Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Prior v Brown [2013] NSWCA 4
• Hearing dates: 19 November 2012
• Decision date: 06 February 2013
• Before: Basten JA at [1]; Hoeben JA at [26]; Ward JA at [27]

Decision

Dismiss the appeal from the judgment of Hallen AsJ in the Equity Division.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PROPERTY - parties to domestic relationship - adjustment of interests - just and equitable - whether one party contributed to maintenance of property purchased by other party prior to relationship - whether indirect financial contribution through unremunerated work in business of owner of property - whether revenue from business used to pay mortgage
• Legislation Cited: Property (Relationships) Act 1984 (NSW), ss 20, 56
• Cases Cited: Bilous v Mudaliar [2006] NSWCA 38; 65 NSWLR 615; Chanter v Catts [2005] NSWCA 411; 64 NSWLR 360; Jensen v Ray [2011] NSWCA 247
• Category: Principal judgment
• Parties: Helen Terese Prior (Appellant); Leonard Graham Brown (Respondent)
• Representation: Counsel: Ms J McIntosh (Appellant); Mr J Millar (Respondent); Solicitors: Peter Cornock & Associates (Appellant); Swaab Attorney (Respondent)
• File Number(s): CA 2012/21444

Decision under appeal

• Citation: Prior v Brown [2011] NSWSC 1006
• Date of Decision: 2011-10-14 00:00:00
• Before: Hallen AsJ
• File Number(s): SC 2007/4969

Judgment

1 BASTEN JA: Between March 2001 and January 2006 Ms Helen Prior (the appellant) and Mr Leonard Graham Brown (the respondent) were parties to a domestic relationship, for the purposes of the Property (Relationships) Act 1984 (NSW) ("the Relationships Act"). Ms Prior brought proceedings against Mr Brown seeking an adjustment of interests with respect to their properties, pursuant to s 20 of the Relationships Act.

2 On 1 December 2011 Hallen AsJ made orders which can conveniently be grouped in three categories. The first (order 1) was a declaration as to the existence of the domestic relationship, pursuant to s 56 of the Relationships Act. The third (order 8) required that the respondent pay the appellant the sum of $180,000. There were also consequential orders including an order which, in substance, required the parties to bear their own costs of the proceedings in the Equity Division (order 11). In addition, to achieve the removal of certain caveats, on 2 December 2011 the Court made further consequential orders. The substantive order made on this date was the extension of a caveat in respect of a property at 9 Radcliffe Place, Kellyville. The other orders noted an agreement between the appellant and her lawyers which involved the payment to them of an amount totalling $180,000, being the full amount she had recovered from the respondent. None of these orders was challenged.

3 The appeal related to the second category of orders made on 1 December 2011, which conferred on the appellant an option to purchase the respondent's interest in 9 Radcliffe Place, Kellyville for an amount of $103,500, together with a discharge of the mortgage over that property (orders 2-5). In the event that the appellant did not take up the option or complete the purchase, orders were made for sale of the property with an equal division of any net proceeds of sale (orders 6 and 7).

4 The notice of appeal sought an order setting aside orders 2-7 made on 1 December 2011, transfer of the respondent's interest in 9 Radcliffe Place, Kellyville to the appellant, together with payment to her of the sum of $1 million or such other sum as the Court might think just and equitable.

5 There were two properties which were the focus of attention in the proceedings. The Radcliffe Place property, which was the subject of the impugned orders, was purchased by the appellant and the respondent jointly in January 2003. The price of the land, together with the amount paid to construct a house on the land, totalled some $670,000 (although $50,000 of that was used to purchase furniture): Judgment, at [243]-[244]. On appeal, little attention was paid to the fate of this property, although it seems unlikely that the appellant would have the means to complete the purchase of the defendant's interest, and take over the mortgage, in accordance with the election provided by the orders of the trial judge.

