ADAIR & MILFORD
[2015] FamCAFC 29
•3 March 2015
FAMILY COURT OF AUSTRALIA
| ADAIR & MILFORD | [2015] FamCAFC 29 |
| FAMILY LAW – APPEAL – TAXATION LIABILITY – Whether the husband’s taxation liability should be treated as a joint matrimonial liability – Where the parties’ liabilities exceeded their available assets – Where half of the taxation liability accrued prior to separation – Where the wife was unaware the husband had not paid tax due – Where husband previously gave evidence he was making payments towards tax – Where there were compelling reasons to leave the husband solely liable for tax debt – Appeal dismissed. FAMILY LAW – APPEAL – SUPERANNUATION – Whether a superannuation splitting order should have been made – Where the wife would receive little from the sale proceeds of the properties – Where the husband’s income was greater than the wife’s – Where to reduce the value of the wife’s superannuation because of the magnitude of the husband’s taxation debt would be inconsistent with finding that the husband should be solely responsible for the debt – Appeal dismissed. FAMILY LAW – APPEAL – SPOUSAL MAINTENANCE – Whether the wife established entitlement to spousal maintenance – Where it is reasonable for the wife to seek only part time work when she has the primary care of the parties’ two children – Where adequate reasons were provided to support a finding that the husband had the capacity to pay – Appeal dismissed. FAMILY LAW – COSTS – Where husband wholly unsuccessful – Husband to pay wife’s costs. |
| Family Law Act 1975 (Cth): ss 75(2), 79, 72 |
| Coghlan and Coghlan (2005) FLC 93-220 Drysdale & Drysdale [2011] FamCAFC 85 Johnson and Johnson (2000) FLC 93-039 |
| APPELLANT: | Mr Adair |
| RESPONDENT: | Ms Milford |
| FILE NUMBER: | MLC | 8241 | of | 2012 |
| APPEAL NUMBER: | SOA | 34 | of | 2014 |
| DATE DELIVERED: | 3 March 2015 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Ryan, Murphy & Tree JJ |
| HEARING DATE: | 11 November 2014 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 2 May 2014 |
| LOWER COURT MNC: | [2014] FamCA 279 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Dr Ingleby |
| SOLICITOR FOR THE APPELLANT: | Coote Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr North SC |
| SOLICITOR FOR THE RESPONDENT: | Lander & Rogers |
Orders
The appeal be dismissed.
The appellant husband to pay the respondent wife’s costs of and incidental to the appeal within one (1) month of the quantum of costs being agreed or assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Adair & Milford has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SOA 34 of 2014
File Number: MLC 8241 of 2012
| Mr Adair |
Appellant
And
| Ms Milford |
Respondent
REASONS FOR JUDGMENT
This is an appeal by Mr Adair (“the husband”) against orders made by Cronin J on 2 May 2014 for the settlement of property pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) and spousal maintenance pursuant to s 72 of the Act.
The husband and Ms Milford (“the wife”) lived together for 15 years and, when the years following their separation are taken into account, for about 17 years they both made significant contributions towards the acquisition of property and to the welfare of their family, including their two daughters. Notwithstanding their contributions, the parties’ total liabilities exceeded their available assets.
In relation to the property proceedings (parenting issues were also contested), one of the pivotal issues was whether the husband’s taxation liability in the amount of $419,000, should be treated as a joint matrimonial liability or solely his. As a consequence of the parties’ contributions being assessed as equal and the size of the adjustment made in the wife’s favour under s 79(4)(d)-(g), the orders provided that she would receive all the available property. In relation to their respective liabilities, the husband was left with sole responsibility for his debt to the Australian Taxation Office (“ATO”) and about $13,000 on credit cards and the wife remained solely responsible for $176,000 in outstanding legal fees and $111,000 she owed her parents for legal expenses incurred by her in the proceedings.
The three parcels of real estate that the parties owned were to be sold immediately and, after the payment of selling costs, from the proceeds of sale, collateralised mortgages paid out. The balance of the proceeds of sale would be paid to the wife. His Honour postulated that after selling costs were taken into account she would receive little, if any, money. Pending completion of the sale of the properties, the wife had exclusive occupation of the family home with the husband being ordered to pay the mortgage instalments.
