Investing with your partner: are equity and equality synonymous?26-March-2019 Family Law,Commercial Disputes By admin
Typically, when investing in property together, couples aim for equality in the equity of an investment. The financial reality is that equal contributions are often difficult to maintain. What impact does inequality in investment have on your equity?
It’s a common love story with a modern twist: boy and girl meet, boy and girl fall in love, boy and girl enter into a Deed to buy an investment property together and live together in domestic bliss. That was the story of Ms Zhang and Mr Metcalf until they separated around a decade later.
The sale of the investment property was arranged and, in accordance with the Deed, the proceeds of the sale were deposited into Ms Zhang and Mr Metcalf’s joint account for equal distribution. However, the entirety of the funds were withdrawn by Ms Zhang and placed into her personal account just as quickly as they were deposited.
Naturally, Mr Metcalf sought to reclaim his share of the sale funds from Ms Zhang. One can only imagine the sense of relief that Mr Metcalf would have been feeling knowing that there was an enforceable Deed to preserve his interest in the sale funds.
Recovering the funds
Mr Metcalf brought a section 66G application under the Conveyancing Act to recover his funds. The once devoted partners found themselves in Court, each arguing for their entitlement to the sale funds.
Mr Metcalf argued that the operation of the Deed was enough to preserve his interest in the sale funds. The intention of the couple was for their equity to be equal and this intention was enforceable irrespective of the voluntary contributions made by Ms Zhang.
Ms Zhang argued that as she had made a greater financial contribution to the property than was required under the Deed, her equity in the property outweighed Mr Metcalf’s and she was entitled to a greater portion of the sale funds than the Deed provided.
The agreement of a modern couple
So, what was the original agreement of the parties? Mr Metcalf and Ms Zhang’s intention with the division and responsibility for the investment property was not dissimilar to most couples.
Mr Metcalf and Ms Zhang had intended that the investment property would be held in equal shares. A mortgage was taken out to finance the purchase, and Mr Metcalf and Ms Zhang were each responsible for exactly half of the outstanding balance less any contributions from the rental income. This equal entitlement and responsibility of Mr Metcalf and Ms Zhang was reflected in the Deed.
Again, like most couples, the reality of Mr Metcalf and Ms Zhang’s financial situation was that one person was in a more financially sound position and was therefore able to increase their contribution towards the mortgage repayments.
Over the life of the loan, Ms Zhang had made increased contributions from her personal account which amounted to $60,000.00 more than she was required to repay. Conversely, Mr Metcalf had not made all the intended payments towards his share of the loan.
The intended happily ever after?
The Court found that though there was an agreement between the Mr Metcalf and Ms Zhang which purported equality, their actions did not lead to equality of equity. Ms Zhang’s increased personal contributions had increased her equity. Orders were made for the division of sale funds to reflect the differing equity and, thereafter, the intention of the Deed.
Essentially, the Deed prevented Mr Metcalf’s interests from being disregarded in favour of Ms Zhang’s increased equity. The Deed allowed the Court to strike a balance between equity and equality to ensure a just division between the former couple.
Safeguarding your interests
As with every great love story, the story of Ms Zhang and Mr Metcalf has a moral for us too: equity and equality are not the same thing, but a Deed is a powerful tool to help balance the two.
Financial investments are serious matters and you should always have an enforceable deed to safeguard your interests. The existence of a Deed protected Mr Metcalf’s interest in his investment. It is likely that, in the absence of a Deed, Mr Metcalf would have received even less than he did by the Court’s orders.
The first step to safeguarding your interests is to have an enforceable Deed.
At Streeterlaw, we understand how important it is to have the right agreement in place to protect your interests and rights. We take the time to you understand your interests, your intentions and your agreements, and then draft a Deed which suits your circumstances.
If you have a financial investment you want to protect, contact Streeterlaw on 8197 0105 to book an appointment with one of our experienced Solicitors. We will help protect your investments.