6 Rather, the challenge to the result in the Court below focused on the fate of another property located at Fairway Drive, Kellyville. That property had been purchased by the respondent in about March 1999, before the relationship with the appellant commenced. The purchase price was $1.35 million, in respect of which the respondent obtained a mortgage requiring 'interest only' payments of $5,500 per month. It was agreed that at the commencement of the relationship, the property was valued at $2.04 million. It remained subject to a mortgage in an amount of $850,000.

7 The parties also agreed that the Fairway Drive property was valued at $4.4 million at the time of separation. There had thus been an appreciation in value of some $2.36 million, largely as a result of a rezoning of the land. The substantial argument put by the appellant on the appeal was that a just and equitable distribution of the joint assets would entail payment by the respondent to her of approximately 50% ($1.18 million) of the windfall increase in the value of the Fairway Drive property. The primary judge erred, it was submitted, in not acceding to a similar submission made at trial.

8 The trial judge dealt with this issue in an orderly manner with which the appellant did not, in terms, find fault. His Honour noted that the power to adjust interests of the parties in the property was to be undertaken having regard to, in the terms of s 20(1):

"(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 ...."

9 Section 20 also permitted adjustment having regard to the contributions made by a party in the capacity of homemaker or parent, but that was not the focus of the present argument. Rather, the appellant submitted that she had worked throughout their relationship in the respondent's catering business and her contributions to the business had provided the funds which were available and used to maintain ownership of the property by payment of outgoings and, in particular, the interest on the mortgage. This, the appellant contended, was at least an indirect financial contribution to the conservation of the property. Without it, she submitted, the respondent would not have been able to maintain his ownership of the property and thus reap the benefits of the windfall increase in value. In support of this approach, the appellant relied on the reasoning of Ipp JA in Bilous v Mudaliar [2006] NSWCA 38; 65 NSWLR 615 at [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'."

10 This passage was cited with approval by Brereton J (Campbell JA and Sackville AJA agreeing) in Jensen v Ray [2011] NSWCA 247 at [26]. Both authorities were noted by the trial judge at [69] and applied.

11 The first premise of the appellant's argument was that she worked diligently in the respondent's catering business. So much was accepted. In referring to some doubts he had about the respondent's evidence, the trial judge noted, in his favour, that the respondent "acknowledged in the witness box that throughout their relationship, the [appellant] had been dedicated, trustworthy and an extremely hard worker in his business": at [117(iv)]. Further, he found as an uncontroversial fact that the appellant had worked in the business between late June 2000 and April or May 2001 and "was paid about $500 per week during this period": at [158(f)]. She was not, it would seem, paid a salary after the commencement of cohabitation. The conclusions in relation to her contribution to the Fairway Drive property were identified in the following passage:

"[215] There is no suggestion that the [appellant] made any direct financial contribution to its acquisition and clearly she was not a party to the decision to purchase the property. She does not assert any direct financial contribution to its maintenance or conservation either.

[216] However, the [appellant] did work in the business without the receipt of any income, or other emoluments, from about April or May 2001 until January 2006. Doing this would have permitted the [respondent] access to more of the business income.

[217] I consider this to be a very small indirect financial contribution to the Fairway Drive property.

[218] Yet, it was this property that provided accommodation for the parties and for the [appellant's] daughter for some part of the relationship. There is no suggestion that the [appellant] paid any rent, or occupation fee, to the [respondent] for her, and/or her daughter's, occupation of this property.

...

[222] The [appellant] claims to have made a non-financial contribution to the improvement of the Fairway Drive property in applying her labour to cleaning the house. Whilst she did do some cleaning, the evidence, which she did not dispute, is that for most of the time that the parties lived there, they had a cleaner. She also maintains that she made contributions in the capacity of a homemaker through the performance of household tasks such as shopping, ironing, and to the welfare of the [respondent]. This is, undoubtedly, true.

[223] Whilst she may have performed other domestic tasks, it does not seem to me that this contribution was very significant. No attempt was made to indicate how much time was spent in the capacity of homemaker or in the performance of household tasks. Also, the [respondent] performed some domestic work. I must also bear in mind, the [respondent's] contribution to the welfare of the [appellant] and of her daughter."

