Friscioni v Friscioni
[2010] FamCA 108
•18 February, 2010
FAMILY COURT OF AUSTRALIA
| HILARE & HILARE | [2010] FamCA 108 |
| FAMILY LAW - PROPERTY - unpaid taxation small pool - liabilities - husband earning high income - whether order sought was for more than 100% of the pool FAMILY LAW - SPOUSAL MAINTENANCE - wife in committed relationship with man with whom not cohabiting - quantum of maintenance in issue - period in which it should be paid |
| Family Law Act 1975 (Cth) ss 79, 79(4)(d) to (g), 75(2)(b),(h),(k), (na) Taxation Administration Act 1953 ss 8AAZA, 8AAZALE, AAAZC, AAZLA |
| Biltoft and Biltoft (1995) FLC 92-614 Milankov and Milankov (2002) FLC 93-095 Gollings and Scott (2007) FLC 93-319 Bevan and Bevan (1995) FLC 92-600 Mitchell and Mitchell (1995) FLC 92-601 |
| HUSBAND: | Mr Hilare |
| WIFE: | Ms Hilare |
| FILE NUMBER: | MLC | 9487 | of | 2008 |
| DATE DELIVERED: | 18 February, 2010 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | BROWN J. |
| HEARING DATE: | 15 December, 2009 |
REPRESENTATION
| COUNSEL FOR THE HUSBAND: | Mr. M. Bartfeld, Q.C. |
| SOLICITOR FOR THE HUSBAND: | Meerkin & Apel |
| COUNSEL FOR THE WIFE: | Mr. D. Sweeney |
| SOLICITOR FOR THE WIFE: | Lander & Rogers |
Orders
That paragraph (5) of the orders made herein on 25 November, 2008 be discharged.
That the husband pay maintenance for the wife of $1,500 per week, commencing on the seventh day after the last payment of $1,650 pursuant to paragraph (5) of the orders of 25 November, 2008, and weekly thereafter until 31 December, 2011.
That the parties do all things reasonably necessary, personally and as office holders of B Pty. Ltd. to realize the assets of the Hilare Family Trust as soon as practicable and, after payment of all costs and fees reasonably incurred in such realization, disburse the balance:
(a)to pay to the Australian Taxation Office each of the husband and wife’s personal liability for income tax due in respect of the year ending 30 June, 2008, together with any interest charged in respect of such tax to the date of payment; and
(b)to pay the balance to the wife (“the payment”).
That contemporaneously with the payment the wife resign any office she holds, and transfer to the husband or his nominee her shareholding (if any), in B Pty. Ltd. and Z Pty. Ltd.
That there be a split in the Hilare Superannuation Fund of an amount equal to eighty-five percent (85%) of the total interest of the fund as at this date and within thirty days hereof the husband and wife do all necessary acts and things and sign all necessary documents to facilitate a transfer of such eighty-five percent interest in the Hilare Superannuation Fund to an approved superannuation fund nominated by the wife.
That upon transfer of the superannuation interest to the wife, the wife :
(a)resign any office she holds with the Hilare Superannuation Fund; and
(b)resign any office she holds, and transfer to the husband or his nominee her shareholding (if any), in Hilare Super Pty. Ltd.
That the husband be solely responsible for and indemnify the wife and forever hereafter keep her indemnified in respect of:
(a)any taxation liability of the Hilare Family Trust which relates to income accrued after 1 July, 2008;
(b)any taxation liability of the wife which relates to any past, present or future distribution to her by the Hilare Family Trust;
(c)the ANZ capital loan referable to the husband’s partnership interest in X Practice; and
(d)any past, present or future taxation liability of the Hilare Family Trust No.2.
That subject to these orders the husband otherwise retain for his sole use and benefit :
(a)the Hilare Family Trust;
(b)the Hilare Family Trust No.2;
(c)the husband’s remaining fifteen percent interest in the Hilare Superannuation Fund;
(d)Hilare Super Pty. Ltd.;
(e)any funds standing in bank accounts in the husband’s name;
(f)any interest in B Pty. Ltd. and Z Pty. Ltd.;
(g)his interest in X Practice and the X Services Trust
(h)the Audi vehicle in his possession.
That unless otherwise specified in these orders each party be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and for that purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank’s record thereof and insurance policies are deemed to be in the possession of the beneficiary thereof.
That all extant applications be otherwise dismissed.
That these proceedings be removed from the List of matters awaiting finalisation.
That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel, including senior counsel.
IT IS NOTED that publication of this judgment under the pseudonym Hilare & Hilare is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 9487 of 2008
| MR HILARE |
Husband
And
| MS HILARE |
Wife
REASONS FOR JUDGMENT
Mr and Ms Hilare commenced cohabitation in May 2001 and married in November 2003. They have two children: N was born in May, 2002 and M in December, 2004. In late June 2008 the wife told the husband the marriage was over and in late July 2008 she and the children left the rented home in which the family lived. The court is asked to determine the orders which should be made for the division of the parties’ property and the question of the wife’s spousal maintenance. Litigation about the children resolved when final parenting orders were made, by consent, on 19 November, 2009.
THE PARTIES
The husband is 39. A professional, he is a partner at X Practice. He lives in rented premises in the eastern suburbs.
The wife is 35. She is undertaking a Masters degree which she anticipates completing by the end of 2011. She lives in rented premises in another eastern suburb.
LITIGATION HISTORY AND PROPOSALS
On 17 October, 2008, less than three months after the wife and children left the matrimonial home, the husband filed an application seeking parenting orders. In a response filed on 21 November, 2008 the wife responded to the application for parenting orders and sought spousal maintenance for “seven calendar years” and unspecified property orders.
On 25 November, 2008 interim orders were made, by consent. They provided for the husband to spend time with the children during the school holiday period at the end of that year and, until further order, from 8:00 am. each Wednesday to 9:15 am. each Thursday and from 4:00 pm. each Saturday to 4:00 pm. each Sunday. The husband was to pay to the wife $20,000 to be categorised by the trial judge. Paragraph (5) provided for the husband to pay spousal maintenance of $1,650 per week, from 28 November, 2008. He was to continue to pay private health cover at the current rate and current primary school expenses for N. In a puzzling addition, paragraph (5) concluded that:
. . . (the totality of all payments pursuant to paragraph (5) to be credited against the Husband’s Child Support Agency Assessment)
which, if applied literally, would mean spousal maintenance was to be characterised as child support.
There were five notations to the order :
A.That the Wife has entered into these orders accepting that the Husband is incurring a weekly taxation expense of $4,400 having regard to the Husband’s estimated income in September 2008.
B.That the Wife has entered into these current arrangements on the basis that she is boarding and not incurring a formal lease expense.
C.In the event that the Husband requests further funds for re-establishment or replacement of furniture and chattels he be at liberty to utilise the sum of up to $10,000, such amount to be categorised by the Trial Judge.
D. It is intended that the fees payable for [N’s] schooling not exceed $1,000 per annum.
E. The Husband has entered into the interim orders on the basis that he be at liberty to argue that the above interim arrangements are more than adequate to cover the wife’s reasonable expenses, including accommodation expenses such as rental and on the basis that he be at liberty to argue that he does not have the means to pay the agreed sum having regard to the totality of his fixed and recurring expenses.
On 1 October, 2009 the husband filed an application for divorce, which was granted in the Federal Magistrates’ Court on 17 November, 2009. The date of separation in the application was 28 July, 2008.
On 19 November, 2009 final parenting orders were made, by consent. The parties retain equal shared parental responsibility. The orders provide for the children to live with the wife and for the husband to spend time with them in a four weekly cycle during school terms. Orders provide for additional time in the Christmas and summer holiday periods, and for half of school term holidays.
In the first and second week of each four week period, the husband spends time with the children from 8:30 am. on Wednesday until 9:00 am. Thursday and from 4:00 pm. Saturday until 9:00 am. Monday. Both children are now at school so this means he drops them off at school on Wednesday, soon after collecting them from their mother’s home, then collects them after school and returns them to school the following morning. The weekend time concludes at the commencement of the school day on Monday.
In the third week of the cycle the same arrangement operates on Wednesday/Thursday and the children are with the husband from 5:00 pm. Sunday until 9:00 am. Monday. Again, that involves him delivering them to school on the Monday morning. In the fourth week of the cycle the Wednesday/Thursday arrangement is maintained and the children are with the father from the conclusion of school on Friday until 9:00 am. on Monday.
In the course of the trial there were a number of references to a shared care arrangement, which is certainly what the orders implemented. During school terms the children spend twelve nights out of each twenty-eight nights with their father; all save four nights involve weekends.
On 25 September, 2009 the father filed an amended application. In relation to property he sought that he pay to the wife “by way of alteration of property interest and/or capitalised spousal maintenance” the total sum of $50,000 within ninety days and that there be a split of the Hilare Superannuation Fund, pursuant to which the wife would receive half of the total interest. Notwithstanding the earlier reference to capitalised spousal maintenance, the husband sought to pay the wife $850 per week by way of spousal maintenance until 31 December, 2010. The husband sought orders which would result in the wife resigning any office she held in B Pty. Ltd. as trustee of the Hilare Family Trust and transferring her share-holding in the company to him. She was to relinquish any interest in Hilare Super Pty. Ltd., the Hilare Superannuation Fund, B Pty. Ltd. and the Hilare Family Trust, including any interest in any bank accounts. The husband sought to retain for his sole use and benefit the assets of the Hilare Family Trust, the Hilare Family Trust No.2, the Hilare Superannuation Fund and Hilare Super Pty. Ltd. (subject to the splitting order), his interest in X Practice, B Pty. Ltd. and Z Pty. Ltd. and any funds in an ING investment account and two ANZ accounts.
