ALLMACK & ALLMACK

[2020] FCCA 2648

FEDERAL CIRCUIT COURT OF AUSTRALIA

ALLMACK & ALLMACK [2020] FCCA 2648

Catchwords:
FAMILY LAW – Property dispute – very long marriage where parties had little in the way of assets at the start of the marriage – consideration of inheritances received by the parties early in the marriage – parties contributions otherwise equal – no s75(2) adjustment – division of parties’ property 55/45 in favour of the wife just and equitable.

Legislation:

Family Law Act 1975 (Cth), s.75

Cases cited:

Stanford and Stanford (2012) 247 CLR 108

Pierce v Pierce (1999) FLC 92-844

Applicant: MS ALLMACK

Respondent: MR ALLMACK

File Number: DGC 1085 of 2020

Judgment of: Judge Burchardt

Hearing date: 10 September 2020

Date of Last Submission: 10 September 2020

Delivered at: Dandenong

Delivered on: 25 September 2020

REPRESENTATION

Counsel for the Applicant: Mr Potter

Solicitors for the Applicant: Wakefield Vogrig and Boote Lawyers

Advocate for the Respondent: Ms Valentine

Solicitors for the Respondent: D M Valentine and Associates

ORDERS

1. The parties confer and forward agreed minutes of orders to reflect these reasons for judgment within 21 days.

2. In default of agreement each party is to forward a minute of proposed orders within 28 days and the matter will be listed for further argument.

3. There be liberty to apply in respect of the implementation of the final orders that are made.

IT IS NOTED that publication of this judgment under the pseudonym Allmack & Allmack is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 1085 of 2020

MS ALLMACK

Applicant

And

MR ALLMACK

Respondent

REASONS FOR JUDGMENT

Introductory

1. This is a property dispute between a couple who were in a relationship from 1986 until they separated on 15 March 2015.  They have three adult children:  Ms B aged 27, Ms C aged 25, and Ms D aged 20.  All three children remained living with the wife following the separation and Ms D continues to do so.  The parties had little in the way of assets at the commencement of the relationship. Neither party has any noteworthy health issues and the parties earn approximately the same amount of money. 

2. The wife seeks a 60/40 division of property in her favour and that she retain her superannuation.  The husband seeks an equal division of property.  For the reasons that follow, I am going to order a division of the parties’ property 55/45 in favour the wife.

Agreed or uncontroversial matters.

1. Although the trial ultimately had to proceed and involved albeit limited cross-examination, in truth, the material facts in this case, are really scarcely the subject of significant dispute, and it is regrettable that it was necessary to have a trial at all.  The wife was born in 1957.  The husband was born in 1957.  The wife has deposed without contradiction that they entered into a relationship in 1986 and married in 1991.  The children, as earlier indicated, followed thereafter.  They separated on 15 March 2015, and a divorce order was made on the 7 April 2019.  The wife remarried almost immediately thereafter, and lives with her husband.  As earlier indicated, all three children stayed with the wife in the former matrimonial home upon separation.  I have been informed by both parents that the children have had significant issues with anxiety and depression over a number of years.  The two elder children moved out from the family home, but the youngest child still lives with the mother and her husband.  The mother vacated the former matrimonial home in November 2018, and the husband has lived there since.

2. The parties had little by way of assets at the time they commenced their relationship. The husband has deposed, and in evidence the wife accepted, that at the start of the relationship, he had cash savings of $55,000, and the wife had $17,000.  However, the wife had inherited from her father's estate the sum of $180,000 in 1998.  It is common cause in 2000, the parties bought a property at E Street, Town F, an 80 acre property they still own. The wife’s inheritance was applied to the purchase, and the balance of the purchase price of some $40,000 was borrowed.

3. It seems also to be common cause that in 2000, the maternal grandmother advanced $100,000 towards renovation of the property (adding a granny flat where she lived) of which following the evidence, there seems no dispute some $40,000 has been repaid.  She also provided a further $20,000 in 2003 and another $80,000 thereafter.

4. The parties subsequently bought various properties including one at G Street, and an adjacent property at H Street, Town F, which are owned either directly or through a trust controlled by the parties.

5. Since 1994, the husband has been self-employed in a business known as J Pty Ltd which conducts a business from the G Street property.  Two adjacent properties which are part of the overall parcel of land are rented out, and the husband has had the benefit of those rentals, which exceed the amounts to be repaid in respect to the loans governing the rental properties.