12 In conclusion, the trial judge accepted the respondent's submission that the property did not change in any way during the relationship and that the increase in value had nothing to do with the appellant. He stated that he would, nevertheless, "take into account the increase in value of this property in determining what order is just and equitable": at [228]. He also noted that after the end of the relationship part of the property had been sold and part resumed, providing funds to repay the debt secured on the title and to repay other debts of the respondent: at [219]-[220].

13 In order to overturn the approach revealed in the passages set out above, the appellant needed to demonstrate that some different conclusion should have been reached in relation to her contribution through her work in the business. However, the argument did not advance beyond the proposition that she devoted many hours to running the business and must therefore have contributed to its overall returns. Beyond that, it was to be inferred that the source of funds to make payments of the mortgage on Fairway Drive must have been the revenue of the business, and hence her work constituted an indirect financial contribution to the payments.

14 There was, however, a lack of direct evidence to support these inferences. There were, for example, no records demonstrating the profitability of the business during the period she worked there. The trial judge accepted that she made "a significant contribution to the businesses owned by the [respondent]", and concluded that she viewed herself as, in a practical sense, a partner: at [259]. The trial judge then stated:

"[262] I note, however, that the balance sheet does not show any increase in the value of the businesses. However, this does not limit the Court in making an adjustment in respect of other property, particularly in circumstances where the level of the business is said to have improved whilst the [appellant] was working in it.

...

[265] Overall, I am satisfied that the [appellant] made a modest financial and non-financial contribution to the conservation of the [respondent's] business and, therefore, to his financial resources."

15 The appellant complained that, in light of these latter findings, it was difficult to understand (and certainly not explained in the judgment) how the trial judge came to the view that her contribution to the Fairway Drive property was "very small". She also complained that there was no clear justification for the award to her of $180,000 by way of adjustment to the financial positions of the parties.

16 The trial judge acknowledged that he had not undertaken a piecemeal assessment of the respective contributions of the parties, nor an arithmetical accounting. Rather, he concluded:

"[292] As a result, the [appellant] has established that it is just and equitable for the Court to make an adjusting order in her favour. In order to acknowledge the contributions made by her, I consider that a modest adjustment to the property interests of the [respondent], in favour of the [appellant], is warranted.

[293] Doing the best I can, and making an holistic value judgment, the [appellant] should receive from the [respondent], a lump sum of $180,000, part of which amount she may use, if she wishes, to purchase his interest in the Radcliffe Drive property. The value of that interest is to be calculated by reference to the agreed value of the property at the date of the resumption of the hearing ($780,000), less the amount owing under the mortgage at the date of the settlement of the transaction (assuming each party has contributed equally to mortgage payments as I was informed they were at the date of the resumption of the hearing) (about $573,000) divided by two (taking into account their joint ownership). Based upon these figures, the value of his interest is $103,500. She will, in those circumstances, assume the debt secured by the mortgage."

17 This conclusion explained both the impugned orders and the order for payment of $180,000, which was not challenged. The trial judge further acknowledged that he was unable to give any additional explanation of the preference for a particular figure over another: at [295].

18 Although it would no doubt have been possible to justify the figure of $180,000 by reference to her work in the business, over a period of some four years 10 months, it is clear that the trial judge did not adopt a simplistic calculation of this kind. The figure adopted, it should be accepted, was affected by the windfall increase in value of the Fairway Drive property, amongst other factors. A reading of the whole of his Honour's reasons identifies other factors tending in competing directions. Although there is an element of arbitrariness in the figure derived in this way, it is a legitimate and accepted approach to an assessment of what is "just and equitable": see, eg, Chanter v Catts [2005] NSWCA 411; 64 NSWLR 360 at [94] (Bryson JA).

