Pelkas & Dellis
[2023] FedCFamC1F 605
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Pelkas & Dellis [2023] FedCFamC1F 605
File number: SYC 5179 of 2019 Judgment of: REES J Date of judgment: 24 July 2023 Catchwords: FAMILY LAW – PROPERTY – Two pool approach – Where pool one consists of the half interest in the property inherited by the respondent after the parties’ separation – 15 year de facto relationship – Where there is significant disparity with respect to contributions in the second pool – Where the respondent helped pay the applicant’s mortgage payments – Robb and Robb contributions – Where the children’s father provided limited financial assistance by way of child support – Where the respondent has greater assets and earns greater income – 35 per cent to the applicant and 65 per cent to the respondent. Legislation: Family Law Act 1975 (Cth) ss 90SM(3),(4) Cases cited: Robb & Robb (1995) FLC 92-555 Division: Division 1 First Instance Number of paragraphs: 89 Date of hearing: 20 July 2023 Place: Sydney Counsel for the Applicant: Mr Jackson Solicitor for the Applicant: McCabe Partners Lawyers Counsel for the Respondent: Mr Givney Solicitor for the Respondent: McGrath Dicembre & Company ORDERS
SYC 5179 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PELKAS
Applicant
AND: MR DELLIS
Respondent
order made by:
REES J
DATE OF ORDER:
24 july 2023
THE COURT ORDERS:
1.That within three months of the date of these orders, the respondent pay to the applicant the sum of $508,061.
2.That other than as provided in Order 1, each party shall be solely entitled to all assets both real and personal in his or her possession at the date of these orders.
3.That in the event that the respondent does not make the payment in Order 1 by the specified date, then the respondent shall do all things required to sell the property at B Street, Suburb C and, from the proceeds of sale, pay to the applicant the sum of $508,061 together with interest from the due date of payment in Order 1 until payment, calculated in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pelkas & Dellis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
REES J:
Ms Pelkas (“the applicant”) and Mr Dellis (“the respondent”) lived in a de facto relationship between 2004 and 2019.
They had no children together. The applicant’s children, Ms D and Ms E, who were aged about four years and two years at the commencement of the co-habitation, lived with them until separation. There is an issue about whether the father of the applicant’s children paid child support.
The respondent’s son, Mr F, who was ten years old at the commencement of the co-habitation did not live with them but spent alternate weekends with them. Mr F lived with the parties from 2016 when he was 23 years of age. There is no dispute that Mr F was working and paid board.
At the commencement of co-habitation both parties had assets.
The applicant owned a property at Suburb G which she estimated had an equity of $64,000. There is a dispute about whether the Suburb G property was negatively geared or produced a net surplus income from its rental. She had credit card debts of $5,000 and owed her former husband $6,500. She had a car and superannuation but there is no evidence of the value of her superannuation. Thus the applicant’s quantifiable contribution was about $52,500.
The respondent owned a property at Suburb C which he had purchased for over $1,500,000 in 2003 and which was subject to a mortgage of $890,000, the equity being about $693,000. He owned an investment property in Suburb H which was sold in 2005 for a net amount of $84,419. He also owned a recreational vehicle and other chattels and conducted a business through a corporate vehicle, known now as K Pty Ltd (“the business”). Thus the husband had real estate worth about $777,000. He deposed that he had savings of $25,000. The wife did not dispute that he had those funds.
In 2006 they bought an investment property in Queensland, borrowing $100,000 secured against Suburb G, $540,000 secured over the subject property and using a loan from the respondent’s business.
The applicant was not employed outside the home until 2006 when she started to work three days each week.
From 2008, the respondent paid the mortgage payments on the applicant’s Suburb G property.
In 2009 they sold the Queensland investment property and received a net amount of $100,847. Those funds were used to pay tax and credit card debts.
In 2010 the mortgage over Suburb C was drawn down to pay $250,000 for renovations.
In 2012, they bought a recreational vehicle for $275,000 which was financed by drawing $250,000 from the mortgage over Suburb C and a loan of $25,000 from the respondent’s brother.
In 2013 a further $180,000 was drawn from the mortgage to pay for repairs and further renovations at Suburb C.