In paragraph 16 of that application the husband sought the following order:
That the husband be solely responsible for and indemnify the wife with respect to :
(a)any taxation liability of the [Hilare] Family Trust of which [B] Pty. Ltd. is the trustee, from 1st July, 2007;
(b) the ANZ capital loan liability; and
(c)any taxation liability of the [Hilare] Family Trust No.2 of which [Z] Pty. Ltd. is the trustee.
On 29 October, 2009 the wife filed an amended response. She sought that the “shares and corpus” of the Hilare Family Trust be sold and the nett proceeds, after payment of costs incurred in the realisation, paid to her. She sought a splitting order in respect of the Hilare Superannuation Fund which would result in it being equally shared between the parties and proposed a number of orders which would result in her resigning as a director and transferring her shares in the various entities to which the husband referred in his application, and relinquishing her interest in the Hilare Family Trust and the Hilare Superannuation Fund. She then sought that the husband be responsible for and indemnify her in relation to all liabilities, past, present or future, including liabilities for borrowings, creditors and to the Australian Taxation Office (“ATO”) in respect of the Hilare Family Trust, B Pty. Ltd., Hilare Super Pty. Ltd., Hilare Family Trust No.2, Hilare Superannuation Fund, Z Pty. Ltd. and X Practice.
In a separate paragraph the wife sought that the husband be responsible for and indemnify her in respect of :
(a)any and all taxation liability and all prospective taxation liability, of the [Hilare] Family Trust, the [Hilare] Family Trust No.2, [B] Pty. Ltd. and [Z] Pty. Ltd.;
(b)any and all taxation liability with (sic) the husband and the wife personally as a result of any distributions made to her in respect to the [Hilare] Family Trust or the [Hilare] Family Trust No.2;
(c) the ANZ capital loan liability.
In that amended application the wife sought that the husband pay spousal maintenance of $2,000 per week for a period of five years.
In final submissions the husband maintained his amended application filed 25 September, 2009. That is, by way of property orders, the wife should be paid $50,000 within 90 days and receive half the superannuation. The final submission of the wife was that she should receive $225,000 from the family trust assets and half the superannuation, and keep her car; the balance should go to the husband. He should be responsible for all tax liabilities.
EVIDENCE
Findings are made on the balance of probabilities having regard to the evidence and my observations of the demeanour of witnesses. In what follows, statements of fact constitute findings of fact.
The wife relied on an affidavit (her trial affidavit) and financial statement, both of which were sworn on 2 December, 2009. She was cross-examined.
The husband relied on an affidavit (his trial affidavit) and financial statement, both sworn on 4 December, 2009 and an affidavit of his accountant, Mr CY, sworn 4 December, 2009. Mr. CY may have prepared tax returns for the wife but described himself as the accountant for the husband. The husband was cross-examined. Counsel for the wife did not seek to cross-examine Mr. CY.
The kindest thing one can say about the husband is that his distress at the breakdown of the marriage has coloured his perception to the point where he is prepared to present speculation as fact and tailor evidence to suit his case. Given the limited issues to be determined, few of the contested facts were ultimately the subject of any comment in final submissions and most are not relevant to the ultimate determination. Nevertheless, I have far more confidence in the wife’s capacity for objective recollection.
Cross-examined about financial matters and budgeting, the husband presented as extraordinarily naïve. For example, it was put to him that when he swore a financial statement in September 2008, he deposed to a taxation debt of $298,000 at a time he had $79,532 in the bank. It was put to him that if he had applied that sum to the taxation debt, the debt would have been around $218,000, to which he responded “that’s ridiculous”, continuing :
I can’t apply money I have today, which is held for today’s tax, to pay previous year’ tax, otherwise I can’t pay today’s tax.
Cross-examined about expenditure to which he deposed in his financial statement, such as a house cleaner and gardener, the husband (who works part-time) said that he “resented the implication” he had spare time to undertake activities such as cleaning the house, mowing the lawn and doing the garden. Notwithstanding that evidence, he was happy to depose that during the marriage the wife (who worked part-time) “had a lot of spare time” and, after giving up part-time work, had “the luxury” of study.
Of more concern were answers the husband gave when cross-examined about a letter he wrote to his accountant. When initially raised by counsel for the wife, senior counsel for the husband objected to the cross-examination, referring to negotiations between the parties; the inference was that the document was privileged. The case was stood down, briefly, for senior counsel to disclose to counsel for the wife the negotiations in question. When the case resumed, counsel for the wife commenced with a reference to an email of 15 October, 2009; a document was shown to the husband. Counsel then asked if the husband had been in the process of “making an arrangement with the Tax Department”. To which the husband responded :
No, I was in the process of, I believe, either formulating or responding to an offer – a settlement offer when that email was sent, I think.
The husband was unable to say anything further about the date (he was not asked the content) of the offer or response, or which it was; it was embarrassing to listen to the evidence, which was transparently opportunistic.
The wife presented as a candid and honest witness. A simple illustration is an answer she gave when cross-examined about the figure she sought as spousal maintenance when, guilelessly, she volunteered that she hoped to use the excess over her needs to create a nest egg for the future. She was more articulate and reflective than the husband, more frank and more able to make appropriate concessions.
ISSUES
The significant issue in the property proceedings is whether the assets held by the family trust should be used to pay some or all of the income tax liabilities of the husband and wife or whether they should form part of the asset pool. Put another way, the issue is whether certain income tax liabilities should be treated as matrimonial debt or as a debt of the husband.
The wife’s submission is that the husband has had the capacity to pay tax, including the 2008 tax and first quarter 2009 tax, from income earned since separation but, for strategic reasons, has endeavoured to quarantine that debt and use income to pay prospective tax for the 2009 and 2010 years. The husband’s submission is that the assets of the trust were always ear-marked to pay the 2008 and first quarter 2009 tax and there is no reason to depart from the well established general principle that the pool available for division is the nett pool after payment of all relevant liabilities.
In the spousal maintenance proceedings the issue is not whether spousal maintenance should be paid but the quantum of the maintenance and the period over which it should be paid.
UNUSUAL ASPECTS
The evidence before the court was minimal; cross-examination of the parties was brief. The issues may be narrow but there are a number of unusual aspects to the case.
First, in a case in which the question of the payment of tax loomed large, not one ATO document was tendered. No tax assessment was tendered, nor any ATO record of payments made or penalties or interest charged. A print out from the ATO Portal may have resolved a number of ambiguities. There was much talk of the 2008 tax liability and the husband’s evidence was of arranging to make quarterly PAYG payments from the first quarter of the 2009 financial year, in lieu of his previous practice of waiting for an assessment to issue after submitting an annual tax return, and paying the whole of the sum due on assessment. The only evidence of the various ATO liabilities are statements made by Mr. CY in a report prepared by him which, he deposed, related to “the financial and taxation history of [Mr Hilare]”.
Second, the husband’s evidence that payments made by him to the ATO were credited by the ATO against post separation tax liabilities, rather than the assessed liability for the 2008 year or the first quarter of the 2009 year, was corroborated by no document or evidence of probative worth and needs to be considered in the light of the provisions of the Taxation Administration Act 1953. For example, the Commissioner is not required to take account of any instructions of any entity (which is defined to include a person and various corporate entitles, as well as partnerships and trustees : s.8AAZA) s.8AAZLE.
There is no evidence the ATO has agreed to defer recovery of the first quarter 2009 tax. The husband agreed he had never sought an arrangement with the ATO to pay tax debts by instalments, although the wife submitted the husband could – and should – have taken that path. The 2008 tax was not due until 23 November, 2009 but was assessed as payable in April 2009. In an email dated 17 April, 2009 Mr. CY advised the husband the unusually long period between assessment and the due date related to “our firm’s lodgement program”; it was not an arrangement made by or on the husband’s behalf. The husband’s evidence was of paying $140,000 by instalments to 30 June, 2009, instalments he attributed to the last three quarters of that financial year. Bank statements suggest the actual payments were made between June and July 2009. The court cannot say how the ATO allocated the payments.
There is no doubt the husband sought to quarantine the 2008 liability. In evidence was an email from the husband to his accountant, Mr. CY, dated 17 April, 2009. In the second paragraph of that email the husband wrote :
Two questions about quarterly instalments – if we proceed to ask the ATO to send quarterly instalments, I assume I will be asked to pay for the first three quarters of this year (or is it all four?). For legal reasons I will probably want to pay the 08/09 tax now from my own resources, and leave the 07/08 tax until trust issue has been resolved with [the wife]. Will the ATO have any issue with payments being directed to the later assessments?
Mr. CY’s reply of 17 April, 2009 is also in evidence. It is in these terms:
In relation to quarterly instalments they are due end of October, January, April and July. So by the end of this month there will be three instalments due.
The ato at times can direct the payments of the debts they want to, all I can recommend is that when we pay the instalments we write a letter stating exactly what the payments are for.
At this point the husband was acting on the basis he would pay the “08/09 tax”, including the first quarter. In the trial he sought to prove he had always planned to pay the 2009 first quarter’s tax from the assets of the family trust but I am satisfied that was a reconstruction.
Third, the evidence supports a finding that large amounts of cash washed through the parties’ hands prior to their separation. Save for general assertions about their lifestyle and the employment of staff such as nannies, there was little evidence of their disbursement. The parties accrued minimal assets but neither party contends that the other has wasted assets, channelled funds into undisclosed assets or failed to make full disclosure of assets.
