AHP v MP[2008] QSC 217

SUPREME COURT OF QUEENSLAND

[1] The applicant seeks orders pursuant to Part 19 of the Property Law Act 1974 arising out of the cessation of his de facto relationship with the respondent.  The resolution of the application has been hampered by the failure of the respondent to file any material in response to the application or to appear on the hearing.

[2] The originating application was filed in the District Court.  On 30 January 2008 Robin QC DCJ made orders for the applicant to file further material and for all material and orders to be served by ordinary airmail post to the respondent’s last known postal address in Germany with service to be effected within 21 days of posting, and to the respondent’s email address.  Until the respondent provided an address for service the applicant was given leave to send any further documents to the same postal address.  Since the value of the applicant’s interest in the property appeared to exceed $250,000, the application was transferred to this court.

Service of the proceedings on the respondent

[3] Mr P Kronberg appeared for the applicant in the Applications jurisdiction for final relief without any material having been filed by or on behalf of the respondent.  The applicant deposes that on 5 September 2007 he received a telephone call from the respondent who indicated that he wished to settle property matters amicably.  They discussed various ways of achieving a settlement.

[4] Mr Robert Martin, the applicant’s solicitor, and the applicant received an email letter from the respondent on 17 September 2007.  He wrote, relevantly,

“Dear [applicant] and Mr Martin,

Firstly, [applicant], thank you for giving Jörg permission to pass your email address on to me.

I’m also very thankful for us agreeing to settle this matter amicably.[1]

As discussed with [applicant], I do not wish to take this matter to court as it would be cost prohibitive, both emotionally and financially.  I simply do not have the emotional strength or the financial capacity to cope with this option.

[applicant], as discussed please send me the proposed settlement and I’d be more than happy for a mediated settlement that is fair to both of us.  I would be happy for Mr Martin to draw up the settlement agreement.

Please note that the correct mailing address for me is:

…

I still do not have a permanent address in Germany, so the above is the best permanent mailing address.”

[5] The following day the applicant forwarded to the respondent at his email address a detailed proposal for the resolution of the proceedings.  The applicant spoke to the respondent by telephone that day and the respondent indicated that although he had received the email he had not yet read the contents fully and that he would get back to the applicant.

[6] During the month following that telephone conversation the applicant attempted to contact the respondent by email, mobile phone and text messages on numerous occasions.  Towards the end of September 2007 he received a text message from the respondent informing him that he would telephone him but he did not do so.  The applicant has had no further communication from the respondent.

[7] On 10 January 2008 Mr Martin wrote to the respondent at the postal address in Germany and the email address noting that there had been no further contact since October 2007 and giving notice that an application was to be made to the District Court in Brisbane on 30 January 2008.  On 14 April 2008 Mr Martin sent, as directed, the District Court order made by Robin QC DCJ on 30 January 2008 together with the applicant’s principal affidavit sworn 26 January 2008, an affidavit of Mr Martin sworn 29 January 2008, the practice direction statement dated 20 February 2008 and the orders proposed by the applicant.  Thereafter Mr Martin sent the respondent a letter dated 3 July 2008 notifying him that the application had been listed for hearing in the Supreme Court at 10 o’clock on 31 July 2008 as well as the further affidavit of the applicant.  He confirmed this posting by email. 

[8] It may be concluded that the respondent has been properly served with the application and supporting material and has had ample opportunity to participate either in settlement discussions or the hearing of the application but has chosen not to do so, leaving it to the applicant to make appropriate submissions.

The relationship

[9] When the parties first met in Brisbane the respondent was a teacher and the applicant was studying for a Diploma of Tourism at Southbank TAFE on a student visa.  His home was then in Tahiti.

[10] In November 1998, according to the applicant’s affidavit, he and the respondent started “dating”.  At that time the applicant was renting his own unit but from November 1998 he began staying each night at a house in Spring Hill which the respondent shared with a flat mate.  In or about May or June 1999 the applicant moved into that house and commenced paying half the rent and general living expenses which were payable by the respondent.  The applicant resided with the respondent for approximately six or seven months before he completed his studies and was required to return to Tahiti as he was unable to obtain permanent resident status in Australia.  The applicant remained in Tahiti from January 2000 until December 2001, almost two years, when he successfully obtained another student visa.  He returned to Australia in December 2001 and in March 2005 was granted permanent resident status in Australia.

