Hewart and Wignall

[2009] FamCA 1132

FAMILY COURT OF AUSTRALIA

HEWART & WIGNALL [2009] FamCA 1132

FAMILY LAW – SPOUSAL MAINTENANCE – Interim
FAMILY LAW – CHILD SUPPORT – Application for departure

Family Law Act 1975 (Cth) ss 72(1), 75(2)
Child Support (Assessment) Act 1989 (Cth) ss 117(2), 117(2)(c), 117(4), 117(5)

In the Marriage of Gyselman [1991] 15 Fam LR 219; [1992] FLC 92-279

APPLICANT: Ms Hewart

RESPONDENT: Mr Wignall

FILE NUMBER: SYC 8683 of 2007

DATE DELIVERED: 27 November 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston JR

HEARING DATE: 7 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richardson, SC

SOLICITOR FOR THE APPLICANT: Barkus Doolan Kelly

COUNSEL FOR THE RESPONDENT: Mr Bell

SOLICITOR FOR THE RESPONDENT: Craddock Murray Neumann

Orders

1. That pending further order the husband shall pay or cause to be paid to the wife by way of spouse maintenance the sum of $1100 per week first payment as from 17 August 2009.

2. That there be departure from the child support assessments issued on 2 March and 23 July 2009 so that in lieu thereof

   -the husband shall be liable to pay child support for the children T born on … April 2000, L born on … August 2001 and F born on … April 2003 at the monthly rate of $5200 for the period from 17 February 2009 until 31 December 2010 and subsequently as assessed pursuant to the provisions of the Child Support (Assessment) Act 1989 AND

   -that the husband pay as and when they fall due all reasonable costs of and incidental to the attendance by the children at L Public School or such other school as mutually agreed by the parties, said costs to include tuition fees, school organised extra-curricular activities agreed by the parties, school excursions, reasonably necessary school equipment such as bags, stationery and the like requisites, text books, and other written requests from the school for non-optional payments and in the event from 7 August 2009 the wife pays any such cost the husband shall reimburse the wife within 7 days of receipt by the husband of the tax invoice, letter or other document from the school requesting payment.  Where practicable the wife will consolidate such requests and documents on a weekly basis.

3. That the applications in paragraphs 6 – 13 of the wife’s Further Amended Application in a Case filed on 22 July 2009 be stood out of the list of active cases with liberty to restore such to the list for further directions on 7 days notice.

4. That the wife’s application for an order that the husband pay an enrolment fee to C School for T be dismissed.

5. That the Court notes the written undertaking to the Court by the husband through his counsel that he will not materially increase his personal salary or salary package without first providing to the wife or to her solicitor 14 days written notice of same.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8683 of 2007

MS HEWART

Applicant

And

MR WIGNALL

Respondent

REASONS FOR JUDGMENT

Introduction and Applications

1. The parties in these proceedings are Ms Hewart and Mr Wignall.  For convenience I shall refer to them as “the wife” and “the husband” respectively.  They have approached the Court for a determination of certain financial matters.  There are outstanding substantive property proceedings between the parties.  At this point the parties hope to be able to resolve those proceedings in time.  To their credit they have been able to resolve some interlocutory issues between them, I shall include these in the orders that I make in these proceedings.

2. The wife seeks orders to the following effect:

   ·That the husband pay or cause to be paid to her by way of interim spouse maintenance the sum of $2065 per week, first payment to be made within 7 days and to be varied on 1 January each subsequent year in accordance with movements in the Consumer Price Index;

   ·That there be a departure from administrative assessment of child support with respect to the parties’ three children T born in April 2000, L born in August 2001 and F born in April 2003 so that in lieu of the current child support liability the husband pay child support for the children in the weekly amount of $2650 first payment within 7 days, such to be adjusted on 1 January each year in accordance with movements in the Consumer Price Index;

   ·That the husband pay to C School the non-refundable enrolment fee of $5700 as and when it shall fall due.

3. The wife had sought orders to the effect that the husband pay to her an amount by way of preliminary costs and also certain orders in relation to the costs of single experts.  But the parties have agreed that such applications would be stood out of the list with liberty to restore them to the list for directions on 7 days notice.

Background

1. The wife was born in 1960 and the husband was born in 1965.  They commenced cohabiting in approximately 1996.  They married in 1996, separated on 6 December 2006 and divorced on 6 March 2008.  There are three children of the marriage as referred to above. 

2. At the time the parties commenced cohabiting the husband was the Chief Financial Controller for a corporation T Pty Limited.  At this time the wife was a director at W Firm.  The wife continued working until shortly before the birth of the parties’ eldest child, then she took twelve months maternity leave.  At the end of her maternity leave she returned to W Firm working three days per week until the birth of the parties’ second child.  The wife took another twelve months maternity leave and then again returned to work with W Firm for three days a week, until shortly before the birth of the parties’ youngest child.  The wife has not worked since the birth of the parties’ youngest child.

3. The husband and wife established a company WH Holdings Pty Limited which they own equally.  In early 2006 this company purchased the company T Pty Limited.  The business was purchased for $1 but there was considerable debt.  So the parties arranged for a loan facility from HSBC in the amount of $7.5M.  Each of them signed personal guarantees for this loan facility.  The husband is the Chief Executive Officer of the business.  The wife also had significant involvement in the operation of the business.  From inception of the business to the time that the parties separated they arranged for the business to pay each of them identical salaries.

4. From February 2007, which was shortly after they separated, until January 2008 they arranged payments to the wife at the rate of $23 630 per month and $10 766 per month to the husband.  Then from January 2008 the husband reduced the wife’s monthly payment by $2058.  The wife said that this coincided with the husband moving into a different home in inner Sydney with his then partner. 

