CEJ v BDL[2009] QSC 210

SUPREME COURT OF QUEENSLAND

1. The applicant (“CEJ”) and the respondent (“BDL”) lived together in a de facto relationship for about 3 years and 10 months. The applicant now seeks a property adjustment order under s 286 of the Property Law Act 1974 (“PLA”). The pool of property to be considered is relatively small. The major issue is the proper characterisation of a sum of money provided by BDL’s father that was used as part of the payment for the house purchased by CEJ and BDL.

Background

2. CEJ was born on 11 September 1980 and is 28 years old. BDL was born on 30 May 1983 and is now 26 years old.

3. It was agreed that the parties entered into a de facto relationship on 23 August 2003 and separated on 16 June 2007. There are no children of the relationship.

4. On 29 July 2003 CEJ and BDL executed a contract for the purchase of a house property at 10 Newman Road, Moorooka (“the Moorooka property”). The purchase price was $250,000. That sum was paid by:  

1. The parties obtaining a loan for $125,000 from the National Australia Bank, and

2. BDL’s father providing $125,000.

5. The title to the property is in the name of the parties as tenants in common with CEJ having a one-quarter interest and BDL having a three-quarter interest.

The Property Law Act

6. The correct approach to consideration of the relevant provisions of the PLA was set out in the reasons of Keane JA in FO v HOF.^[1] His Honour referred to the requirements of the PLA in these paragraphs:

“[46] Section 286 of the PLA provides:

‘(1)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 or a child of the de facto partners in the property.

(2) In deciding what is just and equitable, a court must consider the matters mentioned in subsubdivision 3.

(3) It does not matter whether the court has declared the title or rights in the property.

(4) In this section –

adjust, for interests of persons in property, includes give an interest in the property to a person who had no previous interest in the property.’

[47]The reference in s 286(2) to subsubdivision 3 includes s 291 to s 296 of the PLA. By reason of s 296, the matters mentioned in s 297 to s 309 of the PLA must be considered by the court "to the extent they are relevant in deciding what order adjusting interests in property is just and equitable".

[48] Section 291 of the PLA 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 de facto partners.

...’

[49] Section 292 of the PLA provides relevantly:

‘(1) The court must consider the contributions, including any homemaking or parenting contributions, made by either of the de facto partners ... to the welfare of –

(a)the de facto partners; or

(b) the family constituted by the de facto partners and 1 or more of the following –

(i)a child of the de facto partners;

...’

[50] A court must also consider, to the extent that they are relevant in deciding what order adjusting interests in property is just and equitable:

• ‘the age and state of health of each of the de facto partners’; (Section 297 of the PLA)

• ‘the income, property and financial resources of each of the de facto partners’, and ‘the physical and mental capacity of each of them for appropriate gainful employment’; (Section 298 of the PLA)

• ‘whether either de facto partner has the care of a child of the de facto partners who is under 18 years’; (Section 299 of the PLA)

• ‘the contributions made by either of the de facto partners to the income and earning capacity of the other de facto partner’; (Section 304 of the PLA)

• ‘the length of the de facto relationship’; (Section 305 of the PLA)

• ‘the extent to which the de facto relationship has affected the earning capacity of each of the de facto partners’; (Section 306 of the PLA) and

• ‘any fact or circumstance the court considers the justice of the case requires to be taken into account’. (Section 309 of the PLA)”

7. Justice Keane then said:

“[51]It has frequently been emphasised that the judicial discretion conferred by s 286(1) of the PLA and its analogues in other statutes should not be constrained by pre-determined guidelines. (Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513; In the Marriage of Lenehan [1987] FamCA 8; (1987) 11 Fam LR 615; Kardos v Sarbutt [2006] NSWCA 11 at [51]; (2006) 34 Fam.L.R. 550 at 564.) It is essential, however, that the matters referred to in the provisions set out above be taken into account, and that they are "seen, in the reasons for judgment, to have been taken into account". (Davut and Raif [1994] FLC 92-503 at 81,237.) To this end, the four step approach explained by the Full Court of the Family Court in Hickey v Hickey ([2003] FamCA 395; [2003] FLC 93-143 at 78,386, cf Kardos v Sarbutt [2006] NSWCA 11 at [28] – [29]; (2006) 34 Fam.L.R. 550 at 558) provides a useful discipline to ensure clarity of thought and transparency of judicial reasons.”

