Bilous v Mudaliar & 1 Or; Mudaliar v Bilous & 1 Or [2006] NSWCA 38 (27 April 2006)

Last Updated: 3 May 2006

NEW SOUTH WALES COURT OF APPEAL

CITATION: Bilous v Mudaliar & 1 Or; Mudaliar v Bilous & 1 Or [2006] NSWCA 38



FILE NUMBER(S):
40215/05
40810/05

HEARING DATE(S): 28/02/06

DECISION DATE: 27/04/2006

PARTIES:
CA 40215/05
John Bilous (Appellant)
Jayanti Mudaliar (First Respondent)
Jeevan Investments Pty Ltd (Second Respondent)
CA 40810/05
Jayanti Mudaliar (Claimant)
John Bilous (First Opponent)
Jeevan Investments Pty Ltd (Second Opponent)

JUDGMENT OF: Giles JA Ipp JA McColl JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 5338/03

LOWER COURT JUDICIAL OFFICER: White J

COUNSEL:
CA 40215/05
A F Givney (Appellant)
P Maiden SC (First & Second Respondents)
CA 40810/05
P Maiden SC (Claimant & Second Opponent)
A F Givney (First Opponent)

SOLICITORS:
CA 40215/05
The Charlestown Law Firm (Appellant)
Hills Solicitors (First & Second Respondents)
CA 40810/05
Hills Solicitors (Claimant & Second Opponent)
The Charlestown Law First (First Opponent)

CATCHWORDS:
FAMILY LAW - de facto relationship - application under s 20 of the Property (Relationships) Act 1984 (NSW) for an adjustive property order - relationship of 11 years duration - substantial increase in assets over period of relationship - respondent primary income earner - exercise of jurisdiction under s 20 - whether trial judge erred in adopting an "asset-by-asset" approach - whether the "erosion principle" should be applied in cases under the Property (Relationships) Act - relevance of initial contributions - evaluation of non-financial contributions - whether notional rent should be deducted for rent free accommodation in the family home. D

LEGISLATION CITED:
Property (Relationships) Act 1984 (NSW), s 20

DECISION:
(1) The appeal is upheld with costs (2) The orders of White J are set aside (3) The first respondent is ordered to pay the appellant $228,000.00. (4) The first respondent is ordered to pay J & J Superannuation Pty Ltd, the trustee of the appellant's superannuation fund, $87,163.00 (5) The first respondent to have a certificate under the Suitors' Fund Act 1951 (NSW) if otherwise qualified (6) The first respondent is ordered to pay the costs of the cross-appeal.


JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40215/05

CA 40810/05

ED 5338/03

GILES JA

IPP JA

McCOLL JA

Thursday 27 April 2006

JOHN BILOUS v JAYANTI MUDALIAR & 1 OR

JAYANTI MUDALIAR v JOHN BILOUS & 1 OR

FACTS

The appellant, Mr John Bilous, commenced a de facto relationship with the respondent, Dr Jayanti Mudaliar, in December 1989 or March 1990. Their relationship endured for 11 years until around 17 July 2001 when the parties separated.

At the commencement of their relationship the parties lived together at 29 Hatfield Street, a property purchased by the respondent in 1984. The respondent, a medical practitioner, commenced her own private practice in 1988. The appellant was a partner in a hi-fi business known as Audio Junction. At the end of 1992 the appellant sold his share in Audio Junction and occupied himself in carrying out renovations to 29 Hatfield Street. Later, he became involved with the purchase, construction and development of various properties either in the name of the respondent or in the joint names of the parties. At other times, he worked as a teacher.

During their relationship the parties acquired and developed a number of different properties, some of which were disposed of and others retained. These transactions were financed by loans secured by mortgages from financial institutions. The mortgages were from time to time increased and reduced and sometimes discharged. Trusts (including unit trusts) were created and properties transferred to them. Units were subscribed for. Superannuation funds were created. Assets were transferred to the superannuation funds.

The appellant managed and supervised the actual developments that were undertaken and he also performed various building tasks in developing, improving and maintaining the various properties. The respondent met the payments on the mortgage and paid for the building work that the parties undertook.

White J found that, at the date of the hearing, the pool of assets the parties’ owned, or over which they had control, had a net value of $1,693,002.00. He approached the task before him by considering what adjustments should be made to specific assets in that pool.

White J ordered that the respondent should pay $47,163.00 plus interest to the trustee of the appellant’s superannuation fund. This amount was to compensate the appellant for a loss to his superannuation entitlements resulting from a complex set of transactions that involved a property in the pool, 71 Berner Street, which was initially owned jointly. Further, White J made an order that the appellant should have a 50 per cent share in the capital gain associated with 71 Berner Street. White J calculated on that basis that $86,000.00 should be paid to the appellant.

White J awarded an additional $25,000.00 as a “cushion” to cover contributions that the appellant had made but were not compensated for by other orders.

Further, White J ordered that the appellant owed the respondent an allowance for the rent free accommodation received by the appellant after the separation when he occupied 1/71 Berner Street.

In consequence of the orders made by his Honour (and taking into account the assets already in each party’s possession), the appellant ended up with $339,853.00 or approximately 20 per cent of the asset pool and the respondent retained the balance of $1,353,149.00 or 80 per cent.

The appellant contended that he should have been awarded between 40 and 45 per cent of the asset pool. He submitted that the trial judge erred by taking an asset-by-asset approach and instead a global approach should be adopted.

On appeal, the parties requested the Court, in the event that it should decide that there were errors in the judge’s reasoning, to exercise its discretion itself, afresh, and not remit the matter for a new trial.

Held per Ipp JA (Giles and McColl JJA agreeing)

i. If a global approach is adopted in determining what orders should be made, regard must still be had to the origin and nature of the different assets. If an asset-by-asset approach is adopted, care must be taken to avoid the risk of undervaluing domestic and non-financial contributions and regard must be had to the overall result. Some situations do not lend themselves either to a pure global approach or to a pure asset-by-asset approach.

Kardos v Sarbutt [2006] NSWCA 11

ii. The approach adopted by White J was open to him.

iii. The “erosion principle” should not be applied in cases under the Property (Relationships) Act 1984 (NSW) as it tends to distract from the express wording of s 20 of that Act. Under s 20, the sole consideration of the court, in adjusting the interests of the parties, should be the justice and equity of the case.

iv. In some cases, non-financial contributions of one partner may allow the other to advance his or her career and earn a higher income that enables property owned by the other to be maintained and retained.

In the Marriage of Rolfe [1919] HCA 30; (1977) 25 ALR 217, Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605, (Kardos v Sarbutt [2006] NSWCA 11 not followed)

v. As a general proposition, where the primary income earner has professional or business talents which have enabled him or her to acquire valuable investment or business assets in a way that has little or nothing to do with the contributions of the other party to the relationship, it is likely that no adjustment order would be made in respect of those assets.

vi. The respondent’s provision of the family home was a contribution by her to the partnership, and appropriate weight should be accorded to it. It would be wrong in principle, however, to accord it weight and then, to require a notional rent in respect of the appellant’s accommodation in the home to be deducted from the value of his contributions. That would involve impermissible double counting.

vii. The deduction of a notional rent for accommodation in the family home would be inconsistent with the notion that the relationship ordinarily involves a practical union of both lives and property, and that the acquisition of assets, such as a family home, represents the fruits of combined efforts in wage-earning, homemaking and mutual support. Therefore, his Honour erred in taking into account rent-free accommodation as a countervailing benefit received by the appellant.

viii. The registration of a particular property in the name of a party to a de facto relationship, and even the existence of an intention that the property be the sole asset of the party, does not preclude the court from making an adjusting order under s 20 of the Act based on contributions to the property by the other party to the relationship. The sole ground on which an adjustment order is to be made is what is just and equitable.

ix. The non-financial contributions in caring for children while the breadwinner works are worthy of recognition under s 20.

x. The appellant’s contributions to 29 Hatfield Street, 51 Berner Street, the Shortland property, the medical practice and looking after their adopted child should have been taken into account, but were not. These omissions constitute errors in the trial judge’s exercise of discretion. In addition, the trial judge only had regard to the capital gain that had occurred in regard to 71 Berner Street whereas the appellant was entitled to a share in the property as a whole.

xi. By taking the approach of making a “holistic value judgment”, and taking into account the contributions that the trial judge omitted to take into account, an additional $200,000.00 should be paid to the appellant.

ORDERS

(a) The appeal is upheld with costs.

(b) The orders of White J are set aside.

(c) The first respondent is ordered to pay the appellant $228,000.00.

(d) The first respondent is ordered to pay J & J Superannuation Pty Ltd, the trustee of the appellant’s superannuation fund, $87,163.00.
(e) The first respondent to have a certificate under the Suitors’ Fund Act 1951 (NSW) if otherwise qualified.

(f) The first respondent is ordered to pay the costs of the cross-appeal.

**********

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40215/05

CA 40810/05

ED 5338/03

GILES JA

IPP JA

McCOLL JA

Monday 27 April 2006

JOHN BILOUS v JAYANTI MUDALIAR & 1 OR

JAYANTI MUDALIAR v JOHN BILOUS & 1 OR

Judgment

1 GILES JA: I have had the privilege of reading in draft the reasons of Ipp JA. I agree with them, and with the orders his Honour proposes.

2 IPP JA:

The appeal and cross-appeal

3 The appellant, Mr Bilous, appeals against orders made by White J, in terms of s 20(1) of the Property (Relationships) Act 1984 (NSW), adjusting interests in the property of Dr Mudaliar, the first respondent, in favour of the appellant. The appellant contends that he should have been given more. In these reasons I shall refer to Dr Mudaliar as “the respondent”. The second respondent (Jeevan Investments Pty Ltd) in effect played no part in the appeal.

4 The respondent applies for leave to appeal against the costs order made by White J. His Honour ordered her to pay the costs of the trial. The respondent submits that as she was successful on a number of issues, the appropriate order should have been that each party pays its own costs.

The parties, their relationship, their pursuit of property development and the increase in their assets

5 The respondent, who was born in 1957, graduated as a medical practitioner in 1981. In 1984, she purchased 29 Hatfield Street, Merewether, a suburb of Newcastle, for $90, 000. In 1988 she commenced private medical practice for her own account. Her practice appears, over the years, to have developed into a busy and successful one.

6 The appellant, who was born in 1955, is a qualified teacher. He also has knowledge and skill in the building trade and in the construction and development of domestic houses.

7 A de facto relationship between the parties commenced either in December 1989 or March 1990 when they began to live together in 29 Hatfield Street. The relationship lasted at least until 17 July 2001. The period of the relationship included a year when the appellant was employed as a teacher in Queensland and the respondent resided at the parties’ home in Newcastle, New South Wales. During this year, the respondent returned home during school holidays. Thus, the relationship endured for a period of over eleven years.

