DMH v OAL[2009] QSC 61

SUPREME COURT OF QUEENSLAND

The applications

[1] The applicant seeks a property adjustment order pursuant to Part 19 of the Property Law Act 1974. The applicant alleged in her principal affidavit that she and the respondent commenced a de facto relationship in 1996 and finally separated in November 2005.

[2] One of the items of property the applicant seeks to have taken into account under Part 19 of the Property Law Act is a house and land at Ward Road, Glenwood (“Glenwood”) occupied by the respondent’s mother. The property is registered in the respondent’s name. By a separate application, the third party seeks a declaration that she is the beneficial owner of that property.  The third party is the respondent’s mother.

De facto partners

[3] Although the applicant deposes to a de facto relationship commencing in 1996, I am not satisfied that the evidence supports such a conclusion.

[4] I accept that the relationship between the applicant and the respondent commenced in about 1996. I am also satisfied that there were two children from the relationship. The elder child, EN, was born in the second half of 2003. She died on 19 May 2006. A second child, AH was born on 22 May 2006. He resides with the applicant but the respondent has access to him on three days a week. The applicant continues to breast feed him. When he is weaned, it is expected that he will spend more time with his father than he does presently.

[5] In addition to the children of the relationship, the respondent is the carer of a child by a previous relationship, HL, born 28 January 1986. HL suffers from Downs Syndrome. Despite his age, HL is not independent. It seems he is unlikely to become independent. The respondent receives a carer’s allowance for looking after HL.

[6] The applicant has a child, NH, born 23 December 1986 who is now 22 years old and essentially independent.

[7] In her evidence-in-chief which in this respect I accept, the applicant said[1] that she and the respondent first lived together for a few months in 1996. They lived together for a few months between 1996 and 2003 and commenced living together on a permanent basis at about the time their first child was born in the latter part of 2003.

[8] Until 2003, the respondent and the applicant kept their financial affairs separate. There was no mixing of funds until the sale of a property owned by the applicant at  Raven Way, Noosaville (“Raven Way”) in October 2003.

[9] For the purposes of Part 19 of the Property Law Act a de facto relationship is defined as a relationship between de facto partners. De facto partners are people who live together as a couple on a genuine domestic basis.[2]

[10] Having regard to the applicant’s evidence concerning the development of their relationship, I am not satisfied that the relationship can properly be categorised as a de facto relationship prior to October 2003. The relationship was therefore a short one lasting no more than two years until November 2005.

[11] In his affidavit filed 16 July 2008 the respondent deposes that the parties were de facto partners for a shorter period than two years. He deposes to separations from March 2004 to June 2004 and from January 2005 until March 2005. The respondent did not know the applicant’s whereabouts during these periods.  I adhere to the comments I made in S. v B.[3] regarding the transitory nature of a de facto relationship. It cannot survive a separation in which at least one of the parties intends that the relationship cease.

Glenwood

[12] In determining the property of the parties available for distribution, it is necessary to consider the parties involvement in five pieces of real property. Chronologically, the first is the Glenwood property, to which I referred earlier.

[13] The Glenwood property was purchased by B in 1996. B was at that time married to the respondent’s mother. The purchase price was $28,000, $16,000 of which was paid in cash and the balance of $12,000 was borrowed on vendor finance.

[14] In about 1999 B discovered that he was terminally ill. At that stage he had no money and no borrowing capacity. By a memorandum of transfer dated 16 November 1999 the property was transferred from B to the respondent for a consideration of $1.

[15] The respondent borrowed money from Suncorp to construct a house on the property. A contract to build the house was entered into for the sum of $65,000. The debt secured over the property is currently $80,000. The respondent’s mother presently lives in the house and has done so since the house was built.

[16] The only evidence of the current value of the property is a drive-by estimate from Curra Country Property Sales[4] in October 2008 which estimated the value of the property at that stage as being between $225,000 and $235,000.

[17] What a drive-by would not discover, however, is that some years ago the property was damaged by fire and has not been properly repaired. It is thus unlikely that the real value of the property in October 2008 was as high as was estimated. In addition, the drive-by valuation preceded the current serious financial downturn. It was suggested from the Bar table that the property might be worth about $120,000, although there is no evidence to support that estimate.