8. The four step process identified is:

1. The identification and valuation of the property, resources and liabilities of the parties;

2. The identification and assessment of the contributions of the parties to their pool of assets and the determination of the their contribution‑based entitlements in accordance with sections 291-295 of the PLA;

3. The identification and assessment of the factors in sections 297-309 of the Act to determine the adjustment to the contribution-based entitlement; and

4. Consideration of the result of these earlier steps to determine whether that result was just and equitable in accordance with section 286 of the PLA.

Identification and valuation of the property, resources and liabilities of the parties

9. It is agreed that the major asset in the parties’ pool of property is the Moorooka property. It is further agreed that it should be assigned a value of $480,000 and that (at the time of trial) the mortgage debt was approximately $160,000. There is, therefore, a net “equity” in the Moorooka property of $320,000.

10. Both parties proceeded on the basis that any chattels owned by them were of limited value and neither took them into account when making submissions on the appropriate orders to make.

11. Each party has a superannuation balance of roughly the same amount.

12. The one issue under this heading upon which there was no agreement was BDL’s entitlement under the DRL Family Trust. DRL is BDL’s father. The DRL Family Trust is a discretionary trust. In the 2006 financial year, BDL was allotted $24,348 and he declared that as income. In 2007 the amount was $31,752. BDL claimed to know nothing about the operation of the trust and said that, despite having declared in his tax returns that he had received the money, he had not received the money. DRL, in his evidence, pleaded ignorance of the manner in which the trust operates, even to the point where, when he was asked if he was the trustee, he replied “I think so”. His answers, I thought, displayed a lack of candour but no other evidence was produced which would allow me to reach conclusions about whether BDL did receive money or whether he was likely to in the future.

Identification and assessment of the parties’ contributions to the pool of assets

13. The issues which arise under this topic are:  

1. the characterisation of $125,000 provided by BDL, and

2. the amount paid by each party towards reduction of the mortgage debt.

14. The parties’ incomes meant that they could not afford to borrow more than the amount advanced to them by the bank, namely, $125,000. In order to purchase the Moorooka property an amount of $125,000 more had to be found. It is the applicant’s case that DRL lent the money to the parties and that it was to be paid back if the parties broke up.

15. CEJ said that it was her understanding that the “plan was to pay him [i.e., DRL] back as soon [as we had the money]”, but no further details were given. No payments were made by the parties to DRL during the de facto relationship.

16. CEJ’s parents gave evidence of a meeting which they attended with the parties and DRL. The meeting took place prior to the parties entering into the contract for the Moorooka property. Neither of them had had cause to recollect what had occurred at that meeting until 2008 when each was asked to provide an affidavit for use in these proceedings.

17. PEJ, CEJ’s father, recalled that “the main thing [DRL] was saying [was] that if they upgrade or they sold or they broke up or whatever, he wanted his $125,000 back”. In answer to the suggestion that the money was for BDL not the two of them, he said: “No, that wasn’t never mentioned, sir … that never came up.”

18. HGJ, CEJ’s mother, swore an affidavit in which she deposed as follows:  

“4. Approximately a week before a meeting in August 2003 … DRL telephoned me. During this telephone conversation he discussed with me the impending purchase of the property at 10 Newman Road, Moorooka. He suggested that CEJ could ‘get a loan for $65,000 but would not have her ‘name on the deeds’. I responded to him in words to the effect ‘no, this is not acceptable’. 

…

6. At the meeting DRL said words to the effect ‘I’ll put in $125,000 to give them the head start so they are not paying dead money. All I want is my money back if they break up’. The rest of the meeting was taken up with issues such as the source of the loan and a budget for CEJ and BDL.”

In cross-examination, it was suggested to her that her account and that of her husband were almost identical – that was accepted. It was then put that the reason that they were nearly identical was that she and her husband had worked out together what she and he would say they recalled. She denied that.

19. DRL agreed that there was such a meeting but said that he told those at the meeting that he would contribute half the sale price of the house and that BDL would hold a half interest in the property on his behalf. In cross-examination, he said that he did not regard what he did as either a gift (because “a gift is something you don’t want back”) or a loan (because “a loan is something you set an agreement up to get you money back”). He said that he used words to the effect that the money was BDL’s contribution to the house.

