. See, e.g., Clifford v Turrell (1841) 1 Y & C Ch Cas 138; 62 ER 826 where Knight Bruce V-C said at 148-149; 62 ER 830 that it was clear:

“that the rules of law may exclude parol evidence where a written instrument stands in competition with it, but it has long been settled that it is not within any rule of this nature to adduce evidence of a consideration additional to what is stated in a written instrument … The rule is that, where there is one consideration stated in the deed, you may prove any other consideration which existed, not in contradiction to the instrument; and it is not in contradiction to the instrument to prove a larger consideration than that which is stated”.

  1. See also Walters J in Copper Industries Pty Ltd (in liq) v Hill & Hill (1975) 12 SASR 292 at 297 and the discussion in Greig and Davis, The Law of Contract (1987) at pp. 456-461. 
  1. An examination of the reason for the making of this advantageous loan is also required here by the statutory requirement in s. 291 that the Court consider the financial and non-financial contributions made directly or indirectly by or for the defacto spouses to the acquisition, conservation or improvement of any of their property and their financial resources, as well as the requirement of s. 309 that the Court consider any fact or circumstance it considers the justice of the case requires to be taken into account. A consideration of why a loan was made on particular terms in the circumstances that occurred here is relevant to those issues and does not detract from the operation of the mortgage which continues to express obligations in respect of repayments which bind both parties. The evidence is relevant, however, to show why an advantageous loan was made to both parties and which of the two parties the lender wished to benefit in particular. In those circumstances the authorities suggest that it is appropriate to treat such evidence as relevant when distributing the property of the parties; see, e.g. Koch v Hackney [2005] NSWSC 328; Kussey [1994] FLC ¶92-495 and In the Marriage of Gosper (1987) 11 Fam Law Reports 601 and In the Marriage of Pellegrino (1997) 22 Fam Law Reports 474.
  1. The factual conclusion that it was this loan that enabled the parties to buy the island property also seems to me to be properly grounded in the evidence. The defendant said that he could have borrowed on commercial terms to acquire that property but his inability to save suggests the contrary. That inability to save was reflected in an absence of savings, debt reduction or accumulation of other assets during the period since separation as well as evidence of the failure by him to pay some debts in a timely fashion; see again the evidence at T248-254.
  1. The consequence of this approach seems to me to be that I should treat the liability each party has incurred under the mortgage as a contribution made by each to the acquisition of the island property, but that I should treat the savings in interest payments and the opportunities obtained by the favourable acquisition of the property, referred to at paragraph [46] of these reasons, as essentially a contribution made by or on behalf of the plaintiff. It seems to be incorrect, however, to treat the gains in capital value of the defendant’s assets as wholly attributable to the favourable terms of the loan. He had bought those assets without the help of the plaintiff or her father and, if the loan was not made available, would have been most likely to retain them and benefit from their increased value in any event.
  1. Since the separation the defendant has paid $1,200 per month for child support, an amount calculated on his earlier taxable income which will increase and be backdated when he files tax returns for the 2004 and 2005 financial years. He has otherwise been surviving on his income without saving any significant sums. The plaintiff’s father has been paying at least $1,700 per quarter for his grandchild’s education and otherwise has been assisting the plaintiff by payments of about $1,000 per month since July 2002. That has allowed the island property to be conserved by the payment of body corporate levies and to be maintained as the yard maintenance costs and some outgoings are met from those sums.
  1. The plaintiff’s father is a wealthy man who loves his daughter and wishes to continue to help support her. The defendant submitted that I should take into account the fact that the plaintiff’s father has indicated that he would make the monies lent in respect of the island property available to the plaintiff again once they had been repaid to him less some expenses he appears to have incurred in respect of the plaintiff’s legal costs; see T182-184. That possibility seems not to be particularly relevant to me in assessing how these parties’ property interests should be adjusted.
  1. The defendant also pointed to his payment of the rates on the island property since separation, his contributions to the body corporate fees and the substantial increase in the debt on the property in circumstances where he left it in July 2001 after living there for less than two years while the plaintiff has been able to stay there in property jointly owned by both parties.

Contributions to family welfare – s. 292

  1. When the plaintiff and the defendant were living together her intention was that she would like to return to work, if she could, at some indefinite time. She still wishes to return to work but to weigh the advantages of that against the time she needs to spend in the upbringing of her child and the extra expenses that will be associated with that if she were to work full time now; see T120 ll 18-24. She bore the major share of the homemaking or parenting contributions of the family when she and the defendant lived together and even more so in respect of her son since the separation. It was submitted on her behalf that when she “liquidated her assets, relocated to the defendant’s residence, bore a child, and, in the process lost her career, that she did not merely contribute her financial assets, but significantly more to the relationship”. That is clearly true and an important issue in assessing the nature of her contribution to the relationship and what is just and equitable in resolving this dispute; see also H v G (2005) 34 Fam LR 35 at [123]. 
  1. There are no regular times set for contact between the defendant and their son. The plaintiff’s evidence was that he did not see the child at weekly intervals. He said that he saw him weekly at some stages and later conceded that he exercised contact as often as he could. It seems clear, however, that the defendant loves his son and wishes to be involved in his upbringing if not in paying expensive school fees for him at a school said by him not to be of his choosing but where he signed the application form.

