Kilby v O'Brien [2006] ACTSC 20 (29 March 2006)

Last Updated: 6 April 2006

JOSEPH MAHONY KILBY v JOYCE PATRICIA O'BRIEN [2006] ACTSC 20 (29 March 2006)

DOMESTIC RELATIONSHIPS - Property adjustment - exercise of discretion

Domestic Relationships Act 1994 s3, s12, s15

Ferris v Winslade (1998) 22 Fam LR 725

Hallinan v Wityinski [1999] FamCA 1127

No. SC 195 of 2004

Judge: Connolly J

Supreme Court of the ACT

Date: 29^th March 2006

IN THE SUPREME COURT OF THE )

) No SC 195 of 2004

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: JOSEPH MAHONY KILBY

Plaintiff

AND: JOYCE PATRICIA O'BRIEN

Defendant

ORDER

Judge: Connolly J

Date: 29^th March 2006

Place: Canberra

THE COURT ORDERS THAT:

1. The defendant pay the plaintiff within 30 days the sum of $175,618.

2. The parties have leave to apply in relation to costs.

1. This is an application pursuant to s 15 of the Domestic Relationships Act 1994 (the Act) for an adjustment of property interests following the breakdown of a domestic relationship. While there are factual disputes between the parties as to the precise dates on which they commenced cohabitation, it is common ground that, after commencing a social relationship in about mid 1996, they commenced cohabitation in either late 1996 (the plaintiff's case) or early 1997 (the defendant's case). The parties then lived together until November 2002, when the relationship ceased, although the parties continued to live in the same house until February 2003. During the period of the relationship, a residential property was purchased in the defendant's name, in which they cohabited. The property was subsequently renovated. It is common ground that funds were provided by the plaintiff both to enable the original purchase to occur, and to fund the renovations. The real issue in dispute in these proceedings is whether these amounted to a contribution to the relationship, or whether, as the defendant says, were simply a loan.

2. The matter proceeded to hearing in December 2005, and the evidence took up all of the allocated hearing time. Counsel were in agreement that, rather than seek additional hearing days for submissions, submissions would be prepared in writing and exchanged according to an agreed time frame. The Court received all written submissions by the beginning of February 2006.

3. It is common ground that the relationship satisfies the criteria of the Act, being s 3:

a personal relationship (other than a legal marriage) between 2 adults in which one provides personal or financial commitment and support of a domestic nature for the material benefit of the other, and includes a defacto marriage,

and that the relationship extended for a sufficient period (between five and six years) to allow this court to make an appropriate order for the adjustment of property interests (s 12).

4. The power of this Court to make a property adjustment order is found in s 15 of the Act which provides:

Property Orders

(1) On application by a party to a domestic relationship, a court may make an order adjusting the interests in the property of either or both of the parties that seems just an equitable to it having regard to-

(a) the nature and duration of the relationship; and

(b) the financial or non-financial contributions made directly or indirectly by or on behalf of either or both of the parties to the acquisition, conservation or improvement of any of the property or financial resources of either or both of them; and

(c) the contributions (including any in the capacity of homemaker or parent) made by either of the parties to the welfare of the other or any child of the parties; and

(d) the matters referred to in section 19(2) [maintenance orders], so far as they are relevant; and

(e) any other matters (if any) as the court considers relevant.

5. In exercising the discretion contained in s15 this court has been guided generally by the approach taken by the Family Court of Australia in dealing with matrimonial property adjustments. As Cooper J said in Ferris v Winslade (1998) 22 Fam LR 725 at [33]:

I agree with the observations of a Full Court of the Family Court In the Marriage of Harris (1991) FLC 92-254 at 78,705:

The task of the court in proceedings under section 79 is not akin to an accounting exercise. To borrow a phrase used by McLelland J in Davey v Lee (1990) 13 Fam LR 688 at 689 in relation to section 20 of the De Facto Relationships Act 1984 (NSW) "the court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind.

...

[35] The exercise of the power under s 15 "ultimately requires the Court to select a round figure or percentage as being the just and equitable translation into money terms of the wide and general considerations which [s 15(1)(d)] requires the Court to take into account": In the Marriage of Collins (1990) FLC 92-149 at 78, 043-049).