8 At the inception of the relationship, the appellant was a partner in a hi-fi business in Newcastle known as Audio Junction which he had commenced with his brother. At the end of 1992 the appellant sold his share in the hi-fi business and occupied himself in carrying out renovations to 29 Hatfield Street. Later, he became involved with the purchase, construction and development of various properties purchased either in the name of the respondent or in the joint names of the parties. At other times, he worked as a teacher.

9 In 1999 the parties adopted a child, Jasper. The appellant was the principal carer of the child and otherwise shared household duties and domestic tasks more or less equally with the respondent. This assisted her in pursuing her high-earning occupation for the joint benefit of the parties.

10 During their relationship the parties acquired and developed a number of different properties, some of which were disposed of and others retained. These transactions were financed by loans secured by mortgages from financial institutions. The mortgages were from time to time increased and reduced and sometimes discharged. Trusts (including unit trusts) were created and properties transferred to them. Units were subscribed for. Superannuation funds were created. Assets were transferred to the superannuation funds. All in all, many complex dealings took place.

11 The appellant managed and supervised the actual developments that were undertaken and he also performed various building tasks in developing, improving and maintaining the various properties. The respondent, who earned from her medical practice far more than the appellant, met the payments on the mortgages and paid for the building work that the parties undertook.

12 The judge found that, at the date of the hearing, the pool of assets the parties’ owned, or over which they had control, had a net value (that is, an excess of assets over liabilities) of $1,693,002.00. In consequence of the orders made by his Honour (and taking into account the assets already in each party’s possession), the appellant ended up with $339,853.00 of these assets and the respondent retained the balance of $1,353,149.00. The appellant therefore obtained about 20 per cent of the pool and the respondent about 80 per cent.

13 White J found that, when the relationship commenced, the appellant’s net assets amounted to $77,361, ($66,000 being his interest in the Audio Junction business, and $11,361 savings in the name of another person). His Honour found that at that time the appellant had some cash in his possession, but was unable to determine how much.

14 When the relationship commenced, the value of 29 Hatfield Street was $135,000. There was a mortgage registered against this property in favour of Westpac in an amount of $72,000. Thus, the respondent’s equity in 29 Hatfield Street amounted to $63,000. The respondent also had $16,000 in savings. Her net assets amounted to about $79,000.

15 Thus, when the relationship commenced, the respective assets of the appellant and the respondent were approximately equal. One important difference between the assets, however, was that the respondent owned the property at Hatfield Street, which became the parties’ home, and the appellant owned no fixed property.

16 Over the approximately eleven-year period of the relationship the pool of assets increased from about $156,000 to $1,693,002.00. This increase was at the heart of the dispute.

The pool of assets at the time of the hearing

17 The trial was heard in September 2004 over a period of 5 days. It appears to have been common ground that the relevant date for determining the respective contributions was the date of the hearing. This was accepted on appeal. Neither party contended that the relevant date was the date of separation.

18 White J found that the appellant’s assets at the time of the hearing were:

Superannuation entitlements	$190,373.00
Further superannuation entitlements	$19,317.00
1992 BMW motor cycle	$5,000.00
Holden Commodore	$10,000.00
	$224,690.00

In the appellant’s written submissions, received on 23 February 2006, in reference to the appellant’s assets, it is stated that White J found that the appellant is owed further superannuation entitlements from J & J Superannuation Pty Ltd in the amount of $70,500.00. However, this is an error as the figure of $70,500.00 represents the entitlements owed to the respondent of which the appellant has a 27.4 per cent beneficial share. Therefore, $19,317 represents the correct amount of superannuation owing to the appellant.

White J found that the respondent’s assets at the time of the hearing were:

11 Shortland Esplanade, Newcastle	$1,250,000.00
Debt due to Respondent from Jeevan Investments P/L	$370,000.00
BMW motor vehicle	$59,000.00
Shares	$5,000.00
Superannuation entitlements	$758,100.00
Medical practice	$78,212.00
	$2,520,312.00.
Liabilities	$1,052,000.00
Net assets	$1,468,312.00

19 Mr Givney, who appeared for the appellant, submitted that an additional amount of $468,000 should have been added to the respondent’s assets. This, he submitted, represented the respondent’s interest in a property referred to as the Cleary Street property.

20 Mr Givney initially contended that the respondent was the sole beneficial owner of the Cleary Street property. Later, however, he accepted that Jeevan Investments Pty Ltd, as trustee for a trust of which Jasper is the sole beneficiary, owns the Cleary Street property.

21 The respondent borrowed the funds to enable Jeevan Investments Pty Ltd to purchase the Cleary Street property. She did this by way of a mortgage over 11 Shortland Esplanade, Newcastle, a property which, at the date of the hearing, the respondent owned and in which she resided. As indicated, at the time of the hearing the Shortland property (which had succeeded 29 Hatfield Street as the family home) was valued at $1,250,000.00. Mr Givney submitted that the appellant materially contributed to the acquisition and development of the Shortland property. He argued that, as the purchase price for the Cleary Street property was financed by the Shortland property, the appellant was entitled to a contribution represented by a share of the respondent’s interest in the Cleary Street property.

22 In my view, Mr Givney’s submissions in this regard are not sustainable. Firstly, the respondent has no interest in the Cleary Street property. As mentioned, Jasper is the sole beneficiary of the trust which is the legal owner of it. Secondly, the Cleary Street property was acquired after the relationship between the appellant and the respondent terminated and the appellant’s sole asserted connection with it is the fact that its acquisition was financed through the Shortland property. Were the appellant’s submissions to be upheld, he would be compensated for his contribution to the Shortland property and any further compensation in connection with the Cleary Street property would involve double counting. During the course of argument Mr Givney correctly accepted that this would be the case. It follows therefore that the judge’s finding that the total of the respondent’s net assets at the time of the hearing amounted to $1,468,312.00 should stand.

The orders made under s 20(1) of the Property (Relationships) Act and their effect

23 Section 20(1) of the Property (Relationships) Act provides:

“Application for adjustment

(1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship of either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to:

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

(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:

(i) a child of the parties,

(ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties.”

24 The exercise of jurisdiction under s 20 involves three main steps (Howlett v Nielson [2005] NSWCA 149; (2005) 33 Fam LR 402 at 407; [25] per Hodgson JA). The first is the identification and valuation of the property of the parties. The purpose of this exercise is to determine the “divisible pool of property”. The second is the evaluation and balancing of the respective contributions of the parties of the types referred to in s 20. The third is the determination of the order required sufficiently to recognise and compensate the applicant’s contribution.

25 I have dealt above with the first “main step” required by the section. Before discussing White J’s evaluation of the respective contributions of the parties as required by s 20(1) of the Act (to which the argument on appeal was substantially directed) I shall set out his Honour’s conclusions concerning the “third step”, that is, the orders that recognise and compensate the appellant’s contributions.

26 When the relationship terminated one of the assets the respondent retained was her superannuation entitlement of $785,100.00. This amount represented the value of a duplex development at 71 Berner Street, Newcastle. The appellant had initially been a joint owner with the respondent of 71 Berner Street but as a result of a complex set of transactions this property had ended up in the respondent’s superannuation fund. These transactions represented a loss to the appellant’s superannuation entitlement. The judge found that the respondent should pay $47,163 plus interest to J & J Superannuation Pty Ltd, the trustee of the appellant’s superannuation fund, to compensate for this loss. His Honour held that it would be inappropriate for an order to be made directing a payment directly to the appellant as that would “subvert the laws relating to superannuation”.

27 The judge held that an adjusting order should be made under s 20 to give to the appellant a 50 per cent share in the capital gain that had accrued in regard to 71 Berner Street. His Honour determined that capital gain as being $380,000. The judge held that the appellant had already captured part of his share of that gain through his membership of the J & J Superannuation Fund. He ordered the balance, which he calculated as being $86,000, to be paid to the appellant.

28 The judge awarded an additional $25,000, in effect as a “cushion,” to cover contributions that the appellant had made but were not compensated for by the other orders.

29 The appellant occupied 1/71 Berner Street rent free from the time the relationship ended until the date of the hearing. White J ordered that an allowance be made in favour of the respondent for the benefit the appellant so received.

30 The overall effect of these orders is as follows (excluding interest):

Payment for 71 Berner Street	$ 86,000.00
Cushion	$ 25,000.00
	$111,000.00
Less rent for 71 Berner Street	$ 43,000.00
	$ 68,000.00
Superannuation adjustment	$ 47,163.00
Total	$115,163.00
Add: assets retained by the appellant	$224,690.00
Overall entitlement	$339,853.00

The appellant asserted in his written submissions that, as a result of his Honour’s orders, the amount of $53,756.77 represented superannuation adjustments payable to the appellant and the amount of $44,950.35 represented rent payable to the respondent. However, White J ordered that $47,163.00 plus interest be payable as a superannuation adjustment. Further, his Honour ordered that the appellant pay the respondent the amount of $19,000 for rent for the period of January 2002 to August 2003, and $300 per week from September 2003 to the date of the orders or until he vacates the premises, whichever is the earlier. In a subsequent order the Court noted “all calculations are predicated on the [appellant] ceasing to occupy 1/71 Berner Street, Merewether on or before 20 March 2005”. There are 80 weeks between 1 September 2003 and 20 March 2005. This means that a total of $24,000 rent became owing for that period, giving a total of $43,000 for rent owing for the Berner Street property.

31 His Honour made other ancillary orders relating to various aspects of the assets of the parties that are not subject to challenge.

32 As set out above, at the time of the hearing the respondent had assets amounting to $1,468,312.00. That has to be reduced by the payment of $115,163.00 that she was ordered to make to the appellant. She therefore retained an overall amount of $1,353,149.00. As mentioned, this represents about 80 per cent of the total pool of assets.

The appellant’s principal contentions

33 The appellant contends that he should have been awarded between 40 and 45 per cent of the pool of assets.

34 The appellant submits that the judge determined the adjustments to be made under the Act on an asset-by-asset basis and in so doing his Honour erred. The appellant submits that a global approach should have been adopted.

35 The appellant argues further that his Honour did not properly or adequately take into account that he and the respondent constituted a family unit that had embarked on a joint endeavour in accumulating assets not only through their professional occupations but also by way of property development. He submits that he made a number of non-financial contributions that enabled the respondent to earn a high income from her medical practice, allowed the family to live in a style and in comfortable surroundings that otherwise would not have occurred, and materially contributed in the development of properties that were retained having gained considerably in value, or later sold at a substantial profit.

36 The appellant accepts that, although the assets that each party brought into the relationship did not differ substantially in value, over the period of their relationship the respondent earned far more than the appellant and contributed far more money to the relationship than he. He submits, however, that the judge did not properly recognise and undervalued his contributions to the property developments, to the respondent’s medical practice, and to the domestic household.

37 The appellant contends further that his Honour overvalued what he held to be countervailing benefits received by the appellant from the respondent.