ASSETS BROUGHT TO COHABITATION AND MARRIAGE
When the parties started living together in May 2001 the wife was working as a consultant, earning approximately $35,000 per annum. The husband was working at X Practice, earning about $100,000 per annum. The husband had been living in rented accommodation and the wife living with her parents.
According to the wife, neither party had assets of significance at the commencement of cohabitation. The husband deposed she had a car and some personal items and she did not quibble with that. The husband’s evidence in the witness box was of having “close to $100,000” in assets at this time, made up of a car, cash and shares. He was unable to provide any corroboration of those assertions. Pressed, he agreed it could be less. That it was a significant exaggeration is clear from his trial affidavit, in which he swore that at the commencement of cohabitation he had furniture, a 1999 Holden Vectra, several thousand dollars worth of shares and approximately $20,000 in savings, assets which fall far short of $100,000.
At one point the husband said that if he had realised he was going to be questioned about the assets he had in 2001, he would have obtained documents. The court must assume he meant documents such as statements from banks or financial institutions which would corroborate alleged savings and documents to corroborate the alleged share holdings, whether originating from the relevant share registries or a broker or, for example, tax returns recording dividend income from the shares.
The husband qualified in his profession in 1995 and has practised his profession since that time. He works in the banking and finance industry; …. He was represented in the proceedings. It beggars belief that he could genuinely believe that no documentary proof would be necessary if he sought to maintain clearly contested facts.
It was submitted on the husband’s behalf that the court should give weight to the asserted discrepancy between the assets each party brought to the marriage when assessing their respective contributions although senior counsel for the husband acknowledged that if the asset pool were as small as he submitted, the fine detail of contributions would not be relevant. The husband’s evidence in this respect is noteworthy mainly because it corroborates a tendency to exaggerate his position at the expense of that of the wife and is illustrative of a pattern of assertions uncorroborated by any documentation.
COHABITATION TO SEPARATION
The wife continued in paid work, ceasing after N’s birth in May 2002 and returning to part-time employment until M was born in 2004. When he was about nine months old she returned to part-time employment on two days a week and continued in that work until she commenced part-time study for the Masters degree at the commencement of 2007.
In June 2003 the husband was promoted within X Practice, earning approximately $200,000 per annum, which he received by way of untaxed distributions. The parties married later that year. By the 2007 financial year the husband was an equity partner at X Practice, earning approximately $470,000 per annum.
The husband set out his income between 2002 and 2010 in [14] of his trial affidavit. From a low of $115,000 it grew to $710,000 in 2008. Around the time the marriage foundered, the husband negotiated a part-time arrangement with X Practice, working three and a half days a week. He estimated his income from this part-time work as $537,000 for the 2009 financial year. That remained his estimate for the 2010 financial year.
In approximately October 2004 the parties opened an ING account in the wife’s name and directed the husband’s untaxed surplus income to that account. His evidence was that he held the passwords and controlled the account at all times. From the wife’s ING account $75,000 was paid to the ATO in July 2005 in respect of the 2004 financial year and $110,000 was paid in March 2006, in respect of the 2005 financial year.
In 2007 the parties met with S Financial Advisers to obtain financial advice. The husband conceded that the wife did not necessarily “understand every bit of finance as well as some people”; his evidence appeared to be that he did not, either. I am satisfied the wife had little understanding of the arrangements and was content to leave financial matters to the husband and his advisers. Mr. CY set out the recommendations of S Financial Advisers on page 1 of his report, as follows :
-To have all future investments in shares etc. in the name of the [Hilare] Family Trust.
-Transfer the ING bank account in the personal names into a new Macquarie Cash Management Trust in the name of the [Hilare] Family Family (sic) Trust.
-The existing shares owned in personal names were to be transferred to the [Hilare] Family Trust.
-That $160,000 be borrowed in the name of the [Hilare] Family Trust to purchase shares/investments to increase exposure to the stock market.
-To create a Self Managed Superannuation Fund called the [Hilare] Super Fund and create a new company, “[Hilare] Super Pty. Ltd.” be the trustee of the Fund.
-Roll over from their existing super funds for [the husband] $68,000 and [the wife] $9,817 into the new Super Fund.
-Purchase a new home withn (sic) 3-5 years.
When the Hilare Family Trust was established in February 2007, $258,000 was transferred from the wife’s ING account to the family trust. The husband’s evidence was that income from X Practice was paid to the trust to ensure funds were available to pay the tax eventually levied. He swore that in about June 2008 he paid the sum of approximately $73,000 into the family trust “in order to meet my anticipated tax liabilities for the first quarter of the 2009 financial year”. The email from Mr. CY dated 17 April, 2009 makes it clear no quarterly instalments had been yet paid for the 2009 year. The email of 17 April, 2009 from the husband to Mr. CY raises the inference that the ATO had not yet been asked to change the husband’s arrangements to quarterly payments: he wrote “If we proceed to ask the ATO to send quarterly instalments”, and spoke of paying the “08/09 tax”, with no exclusion of the first quarter. Pursuant to the arrangements which had operated for some years, that income, earned in the year ending 30 June, 2008, should have been drawn on to pay the eventual tax assessed in respect of that year; the assessment would issue in about April 2009. Until the husband altered the ATO arrangement, tax for the 2009 year would have been payable after an assessment issued in or about April 2010.
Mr. CY’s evidence is that at 30 June, 2008 the assets of the parties and related entities, excluding superannuation, totalled $581,989. Mr. CY reported their then taxation liabilities as follows :
Taxation Liability
– [The husband] 2008 tax debt due 23/11/2009 $292,835
– [The wife] 10,261
Deducting the margin loan of $72,935, this left nett assets of $205,958 plus the parties’ superannuation interests which, at 30 June, 2008, stood at $127,959 for the husband and $13,565 for the wife. According to Mr. CY, at 30 June, 2008 the husband had $110,776 in cash with two banks (ANZ, $106,125; ING, $4,651) and there was $2,846 in the ING account in the wife’s name which, the husband agreed, he operated. The family trust had $80,541 in cash with Macquarie Cash Management and dividends/distributions owing at 30 June, 2008 were recorded as $6,636. I accept as accurate Mr. CY’s evidence of the financial situation at 30 June, 2008.
In mid-May 2008 the wife told the husband of her “feelings” for her psychologist Mr H. About a fortnight later, on 1 June, 2008, she told the husband she was in love with Mr. H and that Mr. H felt the same way. On 25 June she told the husband that the marriage was over and that she intended to pursue a relationship with Mr. H. By the end of the 2008 financial year, the marriage was over. The parties physically separated some four weeks into the 2009 financial year, on 28 July, 2008.
AFTER SEPARATION
Mr. CY’s evidence was of a substantial decrease in the value of the portfolio of the Hilare Family Trust from 1 July, 2008. He reported that between that date and the date of his report (4 December, 2009) the trust had earned income of $29,436. However, there had been a decrease in the value of the investment portfolio of $26,559 and the margin loan of $80,740 had been repaid. The value of the assets was thus $390,504.
On page 3 of his report Mr. CY noted that the 2008 tax debt of $292,835, due on 23 November, 2009, had not been paid and that “we have now taken several calls from the ATO requesting payment”. The report is dated 4 December, 2009, eleven days after the due date for the 2008 tax, a period which included a weekend. If it is correct that “several” calls were initiated by the ATO to Mr. CY’s firm in the nine working days between the tax falling due and the report being written, the husband’s apparent disinterest in speaking (or authorising anyone else to speak) with the ATO about the outstanding tax is remarkable. Cross-examined on 15 December, 2009 he said there was “not any reason I should talk to the Tax Office about it (the 2008 assessed tax) at this point”.
Mr. CY’s evidence of the current financial position was as follows :
ASSETS
[Hilare] Family trust
$ $
Investment Portfolio – per [S Financial Advisers] 390504
[Mr Hilare]
Cash as (sic) Bank - ANZ 3030
- ING 350 3380
Motor vehicle 33650
TOTAL ASSETS (excluding superannuation 427534
LIABILITIES
[Mr Hilare] -Tax debt -2008 year 292835
-Estimated Balance of tax debt 2009 year 62896
[Ms Hilare] – Estimated tax debt 2008 year 9952 365683
NET ASSETS (excluding superannuation 61851
Superannuation Assets
Fund balance – [Hilare] Super Fund
as per [S Financial Advisers] $145454
The liabilities above do not include any potential taxation liabilities for the 2010 year. There will be another PAYG instalment for the December quarter of $50000 due in January 2010.
There will also be taxation due on [the husband’s] distribution from the [Hilare] Family Trust for the 2009 financial year of approximately $16200 which will be due in June 2010.
Quite soon after the parties’ separation the husband sought to be able to access the assets of the family trust to pay tax liabilities. I accept the wife’s evidence that she was astonished to find how small those assets then were, which is illustrative of her lack of true involvement in their financial planning and her lack of understanding of it. She was not prepared to agree to the sale of the shares held by the trust, seeing them (accurately) as the only significant assets accrued by the parties. Thus the question fell to be determined by the court.
The only bank statements before the court are those relating to an ANZ Access Advantage account in the husband’s name for the period 1 May, 2009 to 3 August, 2009. From these one can trace the movement of funds from X Practice, to the husband’s solicitors and to the ATO. Other payments by bank transfer between accounts cannot be identified.
At 1 May, 2009 the account stood at $10,198. In that month $29,980 was credited by transfers from X Practice. On 29 May, 2009 $10,000 was transferred to the account from an ING account ending 3940. By 1 June, 2009 the balance was $20,040.
