DISTRICT COURT OF QUEENSLAND

1. [1]
   The applicant and the respondent lived together in a de facto relationship^[1] between 1990 and 2000. The female applicant seeks an adjustment order about property under s 286 of the Property Law Act 1974 (PLA).

2. [2]
   Section 288 of the PLA requires that an application be made within two years after the day on which the de facto relationship ended and the parties agree that time limit expired in about October 2002. The applicant did not, however, bring this proceeding until September 2004 and, therefore, needs leave under s 288(1)(b) to continue. Section 288(2) provides the court may give leave only if it is satisfied that hardship would result to the applicant or a child of the de facto partners if leave were not given.

3. [3]
   There are two infant children of the relationship, living with the applicant. The respondent did not oppose the granting of leave. Notwithstanding that cohabitation ceased in 2000, the parties remained in a business relationship until 2004. During that period there were discussions about the fair division of their property and, indeed, other proceedings associated with a company conducting a business in which both parties worked, of which they were the only directors and shareholders.

4. [4]
   For reasons which will be apparent, I am satisfied there should be a property adjustment order in the applicant’s favour. It logically follows that a failure to grant leave would cause hardship to her and, by implication, those children. An order under s 288(1)(b) should be made.

5. [5]
   During the hearing it became clear the total value of the property, both real and personal, in which the parties may have an interest exceeds the jurisdiction of this court and the applicant undertook, through her Counsel, to file a document enlarging the court’s jurisdiction under s 72 of the District Court of Queensland Act 1967: PLA, s 329(4)(a). Mr Westbrook, Counsel for the respondent, said his client supported that course and would signify consent on the document.

6. [6]
   The female applicant was born on 26 June 1967 and is now 39. The male respondent was born on 24 March 1970 and is 36. There are two children from their relationship: a son born 11 September 1991, and a daughter born 3 February 1995. During cohabitation a son of the applicant from another relationship, born 27 October 1988, also lived with them.

7. [7]
   The parties met in Hervey Bay and began living together around mid 1990. At the time the respondent was employed as a plumber, and the applicant was unemployed. The respondent set up his own business as a plumber in 1993, but was declared bankrupt in 1994. The family relocated to Blackwater in 1995 where the respondent obtained employment at a mine. In 1996 he began working again as a plumber, operating as a sole trader. On 1 July 1998 a company, Jacko’s Plumbing Pty Ltd, was incorporated to acquire his business. The applicant and the respondent were the officers, and sole shareholders.

8. [8]
   Although the parties’ affidavits disputed their respective financial and non-financial contributions to the building up of assets in the course of the de facto relationship, it was agreed, at the commencement of the hearing, that the court could treat those contributions as equal. Although the respondent held the trade qualification, the applicant helped by managing the business and keeping its books and, indeed, performing some of the physical work associated with it.

9. [9]
   In early 1998 a house at 17 Gidyea Street, Blackwater was purchased, in the respondent’s name only, for $58,000. The parties lived there until they separated in October 2000 and the applicant has remained in occupation with her children and, latterly, her new husband to whom she was married on 21 June 2003. The parties give differing accounts about payment of the deposit on the Blackwater house but ultimately little turns upon that.

10. [10]
    At the date of separation the primary assets were that house, then worth $70,000, a Commodore motor vehicle worth $55,000 and the value of their shares in Jacko’s Plumbing, which had plant and vehicles worth about $67,000. There were, however, debts to bank and finance companies, and the Australian Taxation Office, amounting to $166,000.

11. [11]
    The history after separation is unusual. In October 2000 the respondent moved to reside in a storage shed but continued to work in the company business (as did the applicant). In early 2001 the respondent moved to Rockhampton and obtained other employment. In October/November 2001, however, he returned to Blackwater to work for the company on a full time basis and continued to do that until around mid 2004. Each party drew on company earnings for personal income during this period.

12. [12]
    After he ceased to work with and for the company, the respondent obtained employment in Rockhampton at the meat works. In August 2004 he applied to wind up the company on just and equitable grounds. Those proceedings were resolved on condition the applicant would continue to provide him with information about the company’s affairs, and begin these proceedings. There have been other proceedings for domestic violence orders, brought by each against the other.