Kin Kin

[18] On about 10 June 2003 the respondent purchased a property at Bunneys Lane, Kin Kin (“Kin Kin”). The purchase price was $120,000. Initially $150,000 was borrowed but the property was refinanced in May 2004 with Suncorp. At that time the mortgage over Kin Kin was combined with the mortgage over Glenwood, making a total of $233,000 secured on the two properties.

[19] The Kin Kin property was sold in March 2006. The net proceeds of sale after payment of commission and legal fees was an amount of $192,000, of which approximately $160,000 was applied to repaying that part of the mortgage relating to the Kin Kin property. In his affidavit filed on 16 July 2008 the respondent says that the balance was paid to meet ongoing, monthly mortgage repayments on the two other properties held at the time, on a business trip to investigate additional products to sell, and on credit card liabilities incurred in purchasing stock for a shop attached to a property at Tewantin. I have no reason to doubt this evidence and accordingly I accept it.

Raven Way

[20] In 2001, the applicant purchased the property at Raven Way, Noosaville (“Raven Way”). The purchase price was $115,750.

[21] The applicant lived in this property from the date of its acquisition.

[22] The property was sold in October 2003 for a contract price of $320,000. The net proceeds of sale amounted to $286,000. Of the net proceeds of sale, $74,000 was paid into the respondent’s account at the National Australia Bank. This amount was used to pay out the mortgage debt on a property at Parkdale Avenue, Doonan (“Doonan”). A further $161,000 from the settlement proceeds at Raven Way was used to build a house on the Doonan property.

[23] At the time of the sale of Raven Way, $125,000 was owing to the mortgagee. Rather than repay the amount owing, the mortgage debt was transferred to Doonan.

[24] The balance of the settlement sum was an amount of approximately $50,000, $25,000 of which was used to repay the respondent’s Westpac Visa account. This debt related to two sheds which had been purchased and erected on the Doonan property.

[25] $7,600 was applied to the applicant’s Commonwealth Bank MasterCard. The applicant purchased a VT Commodore and the balance applied to various incidental expenses at the Doonan property and in paying rent for a property at Tewantin, where the applicant resided pending construction of the house on the Doonan property.

[26] I am not satisfied that any part of the $50,000 was inappropriately spent. Even were I to take a different view, the length of the de facto relationship was so short that it would not significantly affect the outcome. Until Raven Way was sold the parties were keeping separate finances.

Doonan

[27] The Doonan property was purchased by the respondent in August 2002. At that stage it was a vacant block of land. The purchase price was $67,200.

[28] $74,000 was borrowed to purchase the property and this sum was repaid from the proceeds of sale of Raven Way.

[29] The debt on Doonan was thus $125,000 which had been transferred from Raven Way.

[30] In August 2004 the respondent borrowed a further $100,000 some of which he used to purchase a Bundy Juice franchise for about $26,000. Most of the balance was used either in meeting mortgage repayments or in the addition of a pool and landscaping at Doonan.

[31] After borrowing the additional $100,000, the mortgage was $225,000.

[32] In June 2005 a further $150,000 was borrowed and secured against the equity in Doonan. $90,000 of that amount was applied towards the joint purchase of a residence and house at Griffith Avenue, Tewantin (“Tewantin”).

[33] The balance, or at least $46,000 of the balance, was apparently paid into the applicant’s account. Her evidence is that she spent most of that money in relation to setting up the shop at Tewantin.

[34] It is difficult to trace in the evidence exactly what happened to that amount of money but the evidence does not suggest that it was squandered by the applicant in such an inappropriate fashion that it should be held against her in these proceedings. I am satisfied that at least a significant part of it was used in relation to the shop, either directly or in repaying credit cards on which shop items had been purchased. The balance was properly expended in ordinary, domestic expenses and mortgage payments.

[35] Doonan was ultimately sold by the mortgagee in May 2007 and after sale expenses and repayment of mortgage debt the balance was paid into Pippa Colman & Associates trust account. The balance is a sum of approximately $70,000. Insofar as the money belongs to the applicant, Pippa Colman & associates is exercising a lien over it for unpaid fees.