Effect on future earning capacity - s. 293

  1. Any order I make is unlikely to affect the earning capacity of the parties. In the near future the plaintiff is likely to remain as the primary carer of the child and to have limited employment capacity because of the demands of that parental role. The limited work she has been able to obtain so far illustrates that likelihood. Nor is an order likely to affect the defendant’s earning capacity, which has continued to rise in recent years.

Child support - s. 294

  1. Although the defendant has not been paying child support at the rate he may be obliged to from his present income, once he makes a tax return his child support payments will be reassessed and recovered retrospectively. So, again, this issue does not affect the distribution of the property significantly.

Additional matters for consideration in deciding what is just and equitable – ss 297-309

  1. These sections cover a variety of issues: age, health, resources and employment capacity, caring for children, necessary commitments, responsibility to support others, government assistance, an appropriate standard of living, contributions to income and earning capacity, the length of the relationship and its effect on earning capacity, financial circumstances of a de facto spouse now cohabiting with another person, child maintenance and the other facts and circumstances the justice of the case requires to be taken into account referred to in s. 309. Many of the relevant issues have already been discussed by me, particularly in respect of the length of the relationship.
  1. Each of the parties is in good health, although the defendant is about 19 years older than the plaintiff who is now aged 39. The defendant is likely to continue working for the foreseeable future because of his economic situation. The plaintiff 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. The birth of her child has, therefore, significantly affected her earning capacity and the superannuation she will be entitled to is likely to be much less than that she would have become entitled to had she been able to continue working full time. It is also significantly less than the defendant’s entitlements. The defendant continues to earn a substantial income.
  1. The plaintiff receives a family payment of $122.92 per fortnight and a single parent payment of $476.50 per fortnight from the Commonwealth government. These were said to be income tested entitlements which I must disregard; s. 302(2).
  1. Section 303 requires me to consider what standard of living is reasonable for each of the parties in all the circumstances. If, as is anticipated, the island property is sold, it will be necessary to make provision for the plaintiff to have enough funds to rehouse herself and the child. The plaintiff submitted that the defendant has appropriate accommodation which meets his needs at present, and that does seem to be the case. It was also submitted that the plaintiff will need funds to invest for the support of her and her son, again something which seems to be a reasonable submission.
  1. There is no evidence that either party is now cohabiting with another person although the defendant does appear to have formed a new relationship. The evidence of that relationship was not extensive.

Assessment of contributions of the parties

  1. The submission for the defendant that the island property should be held in shares proportionate to the parties’ contributions, made in reliance upon the decision of the High Court in Calverley v Green, does not attract me.  Where “legislation has conferred a discretionary power on courts to adjust the property rights of de facto partners in the event of a breakdown of their relationship”,[1] I see no reason to limit my discretion further than the statute provides by reference to equitable remedies whose scope it was obviously intended to extend.[2]  In that context s. 286(3) is instructive as it provides that “[i]t does not matter whether the court has declared the title or rights to the property.”  The effect of that subsection in this context would be to allow me to further adjust the interests of the parties in the island property even had I, or another judge asked to resolve that issue earlier, followed the submissions made for the defendant to declare that that property was held in proportion to the original contributions by the parties to its purchase. In my view the contributions made by the parties to the purchase are relevant, of course, but in the context of the other issues made relevant by the Act. 
  1. The financial contributions made by or on behalf of the parties to their assets and financial resources based on the current approximate values of those assets that can be assessed and my views expressed earlier about who was mainly responsible for contributing them is, very approximately, as follows, recognising the limitations inherent in a purely mathematical approach on this evidence:
  1.  

Description

Plaintiff

Defendant

Island property payment of purchase price, improvements and part repayment of loan

$20,000.00

$175,000.00

Island property mortgage liability

$175,000.00

$175,000.00

Benefits from favourable terms of island property loan

(Interest) $105,000.00

(Capital inc.) $825,000.00

 

Beach unit

 

$475,000.00

Fosters shares

 

$57,500.00

Delisted company shares

 

$3,740.00

1989 Toyota Surf vehicle

 

$7,000.00

BMW vehicle

$3,400.00

 

Stargames Ltd shares

 

$38,125.00

Defendant’s bank account

 

$4,876.81

Superannuation

$23,655.26

$452,565.83

Total

$1,152,055.26

$1,388,807.64

  1. Leaving to one side the benefit assessed as interest payments not made of $105,000, as not an asset or resource that is accessible by the parties, the combined total is $2,435,862.90.
  1. The liabilities were calculated to amount to $635,119.00 leaving a combined total of net assets and financial resources of $1,800,743.90. The ratio of the contributions set out above is approximately 45:55 between the plaintiff and the defendant.