13. [13]
    Since 2004 the respondent has set up his own business, trading through a company, and it is quite successful. The evidence is a little sparse but it appears his new partner is in gainful employment. The children remain in the Blackwater property with the applicant, who has been their primary caregiver since 2000 (with the assistance of her new married partner). The respondent pays Child Support as required by law for the benefit of the children. The applicant is not in good health, and requires medication and constant medical care. It seems unlikely she could work in the foreseeable future.

14. [14]
    After the separation in 2000 the respondent purchased two properties in Rockhampton. The first, in Canning St, involved some unusual elements. His new partner contributed $15,000 to the purchase price, the balance was borrowed, and the price also reflected an agreement under which her parents were granted a life interest. Later, he purchased another property, at Upper Dawson Road.

15. [15]
    The three properties now held in the respondent’s name, in Blackwater and Rockhampton, have all increased significantly in value since 2000. The Blackwater house is now worth $220,000; the property at Canning Street, $240,000, and the land at Upper Dawson Road $305,000. The applicant or her husband paid the mortgage payments on the Blackwater house after separation and, in July 2005, her husband paid out the entire mortgage debt. There are still substantial amounts owing on mortgages over the two Rockhampton properties. Although the company no longer trades and has not been wound up (and, it appears, has not lodged tax or other returns since 2004/2005), it still has assets including plant, tools and equipment and motor vehicles.

16. [16]
    The applicant’s case is, in short, that she should receive the Blackwater property free of any encumbrance. The respondent’s case, in summary, is that although the applicant may have an arguable claim to relief, she probably had the benefit of income from the company after separation; but, her inadequate disclosure and unsatisfactory evidence about that income extinguishes her claim, or reduces the strength of it. The only witnesses called were the applicant and respondent, the company’s former accountant Mr Fox, and another accountant from Rockhampton, Mr Bryant, who had looked at the company’s computerised bookkeeping program at the respondent’s behest.

17. [17]
    Both the applicant and the respondent impressed as honest witnesses, but during her evidence the applicant had difficulty with questions concerning the books and accounts she had kept, and it became clear she had only a limited understanding of book-keeping and financial matters. Her evidence about those matters and the computer programme used to keep the books was, I am satisfied, honest and genuine but limited by this want of full understanding.

18. [18]
    A good deal of the evidence focussed upon apparent inconsistencies or discrepancies in the company’s financial records, both within that computer program and in the records associated with the last tax return, 2004/2005. I accept Mr Bryant’s evidence that there are obvious discrepancies between what the computer program appears to show, and the published financial statements. The evidence, overall, compels the conclusion that either deliberately, or more likely inadvertently, some $70,000 of debts owed to the company were written off as bad; that they were, more likely than not, actually bad; and, that the applicant allowed them to fall out of the system and, through ignorance, failed to bring them to Mr Fox’s attention.

19. [19]
    I was not persuaded that any other reasonable inference could be drawn. In particular, there is no basis for finding that the applicant collected some of these debts, but failed to disclose them. In the result, the company lost some taxation advantages but no attempt was made to calculate them and it is unlikely they were substantial.

20. [20]
    The evidence does establish, however, that the applicant had the benefit of profits from the company after it effectively ceased trading in about mid 2004. The applicant, who does not hold plumbing trade qualifications, attempted to keep going with the assistance of an employed drainer but, unsurprisingly, that was not ideal and she ceased seeking work for the company business in about September 2005. It has not traded since.

21. [21]
    The evidence establishes: that a de facto relationship of the kind referred to in the PLA existed when the legislation came into effect, and afterwards, and the Court has jurisdiction: s 257; that this proceeding commenced after the relationship ended: s 283; and, that it would be proper to consider a property adjustment in circumstances where the relationship was of about 10 years duration, there are children of it of less than 18 years, and the applicant contributed to the assets of the relationship in the manner contemplated by ss 291 and 292: s 287.