19 Further, the conclusion that her indirect contribution through her work in the business to the payments with respect to Fairway Drive was "very small" was also justifiable on the evidence and demonstrated no error of approach. First, it was not demonstrated otherwise than by way of general inference that the revenue of the business was used to pay the mortgage. Secondly, it was apparent that the payments were made for approximately a year before she commenced working in the business and for a year after the relationship terminated. Thirdly, in a passage not the subject of challenge, the respondent gave evidence that it was "not necessary to employ an additional person to perform the roles previously performed by [the appellant]" after the termination of the relationship: affidavit, 20 April 2010, par 101. Finally, the evidence of the respondent was that a colleague, Mr Byrne, had made various payments which accounted for some though not all of the interest payments to the bank: Tcpt, 30/08/11, pp 233-236. The respondent also gave evidence of paying Mr Byrne an amount in excess of $400,000 from the moneys obtained on resumption of part of the Fairway Drive property.

20 The trial judge was not satisfied that the true financial dealings between the respondent and Mr Byrne had been explained in their evidence. Further, he was not satisfied that there was any specific loan agreement between them: at [147] and [153]. Nevertheless, there was no finding that the payments made by Mr Byrne did not contribute to the mortgage repayments in a manner which would diminish any contribution made indirectly by the appellant to such repayments. In all the circumstances, there is no sound reason to doubt the correctness of his Honour's conclusion in this regard.

21 Before leaving the question of the appellant's contributions to the business, it is necessary to note a ground of appeal which challenged the rejection by the trial judge of an affidavit by which the deponent, Mr Christopher David Hart, sought to assess the remuneration which the appellant had foregone whilst working for the respondent's business. The transcript recorded the objection to the report as "basis of opinions expressed are not identified, relevance, inadmissible under s 135": Tcpt, 06/06/11, p 6(18). The trial judge rejected the affidavit and stated that "if anyone wants reasons I will give them at a later time". Counsel for the appellant conceded that no reasons had been sought.

22 In preparing the report, Mr Hart said that he had relied upon documentation supplied by the appellant's solicitors which outlined her "past work experience as well as outlining the work that she has performed from June 2000 to early February 2003". The explanation of the exercise was as follows:

"In compiling the comparative data we have aligned the survey data that we collect from our clients to functions similar to the activities Ms Prior undertook. Given that the job matching process is not a perfect exercise we have highlighted a number of positions that are of a similar type to provide the courts with a range of pay levels for functions that are similar to activities Ms Prior performed."

23 The objection that the basis of the opinions had not been identified was sound: there was no information as to the source of the figures relied upon, nor as to the comparisons which had been undertaken. Further, in the absence of any material as to the level of wages paid to others working in the respondent's business, there was at least a serious issue as to the relevance of the material. Further, given the exercise undertaken by the trial judge in reaching an order, it was not demonstrated that there had been any miscarriage of justice in rejecting the report, even had it been admissible. The appeal from the evidential ruling should be rejected.

24 More generally, it was open to the Court, as the respondent submitted, to take account of the respective positions of the appellant and the respondent at the commencement of the relationship and following the adjustment made by the trial judge. At the commencement, the appellant had net assets of $59,000 or 4.28% of the combined assets of the parties. After adjustment, she had net assets of $283,080, or 9.31% of the combined assets of the parties. Of course, it is dangerous to make a simple arithmetical comparison on a global basis, without taking account of the respective contributions of the parties. However, that comparison does not of itself demonstrate error. That the appellant's actual financial position is considerably less advantageous is a result of the funds expended on what appears to have been hard fought litigation (the hearing at trial covering five days) for what was ultimately a modest return.

25 No relevant error having been demonstrated, the appeal should be dismissed. The respondent indicated that he wished to make submissions in respect of costs, in the event which has come to pass. Accordingly the Court should not make orders with respect to the costs of the appeal, but should allow the respondent 14 days to file any affidavit and written submissions in support of an order other than that costs follow the event. The appellant should have 14 days to reply. The Court will make final orders when those submissions have been received. The Court should now order:

Dismiss the appeal from the judgment of Hallen AsJ in the Equity Division.

26 HOEBEN JA: I agree with Basten JA.

27 WARD JA: I agree with Basten JA.

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Decision last updated: 06 February 2013