The statements record a number of payments to Meerkin & Apel, the husband’s family law solicitors. On 4 June, 2009 $8,000 was transferred to the firm. $5,000 was transferred on 22 June, 2009 and $10,000 on 29 July, 2009. These total $23,000.
Between 1 May and 3 August, 2009 $114,092 was received by transfers from X Practice.
On 29 June, 2009 $115,900 was credited to the account by transfer from an ING account ending 6849. The wife’s uncontested evidence was of being advised by the husband’s solicitors in a letter dated 17 August, 2009 (following an unsuccessful mediation) that the husband had used ING funds of $115,900 to meet taxation payments. The statements record payments to the ATO of $50,000 on 30 June, 2009, $50,000 on 16 July, 2009 and $40,000 on 24 July, 2009. The court can say with confidence the husband did not intend those payments to be credited against tax liabilities for 2008 or the first quarter of 2009.
On 3 August, 2009, the date on which the statements cease, the account stood at $12,648.
The husband’s affidavit is silent as to the movement of funds and the expenditure of cash held by the parties or the trust since separation. In [28] he deposed to having paid “a small portion” of the tax liability as at November 2008 (then said by Mr. CY to be $404,000) “from my income and savings since separation”. There is no doubt pre-separation savings have been used, since separation, to pay tax. As the husband insists the 2008 tax and that of the first quarter of 2009 is outstanding, these pre-separation savings have gone (or were intended to go) towards tax levied on post-separation income.
On 24 November, 2008 the husband’s solicitor wrote to the wife’s solicitor about a number of matters, including the then asserted tax liability. She advised of advice that the value of the trust assets as at market close on 20 November, 2008 was $325,814.83 and continued :
As at November 2008 the total tax liability is currently $404,000. Our client therefore intends to retain at least $78,000 from his bank account which will be used to cover the current taxation liability.
At the time of trial the husband deposed to there being an estimated $350 in the ING account and $3,030 in the ANZ access account. The wife saw funds withdrawn as capital and objected to the husband’s use of them to pay tax liabilities which, she submitted, should have been paid from his continuing income. This characterisation ignores the way in which the parties had operated in the past, putting aside income to pay tax assessed in the future on the income. However, the evidence of the husband’s retention of $78,000 (as advised by his solicitor on 24 November, 2008) and $115,900 (as advised by his solicitor on 17 August, 2009) and their application to tax on post-separation income is relevant. A difficulty facing the court is tracing the source of the $115,900 which was in an ING account on 29 June, 2009 and available for transfer to the husband’s ANZ account.
Mr. CY’s evidence was that at 30 June, 2008 there was $4,651 in an ING account in the husband’s name and $2,846 in an ING account in the wife’s name. No account numbers are provided. When the husband swore a financial statement on 4 September, 2008, a little over two months later, he deposed to having $4,678 in an ING account in his name and $2,663 in one in the wife’s name as at 28 August, 2008. No account numbers were provided. By the time he swore a second financial statement on 4 December, 2009 he included a reference to only one ING account, in his name, which stood at $350; the account number is …653.
Putting aside the trust funds with Macquarie Cash Management which were probably used to repay the margin loan, the only account of substance at 30 June, 2008 was described by Mr. CY as an ANZ account in the husband’s name, in which was $106,125. In his first financial statement sworn 4 September, 2008, he deposed to having $79,532 in an ANZ account as at 28 August, 2008, a diminution of $26,593 in less than two months.
The husband’s ANZ Access Advantage account statements tendered by the wife show a transfer of $10,000 from ING account …940 on 29 May, 2009, of $15,000 from ING account …083 on 22 June, 2009 and of $115,900 from ING account …849 on 29 June, 2009.
The court can only act on the evidence before it. According to Mr. CY, the parties had $113,622 in cash with ANZ and ING at 30 June, 2008. To add the $78,000 (letter of 24 November, 2008) to the $115,900 (letter of 17 August, 2009) may involve double counting.
LEGAL COSTS
The wife has paid legal costs to date of $23,487. At the time of trial another $30,632 had been billed but was unpaid. Her total legal costs thus amounted to $54,119, plus the costs of the trial.
In the witness box the husband was unable to give a clear indication of his legal costs, save to say that he has paid about $40,000 to $50,000. Senior counsel for the husband confirmed that the husband had paid approximately $48,000 to date. An amount of $36,000 was billed and owing. The costs of the trial were estimated to be around $16,700. Thus, of total legal costs of about $100,000, $52,700 was owing. It was conceded that the husband’s solicitors held $10,000 in trust for the husband. Late in the trial evidence revealed that the husband had paid the sum of $60,000 to his solicitors that morning. His evidence was of borrowing that money the previous day, from G.E. Capital, and of being required to make payments of $2,100 per month from 14 January, 2010 to repay the loan.
The court cannot find the specific source of funds paid by either party to their lawyers, save the $23,000 which came from the husband’s ANZ account.
The wife received $20,000 pursuant to the orders of 25 November, 2008 which has effectively been expended on legal fees. Perhaps because he submitted that the wife should receive the whole of the non-superannuation asset pool as advanced by the husband, senior counsel did not make a specific submission about the $20,000 and it was not notionally included in the asset pool advanced by him. Costs were not notionally included in the asset pool advanced by counsel for the wife, either, although at one point he did submit legal costs of both parties could be notionally added to the asset pool.
I do not find it appropriate to notionally add funds expended on legal fees (including the $20,000) back into the pool.
FAMILY TRUST
When trial documents were prepared the equity in the Hilare Family Trust was $390,504. Taking account of share values at trial, the figure was $389,474.
X PRACTICE
The husband’s interest in X Practice was valued at $259,000. That is subject to an ANZ capital loan of $210,000, leaving an equity of $49,000.
CARS
The husband has an Audi car which he valued at $33,650; senior counsel said that was a red book value. The wife attributed a red book value of $45,000 to it. The wife has a Holden Captiva car, which she valued at around $25,000, again a red book value. I do not suggest valuations should have been obtained. It is practical to leave the cars out of the pool, acknowledging that the husband’s is more valuable than that of the wife.
TAXATION LIABILITIES
The husband deposed (in [38] and [39] of his trial affidavit) to the taxation liabilities he alleged were outstanding and which needed to be paid from the parties’ assets. There is reference to interest accruing at 14.31%. The court cannot make a finding about the interest. No evidence establishes that payments, such as the $140,000 deposed to by the husband, were credited by the ATO against taxation liabilities accruing for and after the second quarter of the 2009 financial year. The payments to the ATO from the husband’s ANZ account between 30 June and 24 July, 2009 total $140,000; if payments were due (as Mr. CY advised) in October, January, April and July, and the husband (as he asserted) intended the $140,000 to be allocated against the last three quarters of the 2009 year (due in January, April and July) interest may have been running on the unpaid January and April instalments. Interest is probably running on the 2008 tax, due on 23 November, 2009.
In [39] of his trial affidavit the husband deposed to present tax liabilities of $371,404 made up as follows :
2008 Personal Income Tax, [Mr Hilare]
due and payable 24 November 2009 and
interest accruing at 14.31% $292,835.092009 Personal Income Tax, [Mr Hilare]
Estimated at $191,508 of which $140,000 has been paidpursuant to instalment notices $51,508.00
General Interest Charge on Integrated Client Account $459.412009 Personal Tax on [Hilare] Family Trust Distribution
Estimated at $16,650, none of which has been paid $16,650.002008 Tax on [Hilare] Family Trust Distribution
to [Ms Hilare] $9,952.00
$ 371,404.50The failure to specify the interest accrued in respect of (presumably) the unpaid first quarter for 2009 and, since 24 November, 2009, the 2008 tax, needs to be set against the specific inclusion of the general interest charge of $459.41, which the husband deposed needs to be paid to the ATO. That may relate to late payment of quarterly instalments.
The husband then deposed to an estimated personal taxation liability for a distribution from the family trust for 2010 of $16,200 and a tax instalment of $50,000 which would fall due “with respect to the second quarter of the 2009/2010 year”. He noted that no documents have been lodged by him in respect of either.
In paragraph [40] of his trial affidavit the husband requested the court to grant the orders sought in his amended application filed 25 September, 2009 and senior counsel maintained that application. Putting aside the reference to capitalised spousal maintenance in paragraph (11) of the proposed orders, orders in those terms would result in the wife receiving $50,000 and the husband being responsible for the payment of all of the taxation liabilities, past and future. On the figures contained in his case summary filed 15 December, 2009 and advanced by his counsel, the nett asset pool (putting aside superannuation) is $38,929.58. For the purpose of that calculation, the trust assets were included at $390,504.08 (rather than $389,474). More importantly, it included the husband’s car at $33,650 and the sums to which the husband deposed in the ING account ($350) and ANZ access account ($3,030). On these figures the $50,000 the husband sought to pay to the wife was more than the non-superannuation asset pool he advanced.
SUPERANNUATION
The husband sought a splitting order which would result in each of the parties receiving half of the Hilare Superannuation Fund assets which totalled $146,577 at trial. That submission was maintained in final addresses. It sits uncomfortably with senior counsel’s opening of the case, in which it was conceded that were the pool $200,000 or $300,000, his submission would be no different; that is, the asset pool was so low and the discrepancy between earning capacity so high, that the court would be entitled to order the wife receive the lot.
It is true that neither party can access the superannuation entitlements for many years, absent hardship application. However, the superannuation assets need to be taken into account.