Mr F came to live with them in 2016. He was working and paid board of $150 per week.
They separated in June 2019. The applicant and her daughters moved out of Suburb C and lived in rented premises.
At the time of the separation, the respondent had credit card debts referable to their combined living expenses of some $60,084 which he repaid over time.
In 2020, the respondent’s mother died and left the respondent a half interest in a property at Suburb J with his brother. The respondent drew $158,789 from his business to fund his share of the cost of renovations to the Suburb J property.
In 2021, the respondent sold the recreational vehicle for a net amount of $230,750 and used those funds to pay vehicle leases and credit card debts. $35,649 was paid off the mortgage over Suburb C.
ISSUES TO BE DETERMINED
From the narrative above and from the Case Outline documents filed by each of the parties, the following issues arise to be determined:
·Did the Suburb G property produce a net income loss or a net gain?
·Did the father of the applicant’s children make a contribution to their support and, if so in what amount?
·How should the funds that the respondent drew from the business to renovate the Suburb J property be treated?
Did the Suburb G property produce a net income loss or a net gain?
The property was rented and the excess of income over outgoings was deposited into the mortgage account on account of mortgage payments. In cross-examination, the applicant conceded that there were times when the property was vacant and she could not make the mortgage payments.
At some time after the parties started to live together, the respondent started to pay money into the applicant’s bank account so that she could make the mortgage payments. It is not clear when this started but the applicant did not work until 2006 and she had no income with which to meet the mortgage and I assume that the respondent started providing funds for the mortgage repayments from the beginning of the relationship.
Bank statements annexed to the applicant’s affidavit show that, in 2008, the respondent made deposits into the applicant’s account and that both the applicant’s mortgage over Suburb G and the respondent’s mortgage over Suburb C were then paid from that account. At the time, the mortgage repayment for Suburb G was $825 and for Suburb C $3,041. The respondent’s deposits covered the total repayments.
Did the father of the applicant’s children make a contribution to their support and, if so in what amount?
The applicant gave no evidence about child support in her trial affidavit. In cross-examination, she initially asserted that she had received child support from the children’s father of $550 per month but when shown her own bank statements, she was obliged to concede that this was not correct.
Bank statements for the period between September 2018 and January 2019 show one payment of $476.09 in October 2018 but otherwise show that the children’s father only made monthly payments of $35 and lesser sums.
In cross-examination, the applicant said that she had to chase the children’s father about his failure to pay.
There is no evidence that, before 2015, there was any child support paid.
The children’s father wanted them to attend religious schools for their secondary schooling and the applicant agreed that, if he paid the school fees, she would not claim periodic child support. The children were enrolled in a private religious school as each started secondary school.
The respondent deposed that, after about two years, the applicant told him that the school fees were unpaid as to $17,000 and that she had contacted the children’s father who said he was not able to pay. There is no evidence that the father paid any school fees. After negotiations with the children’s school, the respondent paid $12,000 to discharge the arrears and thereafter the applicant and the respondent paid the school fees.
The applicant deposed that, in 2015, she sought a child support assessment and that thereafter the children’s father paid $550 per month in child support until 2017. That evidence was not challenged.
I am not satisfied that, between October 2004 and 2015, the applicant received any significant child support from the children’s father. Thereafter, until the end of 2017, she received $550 per month.
The financial costs of the children’s care were born by the applicant and the respondent, the respondent being the greater earner. The children both attended pre-school and fees were paid. They paid for air fares for the children to travel to Queensland to spend time with their father four times each year, sometimes half of the costs but at other times the whole amount. They took the children on holidays. They paid their private school fees for their secondary schooling, for tutoring and for extracurricular lessons. They paid their medical expenses of about $9,000 for each child. They paid for health insurance. When Ms D got her driving licence, the respondent bought her a car for $23,000. The applicant agreed that when they shopped for furniture for the children, such as beds or mattresses, or clothing for the children, the respondent paid.
It was the respondent who paid the school fees. The applicant deposed,
39.… [The respondent] also paid for entertainment, holidays, school fees and health insurance. [The respondent’s] company also bought [Motor Vehicle 1] for me to drive and [Motor Vehicle 2] for my daughters when they were old enough to drive.