Contrary to the husband’s application that the parties’ superannuation be evenly split, they each retained their respective superannuation interests; the husband in the amount of $178,797 and the wife in the amount of $350,000.
The husband, whose income and earning capacity vastly exceeded the wife’s, was ordered to pay spousal maintenance for three years in the amount of $750 per week.
The wife opposes the appeal and seeks to maintain the orders.
Background Facts
So as to give the appeal context, brief reference to the background facts is appropriate.
The wife was born in 1969.
The husband was born in 1970.
The parties commenced cohabitation in 1997, at which time the wife was employed and the husband was a university student.
Two years later, they purchased the family home, which in the following years and at considerable cost was significantly improved.
The parties married in 2001. The following year the wife embarked on a new career.
The parties’ have two children, the eldest of whom was born in 2003 and the youngest in 2005.
Having graduated from university and completed further study, in 2006, the husband commenced employment as a medical specialist. He has been so employed ever since.
In late 2007, the parties purchased in the husband’s sole name a property (“the second property”) for $340,000 of which they borrowed $306,000.
A third property (“the third property”) was purchased in 2010 for $350,000-$360,000, for which the parties borrowed 80 per cent of the purchase price. As with their other properties, those funds were borrowed from a Bank and secured by mortgage on all three properties. Title to the third property was registered in the name of a corporate trustee of a family trust in which both parties are beneficiaries.
The career on which the wife embarked in 2002 came to an end in 2010.
The parties separated in June 2012, albeit they continued to reside in the family home. Tensions continued to grow and in unhappy circumstances, on 29 August 2012, the husband vacated their home. Since then, the wife and children have lived in the family home and he has either lived with friends or in rented accommodation.
On 10 September 2012, the husband commenced proceedings for orders that the children live with him and an interim order that he have exclusive occupation of the family home. His application was opposed by the wife and in her Response filed on 18 September 2012 she sought that the children live with her, spend time with the husband and that he pays spousal maintenance and child support.
Orders were made by consent on 20 September 2012 which, relevantly, required the husband to pay child support in the amount of $600 per week and $450 per week by way of interim spousal maintenance.
At some stage, the parties joined issue in relation to property settlement and that matter, as well as the parenting proceedings, was heard by his Honour.
As we have already mentioned, on 2 May 2014, his Honour made parenting and property settlement orders and published his reasons for judgment. Broadly stated, the effect of the parenting orders is that during school term the children live with the husband five nights each fortnight and, in school holidays, divide their time equally between their parents. As a consequence of the children living predominately with the wife, the husband is required to pay considerable child support.
The Primary Judge’s Reasons for Judgment
As no error is alleged concerning his Honour’s analysis of the law, we will refer only to his findings of fact and the reasons he gave for his decision.
The Grounds of Appeal
The husband moved on his Amended Notice of Appeal filed on
29 September 2014 albeit he withdrew his appeal in relation to the parenting orders. In relation to the property and spousal maintenance orders the grounds of appeal assert error by the primary judge in:
·failing to distinguish between the husband’s tax liability which accrued prior to separation and that which accrued post separation (ground 9);
·making a finding which was not reasonably open on the evidence, that the husband could and should have paid the entirety of the taxation from income (ground 10);
·failing to give adequate reasons for his decision there should be no adjustment to the parties’ superannuation interests (ground 13);
·giving excessive weight to the wife’s liabilities for legal fees and in failing to have proper regard to the husband’s (non-tax) liabilities (ground 14);
·making a finding which was not reasonably open on the evidence, that the wife’s earning capacity would be limited to $472 per week after tax (ground 15);
·failing to consider the wife’s earning capacity in any proper manner (ground 16);
·failing to consider the impact of making a spousal maintenance order commencing with immediate effect when, pending completion of the sale of the parties’ properties, the husband is required to service the various mortgages, such that any order for spousal maintenance should not have commenced until the date of settlement of the sale of the family home (ground 17); and
·giving insufficient reasons for finding the husband had the capacity to pay spousal maintenance in the sum ordered at the same time as he was required to pay a tax liability in excess of $400,000 (ground 18).
