WDD v SMI[2007] QSC 283

SUPREME COURT OF QUEENSLAND

1. MULLINS J:The applicant applies for orders pursuant to Part 19 of the Property Law Act 1974 (PLA)  as a result of the breakdown in the de facto relationship between the applicant and the respondent that commenced in 1990 and ended in December 2006.

History of relationship

2. The applicant was born in 1964. The respondent was born in 1969. At the time they commenced their relationship in 1990 the applicant owned a house property at Kelvin Grove, but no other significant assets, and the respondent had no significant assets. The Kelvin Grove property had been purchased by the applicant in 1987 for $68,000 with a loan of $50,000. When they met, the applicant was studying full-time and working part-time as an electrician and the respondent was working part-time as a waitress.  At the commencement of the relationship the parties lived with the applicant’s mother.  The Kelvin Grove property was rented, except for a period of about a year in 1994 when the parties lived in it.

3. The applicant finished his accountancy degree in 1993 and worked as an electrician earning approximately $30,000 per annum until 1995/1996. During the period 1993 to 1996 the respondent worked casually as a waitress. In 1996 the applicant commenced with his current employer which is a company that specialises in fire protection. His commencing salary was $30,000 per annum, but his income gradually increased, until he obtained his current position as a manager in mid 2006, when he commenced earning $60,000 per annum plus a car allowance of about $288 per week. His current salary and allowances equate to about $81,500 per annum.

4. In 1996 the respondent continued working as a waitress on a casual basis. She then commenced working in real estate until about 2003. At the time of separation the respondent had not worked since 2003.

5. Between 1995 and 2006 the parties traded in real estate. The applicant and the respondent purchased an investment property in their joint names at Park Crescent, Sunshine Beach in 1995.  They used the applicant’s equity in his Kelvin Grove property to assist in the acquisition of that property.  They purchased the Sunshine Beach property for about $160,000 and at the time owed $210,000.

6. In 1999 the applicant and the respondent purchased a property at Grant Street, Buderim for about $195,000, using the equity in the Kelvin Grove and Sunshine Beach properties.  In mid 2000 they sold the Sunshine Beach property for about $300,000 and purchased a property at Peregian Beach using the proceeds from the Sunshine Beach property and a loan of $250,000.

7. The applicant and the respondent sold the Buderim property in about 2001 for $295,000. The profit was used to repay debt under existing mortgages. The Kelvin Grove property was sold in 2001 for $257,500. The proceeds from the Kelvin Grove property were applied to the purchase of a unit at River Esplanade, Mooloolaba (the Mooloolaba unit). The Mooloolaba unit was purchased for $240,000 and the parties did not need to borrow further to purchase that unit. The parties moved into the Mooloolaba unit.

8. In 2003 the parties sold the Peregian Beach property for $1.2m and used the proceeds to purchase a block of canal front land at Mooloolah Island for $1.2m in July 2003.  The parties separated in 2005 for about three months.  The applicant and the respondent purchased a property at Clithero Avenue, Buderim in early 2006 for about $423,000.  The moved into the Clithero Avenue property and lived there until their separation in late 2006.

9. The applicant moved from the Clithero Avenue property to the Mooloolaba unit.  On 19 February 2007 the applicant found that the respondent had moved her possessions into the Mooloolaba unit.  There was then an incident that occurred between them that resulted in the applicant obtaining a temporary protection order against the respondent which allowed the applicant to move back into the Mooloolaba unit and prevented the respondent from coming within 100 metres of where the applicant was residing.  The applicant has continued to reside at the Mooloolaba unit.

10. During their relationship when they resided together, the applicant and the respondent shared the domestic duties. There are no children of their relationship.

11. At the date of separation, the applicant identifies the joint assets as:

• Mooloolah Island land

• Clithero Avenue property

• Mooloolaba unit

• Range Rover (estimated value $90,000)

• Mitsubishi Triton (realised value $8,700)

• Superannuation (unknown value)

• Bank accounts (unknown value)

• Furniture and household contents in possession of the respondent (estimated value $20,000)

12. At the date of separation the total amount owed by the parties to the Commonwealth Bank was $1,673,321.60. The total mortgage repayments were in excess of $10,000 per month to which the respondent was not contributing and which the applicant could not meet from what he earned. The applicant also claims that the parties owed his mother the sum of $75,000.