The children lived in the home owned by the respondent in relation to which he met the outgoings.
I accept that the applicant did most of the parenting of her children but I do not accept her contention that the respondent did nothing. The respondent deposed that he drove the children to and from commitments such as sleepovers and parties and extracurricular lessons.
The contribution made by the respondent to the applicant’s children was significant and deserves proper recognition.
How should the funds that the respondent drew from the business to renovate the Suburb J property be treated?
The applicant initially contended that the amount should be added back to the asset pool but, as I understand counsel’s position, agreed in submissions that the funds should be taken into account when making an adjustment pursuant to s 90SM(4)(e) of the Family Law Act 1975 (Cth) (“the Act”).
The evidence of the respondent is that he drew a total of $158,789 from the business and the funds were treated as a loan. I infer from his evidence that he paid tradesmen’s accounts as they were received from the business account. Annexed to his affidavit is a schedule of the individual payments made.
There is no dispute that the value of the respondent’s share of the Suburb J property was increased by the renovations which were funded from the business.
Counsel for the respondent submitted that, as the funds were not applied until after the parties separated, the use of the funds should be treated as if the respondent had applied his income earned after separation to fund the renovations and that no adjustment needs to be made.
As I understand his position, counsel for the applicant contended for an adjustment but made no specific submissions.
The respondent is the sole shareholder of the business and it is, in every respect his alter ego. There is no distinction, for practical purposes, between the funds of the business and the respondent’s funds.
There is no dispute that the renovation costs were paid after the parties separated.
I accept that the renovation costs were paid from the respondent’s after separation income and no adjustment is required.
SECTION 90SM(3)
Both parties seek an adjustment of their property interests. They have accumulated property during their co-habitation by their joint efforts and can no longer jointly share the benefits of their property together.
It is just and equitable that the property be divided between them.
THE BALANCE SHEET
The parties tendered a joint balance sheet which set out their respective contentions as to the value of their assets. The balance sheet, as amended by agreement, is reproduced below. I will determine the disputes using the item numbers on the balance sheet.
Ownership Description Applicant’s value Respondent’s value ASSETS H Property known as B Street, Suburb C valued by each party’s expert in 2023 $3,200,000 $3,200,000 W Property known as L Street, Suburb G Qld as at 5 May 2023 valued by joint expert $470,000 $470,000 H Half interest in property known as M Street, Suburb J valued by joint expert 21 June 2023 $950,000 $950,000 H Business – K Pty Ltd valued by joint expert as at 23 April 2021, updated valuation to be completed $245,711 $130,711 (Husband says goodwill not an asset but a financial resource) H Recreational vehicle Sold in 2021 Nil W NAB account #...08 $1,913 Not Known W NAB account #...98 Nominal Not Known W CBA account #...36 $264 Not Known H CBA account #...24 (as at 22 March 2023) $5,750 Nil H N Bank (as at 30 June 2021) not referred to in Husband’s latest Financial Statement Not known Nil H Motor Vehicle 3 $355,000 $177,500 H Furniture and effects $5,000 $5,000 W Furniture and effects $5,000 $5,000 W Jewellery $6,000 $6,000 Total $ 5,244,638 $4,944,211 ADDBACKS H Renovations to the Suburb J property loaned by K Pty Ltd $158,788 Nil Total $ 158,788 $ Nil LIABILITIES H CBA home mortgage (as per Husband’s Financial Statement 22 March 2023 $1,357,000 $1,357,000 W CBA home mortgage $197,173 $197,173 W P Bank credit card $3,508 Not Known H Q Bank Visa not mentioned in Husband’s latest Financial Statement Not Known Nil H Westpac Mastercard as per Husband’s Financial Statement 22 March 2023 $26,500 $26,500 H R Bank credit card as per Husband’s Financial Statement 22 March 2023 $6,900 $6,900 H S Finance car finance debt $188,350 $188,350 Total $ 1,779,431 $ 1,775,923 SUPERANNUATION Member Name of Fund Type of Interest Applicant’s value Respondent’s value W Superannuation Fund 1 Accumulation $ 65,539 $65,539 H Superannuation Fund 2 as per Husband’s Financial Statement 22 March 2023 Accumulation $ 14,348 $14,348 Total $ 79,887 $ 79,887 FINANCIAL RESOURCES Ownership Description Applicant’s value Respondent’s value H Dellis Family Trust Not known Nil H Half interest in property known as M Street, Suburb J Not a financial resource, no longer beneficial interest as half interest has been transferred into Husband’s name - see Item 3 in Wife’s column above. $950,000 H Goodwill in K Pty Ltd Combined value of assets and goodwill in Item 4 of Wife’s column based on 2021 valuation. $115,000 Total $ Not known $ 1,065,000 Item 4 – the husband’s business and Item 27 – the goodwill of the business
A valuation of the business was prepared by a single expert in April 2021. At that time, he valued the business at $245,711 being net assets of $130,711 and goodwill of $115,000. That valuation was based on the financial statements of the business ending in June 2020.