The grounds can be distilled into four discrete topics; namely, error in relation to the husband’s taxation liability, the treatment of the parties’ superannuation interests, the wife’s entitlement to spousal maintenance and the husband’s capacity to pay it. Although the challenge as framed by ground 14 appeared to raise slightly broader issues than those raised by grounds 9 and 10, we were informed by counsel for the husband that the challenge raised by ground 14 is effectively captured by grounds 9 and 10. We otherwise note that grounds 11 and 12 were abandoned.
The Taxation Liability
Before we discuss the challenges raised by grounds 9, 10 and 14 it is helpful if we first set out the manner in which the primary judge determined the questions around the husband’s tax debt.
As his Honour observed it was the husband’s application that the three parcels of real estate owned or controlled by the parties be transferred to him on the basis that he would take over the mortgages and indemnify the wife in relation thereto. In addition, he would remain responsible to satisfy his debt to the ATO. Otherwise he sought to have a variety of chattels and to split the wife’s superannuation interests so as to equalise their entitlements. In the alternative, the three properties would be sold and after payment of selling costs and the mortgages being paid out, the remaining proceeds of sale would be applied to his taxation debt [142-143].
The parties’ real estate holdings had an agreed total value of $1.715 million and the amount outstanding on the mortgages was $1.456 million. In addition, the mortgagee bank “had provided the parties a line of credit as part of their loan facility and the available draw-down was $130,000” [140(g)].
The wife resisted a superannuation splitting order and, adopting the words used by the primary judge, she sought “…to have access to the $130,000 undrawn line of credit” [144(a)]. It was her position that the husband should be solely responsible for his taxation debt and credit card liabilities. After the primary judge made specific findings about the values of each of the parcels of real estate and the amount due on the mortgages, he concluded that if the properties sold for their agreed values, an amount in the vicinity of $200,000 would remain. With agent’s fees and commissions taken into account, this would mean that the limited equity which existed in the properties would be quickly exhausted. On this basis to grant the wife’s application to draw down on the line of credit “...would simply potentially lead to a shortfall” and “in turn … lead the husband to carry more debt on the basis that the wife had no potential to fund anything” [155]. Accordingly this aspect of the wife’s application was refused.
The primary judge then turned his attention to the parties’ desire to retain particular parcels of real estate. In broad terms, the wife sought to retain the family home and for the remaining two properties to be sold. The proceeds of sale of the two properties would be applied to the mortgages and the parties would each take individual responsibility for one half of the remaining debt. On the wife’s application, the husband would pay out his half of the remaining debt within five years.
However, by reference to findings the primary judge would subsequently make when considering the wife’s application for spousal maintenance, he was pessimistic about her financial future and satisfied that, even on the terms she proposed, she could not afford to retain the family home. As he explained, at [156], in order to do so “…she would be entirely dependent upon the husband in the form of maintenance, child support and mortgage payments to keep the home”. In light of the husband’s outstanding taxation liability, ongoing child support and future spousal maintenance obligations, his Honour determined that “to add a mortgage commitment [as sought by the wife] would not be reasonable when he too has to find alternate accommodation” [156] and rebuild himself financially. He said at [157]:
…His obligation must first be to the children by way of child support and then the wife by way of spousal maintenance. Nothing I heard suggested he could do all of that and carry a large mortgage.
Thus the unfortunate reality was that all properties had to be sold. Reference was then made to other assets and liabilities, such as cars, household chattels, small bank accounts and legal costs and associated expenses. This class of assets was found to be “of academic value” and, adopting the approach conceded by the parties, the existence of these assets and liabilities was taken into account pursuant to s 75(2). The only exception concerned chattels about which specific orders were made, the details of which are irrelevant to the appeal [161].
As a segue to the primary judge’s consideration of the husband’s tax debt,
his Honour determined that the magnitude of the wife’s legal and associated expenses (approximately $287,000), when compared with the husband having no outstanding legal fees, established that his “financial position must therefore be strong enough to have enabled him to pay those fees even if they were not of a similar quantum to those of the wife. This is a factor to be considered in relation to the tax issue”. In other words, it was significant that the wife carried substantial liabilities incurred in these proceedings whereas the husband had been able to meet his, albeit lesser legal expenses, from income.
