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Victorian Supreme Court rules family cohabitation agreement upheld  

In a recent Victorian Supreme Court decision the defendant unsuccessfully tried to avoid the terms of a cohabitation agreement.

The plaintiff and defendant resided together in a de facto relationship for five years from 1999 to September 2004. They lived together in rental accommodation until May 2001 when they moved into a home which was a gift to the defendant by his father in 1995 (the Property).

The defendant's father had requested a cohabitation agreement be entered into when the parties moved into the Property. Such an agreement was entered into in May 2001 (the Agreement). At the time of the Agreement, the parties knew the Property had increased in value from $155,00 to $250,000 in the period since the father had purchased it. Both parties anticipated that it would continue to increase in value. The Agreement provided that at death or separation, for $250,000 to be repaid to the defendant's father and any improvement in the value of the Property be divided equally. At the time of trial the Property was valued at $503,000.

The plaintiff sued pursuant to the terms of the Agreement to enforce her interest in the Property. Prima facie, the Agreement vested enforceable rights in the parties with respect to the Property. Accordingly, the plaintiff would succeed in her claim to an interest in the Property, unless the defendant succeeded in adjusting such interest pursuant to the Property Law Act 1958 (Vic).

The defendant sought to rely on s 285 of the Property Law Act 1958 which provides for a court to make an adjustment of property interests which is just and equitable having regard to the contributions of the parties to the property and finance, the contributions of the parties to the welfare of the family or other partner and any written agreement entered into by the parties.

The defendant submitted that regard should first be had to the considerations set out in s 285(1)(a) and (b), and that the value ascertained by the application of the principle stated by Nettle J in Robertson v Austin[2003]

If the net equity in the property is divided rateably according to payments made, each party will receive a share of the inflationary or market gain which accords with the extent to which they have financed the property. That would seem to me to be just and equitable because it rewards each party according to the extent to which they contributed.
The defendant further submitted that if the value ascertained by reference to consideration of the plaintiff's contributions pursuant to subsections (a) and (b) is of an entirely different order from that indicated by the Agreement, then the Agreement should be given little (if any) weight. Ultimately, it was submitted on behalf of the defendant that the plaintiff's contributions, both direct and indirect to the property and home, should be valued at no more that $25,000, representing 5% of the total value of the Property.
Osborn J who granted the application said
There were five fundamental difficulties with the defendant's approach:
(1) The value of the contributions to s 285(a) and (b) were not easily ascertainable. A bare assessment of costs of material and hours worked in effecting improvements, did not give rise to an easy calculation of the increase in value of the Property.
(2) The value of the plaintiff's contribution as a homemaker over the five years was even more difficult to assess, but it should not be regarded as "negligible".
(3) The value of the plaintiff's contributions fell to be assessed within the context contemplated by the parties at the time of entering into the agreement, namely:
- the parties would cohabit
- the plaintiff would engage in renovation of the Property jointly with the defendant
- the plaintiff would operate the florist business , jointly owned by the parties, from the Property.
This context is one in which the plaintiff's contribution both to the improvement of the Property, as a homemaker and as a business partner, involved special value to the defendant.
(4) The statute gave the Agreement independent status as a consideration, bearing on the conclusion of what was just and equitable.
(5) Section 285 did not give primacy to factors (a) and (b) over ©. Each was potentially relevant depending on the circumstances.

There was no sufficient reason to reject the terms of the written Agreement.

To the contrary, the Agreement, was itself evidence of the special value to the defendant of the plaintiff's contributions to their joint financial position in accordance with the Agreement.
The Agreement was the subject of continuing performance by the plaintiff over an extended period of time.

The Agreement was strong evidence that the arrangement effected by the parties was just and equitable having regard to the parties relationship as a whole. It should be given weight on this broader basis, because it is relevant independently pursuant to s 285© and not simply as evidence bearing on the assessment of contributions referred to in s 285(a) and (b).

The plaintiff was entitled to an interest in the Property pursuant to the Agreement.
Rowe v Dassios(2007)

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