38 The judge found that a major reason for the fact that by August 2003 the respondent’s net assets were over $1,400,000 while the appellant’s amounted to about $200,000 was that, between 1998 and 2003, the Shortland property increased in value by some $500,000. His Honour held that the appellant was not entitled to any contribution in respect of this property and the appellant complains about that.

39 The appellant does not claim any particular share in any particular asset. Rather, his claim is put solely in monetary terms.

The general approach to the evaluation of the parties’ respective contributions

40 Before dealing with the facts of the case in detail, it is necessary to make some general observations relevant to important decisions of principle that the primary judge made. I turn, firstly, to the general approach that may be adopted when evaluating contributions for the purposes of s 20.

41 In Davey v Lee (1990) 13 Fam LR 688 McLelland J said at 689:

“[T]he Court is not required under s 20 to undertake a reductionist process analogous to the taking of partnership accounts (notoriously one of the most time-consuming and expensive of litigious exercises) by examining every alleged ‘contribution’ of the kinds described in the section with a view to putting a monetary value on it in order to reach an accounting balance one way or the other, which is to be then eliminated by the requisite financial adjustment. Rather the Court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind.”

I would endorse this approach as well as his Honour’s further observation that, while the parties may value non-material contributions to the welfare of the family more highly than material contributions, these are not matters that lend themselves to detailed examination and analysis by a Court.

42 Generally, the Court has a broad discretion in determining the approach to adopt in considering what order to make under s 20(1). As Brereton J (with whom Basten JA and Hunt AJA agreed) said in Kardos v Sarbutt [2006] NSWCA 11 at [51] (relying on Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513):

“Although in the majority of cases, the global approach is likely to be more convenient than an asset-by-asset approach, the application of the asset-by-asset approach does not of itself amount to an error of law.”

Brereton J at [54] observed that:

“As [Lenehan v Lenehan [1987] FamCA 8; (1987) 11 Fam LR 615] shows, the principal indicator for an ‘asset-by-asset’ analysis is discrepant identifiable contributions of the parties to different assets: in that case, the proportionate contribution of the parties to the acquisition, conservation and improvement of the matrimonial home on the one hand, and to the business assets on the other, were quite different. Such an approach will often be contra-indicated where, as here, there has been a pooling of income.”

43 If a global approach is adopted, regard must still be had to the origin and nature of the different assets. If an asset-by-asset approach is adopted, care must be taken to avoid the risk of undervaluing domestic and non-financial contributions and regard must be had to the overall result: Kardos v Sarbutt at [51] and [54]. Some situations do not lend themselves either to a pure global approach or to a pure asset-by-asset approach. In some cases the judge may decide to have regard to the particular contributions made to individual assets, weigh up the overall respective contributions to the parties and make differing apportionments in relation to the interests of the parties in different assets.

44 White J adopted an asset-by-asset approach and added a further $25,000 to cover contributions made by the appellant not taken into account when assessing those made in respect of particular assets. In my opinion, this approach was open to his Honour but, for reasons set out below, I conclude that the judge otherwise erred in the exercise of his discretion and the orders he made.

45 The parties urged the Court, in the event that it should decide that there was an error in the judge’s reasoning, to exercise its discretion itself, afresh, and not remit the matter for a new trial. Having regard to the substantial expense and inconvenience to the parties should this occur, I would accede to their request. In my view, this Court, doing the best it can, is in a position to carry out an appropriate adjusting exercise.

The treatment of interests in property and capital increases in those interests

46 An important issue of principle in this case is the way in which the court should treat property registered in the respondent’s name alone, both in regard to the overall value of that property and the increase in its value during the period of the relationship.

47 In Howlett v Neilson Hodgson JA (with whom McColl JA and I agreed) said at [29]:

“[The evaluation of contributions under s 20] is not a narrow or purely mathematical process. In many cases, it may be appropriate simply to treat the contributions of the parties during the relationship as equal, even though the nature of the contributions are different, although of course there is no presumption of law to that effect, and this assessment depends on a judgment being made that the quality of the contribution of each, in his or her own sphere, deserves to be considered as equal: Mallett v Mallett [1984] HCA 21; (1984) 156 CLR 605. However, that judgment is one that often may be readily reached: Marriage of Ferraro (1992) 16 Fam LR 1, Marriage of Clauson (1995) 18 Fam LR 693, Jones v Grech [2001] NSWCA 208; [(2001) 27 Fam LR 711].”

I would reiterate my agreement with these remarks.

48 The initial contributions made by parties to a de facto relationship may often take the form of a family home or other assets in the form of immovable property. During the course of the relationship, property may be acquired and registered in the name of one of the parties, alone. The duration of the relationship and the significance of the respective contributions of the parties may lead to a court adjusting the parties’ interests in such a way that the party who provides such property (or the party who is the registered owner) receives substantially less than the full value of that property when the relationship is terminated.

49 The adjusting order may require the party making the initial contribution (or the party who is the registered owner) to pay the other party a sum of money that represents a proportion of the increase in the capital value of the property concerned or, indeed, its overall value. Hodgson JA emphasised the latter possibility in Howlett v Nielson when he said at [35]:

“[I]t is plainly not the case that the contributions of the parties should be considered as making it just and equitable that there be an order only concerning increases in the value of assets over and above initial contributions.”

50 His Honour gave an illustration of what might occur. He said at [36]:

“For example, suppose that one has a ten year relationship to which the man brought assets of $5 million and the woman brought no assets, and both make very substantial contributions during the relationship, both financial and non-financial; but that at the end of the relationship, for various reasons, the total assets of the parties are still around $5 million; and that the court assesses the value of the contributions during the relationship as being approximately equal. In those circumstances, the contributions of the woman may make it just and equitable that she receive an order for a substantial sum of money. This is for at least two reasons. This may be a case in which the value of the initial contributions plus the value of the contributions made during the relationship substantially exceed the value of the assets available for distribution; in which case the person making the original contribution cannot expect to receive it back undiminished. Secondly, in my opinion, while s 20 does not authorise the making of orders by reason of perceived needs of a party to a de facto relationship, or by reason of opportunities lost to that party because of the relationship, it does permit the evaluation of contributions having regard not merely to the benefit of the contributions to the relationship and to the property of the parties, but also having regard to the cost of each contribution to the person making it. If, in a relationship involving the financial parameters indicated above, the woman spends the ten years as a homemaker rather than in developing skills and advancing a career, this may indicate that her contribution, although equal to that of the man in terms of benefit to the relationship and to the property of the relationship, is such as to make a substantial order just and equitable because of what it has cost the woman in terms of loss of opportunity for development of skills and advancement of a career. It is for reasons such as those that I believe that the result reached by the Court of Appeal in Dwyer v Kaljo (1992) 27 NSWLR 728 (substantially increasing the amount awarded by me at first instance) was correct, even though the principle on which the Court then acted was rejected in Evans v Marmont.”

51 His Honour’s remarks concerning the “woman” who earns substantially less than the “man”, apply equally where the male partner earns substantially less than the female.

52 In Howlett v Nielson Hodgson JA accepted that the contributions made during the relationship were “roughly equal”. He determined the adjusting order under s 20 by returning to each party the value of the initial contributions of each (as at the date the relationship commenced) and he apportioned the increase in the value of their property that subsequently occurred.

53 In the course of his reasons, Hodgson JA discussed the so-called “erosion” principle. This is a principle that has been recognised as being of application in disputes under the Family Law Act 1975 (Cth). As is apparent from Way v Way (1996) FLC 92-702 and Money v Money (1994) FLC 92-485, the erosion principle is accepted as being as follows: “... an initial contribution by one party may be ‘eroded’ to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party”.

54 Hodgson JA commented on the erosion principle (at [34]):

“I have found no clear statement concerning the ‘erosion principle’ in cases under the Property (Relationships) Act. In my opinion, it is by no means clear that it would apply to the same extent as under the Family Law Act, where matters other than contributions can be taken into account, and where the relationship itself involves a public commitment to mutual support for life ... “

55 In my opinion, the erosion principle should not be applied in cases under the Property (Relationships) Act as it tends to distract the mind from the express wording of s 20 which provides that:

“... a court may make such order adjusting the interests of the parties in the property [of the parties to the relationship] as to it seems just and equitable having regard to ...”

Under s 20, the sole consideration of the court in adjusting the interests of the parties in their property is the justice and equity of the case, having regard to the contributions that fall into the category of those described in ss 20(1)(a) and (b). Under the erosion principle, on the other hand, the inquiry commences with a determination whether an initial contribution by one party has been made and this is followed by a consideration as to whether that contribution was eroded by later contributions of the other party. On this basis there appears to be an onus on the other party to prove that the initial contribution should be eroded. This approach is contrary to s 20.

56 I would add that the erosion principle, if adopted, would tend - in the same way - to affect the onus in regard to other property assets acquired by a party at a later time in the relationship. Consistently with that principle, it might be said that, once a property is registered in the name of one party, that party should be entitled to the full value of that property at the date the relationship is terminated unless it can be shown that his or her right to that property was eroded by the contributions of the other party. That would plainly be inconsistent with the express words of s 20.

57 In Burgess v King [2005] NSWCA 396 Hodgson JA (with whom Mason P and Campbell AJA agreed) gave the principal judgment of the Court in another matter under the Property (Relationships) Act. The respondent in that case had a 50 per cent interest in her former home at Diggers Avenue, Gladesville. At the commencement of the relationship that interest was worth $120,000 less a $20,000 mortgage. A year after the relationship commenced the respondent purchased the other 50 per cent interest in the Diggers Avenue property for $50,000. The value of the Diggers Avenue property at the time of the hearing was $780,000. The appellant had undertaken renovations to the property worth about $120,000. The primary judge found that the capital increase in the value of the Diggers Road property, apart from any increase in value due to the renovations, was about $420,000. Hodgson JA said that, prima facie, it would be just and equitable that the appellant participate in the $420,000 increase to the extent of about $100,000. Because of other factors in favour of the respondent that the primary judge did not take into account, Hodgson JA concluded that the appellant be awarded an additional sum of $50,000 representing his participation in the $420,000 capital value increase.

58 Nothing in Burgess v King is inconsistent with Howlett v Nielson. The facts in the two cases were different and the claims made by the respective parties in each case were also different. Hodgson JA did not refer to Howlett v Nielson in his reasons in Burgess v King and there was no reason whatever for him to do so. Nothing in Burgess v King detracts from the views his Honour expressed in Howlett v Nielson with regard to the approach to be adopted in relation to the evaluation of contributions and the determination of adjusting orders under s 20.

