Hanton and Evans

[2013] FCCA 222

FEDERAL CIRCUIT COURT OF AUSTRALIA

HANTON & EVANS [2013] FCCA 222

Catchwords:
FAMILY LAW – Applicant seeks interim orders for sale of property – respondent seeks interim spouse maintenance.

Legislation:
Family Law Act 1975 (Cth) ss.72, 74 & 75

Cases cited:
Bevan & Bevan (1995) FLC 92-600

Applicant: MR HANTON

Respondent: MS EVANS

File Number: MLC 10666 of 2012

Judgment of: Judge Roberts

Hearing date: 21 March 2013

Date of Last Submission: 21 March 2013

Delivered at: Melbourne

Delivered on: 22 March 2013

REPRESENTATION

Counsel for the Applicant: Mr Robinson

Solicitors for the Applicant: Taussig Cherrie Fildes

Counsel for the Respondent: Mr Weil

Solicitors for the Respondent: Susan Snyder

ORDERS

1. That MR HANTON (“the husband”) must forthwith pay to the ANZ Bank all arrears payable in relation to the Home Loan Account Number [1] with respect to the property at [E] in Victoria (“the [E] home loan”).

2. That until further order the husband must pay the following by way of interim spousal maintenance for MS EVANS (“the wife”):

   (a)All periodic payments required by the ANZ Bank in relation to the [E] home loan; and

   (b)A monthly sum of $997.00 on or before the first day of each month to an account to be nominated by the wife and the first such payment is due and payable on or before 1 April 2013.

3. That in the event that the child support payments actually paid by the husband to the wife reduces below $423.00 per week, the sum of $997.00 per month referred to in Order 2(b) hereof must be increased by an amount equivalent to that reduction in the child support paid.

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

FEDERAL CIRCUIT COURT OF AUSTRALIA
AT MELBOURNE

MLC 10666 of 2012

MR HANTON

Applicant

And

MS EVANS

Respondent

REASONS FOR JUDGMENT

1. In this matter the applicant is MR HANTON (“the husband”) and the respondent is MS EVANS (“the wife”). 

2. The husband is aged 46 years and the wife is aged 43 years.  They commenced cohabitation in 1997, married in [omitted] 2002 and separated in April 2012.  So the relationship lasted approximately 15 years. 

3. The parties have two children, a boy aged 7 and a girl aged 4. 

4. When they separated the husband moved from the former matrimonial home at [E] into a property at [S] that had previously been let to tenants.  The wife and the children remained living at [E].  It appears to be common ground that the children spend two nights per week with their father. 

5. On 23 November 2012 the husband filed an application for property settlement and he sought interim orders that the [E] property be sold.  He sought no such order in relation to the [S] property. 

6. The husband sought to be excused from particularising the final orders that he sought pending some more clarification of the parties’ financial positions.  On 31 January 2013, the wife filed a response and she also sought to be excused from finalising and particularising the final property orders that she would be seeking. She indicated that she would be seeking final orders for periodic spouse maintenance but on an interim basis she sought periodic spouse maintenance:

   ·firstly, that the husband pay the mortgage payments in relation to the [E] property; and

   ·secondly, an additional sum of $3,000 per calendar month in addition to any amount assessed to be paid by way of child support. 

7. She also sought an order that the husband’s interim application be dismissed.

8. The law in relation to spouse maintenance is governed primarily by sections 72, 74 and 75 of the Family Law Act 1975. The inter-relationship of those sections has been the subject of much discussion in many cases, but it seems clear from Bevan & Bevan[1] that to make an award of maintenance requires the following:

   a)A threshold finding under section 72;

   b)Consideration of sections 74 and 75(2);

   c)No fettering principle that a pre-separation standard of living must be automatically awarded where the Respondent’s means permit; and

   d)Discretion exercised in accordance with the provisions of section 74, with “reasonableness in the circumstances” as the guiding principle.