13. The applicant’s solicitor sent a letter to the respondent dated 28 February 2007 setting out the applicant’s offer to settle their property matters. The letter proceeds on the basis of attributing values to the Mooloolah Island property and the Mooloolaba unit that are in total about $1m greater than the valuations subsequently obtained for this proceeding.  The applicant’s offer to settle was made on the basis of a 55/45 distribution of the joint assets in the applicant’s favour.  The applicant justified this on the basis that at the commencement of cohabitation his assets were greater than the respondent’s assets by $150,000 and that he was the greater financial contributor throughout the course of the relationship.  The offer was described in the letter by the applicant’s solicitors as “somewhat generous”.

History of the proceeding

14. As the applicant was unsuccessful in negotiating a settlement with the respondent, this proceeding was commenced by an originating application filed on 22 March 2007.  The applicant was anxious to obtain orders to sell some of the properties to prevent the bank exercising its powers of sale as mortgagee.  The application identifies that the applicant seeks orders facilitating the transfer of ownership of joint property, the sale of identified properties and orders that adjust interests in the properties to reflect the applicant’s financial contribution to the properties and to the welfare of the respondent.

15. The applicant was unable to serve the respondent with the application and his supporting affidavit. An order for substituted serviced was made by the court on 17 April 2007 enabling the application and supporting affidavit to be served on the respondent’s father.  The respondent was then represented by WHD Lawyers which firm filed an address for service on behalf of the respondent on 3 May 2007.  The applicant’s solicitors and the respondent’s solicitor agreed on consent orders on 2 May 2007 that authorised the applicant to sign a contract of sale in respect of the Clithero Avenue property and dealt with the distribution of the proceeds of sale on an interim basis.

16. The solicitor who was acting for the respondent at that time has deposed that shortly before the hearing on 2 May 2007 the respondent advised him that she was leaving Australia and provided another person’s email address as the only means to communicate with her. On numerous occasions between 9 May and 9 July 2007 that solicitor endeavoured to communicate with the respondent through that email address, but was unsuccessful in obtaining any response. The respondent left for overseas without responding by affidavit to the matters raised in the applicant’s application and supporting affidavit of which the respondent had notice.

17. The respondent’s solicitor did, however, consent to directions in the proceeding on behalf of the respondent that were filed on 15 May 2007. In accordance with those directions, the applicant filed his statement of financial position on 9 May 2007. The respondent was required to file her statement of financial position and affidavit material in accordance with the relevant practice direction on or before 24 May 2007.  Those directions were not complied with by the respondent.

18. Further orders to facilitate the sale of the Clithero Avenue property were obtained from the court with the consent of the respondent’s solicitors on 19 June and 23 July 2007.  Costs orders were made in favour of the applicant against the respondent on 19 June and 9 July 2007.

19. The sale of the Clithero Avenue property was completed on or about 25 July 2007 and, in accordance with the consent orders, the balance of the proceeds of sale of $422,565.15 were paid to the applicant’s solicitors’ trust account.  In accordance with orders made by the court, the balance proceeds of sale were used to discharge a line of credit and all arrears owing in respect of the parties’ mortgages with the Commonwealth Bank, to repay the sum of $75,000 to the applicant’s mother and to pay each party the sum of $20,000 by way of partial property settlement.  The parties authorised the applicant’s solicitors to withdraw from the monies held in trust the sum of $11,060 per month by way of mortgage instalments to the Commonwealth Bank.

20. On 9 July 2007 the applicant had sought final orders as a result of the default of the respondent in complying with directions. An order was made on that day that the respondent file and serve the respondent’s statement of financial position and affidavit material in accordance with the relevant practice direction on or before 9 August 2007 and the proceeding was adjourned for final hearing or default judgment on 3 September 2007.  The respondent’s solicitors gave notice of those orders in the email sent to the address they had for the respondent on 9 July 2007.  As the respondent did not respond to that email, WHD Lawyers made an application that was heard on 28 August 2007 for leave to withdraw as the legal representatives of the respondent.  That leave was granted.

21. There was no appearance on behalf of the respondent when the matter came on for hearing on 3 September 2007. As the proceeding was commenced by originating application (and not by claim), it was not open for the applicant to seek default judgment: r 281 of the UCPR.  It is for the applicant to satisfy the court that he is entitled to the relief sought in the application.

22. There are difficulties associated with such a course, where there is a lack of material from the respondent. However, the applicant should not be precluded from obtaining relief due to the failure of the respondent to comply with directions and provide the material that it is usual for a party to a proceeding under Part 19 of the PLA to put before the court.  The court must be vigilant that the applicant does not obtain a better result than that to which he is properly entitled under Part 19 of the PLA, as a result of the failure of the respondent to make a response of substance to the application.