LEGAL PRINCIPLES
Both counsel referred to the decision in Biltoft and Biltoft (1995) FLC 92-614. In that case the only significant liability was money owed by the husband to Mr. Horrocks; Mr. Horrocks had not reached any agreement with the husband about payment of the debt or what was owing and the trial judge found that any attempt to do so had been made only for the purposes of the property proceedings. The trial judge quantified the debt as best he could, finding that it was at least of an equivalent amount to the husband’s interest in one of two real properties and his other assets, and found that the second real property was thus the only property in which there could be an alteration of property interests.
The husband was the cross-appellant and argued that the trial judge was obliged to determine the quantum of the debt, deducting other liabilities from the found value of the other properties and make orders which operated on the nett value. At 82,125 the Full Court (Nicholson CJ., Ellis and Buckley JJ.) recorded :
It was next submitted that the trial Judge was obliged to determine the quantum of the Horrocks' debt and that he erred in that he did not do so. It was put that the trial Judge was obliged to ascertain the property of the parties, to ascribe that property a value, then to ascertain the liabilities of the parties and make orders which operate on the net value of the parties' property. In support of that submission, we were referred to Rowell and Rowell; DC of T (Intervener) (1989) FLC ¶ 92-026 at p 77,392 .
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. See, Ascot Investments Pty Ltd v. Harper & Anor (1981) 148 CLR 337 where Gibbs J. (as he then was) pointed out at p 355 that the Court ''must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it'' . Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities. See Prince and Prince; General Credits Australia Limited (Intervenor); A-G for the State of Oueensland (Intervening); A-G for the Commonwealth of Australia (Intervening) (1984) FLC ¶ 91-501, Evatt CJ. at p 79,076 said:
``... the outcome of the wife's application will depend upon findings made by the Court as to the parties' assets and liabilities, their contributions and their respective financial resources, means and needs. It would be necessary for the Court to determine so far as is possible the value of the property held by each party. In accordance with the usual practice this would be done by deducting the value of outstanding mortgages, debts, and other liabilities (e.g. Albany and Albany (1980) FLC ¶ 90-905, p. 75,717 ). The Court may have to determine, as between the parties, the existence of a particular liability (Af Petersens and Af Petersens (1981) FLC ¶ 91-095 ).
The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases. While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large, or have not been precisely determined, e.g. tax liabilities (Kelly and Kelly (No. 2) (1981) FLC ¶ 91-108 p. 76,801 ). In some cases the amount of the liability can only be estimated generally (Albany (supra) , p. 75,717). The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly (e.g. a loan from a parent of the party not likely to be enforced; Af Petersens (supra) ; Quirk (1983) unreported). In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party's potential entitlement under sec. 79 (Kimber and Kimber (1981) FLC ¶ 91-085 ; Kowaliw and Kowaliw (1981) FLC ¶ 91-092 ; Antmann and Antmann (1980) FLC ¶ 90-908 ; Af Petersens (supra) ). Complex issues can arise in regard to liabilities to third parties (see, e.g. Pockran and Crewes; Pockran (1983) FLC ¶ 91-311 ).
Of course, the Court cannot ignore the fact that there is or may be a liability; the effect is simply that it does not consider that the other spouse should be called upon to in effect 'contribute' to the liability by having that spouse's fair share in the parties' property reduced by virtue of its existence. The effect may be that the party who has incurred the liability will be left to meet it out of whatever funds remain to that party after satisfying the property order made under sec. 79 (Af Petersens (supra) ).''
Later (at 82,127) the Full Court noted that the court may properly determine not to take into account or discount the value of an unsecured liability in certain circumstances, including but not limited to a liability which is vague or uncertain, is unlikely to be enforced or was unreasonably incurred. A debt to the ATO is very different to the debt to Mr. Horricks in Biltoft.
Senior counsel for the husband relied on Milankov and Milankov (2002) FLC 93-095, a decision of Nicholson CJ. and Buckley J., with whom Kay J. disagreed.
In Milankov the trial judge had granted the wife 90% of the notional pool of assets, which included legal costs already paid by the parties, and ordered periodic spousal maintenance which, because operating retrospectively, gave rise to significant arrears. The husband appealed. One ground of appeal was that the orders granting the wife 90% of the notional pool had the real effect of giving her more than the available assets, in breach of the firmly established principle that a court exercising power under s.79 of the Family Law Act 1975 can only alter the parties’ interest in their property and cannot make orders that would exceed the extent of the property. This argument found support from Kay J. but was dismissed by the majority.
In the majority judgment Nicholson CJ. and Buckley J. concluded that an order beyond the extent of the actual pool of assets, which pool included paid legal fees, was open to the trial judge in that case for two reasons. First, it only exceeded the actual pool of assets by a very small amount which might not have reflected the position as at the date of hearing before the Full Court. Second, any inability the husband had at the time of judgment to meet the orders made by the trial judge was as a direct consequence of his receipt of a pre-hearing distribution to meet his legal expenses.
Much of the argument turned on the notional inclusion of expended sums in the pool. The decision turned on its facts and is not clearly analogous to the circumstances of this case. Its relevance lies in endorsement of Kay J’s dissent in a later case.
In Gollings and Scott (2007) FLC 93-319 the Full Court (Finn, Kay and Boland JJ.) considered a husband’s appeal against property and spousal maintenance orders. It was the husband’s submission that the trial judge erred in determining the size of the pool of assets available for distribution between the parties and that an order which provided for the wife to receive the home unencumbered effectively meant she received more than 100% of the pool of assets. The husband submitted that such an order was beyond the court’s power or, if within its power, unjust. Other aspects of his appeal related to liability for taxation paid after separation. At 81,491 the Full Court found :
78. The issue of a tax liability in respect of income earned in a previous year being paid out of future income is not an unusual occurrence in cases involving a party involved in a professional practice, and each case must be considered on its own facts, particularly having regard to how the income derived was expended post-separation (see HDM and MM and SJM [2006] FamCA 47 at para 31 to 35 and SMB and MFB [2006] FamCA 46 at paras 77 to 81)
79. There was no issue that the liabilities included the quarterly payment that was about to fall due and it would seem on the face of it that there is no valid reason for the sum being left out of the pool of assets, particularly where it was tax on income that was utilised in part to provide for the support of the wife and children. At the same time it was also tax assessed on income that had been utilized for making gifts to Ms. Y (with whom the husband was in a de-facto relationship at the time of trial). Whilst it seems to us to be wholly inequitable for the wife to be responsible for the tax liability in respect of substantial gifts made by the husband to Ms. Y in the post-separation period, we have not been provided with any calculations that would enable us to determine how much of the husband’s tax liability can be fairly attributed to any money spent on Ms. Y. Given our proposed outcome, we think it safest to include the whole tax liability as claimed by the husband but make allowance for this element in determining what is ultimately an appropriate outcome.
When considering whether the order made was within the power, the Full Court referred to Kay J’s dissenting judgment in Milankov, as follows :
In his dissenting judgment in the matter of Milankov Kay J said:
111.The wife's claim for alteration of property interests was brought pursuant to the provisions of s 79 of the Family Law Act 1975 which provides:
"(1)In proceedings with respect to the property of the parties to a marriage or either of them, the court may make such order as it considered appropriate altering the interests of the parties in the property, including an order for a settlement of property and substitution for any interest in the property and including an order requiring either or both of the parties to make, for the benefit of either or both of the parties or a child of the marriage, such settlement or transfer of property as the court determine."
112.The process to be followed in s 79 proceedings is well settled (see Pastrikos v Pastrikos (1980) FLC 90-897, 6 Fam LR 497; Lee Steere v Lee Steere (1985) FLC 91-626, 10 Fam LR 431; Ferraro v Ferraro (1993) FLC 92-335, 16 Fam LR 1; and Davut v Raif (1994) FLC 92-503, 18 Fam LR 237). It generally involves the Court first determining what the parties' property consists of before determining whether it is appropriate and just and equitable to make an order altering the parties' interest in it.
113.In several circumstances, well identified by the cases, this first step often involves including in the "pool of assets" items which no longer exist but which in order to do justice and equity to the parties need to be notionally considered in determining what a fair share of the existing pool of assets should be (see Kowaliw v Kowaliw (1981) FLC 91-092, 7 Fam LN 13; Townsend v Townsend (1995) FLC 92-569, 18 Fam LR 505; Farnell v Farnell (1996) FLC 92-681, 20 Fam LR 513; Cerini v Cerini (1998) Fam CA 143 unreported). Frequently this involves a notional consideration of assets which have been in the possession of one of the parties at some time after separation but which have been dispersed for that party’s own use. It often includes adding back monies that each party has spent in respect of their legal costs. Not to do so would be to offend the principles of s 117 of the Family Law Act which require that each party to proceedings should bear their own costs unless the Court otherwise orders.
114.The inclusion of these notional add-backs to the pool of assets ought not to be seen as a method of increasing the size of the pool but merely assists the Court in determining what should be a fair share of the pool that is available for distribution.
115.In my view, the law is well settled. The Court cannot make an order for the alteration of property interests that extends beyond the available assets of the parties (see Walters v Walters (1986) FLC 91-733, 10 Fam LR 1006; Evans v Public Trustee (1991) FLC 92,223, 14 Fam LR 646; and Grace v Grace (1998) FLC 92-792, 22 Fam LR 442. However, this restriction does not require the Court to be able to clearly identify those assets (see Briese v Briese (1986) FLC 91-713, 10 Fam LR 642; Weir v Weir (1993) FLC 92-338, 16 Fam LR 154; Giunti v Giunti (1986) FLC 91-759, 11 Fam LR 160; Mezzacappa v Mezzacappa (1987) FLC 91-853, 11 Fam LR 957; Black and Kellner (1992) FLC 92-287, 15 Fam LR 343; and Monte v Monte (1986) FLC 91-757).