20. I do not accept that any of the participants at that meeting can remember with any clarity what was said by DRL on that night. Each of them has, in my view, related what they understood would, or, in DRL’s case, wanted to happen.

21. A more reliable indicator of the nature of the money provided by DRL is the documentation relating to the purchase of the Moorooka property.

22. CEJ said that she did not understand the “title deed” but that she did know that “we had to show that his dad put the 125 in so he would get his 125 back in the case of anything happening”. She claimed not to have seen on the transfer document that she was noted as having a one-quarter share while BDL was receiving a three-quarter share.

23. The conveyancing of the Moorooka property was undertaken by Karen Teitzel who, while not a solicitor, conducted a conveyancing support business. Although she said in her affidavit that she prepared the documentation on the instructions of CEJ and BDL, in her evidence she agreed that the instructions came from BDL or DRL or both.

24. The transfer documents were executed at Ms Teitzel’s home. She said she gave the form to BDL and CEJ to read, asked if they understood it, and asked them to sign it. She witnessed both signatures.

25. CEJ agreed that Ms Teitzel explained the form in basic terms and told her that it was set out to show that DRL had put in $125,000 and so he could get his $125,000 back. This acknowledgement does not, however, resolve the question of how DRL’s contribution should be legally characterised.

26. The difficulty associated with the proper characterisation of the provision of money in this way has long been recognised in the decisions of the Family Court of Australia. A helpful analysis of the various decisions can be found in the reasons of Fogarty J in In the Marriage of Gosper.^[2]

27. His Honour said:  

“Where there has been a gift or advance by a relative to one or both of the parties to the marriage, the first step is to determine the ownership of the benefaction … . Confusion often arises at this point because, particularly with gifts of money or in kind, the evidence about it is confused and imprecise and the actual intention of the donor (the critical issue) may have been ill-defined. However, where the evidence enables the court to determine that it is a gift to one or other or both of the parties, that is an important finding. Normally, where title to a property is transferred to one or both of the parties, that would be the strongest indicator of the intention of the donor.”^[3]

“Where a gift is made solely to the donor’s relative (for example a gift by parents to their married daughter) and that spouse applies that property to the marriage, that is a direct financial contribution solely by that party and will be assessed in the ordinary way along side other contributions by each party to the marriage.”^[4]

“The critical case is where a relative of one of the parties gifts property to both the parties to that marriage. Dependent upon the circumstances of the case, it is, in my view, open to the court in such a case to look at the actuality and treat that as a ‘financial contribution made directly … on behalf of’ the spouse relative …

In many such cases that gift was made only because of that relationship and in reality as a means of benefiting that relative in that marriage. It was made “because she was a daughter of that family” as was said in W's case at 75,527.

It is clearly a “financial contribution” and one “made directly” to the acquisition, conservation and improvement of property. In such cases it is open to the court to conclude, if the facts justify it, that it was made “on behalf of” one spouse.

In other cases the evidence, including evidence that the donor intended to benefit both spouses, may not justify that conclusion. If so the application by the parties of that property to the marriage would, at least at that point, be an equal contribution by them.

…

Here the gift of the McCrae land was to the parties jointly. However, in my view, it is clear that the motivating circumstance was the relationship between the wife's parents and the wife and it was transferred to benefit her and because she was a daughter of the Thompsons.

The property at McCrae should be treated as a financial contribution made directly on behalf of the wife.”^[5]

28. As was pointed out by Fogerty J, the critical issue is the actual intention of the donor. I think it more likely than not, given that Ms Teitzel was a close friend of DRL, that he gave her instructions as to the manner in which the conveyancing documents were to be completed and that the apportionment of one-quarter to CEJ and three-quarters to BDL was a clear indication that the money was not intended to be for both of them but was to be, in DRL’s words, “BDL’s contribution to the house”. That is, on the balance of probabilities, what I find to be the case. It follows, then, that the $125,000 from DRL should be treated as a financial contribution made directly on his behalf. In other words, it comes within s 291(1) of the PLA which requires the court to consider the financial and non-financial contributions made directly or indirectly by or for the de facto partners.