22. [22]
    The judicial discretion conferred by Part 19 of the PLA, and s.286(1) in particular, has been said by the Queensland Court of Appeal to involve something akin to the four step approach explained by the Full Court of the Family Court in Hickey v Hickey (2003) FLC 93-143^[2].

23. [23]
    The first step is the identification and valuation of the property, resources and liabilities of the parties. The second, the identification and assessment of the contributions of the parties to their pool of assets, and their contribution-based entitlements in accordance with s.291 to s.295 of the PLA.  The third step is the identification, and assessment, of the factors in ss.297 -309 of the PLA to determine the adjustment (if any) to the contribution-based entitlement. The fourth, and final step, is consideration of the effect of these earlier findings to determine whether the result is just and equitable in accordance with s.286.

24. [24]
    The first step has, here, an unusual element: that the matter comes before the court for consideration more than six years after the parties ceased to cohabit, but in circumstances when a good deal of relevant economic activity has occurred in that period.

25. [25]
    A starting point in the consideration of the property which comprises the relevant estate is the Blackwater house valued; it is agreed, at $220,000.00. The business conducted by Jacko’s Plumbing Pty Ltd has no separate value, but some residual plant and equipment. In November 2004 a valuer assessed the fair market value of that equipment, and concluded that the applicant remained in possession of chattels worth $38,860.00 and the respondent, $10,954.00. The items include a Nissan motor vehicle valued at $10,200.00, a van worth $1,100.00 and a Holden Commodore valued at $17,500.00.

26. [26]
    Shortly after that valuation the applicant caused the Holden to be transferred to her husband for $15,000.00. Although she said that the vehicle was sold because the company needed funds to meet liabilities, and that she did not retain the benefit of the payment of the $15,000.00 (paid to Jacko’s Plumbing Pty Ltd in three separate instalments) the bank statements do not support that contention and indicate, rather, that she did benefit in both a direct and indirect financial, and practical way.

27. [27]
    The company also has some continuing liabilities. There is still an outstanding debit on the Nissan vehicle of $9,736.00 and for a Dingo Digger of $16,692.00. There are outstanding rates of $5,322.00 on the Blackwater property. The applicant’s husband paid some $43,000.00 to discharge the balance of the mortgage debit on the Blackwater property ($28,431.71) and the company overdraft ($14,681.81). The later payment falls to be considered, however, in light of an undertaking the applicant gave to the Supreme Court in 2004 in the winding up proceedings, to reduce the company overdraft by $500.00 a month. It is plain that did not occur. Notwithstanding the final separation, the respondent continued to make, and the evidence shows, payments against the Nissan vehicle and the Dingo Digger and also, from time to time, the rates on the Blackwater property. The Nissan has remained with the applicant and the van with the respondent. The Dingo was repossessed in circumstances which are murky.

28. [28]
    The company continued to receive income and in the tax year 2004/05 banked gross receipts of $227,015.17 and, in 2005/06, $111,982.50. The company accountant, Mr Fox, calculated those figures from banking records and they are, in a sense, reliable. But, it is also clear from the cross-examination of the applicant, and from the accountants’ evidence, that the balances of the financial statements prepared by Mr Fox (on the basis of information provided by the applicant) are probably inaccurate. Financial records provided by the applicant were, it was shown, at odds with accounts prepared by Mr Fox from other, reliable documents like bank statements. None of this is to be taken as criticism of Mr Fox.

29. [29]
    As already remarked, the applicant did not impress, during her evidence, as wilfully dishonest but as somebody who was not comfortable or confident with book keeping practice. The uncertainty which surrounds the company’s records means it is impossible to be precise about the extent of the actual benefit she received from the funds the company banked in the two financial years after the respondent ceased to work in the company business. I was pressed, by Mr Westbrook (for the respondent), with the proposition that the applicant had failed to give proper disclosure and her evidence about the company’s financial dealings and her own income from it should, then, be robustly scrutinised; and that these matters weighed against any order in her favour.