59 In Kardos v Sarbutt Brereton J said at [59] that in Howlett v Nielson Hodgson JA was not “purporting to state a rule of general application”. If all his Honour meant was that Hodgson JA was not intending to suggest that a 50 per cent apportionment of the increase in value of the assets was of general application then I agree entirely. In fact, Hodgson JA made it plain that this was simply the order that was appropriate in the particular circumstances. But, in Howlett v Nielson, Hodgson JA did state rules of general application, namely those that I have set out above in regard to the evaluation of contributions, generally.

60 Brereton J went on to say in [61]:

“The approach which was adopted in Burgess v King is one which gives due weight to the time value of money, and recognises that capital gains are the product of the initial introduction of the property, rather than of ongoing contributions. On the other hand, the approach adopted in Howlett v Neilson, in my respectful opinion, may, in at least some cases, result in the serious undervaluation of initial contributions. It treats any increment in capital value of an asset held at the outset of the relationship as if it were part of the fruits of the relationship, when it is not: it is the result of the asset having been held by one of the parties at the commencement of the relationship, and not the result of joint efforts of wage earning, homemaking and parenting, and mutual support of the type described by Deane J as producing ‘fruits of the relationship’. It disregards the ‘time value of money’. It is likely to produce erratic results, because under it the significance of any particular asset in the ultimate evaluation will depend on its value when it was introduced. If one party has a house worth $250,000 at the outset, and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 – not of money worth $250,000.”

61 Brereton J expressed the opinion that in at least some cases Howlett v Neilson may result in “serious undervaluation of initial contributions”. He went on to comment on the approach in Howlett v Neilson in a way that could be construed as a departure from the views expressed by Hodgson JA.

62 By “the approach adopted in Howlett v Neilson” Brereton J appears to have meant the apportionment of the increase in value of the assets initially contributed. His Honour appears to have stated a rule to the effect that, for the purposes of determining what order should be made under s 20(1) of the Property (Relationships) Act, any increase in value in assets initially contributed should be regarded, in all circumstances, as entirely a contribution by the party who contributed those assets. If that is what his Honour intended, I do not agree.

63 Determinations as to what orders should be made under s 20 are to be made solely on the grounds of the justice and equity of the case. The justice and equity of the case may derive from the fact that the party who owns the family home or other property was able to retain that property, while the market value increased, because “of joint efforts of wage earning, homemaking and parenting, and mutual support”. In some instances the non-financial contributions of one party may result in property of the kind in question not having to be sold. In other instances, the non-financial contributions of one partner may allow the other to advance his or her career and earn a high income that enables the property in question to be maintained and retained. Thus, an increment in capital value may well result, indirectly, from “joint efforts of wage earning, homemaking and parenting, and mutual support”.

64 The contributions of one party to the home and to the family that allow the breadwinner to be free “to earn income, purchase property and pay off the mortgage” were expressly recognised in In the Marriage of Rolfe [1919] HCA 30; (1977) 25 ALR 217 at 219 at 219 (which in this respect was approved in Mallet v Mallet [1984] HCA 21; (1984) 156 CLR 605 at 635 to 636 per Wilson J.)

65 The comments I have made apply equally to a determination that gives one party, who contributes less financially than the other, a substantial proportion of the value of the pool of assets as at the date of the hearing.

66 If the principles expressed by Hodgson JA in Howlett v Nielson are correctly applied, the results would not be erratic and the ultimate evaluation would not depend on the value of the asset when it was introduced. If the evaluation is carried out correctly, and solely on the justice and equity of the case, the contribution in respect of the asset in question and the non-financial contributions will be weighed up and an appropriate adjusting order should then follow.

67 Thus, it is not necessarily the case that, “if one party has a house worth $250,000 at the outset, and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 – not of money worth $250,000.” There may be many reasons why, at separation, the party who contributed the house worth $250,000 was able to retain the house during the relationship (and, perhaps, earn money by pursuing some professional or business occupation as well). One obvious reason might be non-financial support that provides the domestic platform enabling the owner of the house to earn sufficient income to service the cost of the house. There are other non-financial contributions that a party may make which enable the owner of a house to retain the property while the relationship endures.

68 In Kardos v Sarbutt at [64] to [66] Brereton J accepted the “erosion principle”, regarding it as “part of the methodology for weighing and balancing the different contributions” when weighing the initial contributions with all other relevant contributions. There are dangers in elevating a process of reasoning to the status of a principle, and for the reasons I have given I consider it preferable that the erosion principle (as a rule) should play no part in a determination under s 20.

69 Coming to a different point entirely, I would add, as a general proposition, that, where the primary income earner has professional or business talents which have enabled him or her to acquire valuable investment or business assets in a way that has little or nothing to do with the contributions of the other party to the relationship, it is likely that no adjusting order would be made in respect of those assets. That is simply because it is likely that the justice and equity of the case would require such a result.

Countervailing benefits

70 White J concluded that, apart from the contributions that he ordered the respondent to make, other contributions made by the appellant were substantially matched by “countervailing benefits” provided by the respondent.

71 These countervailing benefits included free accommodation at 29 Hatfield Street and the Shortland property when the appellant and the respondent occupied these properties as their family home, payment of wages to the appellant, payment of superannuation contributions for the appellant, payment of medical expenses for the appellant’s mother, payment of more than half of the joint household and travel expenses, payment of certain debts of the appellant, the provision of motor vehicles and the meeting of the cost of joint overseas holidays.

72 I deal in detail below with the “benefits” of free accommodation and wages, but it would be appropriate at this stage to comment on the general approach of determining the contributions made by the respective parties and then deducting “countervailing benefits” from the contributions made by one (which appears to be the approach adopted by his Honour).

73 It is self-evident that the countervailing benefits which the judge deducted from the value of the appellant’s contributions are part of the respondent’s contributions and must be taken into account as such. Generally, that is what his Honour did.

74 The respondent was able to make substantial contributions as she earned far more than the appellant and used part of her income for the benefit of the appellant. The judge several times referred, directly and indirectly, to this aspect of the case. He took these contributions into account.

75 But taking account of the provision of these benefits as part of the respondent’s contributions and then deducting them from the appellant’s contributions as well may mean that the respondent was given credit for these contributions twice; there would have been double counting. That is impermissible and would constitute material error.

76 Courts have often had regard to the economic benefits parties have received, as well as contributions made: see for example Del Gallo v Frederiksen [2000] NSWCA 293; (2001) 27 Fam LR 162 at 172-173; [48] - [50] (discussed below). As was said by Gleeson CJ and McLelland CJ in Eq in Evans v Marmont (1997) 42 NSWLR 70 at 76:

“[O]ften it may be found that contributions of the kinds referred to in [s 20(1)(b)] will involve shared activities or reciprocal benefits not giving rise to any disproportionate burden which it would be just and equitable to satisfy by an adjustment of interests in property.”

77 Nevertheless, when benefits are taken into account as well as contributions, care must be taken not to allow double counting to occur. The question is always: what is just and equitable.

The parties’ property transactions

78 I turn now in more detail to the particular facts of the case.

79 By 29 November 1991, the appellant had discharged her mortgage on 29 Hatfield Street.

80 At the end of 1992, the parties purchased 71 Berner Street as joint tenants for $162,500. In January 1993, they purchased a property at 51 Berner Street, also in their joint names, for $150,000. The two purchases were financed by loans from Westpac Banking Corporation amounting to $336,000. Some of the appellant’s funds may have contributed to the deposits paid on these properties.

81 The respondent claimed at trial that she alone had purchased 51 Berner Street. As she had signed the transfer of the property as a joint transferee with the appellant and as in her tax return she claimed only half of the net loss on revenue accounts and half the capital gain from the investment in 51 Berner Street, White J did not accept that the respondent had the understanding to which she deposed.

82 His Honour found that the respondent intended the appellant to have a 50 per cent beneficial interest in 71 Berner Street, notwithstanding that the loan to acquire this property was taken in the respondent’s name alone.

83 The parties intended and expected that the loan repayments in regard to the Berner Street properties would partly be met by rental receipts and, to the extent that there was a shortfall, out of the income of the respondent. In early 1993 the parties rented out the Berner Street properties. To the extent that rentals did not cover the mortgage payments, the respondent paid the shortfall.

84 At about the time the Berner Street properties were acquired, the appellant sold his share in the hi-fi business and was paid $66,000. He said that he sold his interest at the request of the respondent. He proceeded to involve himself with carrying out renovations to 29 Hatfield Street.

85 In 1993 the appellant commenced work as a teacher on a casual basis. That year the appellant obtained a permit and lodged plans to construct a duplex building on 71 Berner Street.

86 In 1994, 51 Berner Street was sold for $215,000 and the proceeds were used to reduce the mortgage debt to Westpac. In late 1994 the appellant commenced demolishing the existing house at 71 Berner Street and constructing the duplex. The duplex was completed in August 1995. The construction was financed by further borrowings. The duplex constituted two units known as 1/71 and 2/71 Berner Street. These were registered in the names of the appellant and respondent as joint tenants and were rented out to tenants.

87 In 1994 the parties established their own self-managed superannuation fund called the J & J Superannuation Fund with a corporate trustee, J & J Superannuation Pty Ltd of which they were sole shareholders and directors. They transferred their existing superannuation entitlements to this fund. At 30 June 1995, the appellant’s balance was $43,314 and the respondent’s $116,424.

88 On 20 September 1995 a trust known as the Berner Property Trust was established. The respondent was the trustee. The Trust was a unit trust and the units were issued to J & J Superannuation Pty Ltd. On 28 September 1995, 2/71 Berner Street was transferred from the parties as joint tenants to the respondent for a consideration of $180,000. A complex set of transactions then occurred which involved J & J Superannuation subscribing for units in the Berner Property Trust, transferring $180,000 to the respondent as trustee of that Trust, and the respondent using the $180,000 to reduce a loan account with Westpac.

89 White J remarked that the effect of these transactions was that monies in the superannuation fund were used to pay off borrowings on 71 Berner Street. Before the respondent acquired 2/71 Berner Street (which she did in 1995 as trustee of the Berner Street Trust) the appellant had a 50 per cent interest in that property. As a result of the transactions, he ended up with a 27.4 per cent indirect interest in it.

90 At the commencement of the first term of 1997, the appellant returned to full-time teaching. His wages were used for the joint benefit of the parties; this was the case with all the appellant’s earnings.

91 On 27 July 1998, the parties, as joint tenants, transferred 1/71 Berner Street to the respondent who then held it as trustee of the Berner Property Trust. The consideration for the transfer was $270,000. J & J Superannuation subscribed for more units in the Berner Property Trust to enable this transaction to occur. On 28 July 1998, J & J Superannuation transferred $120,000 to the respondent as trustee of the Berner Property Trust. This money was used to discharge a loan in regard to which the respondent was the debtor.

92 In summary, therefore, the complex set of transactions involving 71 Berner Street released a total of $300,000 that was used to reduce loans taken out by the respondent to fund the parties’ property acquisitions. The $300,000 was made up as to the $180,000 released by the transfer of 2/71 Berner Street to the respondent and as to the $120,000 released by the transfer of 1/71 Berner Street to the respondent.