Just and equitable adjustment

  1. The parties differed as to whether I should approach the problem of adjusting their interests globally or an asset by asset approach. Because of the differing nature of their contributions and the difficulty of quantifying mathematically the homemaker role of the plaintiff, the economic effects on her and the defendant of her entry into the relationship and of her bearing the major responsibility of raising their child, quite apart from the major advantage brought by her to the relationship by the generosity of her father’s loan for the island property and his other support for her, which is also difficult to quantify with mathematical precision, it seems more appropriate to me to approach the problem globally.
  1. The defendant’s case made much of the brief period of the relationship. On the findings I have made it lasted for at least four and a half years and produced a child. That had the effect of significantly affecting the plaintiff’s employment and future prospects. The defendant also pointed to the limited contribution of the plaintiff to the superannuation he had accumulated during his working life and the other assets he had acquired and his contribution from his income to their living expenses during the period of the relationship. These are relevant and significant matters. By the same token she contributed greatly in her role as the principal homemaker and, by her father’s generosity, to the increase in the capital value of their assets. Her father has also been contributing to their son’s school fees.
  1. It seems to me, when one also takes into account the defendant’s significantly greater earning capacity and superannuation entitlements, which continue to be contributed to by the plaintiff’s role as the main carer for their child, that the available assets should be adjusted to reflect not only her significant contribution to the pool but her continuing obligations as the parent of their child and their effects on her earning capacity.
  1. I was urged by her counsel to divide the available property pool, not including the superannuation rights of the parties, 75:25 in her favour, partly in reliance on a decision of the Family Court in the Marriage of Clauson (1995) 18 FamLR 693 where there had been a marriage, significantly longer than this relationship, where the wife was left with four young children and the husband continued to enjoy a significant income and had brought much more valuable assets into the marriage. The plaintiff’s counsel submitted that such a division would also reflect the disparity in superannuation entitlements between the parties. 
  1. The defendant’s submission was that the island property should be sold, the mortgage and costs of the sale be discharged from the proceeds of the sale and the balance divided 80:20 in favour of the defendant with him also retaining the property presently held by him. I do not believe that such an approach goes close to reflecting an appropriate solution to this problem. It would deny any effect to the advantageous loan from the plaintiff’s father or the effect of the relationship on her own career and prospects or her significant contribution as homemaker and parent or the defendant’s continuing earning capacity based partly on her adoption of that role.

Decision

  1. In my view an appropriate adjustment of the property pool, leaving to one side the superannuation rights, would be to divide it 70:30 in favour of the plaintiff. There are significant differences from the Clauson decision in the length of the marriage and the number of children. Here the amount properly attributable as a contribution on the part of the plaintiff was far greater than in the case of the wife in Clauson and the defendant here had a more significant amount of superannuation available to him than had the husband in Clauson.
  1. The Court there increased an apportionment of the property pool from 40:60 for the wife to 50:50 attributing 25 per cent to her contributions and a further 25 per cent being attributed to her as “s. 75(2) factors”, as to which the discussion at 709-711 is useful in this context also. Taking into account the fact that I have left the superannuation rights of the parties out of the calculation and the greater contribution by and for the plaintiff here to the parties’ property and financial resources it seems to me that an appropriate adjustment is achieved by the plaintiff receiving 70 per cent of the pool apart from the parties’ superannuation rights.
  1. Both parties appeared to be content that the island property be sold. There was some dispute as to what mechanism should be adopted to reflect the adjustment in the property rights on the sale. Even though there was an agreed value of the island house adopted for these proceedings I do not propose to use that to limit what the plaintiff may be entitled to on the sale. The plaintiff’s counsel submitted that I could order the sale of that property and then add the net proceeds of sale, after payment of the mortgage and costs of the sale, to the sum of $435,786.81 (the value of the parties’ other assets apart from their superannuation less the liabilities apart from the island property liabilities) and order the payment of 70 per cent of that sum to the plaintiff out of the net proceeds of the sale. If those proceeds are not enough to meet the payment then the defendant is to pay the balance.
  1. Subject to any necessary adjustments to that figure of $435,786.81 and to the form of the order for sale and the other consequential orders, that seems to me to be an appropriate solution to the problem. I shall hear the parties as to the form of the necessary orders.

Footnotes

[1] Prentice v Cummins (No 6) (2003) 134 FCR 449, 462 at [48] per Sackville J, apparently approved by the High Court on appeal in Trustees of the Property of John Daniel Cummins v Cummins [2006] HCA 6 at [67]-[69].  The decision in Gray v Gray [2005] FamCA 498 referred to in argument dealt with the situation where there had been a de facto relationship too brief to attract the application of any relevant legislation about the property of de facto spouses.

[2] Queensland Law Reform Commissions Report no 44, De Facto Relationships at pp. 48-54 and see Mullins J in E v S [2003] QSC 378 at [30].

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Editorial Notes

  • Published Case Name:

    F v H

  • Shortened Case Name:

    F v H

  • MNC:

    [2006] QSC 100

  • Court:

    QSC

  • Judge(s):

    Douglas J

  • Date:

    28 Apr 2006

Litigation History

No Litigation History

Appeal Status

No Status