23. Apart from the applicant’s own affidavits and those of his solicitor, he relies on the opinions expressed by an independent valuer, Mr Phil Mannell, in his valuation reports dated 26 June 2007 relating to the Mooloolah Island land and the Mooloolaba unit.  Mr Mannell valued the Mooloolah Island land at $1.5m and the Mooloolaba unit at $550,000.

24. At the hearing on 3 September 2007 I directed that the applicant’s solicitor send a letter and email to the solicitors who had been acting for the respondent to inform them that I was about to make final orders as a result of hearing the application and that if the respondent’s solicitors had a contact address for the respondent, it would be appreciated if they would pass that information onto the respondent. A further affidavit of the applicant was filed on 13 September 2007 that provided additional information about the sale and purchase of the Kelvin Grove property. An affidavit of the applicant’s solicitor was filed on 24 September 2007 dealing with compliance with the direction that I had made on 3 September 2007. The applicant’s solicitors also provided a further draft order that took account of some of the matters raised during the course of the hearing of the application. That draft order will be exhibit 2. While this decision has been reserved, no material has been received from the respondent.

The law

25. It is appropriate to be guided by the longstanding approach adopted by the Family Court in cases concerning alteration of property interests: FO v HAF [2006] QCA 555 at paragraphs [51] and [52].  That approach involves four inter-related steps: Hickey and Hickey (2003) FLC 93-143 at paragraph 39.  The approach can be summarised as requiring the identification of the net asset pool available for distribution as at the date of hearing, the assessment of the contribution-based entitlement of the parties, consideration whether any of the matters set out in sections 297 to 309 of the PLA call for an adjustment of the contribution-based entitlement and consideration whether the order made is just and equitable in all the circumstances.

Net asset pool

26. The net asset pool comprises the assets identified by the applicant and set out in paragraph [11] above, except that the Clithero Avenue property has been converted into the proceeds held in the applicant’s solicitors’ trust account, after paying the debts of the parties that were agreed upon. To the extent that the applicant’s solicitors may have taken from those trust funds an amount of $28,148.85 to pay their fees which exceeds the amount of $20,000 that was to be paid to the applicant by way of partial property settlement, the amount of $8,148.85 needs to be credited back to the parties for the purpose of calculating the net assets. The sum of $20,000 paid to each of the applicant and the respondent from the trust account by way of partial property settlement also has to be treated as part of the net assets already distributed. That makes the net proceeds from the Clithero Avenue property available for inclusion in the net asset pool as the sum of $104,106.  In calculating the net asset pool I will attribute Mr Mannell’s valuations to the Mooloolah Island land and the Mooloolaba unit.  That makes total assets of $2,312,806 (excluding superannuation).  The current balance of the applicant’s superannuation is $56,968, but the respondent’s superannuation is unknown.  The liabilities at the date of the hearing were $1,536,343 owed to the Commonwealth Bank, a debt of $35,080 to the body corporate for the Mooloolaba unit and an unknown amount for capital gains tax on the sale of the Mooloolah Island land when that occurs.  The draft order submitted on behalf of the applicant after the hearing showed the amount owing to the body corporate for the Mooloolaba unit and legal fees for the body corporate’s solicitors as $27,105.81.  Using that figure instead of $35,080 leaves a net asset pool of about $750,000.

Contribution-based entitlement

27. The applicant must be given benefit for bringing the equity that he had in the Kelvin Grove property to the relationship. The amount that his solicitor suggested that it was worth in the initial offer of settlement of $150,000 was clearly inflated. At the time of the purchase of the property, the applicant’s net equity in it was merely $18,000. He was only making repayments himself under the mortgage over the Kelvin Grove property for three years, before he commenced the relationship with the respondent and got the benefit of the respondent’s contribution to the joint household. That would have assisted in meeting the repayments of the mortgage to the extent that rent did not cover them. I infer that the respondent assisted in the parties’ success in trading in real estate from the fact that she was working in real estate for some of the time this trading occurred.

28. Although there is a lack of material on the respondent’s earnings, the applicant deposes to his earnings being greater than the respondent’s earnings. The applicant must be given weight for his greater earnings, particularly from the time the respondent ceased work in about 2003.

29. The applicant claims a total of 25 per cent for his additional contributions. That appears excessive and does not give sufficient weight to the success the parties had in jointly trading in real estate. For the degree to which the applicant’s financial contributions have exceeded those of the respondent (both in respect of the initial contribution of his equity in the Kelvin Grove property and his greater earnings), I would allow a total of 20 per cent.