[11] The applicant deposes that whilst in Tahiti between January 2000 and December 2001 he and the respondent maintained their relationship “as best we could” by telephone calls and occasional visits.  The applicant visited Australia to be with the respondent for one month from December 2000, for one week in March 2001, for one week in June 2001 and for two days in September 2001.  The applicant paid for all his travel expenses.  Upon his return to Australia in December 2001 he and the respondent resumed co-habitation on a full-time basis.  The relationship ended in February 2006.

[12] A court may make orders about the property of parties to a de facto relationship pursuant to Part 19 of the Property Law Act 1974 (“the Act”) only if satisfied that the partners have lived together in a de facto relationship for at least two years.  On the material put before the court by the applicant the relationship subsisted at the least from December 2001 until February 2006, just over five years.  The applicant maintains that the de facto relationship commenced in November 1998.  I would conclude that it did not commence until May or June 1999 when the applicant moved into the Spring Hill house with the respondent and started paying half the rent and likely continued throughout the two years of their separation brought about by circumstances, not choice.  Whether it did or not is unlikely to have an impact on the resolution of property matters between them.

Acquisition of property

[13] In or about October 2001 the respondent purchased a unit property at Spring Hill for $98,000 (“the first unit property”).  It was purchased by him with a mortgage to the Commonwealth Bank of Australia.  When the applicant returned to Brisbane in December 2001 he and the respondent moved into that property on 24 December.  The applicant was studying and made no direct financial contribution towards the purchase or the mortgage repayments and outgoings on the property.  He deposes that he attended to all the household chores.

[14] The applicant commenced employment with the Commonwealth Bank in April 2003.  In or about August 2003 the applicant and the respondent purchased in joint names another unit property in Spring Hill for $265,000 (“the second unit property”).  The purchase was financed via a $20,000 Commonwealth Bank Line of Credit in joint names for the deposit and a mortgage to the Commonwealth Bank of Australia over the first unit property.  The parties continued living in the first unit property while the second unit property was rented.

[15] In about May 2005 the applicant and the respondent purchased another unit property in Spring Hill for $275,000 (“the third unit property”).  The purchase of that property was financed via a mortgage over the first unit property and funds from the joint Commonwealth Bank Line of Credit of $20,000 as well as a mortgage over the purchased property.  The parties took up residence in the third unit property in about June 2005.

[16] The applicant paid half of all mortgage repayments and outgoings on all three properties which were not covered by the rent on those properties. This commenced in April 2003 with the first unit property and continued with the second and third unit properties as they were acquired.

[17] The applicant acquired 21 units of Commonwealth Bank of Australia shares due to the applicant’s employment during the relationship.  The parties used their line of credit to purchase $5,000 worth of Virgin Blue shares in November 2003.  In about 2004 they used their line of credit to purchase $6,500 worth of Pacific Brand shares in the respondent’s name only.

Financial contribution during cohabitation 

[18] During the period of cohabitation the applicant’s annual gross income ranged from $33,500 to $39,500.  The respondent worked throughout the relationship as a teacher.  The applicant deposes that to the best of his knowledge the respondent’s annual gross income ranged from $42,000 to $55,000.  The applicant deposes that since he commenced employment in April 2003 he has paid half of all household and joint expenses as well as repayments on the properties.  The applicant deposes that in or about April 2004 he completed paying the sum of $15,047.74 to the respondent for any expenses paid by the respondent for the applicant whilst he was studying. 

Financial contributions by the applicant after separation

[19] The applicant deposes that since separation in February 2006 he has made all mortgage and outgoing payments on the third unit property and used the rent from the second unit property to cover the mortgage payments on the first unit property and the second unit property.  This has been a considerable financial struggle for him.  The respondent has made some payments in respect of the properties and loan arrears totalling $7,215.21.  The last payment was November 2006.

[20] The applicant deposes that after separation the respondent withdrew $18,500 and $9,020 from their joint credit line accounts with the Commonwealth Bank of Australia on 22 March 2006, an amount of $27,520.

[21] On 1 December 2007 the Commonwealth Bank auctioned the first unit property as mortgagee in possession.  The property was sold for $300,000.  So far as the applicant can say the Commonwealth Bank discharged the mortgage out of the sale funds and repaid three joint loans which were secured against that property. The applicant is unable to say what has happened to the surplus funds from the sale of the property which the Commonwealth Bank must account for to the respondent but which he estimates are $125,000.