There is no challenge to the finding that as at the end of February 2014 the husband was indebted to the ATO in the amount of $419,000 [168]. Not without some difficulty, the primary judge then attempted to ascertain the amount of taxation outstanding at separation and to understand why the debt rose to the level it did. One of the difficulties which bedevilled his capacity to precisely quantify the amount due to the ATO arose because of the husband’s failure to lodge his taxation returns on time. As his Honour explained, when the parties separated in 2012, the husband’s most recent taxation return lodged with the ATO was for the financial year ended 30 June 2010. His 30 June 2011, 30 June 2012 and 30 June 2013 taxation returns were lodged simultaneously in 2013.
Because the husband did not give evidence about the amount of taxation due at separation and notwithstanding various estimates calculated by his accountant and attempts at the same exercise by his counsel, the primary judge was satisfied that the best evidence was to be found in his financial statement filed in October 2012 in response to the wife’s application for interim spousal maintenance and some two months after separation. The husband’s evidence given in answer to question 48, which enquired about assessed and unpaid income tax, that he owed $220,000 was accepted [169]. There can be no doubt that when his Honour went on to find that after separation the husband’s taxation liability “increased significantly” he was satisfied that between separation and the date of the hearing, the tax debt had increased from $220,000 to $419,000.
Having commented on the husband’s failure to file his taxation returns for a number of years, the primary judge continued to analyse his evidence as to why the tax debt had increased so significantly. We observe that it was common ground that for the year ended 30 June 2011 the husband paid $158,840 in PAYG instalments. Thereafter he failed to pay any tax. In order to answer the question about why the husband’s tax debt had increased so significantly the primary judge again turned his attention to the husband’s October 2012 financial statement. Of particular interest was his misleading answer to question 32 that he was then paying $4,230 (PAYG) per week to the ATO. This was said to be in addition to the amount of $287 per week in withholding tax. As his Honour explained the effect of the husband’s misleading evidence was to mislead the wife and the court and to wrongly inflate his expenses so that they exceeded his income, which clearly was not the case [174].
The primary judge then discussed the husband’s claim that after the parties separated he could not afford to pay tax as it accrued because his total expenditure exceeded his income, and what provision, if any, he in fact made for the payment of taxation. As to the latter, the focus initially fell on the husband’s evidence that after the wife refused his request to access the $130,000 line of credit, he did not have sufficient income to pay anything towards his taxation: whether that be the arrears which existed at separation or his post separation liability. The primary judge was “not at all comfortable” with this aspect of the husband’s evidence. As we have already mentioned the primary judge was not satisfied that the line of credit was anything more than a facility for further borrowings. By necessary implication, he did not accept the husband’s evidence that prior to separation he made additional payments into the mortgage accounts as a hedge against his accruing taxation liability (Transcript, dated 3 April 2014, p 113).
Consideration was then given to the husband’s evidence concerning his post separation income and, in particular, its substantial decline. In this regard, it was uncontroversial that for the financial year ended June 2011 the husband had a taxable income in the amount of $564,145 which fell to $442,216 in 2012 and $319,381 in 2013. His Honour was obviously sceptical about the husband’s explanation for his drop in income and in any event, satisfied that after the proceedings were finalised he would be able to re-establish his former and higher income earning capacity. Having rejected the husband’s evidence contained in his 2012 financial statement that his total expenditure exceeded his income his Honour, at [174], turned his attention to the 2013 financial year and found that the husband’s expenditure “…exceeded his income even allowing for the tax that was not paid…” The question that then needed to be answered was whether or not those expenses were reasonable.
At [174-178], the primary judge examined various expenses incurred by the husband which satisfied him that the husband’s “expenditure was hardly modest”. It is unnecessary that we detail all of these items and sufficient that we observe the items of expenditure to which his Honour referred demonstrated a pattern of significant discretionary expenditure. With these matters to the fore, the primary judge determined that notwithstanding in the post separation period the husband’s income had fallen, he had been able to maintain the same affluent standard of living that prior to their separation, both parties enjoyed.