30. [30]
    Ultimately, while I accept her disclosure was deficient and the bookkeeping records are to some extent unreliable, I am not persuaded she received anything much different, in actual income, from the net figures shown in the company’s returns for those years or, in particular, that she received any significant amount of additional income. There is simply no other evidence suggesting, with any degree of probability, something of that kind. The business lost its central asset, a qualified experienced plumber, when the respondent left and income would be expected, logically, to decline. The applicant did attempt to struggle on, so continued outgoings could also be expected. That accords with the process revealed, essentially, by the records and tax returns.

31. [31]
    Another element of the dispute about the assets which fall to be considered concerns the respondent’s two properties at Rockhampton at Canning Street, and Upper Dawson Road. They have a present value of $545,000.00, but carry liabilities of $237,824.00. As already observed, the Canning Street property was purchased for the contribution of $15,000.00 from the respondent’s current partner and is subject to a life interest in favour of her parents. The evidence does not enable a clear finding whether it would have been possible for the respondent to purchase this property without his partner’s assistance, but it is undeniable that she made a contribution and, arguably, has some equitable interest. It is possible, too, that she has a similar interest to some extent in the Upper Dawson Road property. In the result, these assets of the respondent have to be considered in light of this existing equitable interest – the nature of which cannot, however, be confidently measured.

32. [32]
    Conversely, the applicant’s marriage and her apparent dependence upon her husband mean she has an existing but inchoate interest in his property. Ultimately, the paucity of information about these matters makes it appropriate to regard them, as effectively, self-cancelling or neutral.

33. [33]
    The extent to which the two Rockhampton properties should otherwise be brought into account is contentious. Ss 291 and 292 of the PLA address the contributions that are relevant, and it is clear that they are not limited to direct financial contributions. The parties agreed that up to the time of separation their contributions were equal.

34. [34]
    Thereafter, firstly, the applicant and later her husband had the benefit of occupying the Blackwater property, rent free. The Rockhampton properties were purchased by the respondent shortly after the de facto relationship broke down and, initially, with assistance from his new partner. The balance of the funds to complete both purchases involved an assumption by the respondent of the commercial risk of borrowings, serviced from income. There is no evidence that the respondent relied upon any equity in the Blackwater property to obtain or support the borrowings for either of the Rockhampton parcels.

35. [35]
    Increases in the values of those Rockhampton properties involved, simply, the operation of market forces and are the product of the respondent’s decision (with his new partner) to undertake the commercial risk associated with their purchase, with what seems to have been minimal equity.

36. [36]
    Some analogy can be drawn with the superannuation entitlements considered in FO v HF ^[3] where it is suggested that benefits derived from a time prior to the relationship may not be an important element. That conclusion is apposite in connection with the respondent’s success in the real estate market, which occurred after these parties separated. In the result, the Rockhampton properties must be brought into account as part of the exercise of calculating the parties’ respective financial positions (s 291(1)(b)) but subject to the unknown interest of the respondent’s partner, and in light of the fact they were purchased after the de facto relationship with the applicant had ended^[4].

37. [37]
    Other material factors include the applicant’s present health difficulties, dependence upon her husband, obligation to maintain and support the children of her relationship with the respondent, and the respondent’s apparent (significantly) greater earning capacity.

38. [38]
    At the time of the party’s separation they had, then, two substantial assets: the Blackwater property and the company business. The Blackwater property remains available for distribution between them, as do some of the chattels of the company, subject to appropriate arrangements (if that is possible). In the period of six years since the parties ceased cohabitation their lives have taken different courses. The respondent’s financial position improved, with assistance from his present partner and with no relevant contribution from the applicant. The applicants own position has not improved to the same degree but the evidence suggests, at least, that she has some security in the good income earned by her new husband and the maintenance and support he has plainly provided for some time.

39. [39]
    It was contended, for the respondent, that the absence of any satisfactory explanation from the applicant about the funds available to her from the company means that she cannot maintain a claim to the whole of the equity of the Blackwater property. There are, however, factors which compel the conclusion that an order which provides her with security in those premises would be a just and equitable one. She has the sole care for the children of the relationship, but is presently unemployable. She has health problems. Her contribution as a homemaker, notwithstanding those problems, is unassailable^[5]. She has resided continuously at that home for over eight years. The relationship itself lasted for a decade, during which she made equal contributions. Although her husband earns a good salary, there are many contingencies to be taken into account: the persistence of that support, his own ability to maintain earnings at that level, and other vagaries of life.