93 At about the same time the Berner Property Trust acquired 29 Hatfield Street.

94 On 12 August 1999 the parties adopted Jasper.

95 On 13 August 1998 11 Shortland Esplanade was purchased in the name of the respondent for $750,000. The purchase was funded by loans.

96 The respondent carried out building repairs and improvements to the Shortland property. He also negotiated a compensation claim with the Department of Fair Trading for poor building work on the property. This resulted in an award of compensation of $100,000 being made. The $100,000 was used to carry out repairs to the property. Later, the respondent undertook further repairs.

97 29 Hatfield Street was sold on 1 October 1999 for $218,500. This represented a capital loss. The net proceeds of this property were used to reduce the respondent’s debt to the National Australia Bank.

98 In December 2001 the appellant moved out of the Shortland property and began living in 1/71 Berner Street. The respondent continued to live in the Shortland property.

99 In August 2003 the J & J Superannuation Fund had assets of $711,899 and a tax liability of $17,874. Its net assets amounted to $694,025. The respondent transferred her member’s balance of $503,652 to the JIVA Superannuation Fund (of which the appellant was not a member). The balance of $190,373 represented the appellant’s superannuation entitlement.

The monetary contributions by the parties to the relationship

100 White J observed that the appellant’s taxable income, so far as it could be ascertained from the records produced, was as follows:

Year ending 30 June:

1990	$22,305
1993	$47,399: (includes wage and franked dividends from Audio Junction Pty Ltd of $32,350 and wage of $6,000 from respondent).
1994	$25,276: (includes wage of $21,540 from the respondent, $17,298 from the Department of Education and a net rental loss after interest expense on Berner Street properties of $15,141).
1997	$35,493: (includes wage of $10,400 from the respondent, $28,161 from NSW and QLD governments and a net rental loss of $3,670).
1999	$88,772: (includes wage of $1,899 from the respondent and a capital gain of $35,885 on transfer of 1/71 Berner Street).
2000	$48,911: (includes wage of $8,836 from the respondent).
2001	$52,276: (includes wage of $600 from the respondent).

101 His Honour remarked that “[o]ne of the intractable difficulties in this case in determining the parties’ respective financial contributions is that not only did the [respondent] pay money to or for the benefit of the [appellant], but the [appellant] paid money from time to time into the accounts of the [respondent]”. The judge noted, however, that the appellant’s after-tax earnings were not high and he had no significant savings at the end of the relationship. The judge concluded, “all of his income was applied towards a pool of funds from which both parties drew”.

102 The appellant also contributed $11,361, whatever amount he spent on the Hatfield Street renovations, and the $66,000 received on the sale of his share in the hi-fi business.

103 The respondent’s earnings were substantially higher than those of the appellant. She drew $500 or $1,000 per week to pay household expenditure for the benefit of both parties. Because of her higher income she was able to and did pay more than half of the day-to-day household expenses.

104 White J found that the respondent’s taxable income for the 1991-1992 financial years was as follows:

1992	$118,261
1993	$ 62,816
1994	$ 31,996
1995	$ 33,017
1996	$ 55,278
1997	$ 75,082
1998	$ 76,034
1999	$121,040: (includes capital gain on transfer of 1/71 Berner Street of $35,885).
2000	$ 86,635
2001	$ 90,817

105 These figures were struck by his Honour after taking into account deductions in relation to the respondent’s medical practice, including payments made to the appellant “and after taking into account half the net rental losses arising from the negative gearing of the Berner Street properties”.

The parties’ contributions to 29 Hatfield Street

106 As mentioned, the respondent owned 29 Hatfield Street when the parties began to live together at the end of 1989 or early in 1990. The appellant renovated the property. White J found that this work was extensive. It involved the arrangement and co-ordination of the tradesmen, the supervision of their work, and extensive labour. His Honour said:

“Without being exhaustive, he excavated an area for the installation and then installed a new hot water system. He excavated new footings, built a new pier, corrected the fall of land from the house to an adjoining path to prevent water inflow, built stairs to the garage, installed a combustion heater, installed a replacement bathroom and toilet, carried out various plumbing works by laying pipes and the like, completed the construction of an outside deck, paved a set of concrete steps, built a retaining wall, painted the timber deck, removed ceramic tiles, demolished a dividing wall, installed steel support beams and removed two internal walls, inspected the installation of new stairs, sanded and lacquered a large floor area, did various painting work, assisted in the laying of tiles, and installed kitchen appliances. He also organised a number of tradesmen and checked the work which they did.

107 The appellant also paid an unknown amount of his own cash in connection with the works, including the costs of acquiring and installing a slow combustion heater.

108 Although the respondent spent between $35,000 and $38,000 of her own money on the Hatfield Street renovation, the judge found that the amount of time and labour expended by the appellant was more significant than the financial expenditure.

109 Notwithstanding the work done by the appellant, his labours did not result in a substantial increase to the capital value of the house. The house, as I have said, was worth $135,000 as at 1 March 1990 and was sold on 1 October 1999 for $218,500. The judge accepted that the renovations improved the property’s capital value to some extent. They were certainly of benefit to both parties in their enjoyment of the property. They lived there for about ten years and initially, according to the appellant’s detailed testimony, it was in a poor condition.

110 The parties used 29 Hatfield Street as part of the security that financed the purchase of the Shortland property. To the extent that the appellant contributed to 29 Hatfield Street, that contribution must be regarded as a contribution to the means whereby the Shortland property was purchased.

111 The respondent used the net proceeds of 29 Hatfield Street to reduce the debts she had incurred in purchasing the Shortland property. Thus, to the extent that the appellant’s work increased the value of the property, the respondent obtained the benefit of that.

112 In summary, the appellant carried out substantial renovation work on 29 Hatfield Street and the parties both enjoyed the benefit of that by living in a much improved home. The appellant also contributed cash to an unknown degree. Additionally, the renovations increased the value of the property and this resulted in some increase in the market value. Finally, the renovations must have assisted the respondent in using 29 Hatfield Street as security for the loan she obtained to purchase the Shortland property and she received the benefit of the proceeds when Hatfield Street was sold.

113 The respondent’s contributions involved the provision of the actual property itself and the payments she made out of her income towards the mortgage and the costs of renovation.

The judge’s approach to the appellant’s Hatfield Street contributions

114 In assessing the contribution made by the appellant to 29 Hatfield Street, the judge was much influenced by the fact that, until the parties moved to the Shortland property, the appellant lived for some ten years rent free in 29 Hatfield Street together with the respondent.

115 His Honour said that there was authority that the burden borne by one party to the relationship in providing accommodation to the other is a matter to be taken into account, as is the corresponding advantage to the other party. He referred to Del Gallo v Frederiksen in support of this proposition.

116 In Del Gallo the plaintiff owned a house and when she moved into the defendant’s home she was able to let out her house and earn rent. The Court had regard to the benefit of accommodation provided by the defendant (see 172; [48]). It also had regard to the rent that the plaintiff was able to earn from her capital asset, her home (see at 173-174; [52] –[53]). The rental income was regarded as a benefit the plaintiff received for her domestic contributions to the defendant and, in effect, was deducted from them. Heydon JA (with whom Powell JA and Rolfe AJA agreed) considered the rent to be a reciprocal benefit received by the plaintiff that was relevant to whether an adjustment of interests in property should be made.

117 There was no double counting in Del Gallo. The benefit of the accommodation the plaintiff received from the defendant was regarded as a contribution made by the latter (see at 173-174; [52]). The rent earned by the plaintiff was, in effect, a contribution different and additional to the accommodation. As Heydon JA remarked at 173-174; [52], “[The defendant’s] contribution of accommodation was thus the sole cause of the conversion of the plaintiff’s house from a non-income earning asset to an income earning asset”. It followed, as Heydon JA pointed out at 174; [53], “The defendant is entitled to have ‘the value of what the plaintiff has received in return’ for her contributions taken into account”. The plaintiff received the benefit of rental income on top of the benefit of free accommodation. I reiterate that they were two separate benefits. The same benefit was not taken into account twice.

118 White J said, in reference to Del Gallo:

“There is no difference in principle between a party who is provided with accommodation being advantaged by being able to let out his or her own property for rent and a person who is provided with accommodation being spared the expense of rent.”

119 I respectfully disagree with this proposition. A party who is provided with accommodation, and who is thereby advantaged by being able to let out his or her own property for rent, receives two distinct and different benefits, namely, free accommodation and rental income. The accommodation would spare that party “the expense of rent” and he or she would, on top of that, earn rental income. On the other hand, “a person who is provided with accommodation” alone is indeed “spared the expense of rent” but earns no rental income. The difference is fundamental.

120 On the basis his Honour postulated, he concluded that the appellant’s contributions to 29 Hatfield Street were substantially, if not wholly, counter-balanced by the benefit he obtained from living in the property rent-free.

121 With respect to his Honour, I do not accept that, in this case, it is appropriate to use the free accommodation provided to the appellant as being a countervailing benefit to be weighed against contributions made by him.

122 The respondent’s provision of the family home was a contribution by her to the partnership, and appropriate weight should be accorded to it. It would be wrong in principle, however, to accord it weight and then, to require a notional rental in respect of the appellant’s accommodation in the home to be deducted from the value of his contributions. That would be impermissible double counting. It would not be just or equitable.

123 I would also draw attention to the long established rule that Courts accord due weight to non-financial contributions made by parties to a marriage-like relationship that are not directly productive of a monetary return: Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 212 to 213. The weight that is so to be accorded is capable of being substantial.

124 In Jones v Grech [2001] NSWCA 208; (2001) 27 Fam LR 711 at 724 Davies AJA, after referring to the remarks of Wilson J in Mallet v Mallet at 636, said:

“The general thrust of his Honour’s exposition found support in the observations of other members of the Court: Mason J at CLR 623-5 ... Deane J at CLR 639-41; ... and Dawson J at CLR 645-6 ... . One point that their Honours made in relation to matrimonial relationships was that the relationship ordinarily involves ‘a practical union of both lives and property’ and that the acquisition of assets, such as a matrimonial home, can be seen as representing ‘the fruits of a totality of efforts of wage earning, homemaking and mutual support’: per Deane J at CLR 640-1 ... . At CLR 625 ..., Mason J pointed out that there may be an equality of contribution if ‘the efforts of the wife in her roles were the equal of the husband in his’. However, the facts of the particular case must always be examined. The passage from the reasons of Wilson J set out above shows how this examination may be made.”

His Honour went on to say that the same general considerations apply to a de facto relationship.

125 The deduction of a notional rent for accommodation in the family home would be inconsistent with the notion that the relationship ordinarily involves a practical union of both lives and property, and that the acquisition of assets, such as a family home, represents the fruits of combined efforts in wage-earning, homemaking and mutual support.