DISCUSSION
The parties’ respective credit has little bearing on this legal argument. In general, I have preferred the evidence of the wife, to that of the husband, found that he sought to place weight on inferences which could not be sustained and that he reconstructed events to suit the case he sought to make. Little of that is relevant to this point.
The reality is that the parties had a practice of putting aside pre-tax income to pay tax when it fell due. Initially the vehicle for this was a bank account in the wife’s name; in 2007 it became the family trust and the financial structure recommended by the financial advisers. The tax in respect of the 2008 year is tax assessed on income on which the family lived in that year. When implementing the financial advisers’ recommendations, the parties hoped that the family trust would be a vehicle by which their assets could be increased and real property purchased. If assets in the trust as at 30 June, 2008 had been used to pay the tax on that year’s income (which would not have been assessed until the following year) there would have been an excess, as envisaged. The husband’s decision after separation to change the basis on which his tax was assessed resulted in him making $140,000 of quarterly payments in (or just after the end of) the 2009 tax year; it compressed his tax liabilities in the sense he chose to pay tax in respect of income earned in 2009 in that year, rather than waiting for an assessment and paying it in the following year.
It is disingenuous for the husband to assert that the money paid to the family trust prior to separation was intended to pay tax for “the first quarter of 2009”; a decision to ask the ATO for quarterly instalments had not been made by April 2009, far less June or July 2008. Although the wife’s evidence was of believing tax to have been paid by instalments in the past, the evidence of the husband does not substantiate that. It was only after separation that he elected to make quarterly payments. It was envisaged tax would be paid as it fell due; funds paid into the family trust were not earmarked for particular tax quarters. The assets in the parties’ hands or at their disposal at separation all accrued from income earned to date of separation.
The court can find that when the husband swore a statement of financial circumstances on 4 September, 2008 (a document tendered by the wife) he deposed to having $79,532.82 in an ANZ account; [37] of the financial statement recorded that as the current balance as at 28 August, 2008. The same paragraph records an amount of $4,678.83 in the ING account in the husband’s name, as at 28 August, 2008 and $2,663.05 in the ING account in the wife’s name, as at the same date. The funds in the ANZ account and two ING accounts at 28 August, 2008 totalled $86,874.70, some $26,747.30 less than the $113,622 Mr. CY deposed was in those accounts at 30 June, 2008. I have earlier referred to the advice from the husband’s solicitor on 24 November, 2008 of the husband’s intention to retain at least $78,000 to cover “the current taxation liability”.
It was not put that the wife ever accessed these funds after separation. By the time the husband swore another financial statement on 4 December, 2009 there was no mention of the ANZ account to which he had deposed in the earlier financial statement. The financial statement sworn in December 2009 refers to an ANZ E-Trade account with a current balance of $3,030; that account was also recorded in the financial statement sworn in September 2008, when it had a current balance of $830.23. The ING account in the name of the wife is not listed in the financial statement sworn on 4 December, 2009 and an ING account in the name of the husband is reported to stand at $350.
The submission of counsel for the wife was that tax assessed in respect of income earned in 2008 should be a matrimonial liability. In his affidavit Mr. CY recorded the husband’s liability as $292,835 and the wife’s liability as $10,261. In final submission, it was put that the figure for the wife’s tax was slightly lower, at $9,952; that figure came from [39] of the husband’s trial affidavit.
The court can find that at 30 June, 2008 the parties had $113,622 in cash, disregarding the family trust’s cash. It can find that by 28 August, 2008, a little over a month after separation, they still had $86,874 in cash. By 4 December, 2008 there was no record of any sum, save the $3,860 reported by the husband, in different accounts.
The parties were together for only twenty-eight days of the 2009 financial year.
The court cannot say with certainty when the husband made the quarterly payments totalling $140,000 he deposed to making for the second, third and fourth quarters of the 2009 financial year, save that it was after 17 April, 2009 and probably in June and July 2009. But as his evidence was that funds at separation were earmarked for future tax (and thus could not be used for other expenses, including past tax) a reasonable inference is that the cash in the parties’ accounts at separation went towards those payments.
I am not satisfied any tax now due and unpaid in respect of income earned in the 2009 year or any subsequent year should be a matrimonial liability. The husband deposed to an outstanding sum of $51,508 plus $16,650 described as “2009 personal tax on [Hilare] Family Trust distribution estimated at $16,650, none of which has been paid”. I am satisfied that funds available to the parties at separation were sufficient to pay these sums and that the husband chose to use those sums to pay tax on income earned after separation.
I am not satisfied the court should, as submitted by the wife, set against the 2008 taxation liabilities the cash held by the husband at separation. I am satisfied that sum can be notionally attributed to the tax ultimately assessed in respect of the first quarter of 2009 and the family trust distribution, which means that tax can be deemed notionally to have been paid with pre-separation savings.
I cannot say which late payments the “General Interest Charge on Integrated Client Account” of $459.41 referred to in paragraph 39 of the husband’s trial affidavit relates to; there is no mention of it in the accountant’s report, which is dated the same day as the husband’s trial affidavit.
I am satisfied the tax assessed as due by the husband and wife in respect of the 2008 financial year should be paid from the assets held by the family trust. I am satisfied that interest accrued from 24 November, 2009 to the date of payment should also come from that source. The husband’s evidence was of interest accruing at 14.31%. On a tax liability of $302,787 this would result in an annual figure of some $43,329 and a rough monthly figure of $3,611. The court can proceed on the basis that interest on the 2008 liabilities of the husband and wife will be less than $11,000. Taking that $11,000 into account, the ATO would be owed $331,787. Deducting this sum from the trust assets at the date of trial leaves a figure of $75,687.
Thus, after payment of the debt found to be a matrimonial debt, the asset pool would be as follows :
Non-superannuation assets
Family trust $ 75,687
Husband’s interest in X Practice 49,000
Superannuation
Superannuation
Hilare Superannuation Fund 146,577
Total $271,264
CONTRIBUTIONS
In opening, senior counsel for the husband said contributions should not be assessed as equal. He referred to his client’s evidence of bringing substantial assets into the marriage, his substantial income during the marriage and the high level of financial support he has provided since separation. He submitted that the wife’s contributions should be assessed as something less than 50% but did not specifically quantify the discrepancy.
Senior counsel for the husband conceded that the wife had made a contribution as homemaker and parent but said it was over a short period. All contributions were made over a relatively short period. There is no doubt that the significant financial contributions were made by the husband and no doubt that he has provided a significant level of support to the wife and children since separation. The current spousal maintenance figure may be, as senior counsel submitted, a “rolled up figure”, which took account of the children’s needs as well as the wife’s needs, but it is an order for spousal maintenance. The additional payments referred to in the November 2008 order provide specific benefits for the children (for example, health cover and education expenses) and the husband’s affidavit evidence of the many financial contributions he has made since separation was not challenged.
Weighting the scales a little in the husband’s favour for the assets brought to the marriage (albeit not finding they were as substantial as he deposed) and taking account of the parties’ respective contributions of all kinds during the marriage and after separation, a finding of equal contributions could be generous to the wife. As senior counsel for the husband submitted, the wife’s contributions fall short of 50% but any adjustment would be in single figures and, as he submitted, will not influence the outcome.
SECTION 79(4)(d) to (g)
I turn to the matters referred to in s.79(4)(d) to (g).
(d)the effect of any proposed order upon the earning capacity of either party to the marriage;
The husband has maximised his earning capacity
I will consider issues relating to the wife’s earning capacity in the context of s.75(2)(b), (h) and (k). In her case it is important that orders foster, so far as is practicable, her future earning capacity.
(e)the matters referred to in sub-section 75(2) so far as they are relevant;
I will consider each of the relevant paragraphs :
(a)the age and state of health of each of the parties;
The husband is 39 and the wife is 35. Their ages are relevant in terms of income earning capacity and the period before superannuation benefits can be accessed.
In his affidavit the husband deposed to being diagnosed with glomerulonephritis (an autoimmune kidney disease) in his late twenties and losing about 30% of his kidney function. He takes medication to control his blood pressure. His evidence is that medical advice is that there is no reason to believe his kidneys will deteriorate significantly in the future.
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The case was opened by senior counsel on the basis the husband’s income earning capacity was “overwhelming”. The husband works three and a half days per week and earns over $500,000. His remuneration is reviewed in June each year. A letter from the husband’s solicitor to the wife’s solicitor dated 24 July, 2009 estimated the husband’s remuneration for the 2009/2010 financial year at $536,493. The husband’s oral evidence was of this letter being written following an annual performance review and remuneration setting process, which took place around 17 July, 2009. It is probable that earlier in the year he was keen to negotiate on a lower income, which is not unusual in litigation. It is not a matter on which weight needs to be placed.
The husband’s evidence was that it is not an option for him to work half of each Wednesday (bringing him up to four days per week) once M is at school, but that was a subjective assessment, not an objective one. He said he had “other things to do” in the four hours between 10:00 am. and 2:00 pm. on Wednesdays and was not prepared to work those hours, even were X Practice to agree. His evidence was of offering to assist a charity. There was no evidence that he has undertaken any such work; the court can only speculate as to the subject matter of his assistance, given his insistence on the narrowness of his professional expertise. In any event, it is not an aspiration on which I place weight.