On 11 November 2022, I ordered that each party file and serve “all the material they wish to rely upon by 4.00 pm on 17 March 2023” and that no further affidavits were to be filed without the leave of the court first obtained.
The matter was listed before me for hearing for three days commencing 20 July 2023 and I listed the matter for mention before me on 10 July 2023. On that day, both counsel who appeared in the substantive hearing appeared before me and both assured me that, although they had not yet received the updated valuation report of the single expert, they both wanted the hearing to proceed. The hearing dates were confirmed.
The matter commenced on Thursday 20 July 2023 by which time the issues had been significantly narrowed and the cross examination of both parties had finished at about 2.20 pm on that day. I then invited counsel to commence submissions. Counsel then jointly sought an adjournment of the proceedings until Monday 24 July when they hoped to have the updated valuation. I declined to grant the adjournment.
The parties had been directed to file the evidence upon which they relied by 17 March 2023, some four months ago. That evidence included the evidence of the single expert. For reasons not explained, they failed to do so. They assured me on 10 July 2023 that the matter was ready to proceed. They were given the opportunity to present and rely upon all the evidence they had available.
I am left with no current evidence of the value of the respondent’s business, except the concession made on behalf of the respondent that he accepts that the net value of the plant and equipment is $130,711.
The business, which had been operated by the respondent before he and the applicant met, transports goods for a manufacturer. It was operated by the respondent alone until Mr F joined him as an employee. Its assets are primarily motor vehicles.
The respondent disputes the evidence of the single expert in 2021 that there should be a value placed on the business for goodwill.
Because the single expert did not appear to be cross-examined, the respondent did not have the opportunity to test his evidence. No submissions were directed to the issue of goodwill by counsel for the applicant.
I am left in the position that there is no current evidence about the goodwill of the business and I cannot find, on the evidence before me, that the business has goodwill of value.
Therefore, the value of the business will be in accordance with the respondent’s concession.
Item 5 – the recreational vehicle
The recreational vehicle was sold in 2021 and its proceeds of sale have been disbursed. This item will be removed from the balance sheet.
Items 6 to 10 – bank accounts
There was no evidence of the amounts that either party had in bank accounts. These items will be removed from the balance sheet.
Item 11 – Motor Vehicle 3 and Item 22 the loan for Motor Vehicle 3
It was agreed that both these items should be removed.
Item 15 – asserted addback
For the reasons given earlier, this item will be removed.
Items 18 to 21 – parties’ credit cards
It was agreed that these debts, which are accepted to have been incurred after separation, should be removed from the balance sheet.
Item 23 – the Dellis Family Trust
This is no more than a vehicle to distribute income from the business to the respondent. It has not assets. It is agreed this item will be removed.
Item 26 – the Suburb J property
This item has been included as an asset of the respondent.