6. It should be noted that all the parties’ properties, whether directly owned or otherwise, are as I understand it cross-collateralised in an all monies mortgage.  This has been significant because upon the sale of two other properties previously owned by the parties, the bank simply took the proceeds of sale.  The parties expectation that they would find their finances freed up proved illusory, and there was a capital gains tax payable.  The wife, apparently, is likely to have a $40,000 liability which she is presently unable to meet, but the husband in his evidence asserted that his capital gains tax liability is now almost discharged.

7. The husband, as indicated, works in the business, J Pty Ltd, and the wife is employed as a health care worker, earning $1,050 per week.  Although in her affidavit filed on 6 April 2020, she deposed that she was on a probation period of employment, there is nothing before the court to suggest that that employment will not continue.

The Parties’ Affidavits

1. I do not believe there is anything of any material moment omitted from the affidavits save that the husband withdrew his superannuation of $34,258 in 2016, and it seems clear it was applied to living expenses thereafter.  The wife has deposed without challenge that her superannuation, albeit in two funds, amounted to $77,000 at separation in 2015 whereas now it is valued at $117,000.

2. It should also be noted that over time, part of the G Street property has, as it were, being taken over by the J Pty Ltd business and materials are stored on it.  This may represent a difficulty when and if any of these properties are sold.

The Evidence Given and the Submissions Made at Court

1. Counsel for the wife did not elect to make a formal opening but sought to rely upon the wife’s case outline.  The wife was called and adopted her affidavit and financial statement as true and correct. 

2. Cross-examination commenced with details of the parties’ savings at the time of the commencement of the relationship.  As earlier indicated, the wife accepted the husband had $55,000 and she had $17,000.  She confirmed that the parties borrowed $50,000 to buy the G Street property, and her inheritance was the rest.  She also accepted the husband inherited $117,000 rather than $105,000 she had put in her affidavit.  She accepted that they had bought investment properties through borrowings and that this was successful.  She had supported the purchase of the freehold of the business in Town F.  There had been no discussions about the value of the property.  The husband wanted to buy the property next door to expand the business, but she was not in favour.  They were very tight financially.  She said she agreed under duress.  She was married, and the husband was the decision maker.  She conceded she was a director of J Pty Ltd all along.  This ceased the day after he left.  He came back the next day and asked her to resign and said this was to protect her.  This was in early 2015 or thereabouts. The wife conceded that all three children had psychological issues over many years. One is depressed. All have been depressed and anxious over many years. She and her children stayed in the matrimonial home.

3. The wife was cross-examined about alleged sums amounting to $24,665 paid to her benefit by the husband.  She denied having an operation in 2018 (which was said to have cost $5,000).  When she was cross-examined about $8,000 supplied for bond and rent, the wife said that they were asked to move out and took no furniture.  No child support had been paid during the period.  The husband had paid the electricity bills and utility bills in the sum of the $7,844.

4. The wife said the property at G Street had been sold and she had been assured there could be a capital gains tax but was told she would get a part settlement.  She has, in fact, got a capital gains tax liability, but has no funds to pay it.  Several properties have been sold but produced no net funds available for the parties. She was not aware of what the amounts of debt to the bank were. She conceded that she wants all properties sold and understands the mortgages will need to be paid. She denied being tardy in any significant fashion in relation to the execution of documents.  There had been a long delay recently, but the documents took three to four weeks to arrive from the bank.

5. She was taxed with a schedule of depreciation of assets prepared for J Pty Ltd.  The wife said her estimation of the assets came from the husband quite some time ago.  The real estate values were only appraisals.  She had asked K Agents because they seemed reputable and she knew the agent.  The agent was denied access to the properties.  She conceded that the agent had taken time to provide correspondence and their agent made some errors in describing what the exterior of the house was made of.  He had said it was a weatherboard, but in fact it is rendered blueboard, which the wife understood to be more firesafe. 

6. It was put that there had been an offer to purchase the E Street, Town F property for $950,000, but the wife said it was listed at $1.2 million.  The agent thought it inadequate.  The buyer had issues with the property because there are areas of the block that Mr Allmack was renting from someone else.  He could sell it as it is or apply for subdivision.

7. I note that my notes do not record the answers the mother gave in relation to questions about payments made a towards the car.  The wife said this is what she used to ferry the children around.  From the tenor of her answers, I took her to be conceding that the funds had, in fact, being paid and that it they were reasonable given the need of the family for a car. 

8. I should interpolate at this point and say that the wife was an extremely careful and composed witness who was clearly telling the truth.

The Opening and Evidence of the Husband.