[22] An appraisal given in January 2008 and a valuation in July 2008 indicate that the second and third unit properties have increased in value. The properties are now worth approximately $425,000 and $460,000 respectively.

[23] The applicant deposes that between the date of separation at the end of February 2006 and 1 August 2008 he has made payments in the sum of $52,542.44 towards the third unit property, comprising repayments on two loans, council rates and body corporate levy.  He made repayments on two loans in respect of the first unit property between 1 March 2006 and 31 December 2007.  They were $9,005.81 for the mortgage and repayments on the loan in the sum of $3,169.  All loans in relation to the property were paid out on 23 January 2008 after the sale of the property. 

[24] Repayments made in respect of the second unit property are the repayments to the two loans and payments to maintain the property, a total of $24,455.54.  No payments were made during the whole period for the body corporate levy or council rates for the property.  There was a further margin loan of $200 paid by the applicant. 

[25] The total of all those payments is $89,372.79.  Of that amount $29,523 was paid from rent received from the other properties.  The total net amount paid by the applicant from his own monies between 1 March 2006 and 1 August 2008 was $59,849.79.  During the same period the applicant deposes that the respondent paid $4,500 towards their joint liabilities made by a direct debit into the Commonwealth Bank of Australia line of credit in October 2006.  I have assumed that this is in addition to the $7,215.21 deposed to in an earlier affidavit.[2]

[26] The applicant negotiated with the Commonwealth Bank to make reduced payments to the mortgage over the second unit property to avoid a mortgagee in possession sale.  He is negotiating with the Brisbane City Council and the Body Corporate for the second unit property about arrears of rates and contributions respectively.  The figures reveal that the mortgage over the second unit property has remained similar to the position at separation while that over the third unit property has increased.  Since separation the applicant has paid $59,849.70 towards the mortgages net of the rental contributions; the respondent has paid $11,715.21 ($7,215.21 + $4,500).  The applicant has thus contributed $48,134.58 more than the respondent.

Assets and liabilities

[27] The following are the assets and liabilities of the parties as identified by the applicant.

Approach

[28] By s 286 of the Act a court may make any order it considers just and equitable about the property of either or both of the de facto partners, adjusting the interests of the de facto partners in the property.  In deciding what is just and equitable a court must consider the matters mentioned in subdivision 3.[3]  By s 286(4) “adjust” for interests of persons in property, includes to give an interest in the property to a person who had no previous interest in the property.  Included within subdivision 3 is s 291 which provides relevantly:

“(1)The court must consider the financial and non-financial contributions made directly or indirectly by or for the de facto partners…to-

(a)the acquisition, conservation or improvement of any of the property of either or both of the de facto partners; and

(b)the financial resources of either or both of the e facto partners.”

[29] The contribution to the welfare of the de facto partners, including any home making contributions, must be considered by the court.[4]  The court must also consider the effect of any proposed order on the earning capacity of the de facto partners[5]; the age and state of health of each of the de facto partners[6]; the income, property and financial resources of each of the de facto partners and their physical and mental capacity for appropriate gainful employment[7]; the standard of living reasonable for each of the de facto partners in all of the circumstances[8]; the contributions made by either of the de facto partners to the income and earning capacity of the other de facto partner[9]; the length of the de facto relationship[10] and any fact or circumstance the court considers the justice of the case requires to be taken into account.[11]

[30] As Keane JA observed in FO v HAF[12]:

“It has frequently been emphasised that the judicial discretion conferred by section 286(1) of the PLA and its analogues in other statutes should not be constrained by predetermined guidelines.  It is essential, however, that the matters referred to in the provisions set out above [sections 291-296 and section 297- section 309] be taken into account, and that they are ‘seen, in the reasons for judgment to have been taken into account’”.[13]

[31] His Honour expressly approved the four step approach explained by the Full Court of the Family Court in Hickey v Hickey.[14]  His Honour described that process[15] in the following fashion:

•The first step is the identification and valuation of the property, resources and liabilities of the parties;

•The second step is the identification and assessment of the contribution of the parties to their pool of assets and the determination of their contribution-based entitlements in accordance with section 291 to section 295 of the Act;

•The third step is the identification and assessment of the factors in sections 297 to 309 of the Act to determine the adjustment to the contribution-based entitlement;

•The fourth step is consideration of the result of these earlier steps to determine whether that result is just and equitable.