His Honour questioned, if as the husband claimed he was unable to meet his liabilities from income, why it was he withdrew from the parties’ post separation agreement to sell the second and third properties. The point being that it was significant he chose not to take an obvious and commercially sensible step to realise property and retire substantial debt, particularly if he was unable to service the debt. As his Honour said, at [180], “…had he made those payments, the debt in the mortgage loans would have gone down and I presumed (sic) that that would have at least given him an opportunity to renegotiate his [mortgage] repayment level.” Ergo, had there been a deficiency of income which could not be met by modifying his expenditure he would have taken a step which would have increased his disposable income and enabled him to make payments to the ATO.
In a similar vein and weighing against the husband’s approach to the tax debt being accepted as reasonable, his Honour referred to the husband’s evidence that Medicare may owe him between $10,000 and $50,000 the collection of which he had not pursued.
His Honour’s discussion of the taxation controversy culminated with his findings, at [182]:
Thus, examining the financial statement and in particular the income and expenditure columns, I find the husband had the capacity to pay the tax. He made a conscious choice not to pay it. He certainly misled the wife in respect of it. I accept that he was making a significant contribution to the wife, the children and the mortgages but at the same time, he made no arrangement with the Australian Tax Office notwithstanding the Court was under the impression that amounts were being set aside on a weekly basis. In my view, it would not be fair now to attribute the debt to the wife.
In answer to the challenge made by ground 9, as we have demonstrated, the primary judge clearly understood that at least $220,000 of the husband’s $419,000 taxation liability accrued prior to separation. It is beyond dispute that the husband’s evidence on this topic was imprecise and that no criticism can be levelled at his Honour’s decision to accept the husband’s evidence that as at separation he was indebted to the ATO in that amount.
To a considerable extent, the challenge made by ground 9 focused on an assertion that although the husband did not remit sufficient tax prior to separation and in the following year, provision was made in the management of his financial affairs to enable him to meet an assessment when it issued. Namely, the $130,000 to which reference was made earlier. However, the husband does not challenge the finding that the $130,000 was a line of credit facility which, if drawn upon, would only have increased the parties’ liability to the bank. As counsel for the husband ultimately and necessarily conceded, the husband failed to establish that there was an offset account into which $130,000 had been deposited and which could be withdrawn without increasing the parties’ total debt to the bank.
Otherwise and for ground 10 to be made good, it would have been necessary for the husband to successfully challenge the weight which the primary judge attached to the husband’s misleading evidence concerning the payment of his taxation and to the cavalier manner in which he conducted his financial affairs post separation. We observe that had the husband paid the amounts to the ATO he said he paid ($4,230 per week in 2012 and $3,172 per week in 2013), his taxation liability would have been virtually discharged. He would only have needed to reduce his discretionary expenditure or take another of the financially prudent steps to which the primary judge made reference to pay the small shortfall which would have remained. In our view, his Honour was rightly concerned about that misleading evidence and to, in effect, view the totality of the husband’s financial conduct post separation as cavalier and driven by an apparent desire to maintain his pre-separation standard of living rather than use his considerable income and apply some at least of the parties’ assets towards debt reduction. The wife having been unaware prior to separation of the husband’s failure to pay his taxation liabilities as they fell due and then after separation misled into believing payments were being made, it was entirely reasonable for his Honour to focus on how after separation the husband approached this debt and to ultimately conclude that the husband could and should have paid his accrued debt and tax as it fell due.
There is no principle of general application that merely because a taxation debt accrued prior to separation it must be brought to account as a joint matrimonial liability (Trustee of the Property of G Lemnos, a Bankrupt & Lemnos and Anor (2009) FLC 93-394). In our view, the facts as found amount to what the Full Court in Johnson and Johnson (2000) FLC 93-039 described as “compelling circumstances” which would enable the court to leave one party solely responsible for his or her taxation debt.
As we indicated earlier, very little was said in support of ground 14. To the extent that argument was advanced in support of this ground, it was to the effect that if the wife sought to support the judgment by reference to her debts being “a factor to be considered in relation to the tax issue” [162], the primary judge did not go on to explain how he balanced the wife’s unsecured liabilities incurred for legal expenses with the husband’s larger unsecured tax liability. In our view, it is abundantly clear that his Honour was satisfied that the wife, being left with no available assets of value and a pessimistic financial future compared to the husband who had a significant income and earning capacity, made it reasonable that he leaves the marriage with somewhat greater debt than she did. In so doing there is no error.