29. The other matter which must be taken into account is the extent to which each of the parties made contributions towards the reduction of the mortgage debt and the expenses of the household. Neither the applicant nor the respondent put before the court any useful information as to the amounts that each had provided toward the expenses of their life together. It is not particularly surprising that that should occur. As Williams JA said in Hardman v Hobman:^[6]

“[3] Parties to a de facto relationship (indeed as with parties to a lawful marriage) usually do not conduct their financial affairs on the basis that one day, following a parting of the ways, each would be in a position to give accurate evidence as to the financial contribution made by each to the relationship, in particular to the acquisition of property, and as to the value of that contribution when the relationship ended. For that reason courts called upon to adjudicate on issues such as raised by this appeal will, of necessity, have to adopt a broad brush approach. The trial judge cannot ignore positive evidence in order to achieve what is perceived to be a just outcome, but more often than not the sparsity of evidence will call for the application of what has often been referred to as “palm tree justice”. Even then there are constraints on what a court can do.

[4] In cases of this kind the burden of proof is often of critical importance. The party seeking relief must place evidence before the court establishing entitlement to that relief. The absence of evidence does not mean that the judge has a free hand to order the transfer of property in a way which objectively may be seen to be just.”

30. It was put for the applicant that, as she received a higher salary over the relevant period, she should be regarded as having contributed a higher amount. That, as a matter of logic, simply does not follow. The most that CEJ was able to say was that she paid “more than her fair share” as “BDL could not have paid for everything on the wages he was earning”.

31. On the other hand, BDL said that he contributed most of the money towards the expenses of the household and that CEJ was reluctant to make contributions.

32. Neither party can be regarded as having fulfilled any obligation to place before the court sufficient evidence to allow specific findings to be made. The evidence for each party was made up mostly of conjecture and other poorly informed guesswork. But the applicant did satisfy me that she had contributed financially the costs of the relationship. The respondent demonstrated enough to satisfy me that he had also made contributions of a substantial nature. It is not, in the absence of evidence, open to me to attempt to assess the relative contributions on an asset by asset basis. It not infrequently occurs in cases of this type that a global approach has to be taken in that assessment process.^[7] This is one of those cases. In these circumstances I can only come to the conclusion that I should regard each of them as having contributed equally to the household expenses and mortgage payments. Each of them, then, should share in the increase in value of the Moorooka in accordance with the original contributions to obtain the Moorooka property made by them or for them.

Factors in sections 297-309 of the PLA

33. The applicant is 28 and the respondent is 26. There is no evidence that either of them has any health problem which would preclude them from employment or otherwise cause them problems.

34. There are no children of the relationship.

35. Neither has entered into another relationship.

36. Neither has a responsibility to support another person.

37. Neither is eligible for a pension.

38. The fact that BDL is a beneficiary under the discretionary DRL Family Trust would, ordinarily, be a matter to which some weight should be given. He has, after all, received distributions of income in the past and there is nothing which suggests that this will not continue in the future. But there is no evidence about the likelihood of this occurring and, if it occurs, what the amount of any distribution might be.

39. For the 2008 financial year, the applicant’s taxable income was $36,526 while the respondent’s was $52,295. During the relationship this position was reversed in the applicant received higher pay than the respondent. There was insufficient evidence for me to form a view as to the likelihood of the current disparity being continued into the future.

Conclusion

40. The absence of any meaningful evidence as to contributions in the past and possible income in the future makes it very difficult to arrive at any conclusion other than that which I have set out above, namely, that the contributions should be assessed as being equal and that the prospective income of each party in the future be regarded as being of the same order. Another matter which is impossible to accurately calculate is the extent to which BDL may benefit in the future from payments made pursuant to the DRL Family Trust.

41. This was a relationship of relatively short duration. I have found that the sum of $125,000 from DRL should be regarded as being the contribution by BDL. It is appropriate then for the “equity” in the Moorooka property to be divided in accordance with the current proportions, namely, one-quarter to CEJ and three-quarters to BDL. I must consider whether that is equitable in all the circumstances. In the absence of evidence to suggest that there will be a continuing and significant disparity in incomes I find that an adjustment should be made in CEJ’s favour and that an appropriate order is for the respondent to pay the sum of $80,000 to the applicant.

42. The applicant is to bring in appropriate minutes of order.