[32] With that approach in mind it is appropriate to consider the applicant’s proposal for the distribution of the property. The applicant proposes that the second unit property be sold and, after paying out the mortgage to the Commonwealth Bank and the lines of credit, the net proceeds be equally divided.  He proposes that he should retain solely the third unit property having a net equity of $240,200 based on a current valuation.  The proposed settlement is as follows:

[33] The applicant has a credit card liability of $2,442.62 and the respondent a credit card estimated debt of $10,000.[16]  I propose to ignore those liabilities assuming that they relate to personal and not joint expenditure.  The proposed orders provide that the applicant will retain net assets worth approximately $258,340 plus half the net proceeds of sale of the second unit property.  The respondent will receive approximately $180,170 plus half the net proceeds of the sale of the second unit property.  The disparity between them is approximately $78,170 in favour of the applicant.  It must be kept in mind that these figures may fluctuate depending on the value of the shares and the property sale price.

Non-financial contributions

[34] The applicant deposes that throughout the relationship he attended to all household tasks.  This included cleaning, laundry, cooking, washing and ironing for them both.  He deposes that the respondent worked and did not attend to any household tasks but expected the applicant to do so.

Needs of the parties

[35] The applicant is employed by the Commonwealth Bank on an annual base salary of $41,667.  He is aged 32 years and in good health.  So far as he can say the respondent works as a teacher in Germany but he is unaware of his present income and believes him to be in good health.

[36] The applicant has superannuation entitlements of $13,500.  The respondent’s superannuation entitlements are unknown but since he was a teacher for at least eight years in Queensland and likely longer, it may be presumed he had and realised, or has retained, superannuation entitlements.  I propose to ignore superannuation.

Conclusion

[37] Although it was the respondent who, because of his earning capacity was able to borrow to acquire the first unit property, as soon as the applicant gained employment in April 2003 he contributed equally to the financial expenses of the parties in respect of that home.  Prior to that occurring, for about 18 months, he performed most, if not all, of the domestic and household tasks  Nonetheless, due to the respondent’s superior earning capacity for approximately 18 months he provided a home and financial support to the applicant whilst completing his studies, apparently without any financial contribution from the applicant.  The possession of the first unit property by the respondent enabled the parties to borrow to acquire the later properties, the obligations in respect of which they shared equally.  They also equally shared in discharging those responsibilities until February 2006 when they separated.  Throughout this period of joint financial contribution the applicant made virtually the sole contribution to the domestic tasks of the relationship.  This, in my opinion, balances the direct financial contribution by the respondent during the first 18 months of their relationship after they resumed co-habitation.

[38] Of particular importance is the applicant’s maintenance and preservation the properties after separation.  He should not be criticised that the first unit property was sold by the bank.  Apart from the modest $11,715.21 contributed by the respondent, he left the applicant to deal as best he could, with the financial obligations for the three properties, including, not just the mortgage repayments, but the loan repayments and the rates and body corporate contributions. This was, of course, impossible on the applicant’s income which must have been known to the respondent, even with the assistance of the rent from two of the properties.  The applicant has been able to manage the relationship with the bank so as to retain the second and third unit properties, thus avoiding mortgagee sales with the attendant costs as well as a likely reduced sale price.  The applicant has had the benefit of living in the jointly-owned property since separation, some two-and-a-half years.  The respondent’s accommodation arrangements are unknown.

[39] The applicant has laid out $59,349.79 since separation in preserving the properties.  I accept Mr Kronberg’s submission that that can be taken into account and adjusted in his favour less the respondent’s contribution of $11,715.21.  If that amount of $48,134.58 is deducted from $78,170, being the disparity in the proposed distribution, a balance of approximately $30,000 remains in the applicant’s favour.  In effect, the applicant is receiving $15, 000 more than the respondent.

[40] Mr Kronberg submits that that disparity is appropriate to acknowledge the applicant’s personal efforts in negotiating with the bank about reduced payments on the second and third unit properties and generally his contribution to the preservation of those properties.  The respondent’s complete abdication of his financial obligations has caused the applicant financial hardship and, as his emails to the respondent state, considerable emotional stress and anxiety.  He, accordingly, submits that this is a factor which might be taken into account pursuant to s 309 of the Act.  I accept that submission.

[41] It is proposed that Mr Matthew James Rouse, a solicitor, be appointed trustee of the second unit property pursuant to s 333 of the Act on the same terms as a statutory trustee for sale as defined in s 37A of the Act.  By s 333(f) a court may “appoint…trustees”.  This is an appropriate order to make. 