6. Both the male plaintiff and female defendant had previously been married and separated. They are both clearly intelligent professionals, working in demanding jobs. The plaintiff is a lawyer, in government service, and the defendant is a public servant. They are both in their mid 50's. There are no children of the relationship, although the defendant has a 15 year old son, Callum, from her previous marriage. Callum resided with the defendant at all relevant times. The plaintiff has adult children from his previous marriage. Although both are in secure professional employment, the plaintiff has consistently received a considerably higher income than the defendant, and has a significantly higher balance in his public service superannuation account.

7. The plaintiff's case, simply put, is that all of the financial transactions of the parties during the course of the relationship should be viewed as contributions towards the growth of joint assets during that relationship, notwithstanding that the principal asset, the residential property in Chifley in the Australian Capital Territory, was purchased in the defendant's sole name. Accordingly, the plaintiff's case is that the parties' respective capital contributions should be the basis for the distribution of the asset. It is common ground that the Chifley house was purchased in November 1996 for the sum of $121,000. The house was extensively renovated in 2000 and 2001, with the bulk of the funding coming, it was common ground, from the sale of a unit owned by the plaintiff. The evidence at the hearing indicated that at the time of the hearing the Chifley house was valued at about $440,000, and it is the plaintiff's case that the growth in the value of the asset should be shared in proportion to the capital contributions. On the plaintiff's case, this would reflect a capital contribution ratio of about 75%-25% in his favour.

8. The defendant's case is that the funds received from the plaintiff towards the house, both for the initial purchase, and the renovations, were in the nature of a loan. It is her case that the first loan was in fact repaid, and that accordingly the plaintiff should only be entitled to the repayment of the loan monies that went towards the extensions.

9. The parties were in acrimonious disagreement about most aspects of their joint financial affairs, and much time was spent analysing old bank statements during the course of their relationship as to whose salary paid mortgages and other outgoings. Their financial affairs were intermingled, and from these accounts the plaintiff made regular and not insubstantial payments in support of his two adult children. He agreed that, over the period of the relationship, these would have amounted to $65,000 - $70,000 (transcript 66). It seems to me that it is unnecessary to descend into intricate detail in relation to these matters, as to do so would be to fall into the error identified by the Full Court in Hallinan v Wityinski [1999] FamCA 1127 where it was said at [13]:

The trial judge then made reference to the then unreported 1998 ACT Supreme Court decision in Ferris v Winslade (1998) 22 Fam LR 725 in which Cooper J expressed the view, adopted by her Honour in this instance, that the decisions of the Family Court under s 79 of the Family Law Act contain the appropriate principles to guide the exercise of the discretion under s 15. In that case, as the trial Judge noted, Cooper J went on to endorse the three step approach adopted by this Court in property matters as exemplified by the decision in Clauson and Clauson (1995) FLC 92-595. In adopting a global approach to the assessment of the parties' contributions to the property, the trial judge proceeded on the basis that the task of the Court in proceeding under s 79, and accordingly under s 15, is not to undertake an accounting exercise but rather to exercise a very general discretion.

10. It seems to me that it is necessary to look separately at the two significant transactions said by the plaintiff to amount to his contribution to the purchase of the Chifley house. It is common ground that these amount to the initial sum of $25,000, and the later contribution towards the renovations, the sum of about $104,000 in 2000.

The original purchase of the Chifley House

11. It is common ground that the defendant exchanged contracts to purchase the Chifley residence on 21 November 1996 in the sum of $126,000, but there is contention about many of the details of this transaction, and the status of the relationship at that time. The parties began a social relationship in about mid 1996, when the plaintiff was working in the Woden region as a public service lawyer, and the defendant was working in the same region as a speechwriter for a Commonwealth department. At this time he was living in a unit in Braddon, and she was living with her son in a former matrimonial property in Ngunnawal.

12. It is common ground that the defendant's employment contract expired in about September 1996, and it was some time before she again found employment in the same field, probably in November 1996. There was evidence that the plaintiff was reluctant to commence a cohabitation relationship with the defendant until such time as she again held full time employment, and this was not contested. There appears to have been consent orders made in the Family Court in November 1996 in relation to the defendant's former marriage, from which she had the expectation that she would receive a property settlement in the sum of $35,000, and this was significant as she looked to acquire a new residence.