Tewantin

[36] Tewantin was bought in June 2005. It is an old style shop with a dwelling above. The purchase price was $445,000 with an additional $46,000 for the goodwill of the shop. A total of $500,000 was borrowed, of which $150,000 was borrowed on the security of Doonan. The balance now totalling $356,000 was borrowed from Rams..

[37] Apart from Glenwood, Tewantin is the only property which remains registered in the name of either applicant. It is owned jointly. Its value has been estimated respectively by the parties as between $495,000 and $430,000 but there is no acceptable valuation evidence upon which I could determine its actual value. After deducting the mortgage debt the balance is somewhere between $74,000 and $139,000.

The source of the parties’ capital

[38] Looking at the properties acquired both before and during the relationship, it is apparent that the only capital to which either party had access was the equity in the real property created by an appreciation in value. That equity appears to have been drawn upon to invest in further property, to invest in businesses to which I will later return, to live on and to pay interest on borrowings.

The businesses

[39] Throughout the period from about 1999 until the relationship finally ended, the applicant confined herself to domestic duties. During that period the respondent invested in at least three businesses. There was the Bundy Juice franchise, to which I have already referred, a roadside seafood van and the shop operated from Tewantin.

[40] All of these businesses have failed. Despite this, I accept that the respondent made a genuine effort to operate the businesses successfully. I accept that the seafood van and the shop were sold. CL bought the seafood and shop businesses in May 2006 for $35,000.

[41] None of the $35,000 was paid to the respondent. The whole of the purchase price was used to pay accumulated debts of the businesses. CL continued to operate the shop until May 2008 when he closed it with accumulated debts of about $14,000. He continued to operate the seafood business until Christmas Eve 2008 when he also abandoned that business and took a job as a delivery driver. CL was unable to make a profit out of either business.

[42] In view of CL’s evidence, I am satisfied that neither the shop business nor the seafood business has any value. The Bundy Juice business had ceased to operate sometime earlier.

Other assets

[43] The only other assets the parties have are personal items, motor vehicles and a minimal amount of superannuation.

[44] The respondent asserted that at the time Doonan was sold by the mortgagee the sheds on the property contained a large quantity of valuable furniture which he inherited from his grandfather. On the other hand, the applicant alleges that the contents of the sheds were essentially rubbish. Her evidence was that she was given the option by the bank to either remove the contents of the shed herself or that the bank would remove the contents and charge the cost of removal to the mortgage debt. She arranged for the property to be removed free of charge but received no payment for it. This property included a Willey’s Jeep the condition of which was in dispute.

[45] There was no valuation of any of this property. There was not even a proper description of the items in the sheds from which an indication of value might be obtained. I am thus not satisfied that any adjustment should be made in relation to that property.

[46] In such a short-term relationship where initial contributions remain identifiable and other factors do not dictate a different result, I do not propose to bring incidental property presently held by either party into account.

[47] There was opinion evidence from a Ms P that the respondent had taken money from the Tewantin shop in 2004/5. I do not accept this evidence. Having regard to Mr Claffey’s evidence, which I accept, that business was never better than marginal. Further, although professing to give expert evidence, Ms P was plainly not an objective witness. After she had finished giving evidence, it was discovered that she was in fact the applicant’s aunt. This fact was not voluntarily disclosed by her or the applicant’s legal representatives.

Beneficial ownership of Glenwood

[48] The proportions in which the parties contributed capital now reflected in the remaining assets depends very much upon the beneficial ownership of Glenwood. As I have indicated, the respondent acquired the property from his step-father for $1. The gifting of the property to the respondent and his mother’s continuing residence there is a strong indication of a trust. In the absence of an express intention a trust would ordinarily be presumed. In Calverley v Green,[5] Gibbs CJ said:

“Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, e.g., as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money: Robinson v. Preston (1858) 4 K & J 505, at p 510 (70 ER 211, at p 213); Ingram v. Ingram (1941) VLR 95 and Crisp v. Mullings (1976) EGD 730 (a decision of the English Court of Appeal).”