1. Counsel for the husband referred to difficulties in valuations of the properties.  The applicant’s valuations were always based on appraisal only and were inflated.  The husband's appraisal gave lower figures, but neither party has the funds to obtain valuations of the real estate or the business.  It was submitted there was some double counting of assets.  The husband has valued the business on the value of the stock at $400,000.  The equipment was grossly overestimated by the wife. 

2. The debts of parties had only been ascertained the previous night.  The husband's proposal would give the wife over 50 per cent of the net assets.  Monies paid to the wife in the past by the husband should be treated as part payment of property settlement. 

3. The husband was called and adopted his affidavits and financial statement is true and correct.

4. Under cross-examination, the husband denied the wife had been the primary carer of the children after separation.  The children live with her, but two of them were adults.  They spent less time with him.

5. The husband conceded that the various bills that he had paid for the wife came from the incomes of the business and the rental payments from rental properties.  The business was established with the wife.  He did not pay any child support.  His payments were support of the wife and the children.  The adult children lived with the wife.  He conceded that there were no valuations for the property and the business.  His value of the business was the stock.  Goodwill was nebulous.  He then said that buyers will not buy the stock.

6. When it was put to him that there was an all monies mortgage over all of the properties, he agreed, but said that depending on which property was sold, it might be possible that the bank did not take all the monies.

7. Counsel cross-examined about the $200,000 contributed by the wife's mother, and the husband conceded this, and said there was some repayments.  He appeared to accept that they might amount in total to about $40,000.  He conceded that the wife's initial inheritance enabled the purchase of the E Street, Town F property.  He also agreed that that property had been used as security for other property purchases.  The rental from those properties paid the mortgages.

8. It was put that he had paid for the holiday for the wife and children and he said he had paid this voluntarily.  He conceded that the car was for transporting the children.  He conceded that these payments had come from the business.  The current rental of the investment properties exceeds the repayments and he retains the surplus.  He thought the rental income of about $40,000 a year in total was about right. 

9. He was cross-examined about the financial records of J Pty Ltd for the year ending 30 June 2020, and conceded that for that year, the margin was 30 per cent.  He has not decided if he wishes to keep the business.  He went on to say he does not particularly enjoy running the business. 

10. He conceded that he had drawn down his superannuation but said he had invested it wisely.  He had invested in the business.  He conceded that there are some chattels of the wife's at the farm, including the wife's mother's mink coat.  When it was put to him that he wanted the payments he had made added back, the husband said that was what Ms Allmack had agreed to.  The older two children had moved out, but he was paying for them until mid-August 2020.  The mother supported them while they were with her.  All three have had emotional difficulties over the years.  Cross-examination then traversed what chattels the wife had taken with her at the time of separation.  It was not easy to follow the particular items, but the gist of the answer was to the effect that the wife had taken most of it.

11. When asked about his own inheritance, the husband said that, accidentally, they had given the wife's daughter from a previous marriage $42,000 to buy a house.  The rest was funneled into the business.  J Pty Ltd pays rent of $36,000 to the trust.  When asked if he accepted that the wife’s superannuation had increased since separation, he assumed that this was so.  He has almost paid off his capital gains tax.

12. In re-examination, the husband clarified about the business.  It is seven days per week for 14 years.  He would have to do something about boundary because he needs space for business.

Final Submissions of Counsel for the Husband.

1. Counsel noted that the court was forced to rely upon informal valuations. The liabilities in her case outline were as of the previous evening. It was submitted that the payments totaling $74,900 paid by the husband to the wife's benefit should be taken into account. On the husband's proposal, she would receive slightly over 50 per cent of the pool. It was a long marriage, and both have contributed. Things would need to be done if all the properties would be sold. The cost of this must be shared equally. The division should also be equal. They were the same age and there were no significant section 75(2) factors. It was submitted the husband should be given an opportunity to liquidate the business. Arrangements would need to be made with neighbouring properties and the resultant total should be divided 50/50. Counsel made some submissions about what might be described as machinery matters involving the sale of the properties, but as I indicated, I will order that any sale be conducted by an agent, either agreed or nominated by the President of the Real Estate Institute of Victoria. The agent will set the selling price and appoint the conveyancer. I note that I will be granting liberty to the parties to apply in respect to the implementation of the orders. Counsel indicated that if all properties in the business were sold issue, the husband seeks a splitting order.

Submissions of Counsel for the Wife.

1. Counsel submitted that the preliminary test so to speak, in Stanford and Stanford (2012) 247 CLR 108 (“Stanford”) was readily met.  Both parties had radically readjusted the basis of their financial affairs during the marriage and both sought a property settlement.  Counsel referred to the husband's affidavits, filed 9 September 2020, at paragraph 20(g) in which he valued the business at $400,000 and submitted that that should be accepted.  It also was submitted the husband will keep it in the business.