40. [40]
    The discretion arising under the legislation is wide^[6], as is the range of relief which can be considered. Each party’s submissions ultimately suggested the transfer of property still within the legal ownership of the company. This judgment is, obviously, not the best vehicle to address the dilemma which therefore arises. The evidence shows, however, that the company is effectively defunct and that both its assets and liabilities have been identified. In the absence of any other known claims, an appropriate purpose can be served if each party is required to indemnify the other in respect of company property they might retain.

41. [41]
    The property which can be traced directly to the de facto relationship is as follows:

1. Blackwater $220,000.00

2. Jacko’s Plumbing Pty Ltd$  49,814.00

$269,814.00

42. [42]
    For the reasons already explored, the other assets relevant to the discretion arising within the jurisdiction primarily include the respondent’s two parcels in Rockhampton, with a gross value of $545,000.00 and an associated liability of $237,824.00.

43. [43]
    The liabilities which can be traced direct to the de facto relationship are:

1. Debit on Nissan vehicle $ 4,868.00

2. Debit on Dingo Digger$ 8,346.00

3. Outstanding rates on Blackwater property $ 5,322.00

4. Mortgage debit on Blackwater property discharged by applicant’s husband $28,431.00

5. Company overdraft discharged by applicant’s husband $14,681.00 

$61,648.00

44. [44]
    The applicant is, for the reasons already adumbrated, in a much less favourable position than the respondent. Although the respondent has sizeable obligations under the mortgages over the Rockhampton parcels, his business is doing very well and there is no evidence to suggest those debts are oppressive. (Indeed, the significant increases in the value of the properties they secure mean his post-relationship investments have been successful.) The applicant is not in a secure position, exemplified by the fact she has no equity in the home in which she has resided, with the children, for a number of years.

45. [45]
    These conclusions compel the view that a just and equitable division requires the transfer, by the respondent, of his interest in the Blackwater property to the applicant. The wash-up of other assets is complicated by the fact they belong to the company, but both Counsel submitted they could be distributed, as it were, in exchange for indemnities. The additional complication, creating obligations for both the parties and the company, is the discharge by the applicant’s husband of the mortgage debt on Blackwater, and the company’s overdraft.

46. [46]
    The transfer of the Blackwater house to the applicant bestows a significant benefit upon her. The respondent’s contribution to the acquisition and maintenance of that asset and to the business and assets of the company was not insubstantial. Those factors warrant the conclusion that the respondent should, if compelled to give up his interest in Blackwater, also be freed so far as reasonably possible of the burdens which still attach to the ‘communal’ assets.

47. [47]
    These elements dictate that equity and the requirements of the legislation are served if, in exchange for an indemnity from her in respect of the debt on the Nissan, the outstanding rates, and the obligation of the parties, and the company, arising from her husband’s discharge of the mortgage attached to Blackwater and company overdraft debt, the respondent transfers all his interest in Blackwater to her.

48. [48]
    Although the Dingo Digger was repossessed it is not inequitable if the obligation to discharge that debt remains upon the respondent and that he be ordered to indemnify the applicant and the company in respect of it. The Nissan should remain in the applicant’s possession, and the van in the respondent’s. The costs associated with the transfer of Blackwater, including legal costs, and duties and charges, should be borne by the applicant. It may be that the parties also wish to affect a transfer of shares in the company.

49. [49]
    This division gives the greater part of the assets directly attributable to the relationship to the applicant, acknowledging her contribution, her continuing maternal obligations, and her less favourable circumstances. At the same time, it is just and equitable to relieve the respondent, to some degree, of the burdens which are still traceable to that relationship.

50. [50]
    It is necessary to consider the manner in which these things may be done so as to ensure the division proceeds on these lines without complications or difficulties. I will hear submissions about the form of orders to be made.