13. There is evidence of a loan document in early December 1996 (at which time the plaintiff says they were cohabiting, and the defendant rejects this) in which the defendant sought a loan of $66,000 from the ANZ bank, which would be consistent with the expectation that she would have the $35,000 settlement, and together with a sum of $25,000 from the plaintiff, this would meet the purchase price. In fact there were delays in the settlement, and the final bank documents show that the loan was in the sum of $101,000. I find that the plaintiff was, for a short period, the guarantor of this loan, which was solely in the defendant's name.

14. By mid January 1997 it would seem that the parties were in cohabitation in the Chifley residence, and there is evidence that the plaintiff's Braddon unit was being rented, and he had advised Chifley as his address.

15. The defendant's evidence is that immediately upon moving into the Chifley house she offered to repay the advance from the plaintiff. There is evidence from her bank records that, following the clearance of the settlement sum, she made a payment towards the plaintiff's taxation liability of $8,990 on 28 April 1997, and the plaintiff acknowledged this eventually. There is also a record of a transfer of $7,600 on 28 April 1997, which it seems to me, went towards the purchase in the plaintiff's name of a unit trust. The plaintiff's bank records also show transfers that the defendant says was by way of repayments to the plaintiff in the period from May to November 1997 that amount to a full repayment of the advanced sum.

16. It seems to me, on all of the evidence, that at this early stage of the relationship, the monies advanced by the plaintiff were, in truth, a loan, which I find had been repaid by late 1997. I accept that the parties approached this relationship with some care, both having been previously separated and involved in property settlement affairs. I note the plaintiff's acknowledgement that he did not wish to commence a relationship on a cohabitation basis unless the defendant had secure employment. He acknowledged that this was because he did not want to assume financial obligations to support the defendant and her son (transcript 60). I find that, once the defendant received the property settlement, she not only commenced the repayments to the plaintiff, but also was able to further reduce the loan sum on the mortgage and, I find, have the plaintiff removed as a guarantor on the loan documentation. All of this, it seems to me, is more consistent with her version of events. The plaintiff is a qualified lawyer, and, it seems to me, a person well placed to engage in a joint property acquisition if that was what was intended.

17. I find, on the contrary, that it had been the clear intention of the defendant to utilise the proceeds of her property settlement on the former marriage to acquire a new residence in her sole ownership for herself and her son, and that this intention predated the commencement of this domestic relationship. I find that the plaintiff was able to assist by provision of $25,000, but that this sum was repaid, and accordingly does not form a contribution by him towards the assets of the relationship.

18. I also find that the defendant, from her own funds, made capital contributions towards the property by way of paying for removal of trees, landscaping, and insulation in the Chifley property in early 1997, amounting in total to something in the order of $10,000.

The Renovations

19. The parties continued to live together in the Chifley home, and both worked. Their affairs became more intermingled, although, as I have found, over the course of 1997 the defendant fully repaid the $25,000 advance. The plaintiff's unit was rented out. He owned this subject to a mortgage, and I find that, broadly speaking, the parties each met their own mortgage repayment during the period 1997-2000. During this period, I find, the plaintiff was receiving income from his unit and paying the mortgage on that unit, and living in Chifley. The defendant was paying the mortgage on the Chifley property.

20. In April 2000, I find that the plaintiff sold his unit in Braddon and received, after clearing the mortgage, the sum of $104,549.57. It is common ground that this sum was deposited into the defendant's credit union account, and used to fund the extensive extension undertaken to the Chifley property during 2000 and 2001.

21. It seems to me that this transaction appears to be more in the nature of a contribution towards a joint asset. True it is that the plaintiff, as a lawyer, did not have his name on the contract documents for the renovations (although he paid for them). However, it seems to me that the defendant acknowledged in her evidence that in the time preceding the renovations there had been discussions on the basis of the plaintiff selling his unit and "getting a bigger house for us". In her affidavit of 5 June 2005 she said that there had been discussion about putting Chifley into joint names, saying:

"I can put Chifley in our joint names only on the clear understanding that on the sale of your (Braddon) unit and the subsequent purchase of a larger house for all of us to live in, that the new house would be in our joint names."