2. Counsel referred to the wife's initial inheritance.  He submitted that this constituted a springboard and referred to the case of Pierce v Pierce (1999) FLC 92-844 (“Pierce”) in this regard.  Subsequently, the husband had contributed $117,000 and the wife's mother had contributed $160,000.  The husband wants to add back some monies he has paid for the wife and children, but these would be an error. No add backs of this character should be permitted.  

3. Counsel submitted that the husband will not be able to refinance.  The parties have been separated five and a half years and he has not been able to do so thus far.  The wife's $30,000 capital gains tax liabilities should be paid from the property sales as should any residual capital gains tax owed by the husband.  The husband is in receipt of rent and should pay the mortgages until they are sold.  The appraisals are not evidence at all.  The children live with the wife and had significant mental health problems.  This was a further contribution by the wife.  Payments made by the husband came from the business and he has also had the rental from the properties.  It was submitted a 60/40 division was appropriate and, alternatively, a just and equitable resolution would be in the range of 5 to 10 per cent in favour of the wife.

Stanford and Stanford (2012) 247 CLR 108

1. The court's first task is to ascertain the legal and equitable interests of the parties and determine whether a property adjustment is appropriate.  In circumstances where the parties had effectively very little at the commencement of the relationship and amassed assets during the course of what was after all, a lengthy relationship, and both parties now seek a property division.  It is instantly appropriate that there should be a property adjustment.

The Pool

1. This is an area of some difficulty.  The pool can, I think, be described in the following terms:

   (a)Property at G Street, Town F $250,000 (husband's estimate) $360,000 (wife’s estimate).

   (b)The property at H Street, Town F $900,000 (husband’s estimate) $1200,000 (wife’s estimate).

   (c)Property at E Street, Town F $850,000 (husband's estimate) $1200,000 (wife’s estimate).

   (d)J Pty Ltd $400,000 (husband's estimate in his case outline and affidavit and accepted as a concession against interest by the wife).

2. The liabilities of the parties are not the subject of agreement.  The wife's estimate of $1,355,900 is detailed, but includes MasterCard bills of some $13,000 which would seem likely to be post-separation, a L Finance loan on the part of the wife for a vehicle, the purchase date of which is not denoted, and debts in relation to two vehicles owned by the business together with the wife’s $30,000 capital gains tax liability. The husband's calibration of liabilities is $1,158,216.70, but this figure is not in any way broken down.

1. The parties’ only superannuation is that of the wife in the sum of $117,000, of which $72,000 was the figure at the end of the relationship. 

2. The husband has sought either to re-include dollar for dollar, or at the very least, have note taken of the figures that he paid to the wife post-separation.  The wife’s answer appeared to put some of the payments in issue and also to observe that she was not in receipt of child support.  Ms C was born according to the wife's initiating application in 1993, and Ms B was born in 1992, and Ms D was born in 1999. It is immediately apparent that the two elder children were adult prior to the separation.  There is no suggestion that that despite their difficulties, they would have been entitled to adult child maintenance.  The youngest child was 15 and coming up 16 at the time of separation, and although there may be have been child support to be paid, the husband's relatively low income means that any assessment would have been small.  By the same token, however, I accept that the wife had to assist three young women, all of whom had their difficulties.

3. I further note that the amounts that the husband contributed all came from the business and from rental surplus.  I also note that the wife's denial of several of the items (such as her operation) was convincing.  In the end, I am of the view that the amounts involved are not sufficient to justify either a process of addback or any material adjustment in terms of the parties’ contributions.  The fact is that they came from joint resources, albeit that it was the husband alone who was working in the business, and it is simply not possible to disaggregate all the payments in the way that the husband seeks.  Furthermore, as I indicated during the running of the trial, the court is not involved in an accountancy exercise, but rather an exercise designed to produce an outcome that is just and equitable in all circumstances. The husband's post-separation contributions stand to his credit, and, I take them into consideration in the overarching question of the party's contributions, but they do not deserve a dollar for dollar adjustment whether by way of addback, or of arithmetical computation in the total pool.

Contribution

1. This was on any view of matter a long relationship.  There is nothing to suggest that both these parties did not apply themselves diligently to the welfare of the family unit and to the collection and improvement of the family's property interests.  The husband has obviously worked long and hard and for many years in the J Pty Ltd business.  His evidence about his continuous work was given with conviction and I am prepared (subject to, perhaps, some slight exaggeration – he must have had some days off) to accept it.  By the same token, the wife has not only worked, but brought up the three children who, it seems, have presented particular difficulties for a long time.