The wife’s evidence, which I accept, was that in June/July 2008 the husband negotiated to reduce his workload to a part-time (0.7) loading, unbeknown to her. His evidence was of the parties often discussing the possibility of him reducing his working hours in order to spend more time with the children and that as the parties’ relationship deteriorated in 2008, he began to make arrangements to achieve this. ….
The husband maintained that he is not able to meet his liabilities, particularly his taxation liabilities, as he has been unable to access the assets of the family trust for this purpose. He spoke of the difficulty in meeting targets at X Practice. He spoke of the potential for bankruptcy. He deposed that he has an obligation to disclose to X Practice if he is unable to meet his debts and that his position as a partner could consequently be jeopardized. It must be said that his demeanour when giving this evidence suggested he himself thought it lame. I proceed on the basis it is probable he will continue to earn a very significant income.
The wife’s submission was that the husband’s true income earning capacity is between $750,000 and $1,000,000 per annum. She was sceptical of his stated intention to remain in part-time employment in the medium to long term. A copy of an email obtained from the husband’s personnel file dated 26 June, 2008 recorded the company policy which “requires that all part-time working arrangements for partners be of a limited duration”. The husband’s responsive email, written on the same day, stated that the part-time work arrangement would be a “trial” and should be noted as continuing for a six month period. By the time of the trial the husband had been working on a part-time basis for some eighteen months.
It is probable the husband could work more than the present three and a half days and increase his income. Notwithstanding that finding, I proceed on the basis of his current income and a continuing income derived from working 3.5 days a week.
It was common ground that the parties agreed when together that the husband would support the wife during her studies and it was anticipated she would complete the degree in 2010. I accept the wife’s evidence that the upheaval consequent on the breakdown of the marriage and the litigation, coupled with the time-tabling of certain subjects in one semester in each year only, mean she will not complete her studies until the end of 2011. She anticipates that after completing registration requirements she could set up a practice by February or March 2012. She is not optimistic about her income earning capacity, particularly in the first years following the completion of her Masters degree.
The husband’s perception is that the wife has elected to extend her studies in order to take financial advantage of him. I do not find that to be the case.
In his trial affidavit the husband asserted that the wife received financial support from Mr. H and her family and that she and Mr. H “conduct their households as one”. Mr. H and the wife each live in rented premises, some two houses apart. Cross-examined, the husband advanced four reasons for his assertion. First, he was told by the wife that Mr. H would be attending their son’s birthday party. Second, he was told by the children that their mother told them to treat Mr. H as a member of the family. Third, an analysis of bank statements demonstrated that “money is changing hands”; Mr. H paid for a bed and contributed to a holiday. Fourth, the husband claimed that the wife told him that she and Mr. H intended to live together and he believes this will occur as soon as the two year embargo contained in the Australian Psychological Society Code of Ethics (regarding relationships between patients and psychologists) expires in May 2010.
The wife did not deny that she and Mr. H live close to each other but was adamant in denying that she and Mr. H conduct their households as one. She described their relationship as “dating”; she said she loves Mr. H (as she told the husband when they separated), they are in a monogamous relationship and she envisages its continuation, but she has no current intention of living with Mr. H. She denied instructing the children to regard Mr. H as part of the family, which I accept, and confirmed that Mr. H had attended M’s birthday party. She denied receipt of financial support above the two items on which the husband relied and denied telling the husband she planned to live with Mr. H at the expiration of two years.
When opening the husband’s case, senior counsel referred to the asserted prohibition on the parties living together and read from the relevant Code of Ethics. Rule C4.3 of the Code provides :
Psychologists :
(a)do not engage in sexual activity with a client or anybody who is closely related to one of their clients;
(b)do not engage in sexual activity with a former client or anybody who is closely related to their former client within two years after terminating the professional relationship with the client;
(c)who wish to engage in sexual activity with a former client after a period of two years from the termination of the service, first explore with a senior psychologist the possibility the former client may be vulnerable and at risk of exploitation, and encourage the former client to seek independent counselling on the matter and do not accept as a client a person with whom they have engaged in sexual activity.
The husband practices a profession generally thought to require analytical capacities. Perhaps the husband truly believes that a provision which proscribes sexual activity is not breached if the parties involved in the sexual activity do not live in the one home. There is no logic in the proposition and it is probable its advancement had more to do with the husband’s distress than a genuine belief in its accuracy.
I accept the wife’s evidence that the demands of her degree are onerous, the necessary placements inflexible and that she spends between fifteen and thirty-five hours per week studying.
At present, the wife’s sole income comes from the husband. However successful she is in her profession, it is highly improbable her earning capacity will approach that of the husband. The husband deposed that when working for a consulting firm part-time, the wife was paid $30 per hour. Were that part-time role extrapolated to a 40 hour week (an unrealistic calculation) she would earn $1,200 a week. I do not find the wife presently has a capacity to undertake paid work. Work in that field may be possible in the future although a reasonable inference is that the parties believed psychology to be a more lucrative occupation.
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The arrangements put in place by the final parenting orders of 19 November, 2009 have been summarised. The parties’ younger child started school in 2010. Both parents are playing a significant role in the children’s lives. On a strictly mathematical basis, the children spend more nights with their mother than with their father and more than half of school holiday periods.
(d)commitments of each of the parties that are necessary to enable the party to support :
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain;
The husband has been supporting the wife and children as described. Each of the parties has a commitment to support the other, subject to the legislative provisions, and to support their children.
(e)the responsibilities of either party to support any other person;
Neither party has a responsibility to support any other person.
(f)subject to subsection (3) the eligibility of either party for a pension, allowance or benefit under -
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
The parties’ superannuation interests have been described. Neither deposed to receipt of any government benefits in their most recent financial statements.
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
It is probable the standard of living of both parties has declined since separation. The fall comes off a high base. What is important is that the fall not be disproportionately borne by one party.
The wife was candid that the figures contained in her financial statement represented the sums she saw as necessary to support herself and the children. While senior counsel for the husband made some reference to that, the reality is that the husband, too, included expenses not actually paid; an illustration is the figure in his financial statement of $961 a week for superannuation contributions, in circumstances where he agreed he had made no contributions to superannuation for the past two years.
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
This factor is referable to spousal maintenance and will be considered when determining the wife’s application for continuing spousal maintenance. It can also be relevant to the property application. The husband sought an order that he pay $850 per week by way of spousal maintenance to 31 December, 2010; the wife’s application is for $1,721 per week for five years. The completion of the Masters degree is the wife’s ticket to an income earning future, albeit one in which her earning capacity will never rival that of the husband.
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
The husband spoke of the demands of fulltime practice at X Practice and it was the wife’s capacity to bear the brunt of day to day homemaking and child rearing which allowed him to work the necessary hours. As is not unusual for people in their financial position, assistance was obtained from cleaners and nannies at times, but that does not detract from the responsibility for fulfilling parental and homemaking roles.
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
The parties commenced living together in May 2001, married in November 2003 and separated in July 2008. They were thus together for a little over seven years. In that period the husband’s earning capacity increased exponentially, as described in his trial affidavit. The wife’s decision to undertake a Masters degree which would equip her to work in a profession was taken when the parties were together, was supported by the husband and envisaged her engaging in paid work in the future.
(l)the need to protect a party who wishes to continue that party’s role as a parent;
The children will benefit from both parents continuing the roles they are playing in their lives.
(m)if either party is cohabiting with another person - the financial circumstances relating to the cohabitation;
The wife’s affidavit was silent about Mr. H’s income and he was not called as a witness. Cross-examined, the wife’s evidence was that Mr. H is self employed as a professional in the inner city, renting premises with three other professionals. He earns about $100,000 per annum. He is divorced, has recently settled property proceedings with his former wife and has no assets. He has two children.
The submission of senior counsel was based on the proposition that a man and a woman in a committed relationship who maintain separate households do so for strategic reasons. That is not a proposition I accept. The parties’ evidence in respect of this must be weighed in the same way as any other evidence is weighed and I prefer the wife’s account. Were the wife receiving financial benefits from Mr. H, that could be taken into account when assessing her financial position and other relevant circumstances, regardless of whether they are cohabiting.
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, or is to provide, or might be liable to provide in the future, for a child of the marriage; and
No child support assessment has been made which is unsurprising, given the level of financial support provided by the husband to date. Counsel for the wife spoke in terms of the husband being assessed to pay, in due course, at the top of the scale which, of course, would be an assessment based on an income far lower than his. The relevant figure would be $313 per week. Senior counsel for the husband retorted that were an assessment in those terms to issue, one would expect an application for review and, if necessary, departure.
There is little point in the court speculating on what may happen if and when a child support assessment issues. It can find that the husband has been both responsible and generous in his support of his children and it is unlikely his attitude to them will change.
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
The wife’s evidence was of aspiring to buy a unit for $350,000 or $360,000. The husband readily conceded that it was the wife who, during the marriage, was keen to put money away to buy real property; he was less keen. The reality is that the parties acquired no real property and both rent now, as they did during their marriage. The wife’s lower income renders her more vulnerable. The husband’s current rental is more than twice that of the wife, illustrating the divergence in their financial circumstances. Her rental needs can be considered when assessing the claim for spousal maintenance.
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
There are no other orders made under the Family Law Act 1975 which affect a party or a child which need to be taken into account pursuant to s.79(4)(f) other than the parenting orders to which reference has been made. Similarly, the provisions of s.79(4)(g) have been considered in relation to s.75(2)(na).