[42] The draft order also proposes that the applicant be authorised to execute all documents and do all things necessary to effect the transfer to him of the respondent’s interest in the third unit property and the jointly owned shares in National Australia Bank and Virgin Blue.  The power to do so is found in s 333(1)(c) which provides that the court may order that a document be executed or that anything else be done to enable an order to be carried out effectively.

Costs

[43] The Act contemplates that a party to a proceeding under Part 19 must bear that party’s own costs.  However

“…if the court is satisfied there are circumstances justifying it making an order, it may make any order for costs…it considers appropriate.”[17]

[44] In considering if there are circumstances justifying making an order for costs the court is required to consider, relevantly:

●          the income, property and financial resources of each of the parties;

●          the conduct of each of the parties in relation to the proceedings;

●          whether any party has made an offer to settle and the terms of the offer; and

●          any fact or circumstance the court considers the justice of the case requires to be taken into account.[18]

[45] The applicant contends that the failure of the respondent to co-operate in negotiating a settlement or to respond to the proceeding has augmented the costs incurred by the applicant.  In that circumstance an order for costs ought to be made in favour of the applicant.  In WDD v SMI[19] Mullins J ordered that because of lack of co-operation by the respondent and her failure to participate in negotiating a settlement, the costs of the applicant were aggravated and made an order that the respondent pay one-half of the applicant’s costs of the proceedings.

[46] The respondent had been unable to reach agreement with the applicant in circumstances where he appeared to recognise the fairness of the process and that the parties could settle property matters.  He has, however, been unable to bring himself to respond to the proposals.  The outcome has been reasonably consistent with the earlier informal offer made by the applicant.  It is clear that the costs of this application were largely unnecessary and have increased because of the approach of the respondent.  I accept Mr Kronberg’s submission that it is appropriate that the respondent pay one-half of the applicant’s costs.  Even though the applicant commenced proceedings in the incorrect court an application would have had to be made to obtain directions about service in this court so that the order for removal was not productive of wasted costs.  Mr Martin, the applicant’s solicitor, has deposed that his fees inclusive of GST will be between $7,000 and $8,000 and counsel’s fees approximately $5,000 inclusive of GST.  Those costs appear reasonable and rather than the added expense of a costs statement and assessment I propose to order the respondent, pursuant to r 687(2)(c)[20] of the Uniform Civil Procedure Rules, to pay to the applicant $6,250 towards his costs. That amount may be withheld from the respondent’s share of the proceeds of sale of property to be sold.

[47] The orders are:

1. The parties’ property described in these reasons as the second unit property and being more particularly described as Lot 34 on Building Units Plan of Resubdivision 104285, County of Stanley, Parish of North Brisbane, Title Reference 50134034 be vested in Matthew James Rouse as trustee for sale on the same terms as a statutory trustee for sale defined in section 37A of the Property Law Act 1974.  Such property to be sold by the trustee and that the net proceeds of such sale, after discharge of any mortgage, rates and body corporate fees, payment of expenses of sale (including real estate agent’s and trustee’s fees and expenses and reasonable legal costs of sale) be distributed as follows:

(i) first in payment of the parties’ Commonwealth Bank of Australia credit line;

(ii) second in payment of the parties’ Commonwealth Bank of Australia margin loan;

(iii) third, the balance to be equally distributed between the parties, subject to Order 7 hereof.

2. The respondent’s right, title and interest in and to the parties’ property described in these reasons as the third unit property and being more particular described as Lot 11 on Building Unit Plan 5222, County of Stanley, Parish of North Brisbane, Title Reference 16356154 be transferred to the applicant.

3. The respondent’s right, title and interest in and to the following shares jointly owned by the parties be transferred to the applicant:

(i) National Australia Bank;

(ii) Virgin Blue.

4. The applicant be authorised to execute all documents and do all things necessary to effect the transfers in Orders 2 and 3 hereof on behalf of the respondent.

5. The applicant indemnify and keep indemnified the respondent in respect of the mortgage and any other liabilities in respect of the property referred to in Order 2 hereof.

6. Save as aforesaid each party retain all other property, real or personal, in that party’s name, possession or under that party’s control.

7. The respondent pay to the applicant $6,250 towards his costs of and incidental to this application which may be withheld from the respondent’s share of the proceeds of sale referred to in Order 2.

8. In the absence of information about any other appropriate address service of this Order and these reasons may be effected as directed by Robin QC DCJ on 30 January 2008.