Grounds, 9, 10 and 14 have not been established.
The treatment of the parties’ superannuation
It will be recalled that the husband had superannuation interests worth $178,797 and the wife had superannuation worth $350,000. He sought orders that would have the parties left with superannuation of equal value, which meant that from the wife’s superannuation interest a splitting order in the amount of $85,601.50 would be made in his favour.
Because the parties’ superannuation interests had different characteristics to their available assets, the primary judge decided he would give separate consideration to the two different classes of assets, albeit his findings made when considering non-superannuation property informed his approach to superannuation (see Coghlan and Coghlan (2005) FLC 93-220).
As to superannuation, the primary judge first observed that each party was “a long way” from when their interests would vest. Having found that the wife would receive little or nothing from the proceeds of sale of property and expressed the pessimistic view of her financial future to which reference has already been made, his Honour said that the disparity in the value of their superannuation interests was “not large”. With these factors in mind, and on the additional basis that the husband’s greater income meant that he had the capacity to continue to contribute to his superannuation interests in a manner and to an extent that the wife could not, he declined to make a superannuation splitting order.
The first challenge raised by ground 13 is to the finding that the disparity between the parties’ superannuation interests was not large. Counsel for the husband is correct when he pointed out that the wife’s interest was more or less double that of the husband, and so in percentage terms it might be considered large. However, we understood his Honour’s description to be to the differential in absolute terms considered in the context of the parties’ total financial circumstances. In particular, in each and every of the recent years the husband earned considerably more than the differential amount. Approached in this manner, we agree with the primary judge that the difference in the value of the parties’ superannuation interests was not large.
The second challenge raised by ground 13 argues, in effect, that by failing to split the parties’ superannuation interest the property settlement orders which his Honour made were manifestly unjust. As we understood the submission, the injustice asserted was that “…the overall effect of the orders was to leave the husband in a negative position”. Of course, given the size of the husband’s debt to the ATO, even if the wife’s superannuation interest was split in the manner sought, he would remain in “a negative position” as indeed, until her superannuation vested, did the wife. And even when it vested the amount by which her superannuation would exceed her liabilities was modest and far less than the husband would earn in one year.
As we have already explained, it was open to the primary judge to decide that it would be unfair to attribute the taxation debt to the wife and for it thus to be entirely the husband’s responsibility. For his Honour to then reduce the value of the wife’s superannuation interest because of the magnitude of the husband’s indebtedness to the ATO would have been inconsistent with this earlier finding. In the unusual circumstances of this case, it was open to his Honour to refuse to adjust the parties’ superannuation interests. It follows that this ground must fail.
The Wife’s Earning Capacity
Grounds 15 and 16 were argued together and, in different respects, challenged his Honour’s determination that the wife was unable to adequately support herself. Ground 15 is focused on a finding that the wife’s income is “…$472 per week … net of tax” [225], whereas by ground 16 it is asserted that the primary judge failed to consider the wife’s earning capacity “in any proper manner”.
Although error is not asserted in relation to the primary judge’s statement of the law, so as to understand these challenges, it is helpful if we set out the salient parts of s 72 of the Act, it being the provision that governs a spouse’s right to maintenance:
(1) A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
…
Consistent with the onus sitting with the wife to establish that she was unable to support herself adequately, the primary judge examined her circumstances first. She was in part-time employment in specialised administration. Specialised administration being “the limitation on her employment” [221]. With primary responsibility for the day to day care of two children then aged 10 and 8½ and considered in the context of the family’s pre-separation affluent lifestyle, the wife’s desire to be with the children for the next three years as much as possible was viewed as reasonable. In coming to this view his Honour took into account that the children were accustomed to before and after school care and that the wife had not looked for full time work.
Consideration was then given to the wife’s needs and expenses which amounted to $1,476 per week. On the basis that the wife earned and we infer was likely to continue to earn $472 per week, the primary judge was satisfied her needs exceeded her income in the order of $1,004 per week. On this basis, the wife established she was not able to adequately support herself without spousal maintenance.