[49] Application of this principle would result in a trust in favour of Mr B, with the beneficial ownership on his death passing under the intestacy rules. That interest may have changed as a result of subsequent contributions. However, the only evidence is that the respondent’s mother has been paying the mortgage and the rates. Whether this is by way of direct payment or rent depends on how I view the claim that there is an express trust.

[50] In this case both the respondent and his mother assert an express trust. There is nothing in writing in relation to any express trust. Notwithstanding this and the effect of s 11(1)(b) of the Property Law Act 1974, the solicitor for the applicant expressly declined to rely upon the absence of writing as a reason not to find the existence of a trust.[6]

[51] If I accept the evidence of the respondent and his mother in relation to this matter, it seems to me that there is an express trust under which the respondent holds his interest on trust for his mother.

[52] One fact supporting a conclusion that there was no express trust in that the respondent’s mother entered into a tenancy agreement for a period of time in 2002. The respondent’s mother in her evidence indicated that the purpose of the tenancy agreement was to enable her to represent to the pension authorities that she did not own realty and would thus be entitled to greater benefits. Whether by so representing the respondent’s mother committed an offence is not a matter with which I am presently concerned.

[53] Another contraindication of a trust is the fact that the respondent claimed his First Home Owner’s Grant for the purpose of contributing that sum towards the construction of the house at Glenwood. On the other hand, by leaving a mortgage over the property of $80,000 in circumstances where the cost of the house built on the land was of the order of $65,000, it appears he has at some stage redrawn that sum of money for his own use.

[54] The explanation for the creation of the trust is, in my view, convincing. The respondent’s stepfather was dying and wished to make some provision for his wife. He was unable to borrow and, presumably, his widow, being a pensioner, would also be unable to borrow to build the house. Within a family situation, it seems to me to be unremarkable to transfer the property to a family member who is prepared to undertake the primary obligation under the mortgage to enable the house to be built.

[55] Although the respondent’s mother paid a monthly amount to the respondent, often in cash, I accept her evidence that the amount she paid was not related to the rental value of the property but was an amount to cover the mortgage payments and rates. It does not appear to be disputed that the respondent’s mother in fact paid the rates. This would not normally be an obligation of a tenant. The respondent incurred no actual liability by holding the bare legal title.

[56] In all the circumstances, I accept the evidence given by the respondent’s mother and find that the Glenwood property was held on trust for her.

Entitlements to property pool

[57] Having found that the Glenwood property does not form part of the parties’ assets, the property pool appears to be limited to the equity in Tewantin and the $70,000 held in Pippa Colman & Associates trust account.

[58] The equity in Tewantin is between $74,000 and $139,000. The total value of the pool, therefore, ranges between $209,000 and $144,000, depending upon the value of Tewantin.

[59] When regard is had to the various matters outlined in sections 291 and following of the Property Law Act, there is little between the parties save in relation to their initial contributions.

[60] An important initial consideration is that the parties were de facto partners within the statutory definition for only a very short period of time. In my view, that period of time may have been as little as a year, but is not likely to have been in total much more than two years.

[61] Each of the parties contributed to the family welfare in accordance with their assigned roles. The applicant assumed the duties of homemaker and parent, while the respondent assumed the duty of breadwinner. That the respondent was unsuccessful in his business activities does not take away from the contribution which he endeavoured to make. It has been submitted that I should add back to the pool or otherwise credit the applicant with the value of the failed businesses. It is not suggested that the applicant opposed the respondent’s endeavours to make money out of these businesses. It is not suggested the businesses failed because of a deliberate act by the respondent or neglect. It seems to me that the fact of their failure is simply something the parties must accept as an unfortunate outcome of the way they chose to support themselves.

[62] I am not satisfied that save for the responsibility for the care of the additional child, neither party had his or her earning capacity adversely affected by the relationship was a consequence of it. In my view, both parties, in spite of having the care of at least one child, has the capacity to work and earn a living. Both parties are prima facie healthy and relatively young. Both presently receive Australian pensions.

[63] In the circumstances, the overwhelming feature of the relationship from a property point of view is the disproportionate contributions made to the initial capital. Because of the short duration of the genuine de facto relationship, the significance of those contributions has not been materially diluted by subsequent events.