I take this to mean that the parties, by then in a stable relationship of some years standing, were discussing acquiring, perhaps in joint names, a larger residence, by way of selling both of their individually owned premises. There was evidence that a few houses were looked at, but none were acquired, and I took from the defendant's evidence that she felt aggrieved that the plaintiff had not agreed to buy the bigger house. On this evidence, it seems that what did in fact happen, was that his unit was sold and the proceeds were in effect invested in improvements to the Chifley property rather than an acquisition of a larger house. It seems to me that this must be seen as a contribution to what was becoming the joint home.

22. The renovations were successfully completed, and the defendant continued to service the mortgage on the Chifley property, save that, from February 2002 to January 2003 the plaintiff met these sums.

23. In June 2001 the parties took out a supplementary loan in the sum of $42,000 which funded the purchase of a new motor vehicle (that has remained in the possession of the defendant) in the sum of $32,000, with the balance going to completing the renovations. This loan, it is acknowledged in the plaintiffs submissions and I find on the evidence, was being repaid throughout the relationship by the defendant.

24. It seems to me then that I should approach the question of the relative contributions of the parties towards the acquisition of the assets on the basis that the Chifley house was acquired solely in the defendant's name by way of application of her matrimonial settlement, a mortgage taken out solely in her name and repaid by her for the bulk of the relationship, and a short term loan from the plaintiff at the outset of their relationship. I do not regard this as a contribution, as I find that it was fully repaid. I find that by mid 2000, the relationship was longstanding, and the plaintiff then sold his unit and the proceeds were fully applied to extensive renovations on the Chifley property. This I find amounted to a contribution for the purposes of s 15 of the Act.

25. It seems to me that, the defendant had, as I find, solely contributed to the original acquisition of the Chifley house by way of fully applying her settlement ($35,000) and fully paying the mortgage up until 2002. However, the value of that asset was significantly increased by the extensive renovations from mid 2000, which were funded by the plaintiff's contribution of some $104,000, together with an additional loan sum following the acquisition of a car of some $10,000. This loan has been serviced by the defendant. There was also a contribution by the defendant by way of landscaping, tree removal and insulation in the early months of residence.

26. Contributions for the purpose of s 15 are not, of course, limited only to contributions of capital, and while I have taken the view that general living expenses have more or less balanced out during the course of the relationship, I am satisfied that the defendant played by far a greater role as "homemaker" for the purposes of s 15(1)(c). I find that she contributed overwhelmingly to meal preparation, household cleaning, and general living arrangements, including responsibility for Callum, who lived with the parties during the course of the relationship. So her contributions need to be seen as more than simply the initial capital contributions of $35,000 from her property settlement, the landscaping and insulation, all of which occurred at the time of acquisition. Throughout the course of the relationship, I am satisfied that she played the dominant role in homemaking in terms of meals and cleaning, despite both parties working full time, and this must be taken into account.

27. The plaintiff made a significant capital contribution of the $104,000 by way of the funding of the extensions from the proceeds of the sale of his unit in April 2000. While this was the larger capital figure, it seems to me that it would be unreal to simply compare the figures, ignoring the fact that the $35,000 and the landscaping were contributed at the time of acquisition or shortly thereafter in 1996/1997, and this had allowed the asset to be acquired, and to increase in value up to the time the plaintiff made a contribution in early to mid 2000. This, together with the ongoing contribution by way of domestic duties, seems to lead to a position of greater equality between the parties.

28. The joint assets of the parties, on the plaintiff's case, amount to some $351,236. It seems to me that this figure (established on the evidence and set out in an Aide Memoire attached to the plaintiff's submission) is appropriate.

29. It seems to me that in these circumstances, and given all of the evidence in relation to the parties' financial interdependence and their respective salary and superannuation positions, that it is appropriate to regard the plaintiff's contribution as being in the order of 50%. This would result in an order for a property adjustment, in his favour, in the sum of $175,618.

30. I will hear the parties as to costs.

I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 29^th March 2006

Counsel for the plaintiff: Mr G Brzostouski SC

Solicitor for the plaintiff: KJB Law

Counsel for the defendant: Ms J Fray

Solicitor for the defendant: Greg Mackey & Associates

Dates of hearing: 30^th November; 1^st December 2005

Date of judgment: 29^th March 2006