2. The only areas in which there could be said to be any distinction between the parties’ contributions was in their inheritances and their effect.  The husband withdrew a relatively modest amount of superannuation which was put into the business, but it is not of any significant moment in the scheme of things.  The wife's initial inheritance enabled the parties to buy the E Street, Town F property.  There is no doubt that this was the springboard for the purchase of other properties.  Nonetheless, is now so long ago that one is left to surmise where the parties would have been without it.  The husband obtained a relatively significant inheritance reasonably early in the relationship also, and one might perhaps infer that that might have been put to purchase a first property, had the parties not otherwise already possessed one.  It is clear from the authorities of which Pierce is indeed a good exemplar, that in circumstances such as these, that it is not a question of the erosion of the initial contribution, but rather a matter of calibrating its value as at the time of final assessment.  In my view and bearing in mind that the wife's mother also made a significant cash contribution to the party's general wellbeing, albeit being one it is not possible to put a particular price on, I think an adjustment of 5 per cent in favour of the wife is appropriate.

Section 75(2) factors.

1. Both the parties are in at least reasonable good health and in employment.  The wife has re-partnered and lives with her husband.  I have not been informed whether the husband is presently in a relationship.  Neither counsel suggested that any adjustment for future needs matters was appropriate and I agree.

What is Now to be Done.

1. The husband wants to keep the properties at his own valuation which is set out in his document “assets as estimated by Mr Allmack”.  It should be noted that a number of documents were provided to the court, but none were formally tendered.  In order that any third party reading this judgement is in a position to evaluate the matter, I will mark the husband's list of payments next to the letter dated 9 September 2020 as MFI-1 and the assets as estimated by Mr Allmack as MFI-2.

2. The difficulty with the husband's position is that his values suit him only too well.  According to him, the total value of the pool in property terms is $2 million.  The wife's countervailing figures are $2.76 million.  This is an enormous disparity.  It is immediately apparent that the court cannot possibly adopt the methodology that the husband propounds as being one that is going to produce a just and equitable settlement.  It has the capacity to underpay the wife very significantly.

3. As a matter of practical politics, all the properties will have to be sold.  It is clear that the husband cannot refinance because he has had five and a half years to do so, without success.

4. This leaves to one side, of course, the question of the business.  In my opinion, there are two alternatives and it will be up to the husband to make his choice.  It should be noted that I have not accorded any values to the stock of the business because I accept the pragmatic and sensible concession made by the wife through her counsel that the business should be valued at the husband's own valuation. For what it is worth, the plant and equipment is likely to be worth an awful lot less than the figures the wife has ascribed to it.  The wife has a car, but it appears to be significantly encumbered.

5. The husband may elect either to keep the business at a value of $400,000 or, should he, in fact, elect he does not wish to keep it, he should liquidate all its assets, and they will simply be part of the property pool to be divided, as to the net outcome, in percentages of 55/45.

6. I note that the parties foresee some possible difficulties in selling the G Street, Town F property and, possibly, the adjacent ones.  It is for this reason that I provided liberty to apply.  It should be noted, however, that I get a keen sense from the materials taken as a whole that the husband has sought to delay the outcome of these proceedings.  I am not going to encourage the parties to enter into any kind of lengthy argumentation over whether or not these properties should be subdivided or the like.  If there is not agreement, they must simply be sold as they stand, and the parties will simply have to wear whatever gain or loss to which this may give rise. 

7. Finally, I should say that given that the properties are all to be sold, it is appropriate to include in the pool the wife's superannuation as at the date of separation.  The husband's superannuation was entirely committed to the joint benefit of the parties through the business, and in my view, a split of the party's superannuation garnered during the relationship of 55 to 45 per cent is likewise entirely just and equitable.

Conclusion

1. If I have not said so already that I hope it is apparent that I regard a resolution of this matter that divides the parties’ property interests in the proportions of 55 to the wife and 45 to the husband to be eminently just and reasonable.  I repeat, it is, perhaps, regrettable that they were not able to save themselves the costs of a trial to produce a result which, given their competing positions, might perhaps have been thought a fairly obvious one.

2. Finally, I should note that there was some mention of chattels during the currency of the proceeding.  I will seek that the parties confer about these aspects of the matter, noting that at the least, there is a mink coat to be returned to the wife.  The parties should note that I do not propose to adjudicate any matters other than chattels, said to be of particular sentimental or other discrete value to either party.  Items such as furniture and televisions are simply not matters that is appropriate for this court to adjudicate.

I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate: 

Date: 25 September 2020