126 The dedicated and energetic efforts as a homemaker over a long period by a de facto partner (who owns no property of his or her own and who makes no financial contribution to the family unit) may entitle him or her to a substantial contribution from property owned by the breadwinning partner, including the family home. In such circumstances, to deduct notional rental in respect of accommodation in the family home from those non-financial contributions would be a negation of their value that would be neither just nor equitable.

127 In my view, the same considerations apply to the case where the partners, to some degree, share homemaking duties and each works for the financial gain of the relationship, but where there is a substantial difference, in monetary terms, in what each is able to provide. In such a situation there would still be a practical union of both lives and property and the acquisition of assets, including the family home, would still represent the fruits of a totality of efforts of wage earning, homemaking and mutual support.

128 His Honour’s view that a countervailing benefit of free occupation was received by the appellant which is to be set off against his contributions to 29 Hatfield Street, caused his Honour to refrain from taking account of the appellant’s contributions to that property. In my view, he erred in adopting that approach. As I later explain, those contributions assisted in the acquisition and retention of other properties. In my view, they constituted a factor relevant to the determination of the extent of the appropriate order to be made under s 20.

The parties’ contributions to 51 Berner Street

129 To recapitulate:

(a) 51 Berner Street was purchased in the joint names of the appellant and the respondent.

(b) Westpac financed the purchases against the security of mortgages registered over the properties in question; the appellant may have paid part of the deposits.

(c) The respondent was the mortgagee and paid the mortgage instalments; the appellant’s earnings were used to pay part of the living expenses of the parties.

(d) 51 Berner Street was purchased on 20 November 1993 for $150,000. It was sold in 1994 for $215,000. The proceeds of the sale were used to reduce the loans owed to Westpac.

(e) Thus, the acquisition and sale of 51 Berner Street occurred for the joint benefit of the appellant and the respondent.

130 The appellant’s contribution regarding 51 Berner Street represented his domestic contributions to the joint household and the relatively small financial contributions he made to the joint expenses. These financial contributions, to the extent that they benefited the respondent, increased the funds she had available generally and for financing the acquisition of the property.

131 The respondent contributed far more financially to 51 Berner Street than the appellant. Her domestic contributions to the joint household were roughly equal to those of the appellant (save in regard to caring for Jasper).

The judge’s approach to the appellant’s contributions to 51 Berner Street

132 I have observed that White J found that the parties intended that the appellant would have a 50 per cent interest in 71 Berner Street and did not accept the respondent’s assertion that she purchased 51 Berner Street for herself. His Honour said that, as 51 Berner Street was later sold and the proceeds applied to the reduction of debt, “the question of [the respondent’s] intention as to the ownership of 51 Berner Street is immaterial”.

133 However, the parties’ intentions as to ownership of property were potentially relevant for the purposes of s 20(1) of the Act as they were capable of bearing on the justice and equity of any adjusting order to be made.

134 His Honour’s comment that the respondent’s intention as to the ownership of 51 Berner Street being “immaterial” supports an inference that he did not take into account any contribution made by the appellant in respect of 51 Berner Street. That inference is reinforced by the fact that the judge made no reference to any contribution by the appellant to 51 Berner Street when assessing the contributions that were relevant for the purposes of making an adjustment of interests under s 20.

135 White J observed in relation to 71 Berner Street:

“The costs of purchase and construction were met by borrowings. At the commencement of the project there was no or very little ‘equity’ in the project. The parties’ intentions and expectations were that the loan repayments would be partly met by rental from the properties and to the extent there was a shortfall would be paid by the [respondent], who had the greater income.”

These remarks apply equally to 51 Berner Street. The facts support a conclusion that the parties intended that the appellant would have a 50% interest in 51 Berner Street (as well as 71 Berner Street).

136 The proceeds of 51 Berner Street were used to reduce the respondent’s mortgage indebtedness and to improve her financial position. Apart from reducing the mortgage instalments over a period, the respondent’s improved financial position assisted her in borrowing funds to buy the Shortland property and in paying the instalments owing in respect of them. These are indirect but real benefits and, in my view, his Honour erred in not having regard to them.

137 In my opinion, the appellant and the respondent should be regarded as having contributed equally to the profits made from the sale of 51 Berner Street, and account should have been taken of these contributions when assessing the overall contributions each party made to the pool of assets at the date the relationship terminated.

The parties’ contributions to 71 Berner Street

138 To recapitulate in regard to 71 Berner Street, this property was purchased on 17 December 1992 for $162,500.00 in the parties’ joint names and in late 1994 steps were taken to subdivide the property. The appellant arranged for the development of the subdivided properties. He consulted an architect who drew up plans for the construction of two townhouses on the property. The appellant demolished the existing house and supervised the construction of the two townhouses and laboured himself on the construction work. Construction was completed in August 1995. After the townhouses were built, the appellant, from time to time, carried out repairs and maintenance to them.

139 The respondent claimed that she paid the appellant for the work that he did. White J found that the evidence did not support this contention.

140 White J found that the cost of developing and constructing the two townhouses was $203,530.00. The costs of acquisition of 71 Berner Street and the construction costs totalled $353,530.00 plus stamp duty and legal and incidental expenses on purchase. White J said that the uncontested evidence at the hearing was that as at mid-August 2003 the market value of unit 1 was $392,500.00 and that of unit 2 $378,000.00. That is, a total of $770,500.00.

141 As I have mentioned, the appellant and the respondent transferred both 1/71 and 2/71 Berner Street to the respondent alone and, by the series of transactions that I have mentioned, $300,000.00 was released to reduce the respondent’s mortgage debt.

142 The appellant’s contributions to 71 Berner Street fell into the same category as those that were made to 51 Berner Street and, in addition, involved the considerable work he did in demolishing, managing, supervising, and working on the construction. The respondent’s contributions fell into the same category as those that were made to 51 Berner Street.

The judge’s approach to the appellant’s contributions to 71 Berner Street

143 The starting point in the judge’s approach to 71 Berner Street was his finding that the parties intended that that they should own it jointly, in equal shares. His Honour said:

“The [appellant] would do the work of securing approval for the development and having it carried out. He would attend to the maintenance and repairs. When the property was acquired the parties were joint owners. I infer that it was the parties’ intention at the time that the [appellant] should have a 50% beneficial interest in the property notwithstanding that it was understood that the [respondent] should bear the costs of the loan to pay for the purchase of the property and to pay for the costs of construction. I infer that they regarded this as fair and appropriate having regard to the existing state of their relationship and what they envisaged each would do. Rather than the [respondent] claiming to be entitled to contribution for 50% of the mortgage repayments which she made and the [appellant] claiming to be entitled to an amount for his labour, they would both have shared the capital gains equally had their relationship continued happily.

144 The judge’s reference to the parties sharing “the capital gains equally had their relationship continued happily” is revealing as the notion of sharing in the capital gain is different from sharing in the equity in the property as a whole, and his Honour had found that the parties intended that the appellant should have a half share in the property. The reference suggests that his Honour was of the view that, at most, the appellant was entitled to a share of the capital gain in the value of 71 Berner Street and not in the overall value of the property. If that is so, on the facts of the present case that would be erroneous (for the reasons expressed above – see Howlett v Neilson).

145 His Honour pointed out that the device of transferring 71 Berner Street to a trust and issuing units in the trust to the trustee of the superannuation fund favoured the respondent. He said:

“[B]y taking this course their ultimate beneficial interests in the Berner Street development were changed from 50% each, to the proportion from time to time of their respective balances in the superannuation fund. This always favoured the [respondent]. In effect the [appellant] lost 22.6% of the increase in the capital value of the property. If, at the time the Berner Property Trust was established, the parties had turned their mind to such a consequence, I do not think it is one that they would have intended. However they did not at that time have any expectation that their relationship would end as it did, nor did they turn their minds to the financial consequences if the relationship were to break down. I consider that the [appellant’s] acquiescence in these arrangements was a contribution by him to the financial resources of the [respondent] which warrants an adjusting order under s 20. I am of the view that an adjusting order designed, so far as practicable, to restore to the [appellant] his 50% interest in the increase in the capital value of the Berner Street property is just and equitable.”

146 The judge in this passage again moved from the appellant’s 50% beneficial interest in the property to the appellant being entitled to a “50% interest in the increase in the capital value”. In my view, his Honour thereby erred. In my view, the equity and justice of the case required an adjusting order under s 20 to be made that recognised that the appellant was entitled to half of the equity in the property; not merely half of the capital gain.

147 His Honour repeated this error when expressing his conclusion as to the appellant’s entitlement arising out of his contributions to 71 Berner Street. He said:

“I am of the view that an adjusting order designed, so far as practicable, to restore to the [appellant] his 50 per cent in the increase [of] the capital value of the Berner Street property is just and equitable.”

The considerations in making the adjusting order should have included restoring to the plaintiff the value of his 50 per cent in the equity of the Berner Street property (this being a property that remained in the common pool at the date of the hearing).

The parties’ contributions to the Shortland property

148 On 21 August 1998 the respondent purchased the property at Shortland Esplanade for $750,000.00. The appellant and the respondent immediately moved to live in that property.

149 As mentioned, the $500,000.00 increase in the value of the Shortland property was a principal reason for the fact that by August 2003 the respondent’s net assets were over $1,400,000.00 while the appellant’s amounted to about $200,000.00.

150 The appellant’s statement of claim alleged that the respondent financed the purchase of the Shortland property by three loans. The first was a loan of $450,000.00 from National Australia Bank secured by mortgages over the 71 Berner Street units and 29 Hatfield Street. The second was a further loan from NAB secured on Shortland itself. The third was by way of an increase in the respondent’s overdraft in respect of her surgery practice.

151 The appellant alleged in his statement of claim that later, when 29 Hatfield Street was sold, the proceeds were used to reduce the NAB loan indebtedness.

152 The respondent’s defence admitted the appellant’s allegations as to the means used by the respondent to purchase the Shortland property and admitted that the proceeds of the sale of 29 Hatfield Street were paid to NAB to reduce the loans secured by the 71 Berner Street and Hatfield Street properties.

153 Mr Maiden SC, who appeared for the respondent at the trial and on appeal, indicated at one stage (with some hesitation) that he and senior counsel then appearing for the appellant may have agreed on facts that were different from the admissions made by the respondent to the appellant’s allegations to which I have referred. Mr Givney for the appellant disputed this. The parties were given leave to make written submissions on the point and I do not understand Mr Maiden to be persisting in his contention. In any event, on the material before this Court the state of the pleadings and evidence before it do not justify departing from those admissions by the respondent.