   [1] Bevan & Bevan (1995) FLC 92-600

9. In my view, I do not need to deal with the threshold test under section 72 because, as Mr Weil commented yesterday, there appeared to be no suggestion that his client’s financial circumstances did not meet that threshold situation. That will become obvious when I refer to the payment of the mortgage payments in relation to the [E] property.

10. This matter was dealt with both on the papers, and on submissions.  There were also a number of documents tendered which are now exhibits. 

11. The husband relied upon his affidavits filed on 23 November 2012 and 15 March 2013, as well as his financial statement filed on 23 November 2012. He is a [occupation omitted] and by general Australian standards he is a high income earner and I will refer further to his income.

12. The wife is employed part-time in [omitted]. It appears that she was qualified as a [omitted] but has not worked in that field for about 10 years.

13. The [S] property was purchased using $70,000 of savings that the wife had at the start of the relationship.  The [E] property was purchased using a gift of $100,000 from the wife’s father and stepmother.  There is a dispute between the parties as to whether that gift was a gift to the wife alone, or whether it was gift to them jointly.  I cannot decide that now and, in any event, the outcome of that dispute is not relevant to what I have to determine.  

14. The parties’ precarious financial position is set out in the husband’s schedule of assets and liabilities which is part of Exhibit “H1”.  That document states that:

    ·The [S] property has a value of $670,000, with a mortgage against it of a bit more than $518,000, so the equity is approximately 152,000. 

    ·The [E] property has a value of $1,100,000 and the mortgage balance in Exhibit “H1” is shown to be $1,053,888.  In actual fact, it is probably more than that amount because Exhibit “W3” shows that the mortgage arrears in relation to the [E] property were $18,688.19 as at the 7^th of this month.  That suggests that they have been in arrears for approximately three months. 

    ·The wife has a car.  The value attributed to it is $8,000.

    ·The husband has a significant tax liability shown to be $183,186; and

    ·The husband has a credit card debt of $30,000.  (Argument yesterday got a little heated over the use of the word “joint” in relation to that credit card debt.  I do not think that is particularly important at this time.) 

15. So it is clear that, if those figures are correct (and I say that the mortgage in relation to [E] is probably more), the parties’ non-superannuation assets have a negative value.  How the parties could get into that position when their combined annual incomes were between $300,000 and $400,000 almost defies belief.  Both counsel appeared to accept the parties were living beyond their means and, frankly, that appears to me to be a somewhat euphemistic way of putting it.

16. However, it is clear that the situation has reached what appears to be a crisis point.  Essentially, that is because the ANZ Bank is threatening to act under the mortgage and sell the [E] property.  It does not, however, take an Einstein to work out that that is a direct and logical result of the fact that the husband stopped paying the ANZ mortgage in relation to the [E] property which is, of course, where his wife and children live.  However, he still kept paying the mortgage on the [S] property where he lives. 

17. It is clear to me that the wife has no capacity to meet the mortgage payments required in relation to the [E] property.  Those payments are in the vicinity of $1,400 per week and her gross income, including the child support that she receives from the husband, is approximately that amount.  The wife’s income from earnings is $982 per week and her child support is $423 per week; giving her an income of $1,405 per week. 

18. When I look at her financial statement it seems to me that her reasonable expenses are as follows: 

    ·Tax - $182 per week.

    ·Superannuation - $68 per week.  (I have included that for the purposes of this exercise but clearly, if things get tight, that may have to stop.  I take it that is an additional amount and not the 9% compulsory superannuation.)

    ·Motor vehicle insurance - $17 per week.

    ·Home and contents insurance - $23 per week.

    ·Car registration - $12 per week.

    ·Minimum credit card payments - $17 per week.

19. All of that adds up to $319 per week.  To that must be added her reasonable expenses as set out in Part N of her Financial Statement.  In the main, I accept most of those that she has listed as being reasonable.  However, I have made some adjustments: 

    ·The first adjustment, in my view, should be house repairs.  Nothing in the affidavit material suggests that any house repairs are imminent.  That is not an immediate requirement, so I deduct that $60.

    ·I have reduced entertainment and hobbies to half the amount, being $70, not $140. 