The central challenge made by ground 15 is that the wife advanced no cogent reason for her failure to seek more than part-time employment in her chosen field. This challenge can only be made good if we disregard the wife’s evidence concerning her desire to continue her care of the children and cavil with his Honour’s decision that, having regard to the children’s ages and the family’s circumstances, it was reasonable in effect that the wife work part-time in order to care for the children.
The Full Court in McCrossen & McCrossen (2006) FLC 93-283 said, at [32], that the question of whether an applicant for spousal maintenance can support himself or herself adequately:
…is not to be determined upon a “subsistence level” but upon consideration of whether the applicant can support himself or herself “adequately” importing a standard of living reasonable in the circumstances...
The Full Court agreed with the trial judge that “…if the wife was the primary carer of the two children, that responsibility would impact upon her ability to engage in full time employment…” [36].
In Drysdale & Drysdale [2011] FamCAFC 85, Coleman J, sitting as the Full Court, said at [17] that:
…the legislative intention which clearly emerges from the wording of s 72(1) is that claimants falling into either of those categories (72(1)(a) – (b) having the care and control of a child of the marriage who has not attained the age of 18 years)… satisfy the threshold to that extent…
We agree and observe that it is well settled that the word “adequately” does not import a fixed standard and enables, indeed requires, a court to examine a family’s individual circumstances.
This is exactly what the primary judge did and it is irrelevant to the disposition of this appeal that a differently constituted court (not that we would have done so) might have concluded that the wife should have pursued full-time employment and placed the children in before and after school care. In our view, the husband has been unable to demonstrate that in this respect his Honour’s decision was not open to him.
His Honour’s determination about the wife’s income and, by inference her earning capacity is inextricably linked to his view that it was reasonable she works part-time and that her capacity for work was limited to employment in her current field. We are satisfied that it was open to the primary judge to infer that her income and earning capacity were the same.
Ground 15 must fail.
In oral argument, ground 16 morphed into an assertion that in determining the wife’s earning capacity, his Honour ought to have taken into account that she had experience across a range of careers and could return to one or other of them. The flaw in this argument is that it was mere speculation that the wife might be able to return to one of her earlier (somewhat esoteric) careers and that there was a paucity of - indeed no - evidence, contrary to his Honour’s finding at [221] that “…the limitation on her employment seems to be in the [specialised] administration area…” such that it could be contended that this finding was not open to him. As a consequence, ground 16 must also fail.
The husband’s capacity to pay spousal maintenance
The focus of grounds 17 and 18 is on the finding that the husband was reasonably able to pay $750 per week spousal maintenance for a period of three years. By ground 17 it is asserted that when the primary judge calculated his capacity to pay spousal maintenance, he failed to take into account that the husband would be ordered to pay the mortgages on the parties’ properties pending their sale. Ground 18 is broader and asserts an insufficiency of reasons for the finding that the husband had the capacity to pay spousal maintenance and meet his personal tax liability.
It is convenient to deal with ground 18 first. His Honour’s findings concerning the husband’s capacity to pay spousal maintenance are succinct and may be set out in full:
227.The husband relied upon his financial statement. He said his gross income from his profession was $6291 per week. He allowed himself $2350 for tax, $369 for rent and $4 for insurance. He allowed $55 per week for medical insurance and he has the child support obligation as it currently stands under the order of $600 per week. His living expenses were not challenged at $795 per week and when the children are living with him, he expends $250 per week on them.
228.Using the husband’s own figures, he earns $6291 per week and spends $4423. Those figures obviously do not take into account the existing tax liability which must somehow be met. On any view however, he has $1800 or thereabouts per week to satisfy spousal maintenance and arrears of tax. As I earlier mentioned, no reference was made in his financial statement to any outstanding legal costs.
229.In my view, the husband is reasonably able to pay $750 per week.