Any adjustment to the contribution-based entitlement

30. The de facto relationship was for a significant period of time, but there is no evidence that the de facto relationship has affected the earning capacity of either party. The applicant is in good health and employment and has no responsibility to support any other person. There is no evidence as to the respondent’s personal circumstances. The evidence available on the additional matters covered in sections 297 to 309 of the PLA does not suggest that any adjustment to the contribution-based entitlement is appropriate.

What is just and equitable

31. The order that the court makes by way of a property adjustment order must be just and equitable: s 286(1) of the PLA.  On the basis of the material that is before me on this application, I am satisfied that a division of the net assets of the parties on the basis of 70 per cent in the applicant’s favour and 30 per cent in the respondent’s favour is just and equitable in the circumstances.

Costs

32. As at the date of the hearing the applicant had incurred costs and disbursements of $28,148.85. He estimated that he would be liable for further costs of about $5,500. The applicant’s solicitors had obtained independent assessments of the costs for the two orders for costs made in the applicant’s favour. Those assessments were for $3,053.95 and $4,811.20 (and are included the applicant’s solicitors’ account for $28,148.85). The draft order submitted after the hearing seeks an order that the respondent pay the applicant’s costs of the proceeding fixed at $7,865 for the orders made on 19 June and 9 July 2007 and two-thirds of the balance of the applicant’s costs of the proceeding.

33. The reasons put forward by the applicant to justify an order for costs in his favour include that the applicant attempted to negotiate the resolution of their property interests with the respondent at an early stage, the applicant was required to obtain an order for substituted service as he did not know the respondent’s whereabouts, the respondent agreed to orders and directions on 2 May 2007, but failed to abide by the directions and the respondent did not cooperate in the sale of the Clithero Avenue property.

34. Under s 341 of the PLA a party to a proceeding under Part 19 must bear the party’s own costs, unless the court is satisfied there are circumstances justifying the making of an order for costs.  The court must have regard to the matters that are set out in s 341(4) of the PLA in deciding whether there are circumstances justifying the making of an order for costs.

35. The failure of the respondent to participate in the proceeding has compounded the difficulties for the applicant in endeavouring to resolve the property interests between the parties. The parties only separated in December 2006. This proceeding has been prosecuted expeditiously by the applicant. That was no doubt contributed to by the financial pressures due to the default situation under the mortgages. As a result of the parties’ dealings in real estate, their property interests were complicated and legal costs would inevitably have been expended.

36. The lack of cooperation of the respondent and her failure to participate in negotiating a settlement or respond to this proceeding has aggravated the costs incurred by the applicant. Bearing in mind that the applicant has the benefit of two costs orders in his favour, the circumstances justify making an order that the applicant pay one-half of the balance of the applicant’s costs of the proceeding to be assessed.

Orders

37. The draft order submitted after the hearing provides for the making of the property adjustment order under s 286 of the PLA.  It facilitates the sale of the Mooloolah Island land and provides for the transfer by the respondent to the applicant of the respondent’s interest in the Mooloolaba unit.  That makes it likely that the applicant will have to pay a cash amount to the respondent in order to ensure the 70/30 division of the net assets.

38. Both parties occupied properties jointly owned by them in the couple of months following separation. After the applicant resumed possession of the Mooloolaba unit in early March 2007, it appears that the respondent then no longer occupied any of the jointly owned properties. It is therefore appropriate that the applicant indemnify the respondent for all rates, taxes and body corporate fees for the Mooloolaba unit as from 1 March 2007.

39. The applicant’s solicitors had a concern that the finalisation of the distribution of the net asset pool would be stymied by the inability to contact the respondent. The applicant therefore proposed that the court appoint the Public Trustee of Queensland as the trustee of the balance of the funds due to be paid to the respondent. The applicant relies on the power conferred on the court by s 333(1)(f) of the PLA.  Although I expressed reservations about the proposed course, the power conferred by that provision is wide and the Official Solicitor to the Public Trustee provided the applicant’s solicitors with a letter dated 19 September 2007 indicating the willingness of the Public Trustee to accept the proposed trust for the respondent provided the funds to be held in trust were more than $10,000.  As that will be the case, I will make the order that permits the applicant’s solicitors to pay the funds due to the respondent to the Public Trustee to be held upon trust for the respondent.  In addition, I will direct that the applicant serve a copy of the order on the respondent’s father in the hope that will assist in bringing notice of the making of these orders to the attention of the respondent.

40. I have amended the draft order to reflect the conclusions that I have reached in these reasons. I therefore make an order as per the draft order initialled by me and placed with the file.