    ·Holidays - frankly, if you are at a crisis point – you cannot afford holidays if you cannot afford to pay the Tax Office and the mortgage. 

    ·I have deleted education expenses from her list because her husband says he is paying those - if I was to leave them in it would be “double dipping”. 

    ·If one’s finances are at crisis point, paying a cleaner is a bit of a luxury, so I have taken that out as well. 

20. That brings her expenses in Part N down to $1,303.  Adding that to the $319 that I referred to earlier makes a total of $1,622. 

21. If her income is $1,405 inclusive of child support, she has a shortfall of $217 per week.  So, allowing for unforeseen contingencies, it seems to me that $230 per week is probably a reasonable amount for periodic maintenance.  Consequently, if the husband has the capacity to pay $230 per week, and the mortgage, he should pay that as spouse maintenance. 

22. Consequently, one needs to look at his capacity to pay and assessing his capacity to pay is more problematic than assessing the wife’s income and expenses.

23. In the aide memoire provided by the husband’s counsel,[2] he sets out the following:

    [2] Part of Exhibit “H1”

Taxable Income (average 2011-2012 plus $60K)	$341,000
Tax (calculated on income $341,000)	$127,000
Medicare	$5,100
Net	$208,900
Per week	$4,107

1. With all due respect to Mr Robinson, that is not a useful way of assessing cash flow and funds available in the short term.  That is essentially because it treats the husband as if he was a salaried employee, having tax deducted from his salary every pay day.  He is not a salaried employee and I venture to suggest that if he had been a salaried employee on that sort of salary, the parties probably would not be in the “pickle” in which they find themselves at the moment. 

2. Mr Weil suggested that, from a quick analysis of Exhibit “W1”, the husband is doing somewhat better this financial year than the average of the last two years.  Exhibit “W1” is a weekly summary from the husband’s clerk of his billings and receipts.  Mr Weil suggested (erroneously, in my view) that I should divide the receipts by 30 to arrive at a monthly income of $49,314. 

3. That is erroneous for two reasons.  Firstly, it covers a period 36 weeks (as was pointed out by Mr Robinson) and secondly, it does not properly account for recurring expenses as a [occupation omitted]. 

4. In trying to work out what the husband’s reasonable recurring expenses would be, I have had regard to his draft tax return for 2012.[3]  It shows overall expenses of $38,426 (excluding $60,000 that was paid to the wife).  That is approximately 10% of the gross receipts. 

   [3] Exhibit “H2”

5. So if one applies a 10% rate of expenses to gross receipts in the 36 weeks, he would have an income available to that date earlier this month at the end of those 36 weeks of $329,517 after expenses (i.e. 90% of $366,131). 

6. If I extrapolate that out to 52 weeks it gives him an income this financial year of $475,924, which is a significantly higher income than the previous two years, being 2011 and 2012.  Of course, I cannot come to any firm view that he will earn $475,000 in this tax year.  However, I can conclude that he is travelling a lot better than he did last year and the year before.  That may well explain why he has $40,000 in a bank account. 

7. In my view, it is appropriate for the purposes of today’s exercise to adopt a current notional gross income of at least $375,000 in relation to this particular matter.  That is a gross of $7,211 per week. 

8. In my view, I should ignore current tax because, as I have already said, he is not a salaried employee and he is not paying tax yet on the income that he is earning at the moment in the same way that a salaried employee would.  However, his past tax cannot be ignored because the ATO will push him into bankruptcy if he does ignore it. 

9. I now turn to consider the other expenses of the husband.  Part N of his Financial Statement needs to be viewed in the same that I viewed the wife’s Part N.  In my view:

   ·His claimed expenditure for food is excessive, and I have reduced that to $80 per children and $165 for the husband, making a total of $245. 

   ·House repairs I have ignored for the same reason - no immediate repairs requiring significant expenditure are referred to in the affidavits. 

   ·Clothing and shoes I have reduced to similar levels set out by the wife.  What I have done is reduce the children’s to $20 per week (given that they are with him less) and his to $65, making a total of $85 per week. 