As senior counsel for the husband conceded, the disparity in earning capacities alone justifies a very significant adjustment in the wife’s favour, so significant that, were the asset pool $200,000 or $300,00, the wife should receive the whole of the pool.
Although both parties submitted superannuation should be equally split, counsel for the wife opened his case on the basis the concession was made in the context of his client receiving the property order sought, or something close to it. The findings in respect of the taxation liabilities preclude any such order, as the court has found a total asset pool (absent superannuation interests) of $124,687, of which $49,000 is the husband’s interest in X Practice.
The husband’s evidence was of hoping to be in a position to make a superannuation contribution in June 2010 of just under $52,000. It was common ground that he could receive a tax deduction for only $26,000 of any such payment. Taxation liabilities may well impact on his capacity to make that payment in 2010. But the fact he considered it possible, and the likelihood it will be possible in subsequent years, illustrates the enormous discrepancy between the parties’ financial positions. In these circumstances I am not satisfied a splitting order which provides for the wife to receive 50% of the superannuation interest is appropriate. The superannuation and non-superannuation assets need to be considered together and an assessment made of an appropriate adjustment.
I am satisfied that a just and equitable outcome requires the wife to be paid the balance of assets of the trust after payment of the husband and wife’s taxation liabilities in respect of the 2008 year, and interest accrued on those liabilities to the date of payment. The exact figure will depend upon the nett figure realised from the sale of the trust assets. Neither counsel mentioned the potential for any capital gains tax and as the evidence is of the global financial crisis having impacted adversely on the parties’ shareholding, that should not be an issue. On the figures used in this judgment, the wife will receive $75,687, about $25,000 more than the husband proposed and very significantly less than she sought.
The husband frankly conceded that he had made no attempt to discuss payment options with the ATO and that his advice was that an arrangement might be made for him to pay outstanding tax over a twelve to eighteen month period. He gave that answer in response to questions about the 2008 liability, but there is no reason to assume it could not relate to any residual 2009 liability (whether a quarantined first quarter or simply a figure outstanding). Matrimonial assets have been deemed to have been used to pay the tax due in respect of the first quarter of 2009.
I am satisfied a splitting order should provide for the wife to receive 85% of the superannuation interest, which would be $124,590 on the figures before the court. In total she would receive just over $200,000, albeit only $75,867 will be available as cash. The court cannot conjure assets out of thin air but must do the best it can to achieve a just and equitable outcome.
Each of the parties will retain the car in his/her possession and the husband will retain his interest in X Practice. The wife has outstanding legal fees which may take much of her capital; the husband has the liability to GE Capital Finance but can use the excess sum in trust with his solicitor for other purposes. I am satisfied this is a just and equitable outcome.
SPOUSAL MAINTENANCE
The wife sought spousal maintenance, relying generally upon the shortfall between her expenses and income.
In Bevan and Bevan (1995) FLC 92-600 at 81,981 to 81,982 the Full Court stated the law as being :
That an award of spousal maintenance requires:
1.a threshold finding under section 72;
2.a consideration of section 74 and 75(2);
3.no fettering principle that pre-separation standard of living must automatically be awarded where the respondent’s means permit; and
4.discretion exercised in accordance with the provision of section 74, with ‘reasonableness in the circumstances’ as the guiding principle.
Section 72 imposes a duty on a party to maintain the other if reasonably able to do so and if that other party is unable to support himself or herself adequately by reason of one of the factors set out in the section. Section 74 enables the court to make such order as is proper and it is further required to take into account the matters referred to in s.75(2), one of which (s.75(2)(n)) provides that the court shall have regard to the terms of any order made or proposed to be made under s.79 in relation to the property of the parties.
As the Full Court noted in Mitchell and Mitchell (1995) FLC 92-601 at 81,995 the threshold question of whether an applicant can support him or herself “adequately” is not to be determined by any fixed or absolute standard, but having regard to the matters referred to in s.75(2). Nor is the question to be determined upon a “subsistence” level.
The wife will receive little by way of property orders.
The husband proposed the payment of spousal maintenance of $850 a week to 31 December, 2010. When the case commenced, the wife sought $2,000 a week for five years; consequent upon a concession made by the wife during cross-examination, this was amended to $1,721 a week for five years.
Although senior counsel for the husband referred to the need for the court to consider the reasonableness of some of the wife’s alleged expenditure, he did not dispute her need for maintenance nor a capacity in his client to pay, albeit not necessarily to pay the amount sought.
The wife frankly conceded that the figure sought exceeded her anticipated expenditure and was based on her desire to accumulate a little capital. That is not the purpose of maintenance.
In her financial statement the wife deposed to anticipated expenses of $1,250 per week for herself, plus the bulk of fixed expenses totalling $446 (deleting a claimed Visa payment). Her rent is $380 per week; the husband’s rent is $790 per week. At present she receives no income save the spousal maintenance and benefits paid by the husband for her and the children, pursuant to court order. When that order is discharged, and replaced with an order for spousal maintenance, a child support assessment may issue and, on the evidence before the court, the husband would be assessed to pay child support of $313 per week. The parties may enter a child support agreement or there may be applications for review or departure.
In his financial statement the husband deposed to an income of $10,310 a week and total expenditure of $9,965. He agreed that the figure of $961 per week for superannuation was aspirational and that he had not made any superannuation payments during the last two years. Included in his weekly expenditure was $1,720 paid to the wife; at paragraph 31 of his financial statement he referred to a figure of $1,620 per week, plus school expenses of up to $1,000 per annum and private health cover. He deposed to weekly personal expenses of $1,670 (compared to the wife’s $1,250) and fixed expenses of $7,915 per week, which includes tax of $4,300, the unpaid superannuation contribution of $961, rent of $790 and the $1,720 paid to the wife.
Since swearing the financial statement the husband has borrowed $60,000 from GE Capital Finance to pay legal fees. On the figures advanced by his counsel, he owes $26,000 in legal fees ($36,000 billed, to be set against $10,000 held in trust) plus the costs of the trial of about $16,700, a total of $42,700, leaving some $17,300 to his credit in his solicitor’s trust account. He has an obligation to make payments to GE Capital Finance over a two year period. From his income he must find funds to pay tax and, were he to borrow to pay tax in the future, funds to pay interest on borrowings. He earns a very high income but it is not infinite. The court has found it probable that he will continue to support his children as he has to date.
The husband’s submission was that the wife will be in a position to earn an income to support herself from 1 January, 2011. She would be qualified to undertake employment in her profession and could do that, in lieu of starting her own business. He agreed she would need a “child friendly” employer who would allow her to take leave for significant parts of the school holidays as, on his present schedule, he is entitled to only 0.7 of five weeks annual leave, in terms of blocks of time (as opposed to the Wednesdays on which he is not in paid work). His evidence was of expecting the wife to take the children to school and collect them, or arrange for someone else to do that; he preferred they were not put into after-school care but said that was a matter for “my former wife, her family, her partner and her employer, really”.
There is no evidence of what the wife could anticipate earning as an employed professional or in private practice. Common sense suggests a private practice takes time to build. Her evidence was that Mr. H earns about $100,000 a year from the private practice he conducts in the inner suburbs. The court can say nothing of his working hours. The Master’s course undertaken by the wife is a fee paying course.
Much of the evidence went to the wife’s relationship with Mr. H. The legislation does not provide that a relationship with another person disqualifies a spouse from maintenance although some in the community may struggle with the concept of a man in the husband’s position paying maintenance to a former wife who is in a committed relationship with another man, albeit not sharing a home with him. The evidence does not establish that the present arrangement is a sham, designed to stave off the wrath of the Psychologists’ Registration Board and/or to improve the wife’s claim for maintenance; nor does it establish that Mr. H and the wife combine their finances or that she is effectively supported by him. Little can be said about the husband’s claim of family support provided to the wife; save for a couple of throw away lines, there is no evidence on which the court could act.
In his final submission, senior counsel for the husband invited the court to find that the sums the wife deposed to spending on food, household supplies and household repairs were unreasonable. When it was pointed out to him that she, who has the children more often than the husband, claimed a total of $220 per week for those items and his client claimed $270 per week for them, it was put that the husband is “on his own, and he works” and “he eats in restaurants”. The unspoken assumption may have been that someone who lives alone (save for the twelve nights out of twenty-eight on which his children are with him) and is in paid employment on three and a half days a week, must eat in restaurants; it may have been that a man in that position must eat in restaurants. Neither is compelling.
I am satisfied the wife is unable to support herself adequately and that the husband is reasonably able to maintain her. I am satisfied the wife’s reasonable needs exceed $1,500 per week and that the husband has the capacity to pay $1,500 per week.
I am not satisfied the wife should receive maintenance for five years, as sought. The payment of maintenance will foster her eventual earning capacity as it will enable her to complete the course of education necessary to establish herself in her profession, whether in private practice or as an employee. It is reasonable to provide for a period in which registration requirements can be met, and a private practice (or other work) established. I am satisfied maintenance should be paid to the end of 2011, being a period of a little less than two years.
I make this maintenance order on the basis the husband is paying private health cover for the family and contributing up to $1,000 per annum towards school fees. The provision which provides for those payments forms part of the spousal maintenance order made on 25 November, 2008, which will be discharged. I proceed on the basis the husband will continue to make those payments, absent the order, and the wife will continue to receive a benefit consequent on the family health cover.
I certify that the preceding
170 paragraphs
are a true copy of the reasons for
judgment herein of the
Honourable Justice Brown AM.
Dated the day of 2010.
…………………………………………
Associate.
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