[64] In view of my finding in relation to Glenwood, the respondent brought to the relationship only his equity in the Kin Kin property. Based upon the sale price, that equity was approximately $32,000.

[65] The applicant brought to the relationship her equity at Raven Way. Again, based upon the sale price, the value of that equity, most of which flowed through to Doonan, after deducting the mortgage amount, was $161,000.

[66] The result is that the applicant contributed more than 80 per cent of the initial capital and the respondent less than 20 per cent. Adopting the median position on the value of Tewantin, it seems to me that the asset pool is of the order of $177,000. Of that, the amount directly referable to the capital contribution of the applicant is $147,000, and that directly referable to the capital contribution of the respondent, $30,000.

[67] Since the respondent wishes to continue to reside in Tewantin, whereas the applicant merely wishes it sold and the equity realised, I propose to give the respondent the opportunity to pay out the applicant’s entitlement. If he is unable to do so, then it seems to me that the property should be transferred to the applicant to enable her to sell it and realise the equity. In that situation, the applicant will, of course, have to bear the costs of sale. Since she asserts the property is worth more than the respondent asserts it is worth, she will, if her estimate of value is correct, still receive more than the amount the respondent would have to pay her to retain the property. If Tewantin is sold, there is sufficient in the net proceeds of sale of Doonan to pay the respondent’s entitlement.

[68] While I am aware Pippa Colman & Associates assert a lien over the applicant’s net proceeds of Doonan, that is a matter solely between those parties. It is not a relevant consideration in these proceedings.

Orders

[69] The orders will therefore be as follows: 

1. If within 28 days of today’s date (“the payment date”) the respondent:

(a) pays to the applicant the sum of $77,000, (“the payment”) and

(b) obtains from the mortgagee a release (“the release”) in favour of the applicant of all her obligations pursuant to mortgage number 708797023,

the applicant shall execute a transfer of her interest in the property at  Griffith Avenue, Tewantin, described as Lot 184 on Registered Plan 886724 in the County of March, Parish of Tewantin, title reference 50075274 to the respondent within seven days of the receipt of such transfer from the respondent or his solicitors and in the event that the transfer is not executed by the applicant within such period of seven days the registrar is empowered to execute such transfer on her behalf.

2. In the event that the respondent makes the payment and provides the release by the payment date, the applicant shall be entitled to the moneys presently held in Pippa Colman & Associates Trust Account absolutely. 

3. In the event that the respondent does not make the payment and provide the release to the applicant by the payment date, I order that the applicant be at liberty to sell the property situated at Griffith Avenue, Tewantin, described as Lot 184 on Registered Plan 886724 in the County of March, Parish of Tewantin, title reference 50075274 (“Tewantin”) and to retain for her own use absolutely the net proceeds of such sale. 

4. In the event that the respondent does not make the payment and provide the release by the payment date, I order the respondent to deliver up vacant possession of Tewantin to the applicant within 14 days of service of notice that such vacant possession is required. 

5. In the event of a sale of Tewantin by the applicant, I order that the applicant be at liberty to sign any transfer of such property on her own behalf and on behalf of the respondent. 

6. If the respondent fails to make the payment and provide the release by the payment date, I order that the respondent is entitled absolutely to the sum of $30,000 presently held in Pippa Colman & Associates Trust Account and that the balance of the funds so held are the property of the applicant. 

7. In relation to the cross application by the third party, I declare that subject to the rights of the mortgagee pursuant to mortgage number 707554830 the third party is beneficially entitled to the whole of the real property situated at Lot 510 Ward Road, Glenwood, more particularly described as Lot 510 on Registered Plan 160316 in the County of March, Parish of Gutchy and being the land comprised in title reference 15840090 and I further declare that the respondent holds the said property at Lot 510 Ward Road, Glenwood, on trust for the third party. 

8. I order the applicant to pay the third party’s costs of and incidental to the third party’s application to be assessed on the standard basis. 

9. Unless otherwise dealt with by these orders, each party is to retain for their own use and benefit absolutely such property as is presently in that party’s possession.