   ·I have pruned entertainment and hobbies by half to $50. 

   ·I have taken out holidays for exactly the same reason that I took that out of the wife’s expenses. 

   ·I consider the husband’s claimed expenditure on books magazines, vinyl, compact disk, records and MP3s to be almost ridiculously high and I have reduced that to $25 from $150. 

   ·I have reduced the payment on gifts to the same level of payment by the wife - $15. 

   ·He has an unusually high expenditure on taxis.  Mr Robinson said yesterday that the husband does not have a car and he needs to see clients and to move about.  I note that he is claiming for “Myki” (which I know happens to be that whiz-bang piece of plastic one uses getting on trains and buses - I have one myself even thought I do not come from Melbourne.)  I also suggest that any expenditure on taxis related to the husband’s work would be a tax deduction and, in any event, would come out of as a taxable expense.  However, I do accept that there will be times when he will need to use a taxi to travel from A to B with the children.  So I have left in the $50 that he has allocated to the children. 

10. That gives him what I consider the more reasonable expenditure per week of $1,257.  To that I need to add:

    ·The [E] mortgage which I calculate to be $1,450 per week. 

    ·The [S] mortgage - $585 per week. (I get that from paragraph 8 of the husband’s second affidavit and, with respect to Mr Robinson again, I think it is overstated in his document [4] as $800-odd.)

    ·He has a current arrangement with the Tax Office to pay $2,307 per week (i.e. $10,000 a month). 

    ·He is paying the children’s school and/or kindergarten fees of $443 per week. 

    ·As I have already stated, he is paying $423 in child support, which is more than the assessment but which he says he is willing to keep paying. 

    ·Minimum payments on credit cards - $300 per week. 

    ·Rates and insurance - $186 per week.

    [4] Exhibit “H1”

11. When one adds in his reasonable living expenses of $1,257, the total is $5694. 

12. If his income is $7,211, that gives him the capacity of $1,517 per week within which to negotiate with the Australian Taxation office in relation to the personal tax that he wishes to pay at $5,000 a month or $1,154 per week. 

13. He also has the capacity to pay the wife the sum of $230 per week spouse maintenance that I have referred to earlier as being what I consider to be an appropriate sum. 

14. I am therefore of the view that, managed carefully and at least in the short term, the husband is in a financial position to avoid the sale of the [E] property.  It may well be the eventual outcome that one or both of the properties will need to be sold.  However, it is my view that that should not be ordered on an interim basis. 

15. Those decisions must either be left to the parties to work out for themselves, or for the court to work out for them if they are unable to work them out.  I also note that there is a financial conciliation conference scheduled and there is a listing of this matter for a final hearing. 

16. Certainly, the arrears of mortgage payments in relation to the [E] property need to be paid and the husband has the capacity to do that in that he has $40,000 in the bank. 

17. I have also found that he should pay $230 per week, which is $997 per month.  However, that is based upon him paying child support at an agreed inflated rate, so any order I make needs to take account of that as well.

18. Consequently, the orders that I will make are that:

    ·The husband must forthwith pay to the ANZ Bank the arrears in relation to the mortgage over the [E] property - that is the home loan that is referred to in the two exhibits handed up to me, the current balance being something in excess of $800,000. 

    ·Until further order the husband must pay by way of interim spousal maintenance all periodic payments required by the ANZ Bank in relation to the [E] home loan and a monthly sum of $997 to an account to be nominated by the wife, the first such payment to be made on or before 1 April 2013.

    ·If the child support payments actually paid by the husband to the wife reduce below $423 per week, then the sum of $997 per month must be increased by an equivalent of whatever that reduction is.

19. As I have already said, this matter is scheduled for a conciliation conference on 20 May 2013 and, if it does not resolve, a trial is scheduled for 5 September 2013.  Directions have been made in relation to that, so I am therefore of the view that I do not need to make any other further orders. 

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Judge Roberts

Date:  7 May 2013