154 The appellant testified, by affidavit, as to how the Shortland property came to be purchased. He stated:

“We started looking for properties to purchase. We saw 11 Shortland Esplanade, Newcastle. This was a property across from the beach and had five bedrooms. I remember when we saw the property Jan said to me words to the effect of ‘this looks perfect let’s buy this property’. The purchase price of the property was $750,000. I recall Jan said to me words to the effect of ‘who’s name shall we purchase the house in’. I replied in words to the effect of ‘it doesn’t really matter’. At that time I felt I was in a committed relationship and it did not concern me if the property was in Jan’s sole name or joint names. At that time our finances were intermingled in that although we had separate bank accounts I was the signatory to all Jan’s accounts.

The property was purchased by transferring 1/71 Berner Street to the Berner Property Trust and by transferring 29 Hatfield Street to the Berner Property Trust.

Jan borrowed $450,000 from The National Australia Bank as trustee of the Berner Property Trust. Annexed hereto and marked as “JB-52” is a copy of Flexiplus Mortgage Facility in the amount of $450,000 showing Jayanti Mudaliar ATF Berner Property Trust.

1/71 Berner Street was transferred to the Berner Property Trust for $240,000 and Hatfield Street was transferred to the Trust for $280,000.

At about this time we transferred $120,000 from the J & J Super Fund to the Berner Property Trust in National Account No 45/250/1789. This was then used in part to pay out the BMC Loan ...”

The appellant was not cross-examined about this evidence, and the respondent did not refute it in her testimony.

155 White J commented that “no one contends that the [appellant] contributed or paid mortgage on Shortland Esplanade ...”. I understand this comment to be directed at the fact that the respondent, alone, was liable as mortgagor and the mortgage payments were made out of the respondent’s bank account and funds alone. The comment, however, says nothing about whether the use of 1/71 Berner Street and 29 Hatfield Street as security for the Shortland property constituted an indirect contribution to the purchase of that property by the respondent.

156 In the circumstances, I accept that the purchase of the Shortland property was financed as the appellant pleaded and testified.

157 To the extent that the Shortland property was financed by loans on the security of 29 Hatfield Street and 71 Berner Street, the appellant indirectly contributed to the purchase. That is because of his contributions to the value of 29 Hatfield Street and to the acquisition and value of 71 Berner Street.

158 Additionally, in my view, to the extent that the Shortland property was financed by loans on the security of the property itself, the appellant thereby also indirectly contributed to the purchase. Firstly, the appellant’s contributions to 29 Hatfield Street and of 71 Berner Street put the parties in a position whereby a relatively lesser amount of money needed to be raised against the Shortland property. Secondly, the appellant’s contributions to the relationship, generally, had improved the parties’ overall financial position and this facilitated the respondent’s ability to purchase the Shortland property in her name. Thirdly, the appellant’s non-financial contributions generally assisted the respondent in her medical practice and contributed to her capacity to earn the money that she did.

159 After the purchase, the appellant did a considerable amount of work on the Shortland property. The judge found:

“When the parties moved into Shortland Esplanade in August 1998 the [appellant] carried out various repairs to the property where steel fittings and the like had been corroded and needed replacement. He also arranged for the construction of a storage area under the house and associated works. He repaired a pump, cleared filters, regularly cleaned the garage and carried out certain excavation and plumbing works to improve the drainage of the site. About six months after the parties moved in they discovered that there were serious building defects which had led to water encroachment, damp walls and white ant infestation. These works had been carried out before the property was purchased. The builder who carried out the works was insolvent and the Department of Fair Trading ultimately paid an amount of $100,000 towards the cost of the building repairs. The [appellant] claimed that he was principally responsible for obtaining that order for compensation from the Department of Fair Trading. Given his building expertise I accept that that was so.

The repair work was carried out by a builder called Cooks Hill Constructions. The payment from the Department of Fair Trading covered most of the repairs which that firm carried out. The [appellant] liaised with the builder, provided advice to the builder, not all of which was taken, and generally checked their work. Additional costs involving the construction of a path, the installation of kitchen and bathroom appliances and tiling, totalling in all about $8,000 were paid by the [respondent].”

160 The respondent’s contributions to the Shortland property were largely financial. She was the mortgagor and borrower and paid the mortgage and other instalments on the property.

The judge’s reasoning in regard to the appellant’s contributions to the Shortland property

161 White J made no mention of the contributions the appellant made, indirectly, to the financing of the purchase of the Shortland property (to which I have referred). In my opinion, he erred thereby.

162 There is no doubt that, after the purchase of the Shortland Street property, the appellant did a great deal of work on the property to its substantial benefit. In dealing with those contributions, White J said:

“I do not think the carrying out of this work by the [appellant] warrants a substantial adjustment of property interests in his favour. He was living in the property without paying rent. Using his building expertise to do the best he could with the Department of Fair Trading as well as doing repairs and construction himself and supervising building repairs of Cooks Hill Constructions was of benefit to the [respondent]. At this time the [appellant] was earning a larger income than in previous years and was also contributing part of his income to household expenses including payment of rates. However I accept that over the course of their relationship the [respondent] paid more of the domestic expenses for the [appellant’s] benefit than did he for hers, as well as meeting the costs of her borrowings which were applied, amongst other things, to provide the house in which they both lived. He received reciprocal benefits for the work which he did such that he did not suffer a substantially disproportionate burden, particularly when regard is had to the adjusting order which I propose to make as outlined in para 74 above. However I am of the view that some further adjustment is warranted on this score.”

163 Later, White J said:

“His work on the 11 Shortland Esplanade property and his work in arranging a settlement of the claim upon the Department of Fair Trading which paid for the cost of needed repairs, has been of enduring benefit to the [respondent], even though it is not possible to say to what extent it has improved the capital of the property. However it is not a contribution of a kind which should entitle him to an order which in effect gives him a beneficial interest in the property, such that he participates in its capital appreciation. I take it that the parties intended when the [respondent] bought the property that she should be its sole owner.”

164 An important part of the judge’s reasoning which led him not to award anything to the appellant in respect of contributions he made to the Shortland property was his assumption that the parties intended when the respondent bought the property “that she should be its sole owner”. I refer in this regard to his observation that “I take it that the parties intended when the [respondent] bought the property that she should be its sole owner”. His Honour also remarked in this regard:

“The parties agreed on what properties should be put in their joint names. The [respondent] did not agree that the [appellant] should have a beneficial interest in 11 Shortland Esplanade.”

165 I have referred to the evidence given by the appellant concerning the facts that led to the purchase of the Shortland property in the respondent’s name. I reiterate that, according to the appellant, when he and the respondent decided to buy the property, the respondent asked, “Whose name shall we purchase the house in” and he replied to the effect that it did not “really matter”. Because there was no cross-examination as to this evidence and as the respondent gave no evidence to the contrary, that evidence in my view should be accepted.

166 The inference from the appellant’s evidence is that the property was bought for their joint benefit. There are other factors that support such an inference. At the time the Shortland property was purchased, the parties appear to have been firmly committed to each other. They had been living together for some nine years (apart from the period when the appellant was teaching in Queensland). They lived in the Shortland property on the basis that it was their family home. At about the time of the purchase, or shortly after, they decided to adopt a child and eventually on 12 August 1999 they adopted Jasper. The appellant was the signatory to all the respondent’s bank accounts. The use of 29 Hatfield Street and 71 Berner Street to finance the purchase is indicative of an acceptance that their respective assets were to be deployed for the benefit of the relationship and it did not matter in whose name a particular property would be registered.

167 More important, however, is that the registration of a particular property in the name of a party to a de facto relationship, and even the existence of an intention that that property be the sole asset of that party, does not preclude the court from making an adjusting order under s 20 of the Act based on contributions to that property by the other party to the relationship. The sole ground on which an adjusting order is to be made is what is just and equitable. The fact that property is registered in one party’s name and intended to be the sole property of that party does not necessarily mean that it is just and equitable to ignore contributions made by the other party to the property or generally.

168 Nevertheless, the judge appeared to be of the opinion that the appellant was not entitled to any contribution he made to the Shortland property because the parties intended when the respondent bought the property that she should be its sole owner. In my respectful opinion, he erred thereby.

169 I would also refer to his Honour’s observation that, the work done by the appellant on the Shortland property “is not a contribution of a kind which should entitle him to an order which in effect gives him a beneficial interest in the property, such that he participates in its capital appreciation”.

170 The appellant was not claiming a beneficial interest in the property, he was claiming a sum of money. His entitlement to a contribution is grounded on the justice and equity of the circumstances, not whether he had a beneficial interest.

171 In my view, these matters support the conclusion that his Honour, with respect, applied a faulty approach to the inquiry he was required to make under s 20.

The respondent’s medical practice

172 The judge found in relation to the respondent’s medical practice:

“The [appellant] made some contribution to the conduct of the [respondent’s] medical practice. He wrote up books of account from other financial records. He assisted in the movement of fittings and the installation of fittings and equipment in her surgery. He helped with the installation of a computer for the surgery and provided some assistance to the staff in the operation of computer programs. From time to time he accompanied the [respondent] when she made night calls to patients. He organised the installation of a security system and installed a security screen door. He prepared payslips and group certificates and attended to the payments of employees’ superannuation. He was given the title of Practice Manager, but that was an exalted description of the work which he did for the practice.”

173 The respondent paid the appellant “wages” from her practice and the judge found that the appellant “was well paid for the work he did for the [respondent’s] medical practice”. This finding was made notwithstanding that his Honour said that he would not be justified in placing any reliance upon the part of the respondent’s financial statements that reflected the wages paid to the appellant.

174 Irrespective of this difficulty, I do not accept that whatever wages were paid to the appellant could be regarded as independent compensation to him for the work he did in relation to the medical practice. It seems that the respondent paid wages to the appellant to reduce her income for tax purposes and whatever wages she paid to the appellant were used for the joint benefit of the parties. In these circumstances, the work done by the appellant and the payments made by the respondent for it were merely integral parts of the joint endeavours of both parties. Both the work done and the wages paid were for the mutual benefit of both.

175 In my opinion, in assessing the contributions made by the appellant, regard must be had to the appellant’s contribution to the respondent’s medical practice. The judge erred in failing to take these contributions into account. However, they do not appear to be particularly significant in the context of the case as a whole.

176 The appellant claimed to be entitled to a share of the goodwill of the respondent’s medical practice. I do not accept that. The respondent developed her practice largely by her own skill and labours. She put the income from the practice to work for the joint benefit of the parties. It would not be just and equitable to require her to allocate any share in the goodwill of the practice to the appellant. I would add that it was not established that the practice has a goodwill value.

Homemaking contributions made by the appellant

177 The appellant accepted that he made no disproportionate non-financial contribution as homemaker except as regards looking after Jasper. The judge found that the appellant spent more time caring for Jasper than the respondent. Nevertheless, his Honour held that the appellant did not sacrifice his employment prospects in order to look after Jasper and there must have been a reciprocal benefit to him in being able to spend time with Jasper while the respondent worked and paid for their joint living expenses. He said that he did not “think that any further order adjusting property is warranted by this consideration.