Yet, while those specific findings are there referenced to that issue, they are but part of the findings that affect the primary judge’s conclusion as to the husband’s capacity to pay. Although his Honour’s findings in that respect have already been referred to in some detail, it is helpful to refer to them again here. By way of summary, when taken together with our conclusions there expressed, it can be seen that the primary judge correctly found that:
·The husband consented to, and in fact paid, interim spousal maintenance of $450 per week;
·At [157] that the payment of the mortgage as well as child support and spousal maintenance would create a significant financial impost for the husband. It is of considerable significance that his Honour’s orders required the parties to immediately list the properties for sale. Self-evidently, the primary judge considered the situation to be too urgent to afford them the usual opportunity to present their properties for sale over a longer period and thus, without expressly saying so, he proceeded on the basis that a sale would be imminent;
·The specific finding that the husband’s financial circumstances, and in particular his income, leading up to the orders was such that he could pay legal fees (even if they were not as large as the wife’s legal fees which resulted in her carrying significant liabilities in respect of her fees);
·The husband was, at least in part, the author of his current financial situation – he had failed to pay tax and withdrew from an agreement to sell properties and pay debt;
·Importantly, the husband had given misleading evidence, the effect of which was to mislead the wife and the court and to wrongly inflate his expenses so that they exceeded his income, which clearly was not the case [174];
·The necessarily implicit finding earlier referred to the effect that the primary judge did not accept the husband’s evidence that prior to separation he made additional payments into the mortgage accounts as a hedge against his accruing taxation liability;
·The finding that, despite the substantial decline in the husband’s taxable income post-separation (about which his Honour was clearly sceptical), the husband would be able to re-establish his former and higher income earning capacity;
·Consequent upon finding that the husband’s expenditure was “hardly modest” and notwithstanding that, in the post separation period the husband’s income had fallen, he had been able to maintain the same affluent standard of living that prior to their separation, both parties enjoyed; and
·Medicare may owe the husband between $10,000 - $50,000, the collection of which he had not pursued.
When read in their entirety, we are well satisfied that the primary judge provided adequate reasons for concluding that the husband had capacity to pay the amount ordered.
Ground 17 addresses, in terms, an asserted error directed only to the period between the date of the orders and the sale of the home.
In calculating the husband’s capacity to pay spousal maintenance, no reference was made to Order 19 which provided:
19.That until the discharge of the mortgages entirely concerning the sales of the three properties under these orders, the husband be responsible for all mortgage payments as and when they fall due.
The question which must be considered, therefore, is whether that omission has the potential to materially influence the finding concerning the husband’s capacity to pay. His Honour’s reasons for judgment are silent about the quantum of the mortgage loan repayments. However, by reference to the husband’s financial statement referred to at [227] of his Honour’s reasons, it can be seen that as at 28 February 2014 the total mortgage payment was $1,919 per week. Although his Honour did not say so, we understood it to be uncontroversial that after the parties separated the husband paid and, at the date of hearing, continued to pay the mortgage repayments.
Each and all of the findings earlier referred to are, of course, equally applicable to this challenge. In addition, the period under consideration is short; from the date of orders until the family home valued at $1.5 million was sold. And, as the primary judge mentioned more than once, the husband was not paying tax and could, as in his evidence he said he would, approach the ATO and come to an arrangement concerning payment of his tax.
The question is, in light of those findings and considerations, is error as to capacity to pay established in respect of the period to which the ground refers? We think not.
Once it is accepted that each and all of the findings earlier referred to properly inform the orders, including the orders for immediate sale, and the other considerations to which we have just referred are taken into account, the difficulties confronting the husband become manifest. The asserted error becomes not one of material fact (whether in fact the husband had capacity to pay) but an asserted error of discretion (whether that particular order ought to have been made). It is thus not to the point that any or all of us may have made a different order; the only question becomes whether error is established in the exercise of his Honour’s discretion. No such error has been established.
Conclusion and Costs
The husband has failed to establish error by the primary judge and the appeal will be dismissed. In the event the appeal was dismissed, an application was made by the wife that the husband pays her costs.
Counsel for the husband appropriately acknowledged that in the event the husband was unsuccessful, costs should follow the event. We agree. In our view, that the husband’s appeal has been wholly unsuccessful justifies a departure from the approach that each party pays their own costs, as well as an order for costs.
We will order the husband to pay the wife’s costs of and incidental to the appeal.
I certify that the preceding eighty one (81) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Murphy & Tree JJ) delivered on 3 March 2015.
Associate:
Date: 3 March 2015