I therefore find that the assets and liabilities of the parties are:
ASSETS R Property known as B Street, Suburb C valued by each party’s expert in 2023 $ 3,200,000 A Property known as L Street, Suburb G Qld as at 5 May 2023 valued by joint expert $ 470,000 R Half interest in property known as M Street, Suburb J valued by joint expert 21 June 2023 $ 950,000 R Business – K Pty Ltd valued by joint expert as at 23 April 2021 not including good will $ 130,711 R Furniture and effects $5,000 A Furniture and effects $5,000 A Jewellery $6,000 TOTAL $4,766,711 LIABILITIES R CBA home mortgage (as per Husband’s Financial Statement 22 March 2023 $1,357,000 A CBA home mortgage $197,173 TOTAL $1,554,173 SUPERANNUATION A Superannuation Fund 1 Accumulation $ 65,539 R Superannuation Fund 2 as per Husband’s Financial Statement 22 March 2023 Accumulation $ 14,348
The parties have agreed on a two pool approach. The first pool is comprised of the Suburb J property.
The second pool contains the other assets and liabilities.
Neither party seeks a superannuation splitting order. Each will retain her or his respective superannuation benefits.
The first pool has a net value of $950,000.
The second pool has a net value of $2,262,538 of which the applicant has or will retain assets with a net value of $283,827.
CONTRIBUTIONS
In relation to the first pool, the applicant made no contributions.
In relation to the second pool, there was a significant disparity in contributions.
The applicant’s initial contribution was about $52,500.
The respondent’s initial contribution was about $800,000 and the business.
The applicant made no financial contribution for the first two years of the relationship and she was supported by the respondent to stay at home and care for her children.
After 2006, the applicant initially worked part time. The evidence does not disclose when she started working five days each week.
The respondent provided the applicant with funds to pay her mortgage which enabled her to retain the Suburb G property.
Taking all of those matters into account, I assess the contribution to the second pool to be 35 per cent to the applicant and 65 per cent to the respondent.
S 90SM(4)(E) ADJUSTMENT
I do not propose to make any adjustment to the first pool but rather to take into account the fact that the respondent will retain that property when considering what adjustment should be made to the second pool.
There are a number of factors to be considered:
·The respondent’s Robb & Robb contribution to the applicant’s children.
·The respondent’s greater income.
·The respondent’s greater assets.
·The fact that the respondent after separation paid down joint debt of about $60,000.
·The fact that when the respondent sold the recreational vehicle in 2021, he used about $60,000 to pay down his own credit card debts.
In relation to the last two considerations, I propose to offset one against the other and give them no further weight.
In Robb & Robb (1995) FLC 92-555 the Full Court held that, in supporting her own children during a subsequent relationship, the mother was merely honouring her legal obligation to them, while her subsequent partner, in making his contributions, was acting as a volunteer to assist the mother to discharge her legal obligations. Therefore, their Honours concluded, that the partner’s contribution to the children should be taken into account whereas the mother’s should not.
The respondent’s contributions were significant, including, as they did, accommodation, private school fees, private health insurance and the provision of a car. Until 2015, there was no significant contribution by the children’s father to their support. Thereafter, until the end of 2017, the father paid $550 per month in child support, a sum which bore no resemblance to the actual costs of the support of the children.
Although there were no submissions directed by counsel for the applicant to the contributions that the applicant made to Mr F’s care, I note that she does not claim to have made any financial contributions and that Mr F spent time with the parties on alternate weekends whereas the applicant’s children lived with them for the whole of each school term and half of the school holidays.
An adjustment of 10 per cent in favour of the respondent is appropriate. Lest this should be thought excessive, it represents about $25,000 per annum over the period of the relationship which, on any view, does not come close to the amounts which the respondent spent for the benefit of the applicant’s children.
The applicant’s income is about $1,000 per week less than that of the respondent. The respondent will have the benefit of the Suburb J property. The applicant will not. The applicant will retain superannuation benefits currently valued at $65,539. The respondent’s superannuation is valued at $14,348.
Overall, I consider that the adjustments in favour of the respective parties are evenly balanced and I would make no further adjustment.
CONCLUSION
The applicant will receive 35 per cent of the second pool or $791,888. She will retain property totalling $283,827 so the respondent must pay her $508,061.
He wants to retain the Suburb C property and will be given the opportunity to do so.
I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rees. Associate:
Dated: 24 July 2023
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