178 The fact that the appellant did not sacrifice his employment prospects in order to look after Jasper was a legitimate factor to take into account. The courts have long recognised, however, that non-financial contributions in caring for children while the breadwinner works are worthy of recognition under s 20. I do not think that in the circumstances of this case the contribution that the appellant should receive for looking after Jasper is substantial, but it is a factor that should have been taken into account.

The additional award of $25,000

179 His Honour said:

“It is impossible to explain why one sum rather than another should be selected as an appropriate adjusting sum, in order to do what is just and equitable, having regard to all the relevant considerations. I consider that an additional $25,000 is an amount which it is just and equitable the [respondent] pay to adjust the parties’ property interests by reason of the above matters.”

180 The “other matters” to which his Honour referred are the following:

“[T]here is his work on the Hatfield Street property, his payment of an unknown amount of cash to the costs of those renovations, his work in the medical practice, his payment of $11,361 formerly in the name of Mr Phanichewa, his payment of $66,000 from the sale of his shares in Audio Junction Pty Ltd, his contribution of after-tax income to their joint benefit, and the work done on 11 Shortland Esplanade.”

The deduction for rent after the relationship terminated

181 The judge made a further adjustment in the respondent’s favour. The appellant had occupied 1/71 Berner Street since the breakdown of the relationship. He was in occupation of the unit from January 2002 and had not paid rent to the time of the trial. On this basis the judge held that there should be an allowance in the respondent’s favour in respect of rental and he assessed that allowance at $19,000.00. This was not challenged by the appellant.

Other countervailing benefits

182 His Honour concluded that, apart from the contributions that he ordered the respondent to make, the other contributions made by the appellant were substantially matched by “countervailing benefits” provided by the respondent. He said:

“During the course of these reasons I have referred to some, but not all, of the reciprocal benefits afforded by the [respondent] for the benefit of the [appellant]. As well as providing accommodation, the [respondent] paid the greater part of the household expenditure. She made weekly drawings from her work account of between $500 and $1,000 to pay such expenses which benefited both parties. Although the [appellant] also contributed his income from time to time I am satisfied that the greater contribution was made by the [respondent]. She paid the [appellant] wages to which I have referred .... She also met the cost of joint overseas holidays and from time to time paid some money to the [appellant] to pay off or reduce his credit card expenses, although the [respondent] only had records of paying $1,500 in this way. Between 1996 and 2000 she paid $24,589 in payment of the [appellant’s] income tax liabilities. Of that amount $18,256 was paid on 25 May 2000 as being capital gains tax payable on the transfer of the unit at 1/71 Berner Street to the [respondent] as trustee of the Berner Property Trust.

The [appellant’s] tax liabilities were diminished by the deductions he claimed as a net rental loss on the Berner Street properties. The interest and other expenses were paid by the [respondent].

The [respondent] also provided motor vehicles for the [appellant’s] use. At the beginning of 1998 the [appellant] purchased a Porsche motor vehicle from an acquaintance. The cost was the sum of $10,000 which the [respondent] provided and a utility motor vehicle for which it was swapped. The utility motor vehicle had been purchased from the practice, that is, it had been purchased by the [respondent] and tax deductions were claimed in respect of it as a vehicle used in connection with the practice. In September 1999 the Porsche was sold and the proceeds paid to the [respondent]. She purchased a Holden Commodore motor vehicle which the [appellant] used.

In addition the [respondent] made the following superannuation contributions on behalf of the [appellant]:

[<br>]

1993	$ 13,000
1994	$ 13,641
1995	$ 25,000
1996	$ 10,000
1999	$ 28,420
2000	$ 10,000
	$100,061

[<br>]

There is conflicting evidence as to the superannuation contribution in 1996. The [respondent’s] tax return suggests the payment was only $905, but $10,000 was paid from her account. It is also unclear whether any part of the amount of $38,420 paid by the [respondent] to the [appellant] in the year ended 30 June 1998 ... was a superannuation contribution rather than wages.

On the [respondent’s] side there is her provision of accommodation at Hatfield Street and at 11 Shortland Esplanade until the parties separated, her payment of wages and superannuation contributions for the [appellant], her payment of medical expenses for the [appellant’s] mother, her payment of more than half of the joint household and travel expenses (whilst recognising that she had more money with which to pay such expenses), the provision of motor vehicles and the payment of his debts.”

183 I have dealt above with the judge’s findings that the respondent’s provision of free accommodation to the appellant, and her payment to him of wages for work done for the parties’ joint benefit (which wages were expended for their joint benefit) are countervailing benefits that should be deducted from the value of the contributions the appellant made. I have concluded that these findings were incorrect.

184 As regards the other countervailing benefits taken into account (namely, payment of superannuation contributions for the appellant, payment of medical expenses for the appellant’s mother, payment of more than half of the joint household and travel expenses, payment of certain debts of the appellant, the provision of motor vehicles and the meeting of the cost of joint overseas holidays), these are more properly to be considered as being part of the respondent’s contributions and, taken into account as such, should not be deducted from the appellant’s contributions.

The approach to be adopted in evaluating the respective contributions

185 White J considered the contributions made to each of the assets in the pool at the date of the hearing and evaluated those. He then had regard to the overall contributions each party made and after weighing those up ordered the respondent to contribute a further $25,000.00.

186 The appellant criticised this approach but, in my opinion, it was open to his Honour.

187 I have held that the judge’s approach was erroneous in a number of other respects. I reiterate that the parties requested the Court, in the event that it should decide that there were errors in the judge’s reasoning, to exercise its discretion itself, afresh, and not remit the matter for a new trial. I have expressed the view that I would accede to their request.

188 In so exercising my discretion it is not possible to adopt the same asset-by-asset approach as White J adopted. In consequence of what I have held to be errors in the judge’s approach, the orders made provided the appellant with inadequate compensation for the contributions he made. In theory, the most important adjustments that should now be made are in respect of 71 Berner Street and the Shortland property. These two properties represent by far the two most substantial properties in the pool of assets at the date of the hearing. The value of 71 Berner Street constitutes the superannuation funds (forming part of the pool of assets) amounting to $785,100.00 and Shortland is valued at $1,250,000.00. The adoption of an asset-by-asset approach in regard to these two properties is not possible, however, as there is no evidence as to the amount, if any, of any mortgage or other liabilities that may have been attached to these properties at the relevant date. In these circumstances, the Court must do the best that it can.

189 The starting point is that the net value of the pool of assets at the relevant date was $1,693,002.00 with $224,680.00 accruing to the appellant and $1,468,312.00 to the respondent. The net value of $1,693,002.00 is arrived at by deducting liabilities of $1,052,000.00 from assets of $2,745,002.00. When the relationship commenced, the net value of the pool of assets was $156,000.00. Over the period of the relationship the pool of assets therefore increased by $1,537,002.00.

190 I bear in mind that the parties came together with virtual equality in assets that they combined for the common good. The respondent’s assets constituted, largely, equity in residential property in which the parties lived. The appellant’s assets constituted cash that was used for the benefit of both parties on the basis that a family unit had been formed. They remained together for some eleven years. That is a relationship of “lengthy duration” (cf Gazzard v Winders (1998) 23 Fam LR 716 at 728 per Beazley JA). Both parties expended their efforts with energy and success in making a home and improving their combined financial position, firstly, by providing the respondent with a platform from which she was able to conduct her medical practice successfully and, secondly, by the acquisition and development of property. Both parties appear to have used, successfully, all their energies and ability to benefit the family unit.

191 I accept that the respondent contributed, financially, more to the improvement in the parties’ financial position than the appellant. This is due to the high income she earned as a medical practitioner. Part of the net value of $1,693,002.00 of the pool of assets must be regarded as having been acquired by her efforts without significant contribution by the appellant. The appellant accepts this; hence his claim for 40 to 45 per cent of the pool, and not 50 per cent.

192 I propose to adopt the approach propounded by McLelland J in Davey v Lee at 689 by making a “holistic value judgment” taking into account the matters to which I have referred.

193 I have concluded that the appellant’s contributions to 29 Hatfield Street, 51 Berner Street, the Shortland property, the medical practice and looking after Jasper should have been taken into account, but were not. In addition, the judge only had regard to the capital gain that had occurred in regard to 71 Berner Street whereas the appellant was entitled to a share in the property as a whole. Some payment has to be made to the appellant to cover these matters.

194 In my opinion, orders should be made having the effect that an additional $200,000.00 should be paid to the appellant. $160,000.00 of the $200,000.00 represents the value of all the additional contributions referred to in the preceding paragraph, save for those in regard to 71 Berner Street. I would apportion $40,000.00 of the $200,000.00 to those contributions the appellant made to 71 Berner Street for which he was not compensated by the primary judge. The $40,000.00 represents a loss to the appellant’s superannuation entitlement. The respondent should pay $40,000.00 to J & J Superannuation Pty Ltd, the trustee of the appellant’s superannuation fund, to compensate for this loss.

195 Therefore, the orders made by White J should be set aside. Instead, the respondent should pay the appellant $228,000.00. This sum comprises the original orders made by White J that the respondent receive $68,000.00 (being $86,000.00 for his contributions to 71 Berner Street plus $25,000.00 as a cushion less $43,000.00 rent for 71 Berner Street) and the additional $160,000.00 I propose to compensate for other contributions not taken into account by White J. Further, the respondent should pay $87,163.00 to J & J Superannuation Pty Ltd, comprising the original order that the respondent pay $47,163.00 and the additional $40,000.00 that I propose.

196 The result of the order I propose would be the following:

(a) The appellant would receive a total of $539,853.00 out of the net pool of $1,693,002.00 and the respondent would receive $1,153,149.00. The $539,853.00 is comprised of $224,690.00 (being the appellant’s assets at the time of the hearing before White J), $228,000.00 (being the sum I propose the respondent pay the appellant) and $87,163.00 (being the sum I propose the respondent pay to the appellant’s superannuation fund).

(b) The appellant would receive 32 per cent of the net pool and the respondent 68 per cent.

(c) Of the net increase in assets during the relationship amount to $1,573,002.00, the appellant would receive about 35 per cent and the respondent about 65 per cent.

Conclusion

197 I propose the following orders:

(a) The appeal is upheld with costs.

(b) The orders of White J are set aside.

(c) The first respondent is ordered to pay the appellant $228,000.00.

(d) The first respondent is ordered to pay J & J Superannuation Pty Ltd, the trustee of the appellant’s superannuation fund, $87,163.00.

(e) The first respondent to have a certificate under the Suitors’ Fund Act 1951 (NSW) if otherwise qualified.

198 As regards the application to cross-appeal in regard to the costs order made by White J, that falls away in the light of the appellant’s success in the appeal. The first respondent is ordered to pay the costs of the cross-appeal.

199 McCOLL JA: I agree with Ipp JA.

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LAST UPDATED: 02/05/2006