5. In March 2008 the husband made the wife redundant from the company despite her opposition to this.  He stopped her salary payments and the company made a redundancy payment to her of $39 905 net.  From that time the husband made payments to the wife for herself and the children of $10 483 per month until June 2008.  From June 2008 the wife was paid $20 000 per month and the husband was paid $12 824 per month plus provision of a company car.  In November 2008 the husband informed the wife that they both needed to take a 20 percent pay cut.

6. On 25 January 2009 the husband remarried, his wife being Mrs Wignall.  Ms Wignall practices a profession.  In February 2009 the husband informed the wife that they both needed to take a further reduction in their salaries.  But the wife informed the husband that whilst her salary had been reduced she noticed that his had not been reduced.  In any event, in February 2009 the husband reduced his monthly payment for her and the children to $7596.  But the husband’s monthly salary remained at $10 652. 

Interim spousal maintenance

1. Sub-section 72(1) of the Family Law Act 1975 provides to the effect that a party to a marriage is liable to maintain the other party to the extent that the first-mentioned party is reasonably able to do so if, and only if, that other party is unable to support himself or herself adequately whether by reason of having the care and control of a child of the marriage who has not attained the age of 18 years or for some other reason expressed in the sub-section, having regard to any relevant matter referred to under s 75(2) of the Act.  It is submitted on behalf of the wife that she satisfies this threshold requirement particularly on the basis of being the children’s primary parent.

2. On the other hand it is submitted on behalf of the husband that the wife has had a very successful career certainly to the time of the birth of the children and since then in a part time capacity at least and that it is inconceivable that the wife would not be able to find appropriate employment.  It is submitted in this regard that all the children now attend school, that the wife had previously been able to find employment which permitted her still to attend to the responsibilities involved in the care of the children and that in all these circumstances there is no basis whatsoever to conclude that the wife has no income earning capacity.

3. But as was pointed out by learned senior counsel for the wife, after the expiry of her maternity leave following the birth of the parties’ youngest child the wife negotiated with W Firm to accept a redundancy package.  The wife said that this was specifically because consulting work was not compatible with looking after children even though her employer had been extremely supportive and flexible about her working arrangements.  Her experience had been that clients wanted her readily available and prepared to travel on short notice.  She said that this was completely incompatible with the responsibilities required for caring for the children.

4. I must say I am persuaded by the submissions on behalf of the wife in this regard.  One might anticipate a time when the children acquire a greater degree of independence than at present which would then enable the wife to be able to be in a position to properly balance the requirements of employment and those of being primary parent to the children.  In my view, this point has not been reached, at least not at this interim stage of proceedings. 

5. I would have a different view if the position was that the husband had offered the wife some part time work in the parties’ business provided that there was some flexibility about such.  But this is not the case and, as I have said, the husband made the wife redundant. 

6. In her financial statement the wife estimated her total personal weekly expenditure as being $4004.  This includes attributing to her own needs the cost of the totality of the $1000 rent paid for the apartment in which she and the children live.  In my view part of this should more appropriately be attributable to the children.  It was submitted on behalf of the husband that the wife’s estimates of her expenses were too high.  Notwithstanding the fact that the parties enjoyed a high standard of living prior to their separation, certainly by what one sees commonly in the community, in my view the wife’s estimates are too high.  And they are too high by a considerable margin. 

7. Sub-section 75(2)(g) of the Act requires the Court to take into account where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable.  It is clear that this requires the Court to consider the standard of living that the parties had enjoyed prior to their separation as well as their current circumstances.  Despite my observations about the wife’s estimates in relation to many items as being too high, I do not have this view in relation to her expenditure of $1000 per week on rent.  This is because the husband is paying approximately $1128 per week to rent premises for himself and his wife.  In these circumstances I cannot see how it could be suggested that $1000 per week rent for the accommodation of the wife and the children would be unreasonable.  But the Court must also take account of the fact that following separation and divorce there are two households which must then be funded.  For most people this involves some reduction in their standard of living. 

8. The $4004 which the wife estimated her personal expenditure to be, not only included the wife’s estimates of her own costs but also her estimates of the costs of the children during periods when they are with her as their primary parent. 

9. Leaving to one side for a few moments the wife’s estimate of her own average weekly expenses, the wife’s financial statement estimates her other personal expenditure as being $1555 per week.  In my calculation of her appropriate costs I do not propose to include her superannuation contributions of $264.  I propose to include $500 as the wife’s share of the rent on the apartment in which she and the children reside, I do not propose to include life insurance premiums, I do however include the contents insurance in the revised amount of $31 and the health insurance in the revised amount of $40, the green slip at $35 and the registration at $7.  This is a total of $613. 

10. To this is to be added the appropriate average weekly expenses for the wife.  In her financial statement the wife estimated these as coming to a total of $800 per week.  In my view some of the estimates are simply too high given all the appropriate circumstances as I have said.  Without specifying particulars, in my view the estimates for food, telephone, motor vehicle maintenance, fares / car parking, clothing and shoes, medical, dental and optical, entertainment / hobbies, holidays, repairs and a few minor matters are too high.  In all the circumstances in my view the appropriate cost for the wife’s average weekly expenses as distinct from those of the children are a total of $505.  This means that the appropriate weekly costs of the wife for both personal expenditure and average weekly expenses is $1120.  I shall round this off to $1100.

11. The next matter to consider is the husband’s capacity to pay such an amount.  I propose to deal with this after I have considered the issue of departure from child support assessment.

Child support departure

1. The wife applied for an administrative assessment of child support to be payable by the husband for the children.  An assessment issued on 2 March 2009 which required the husband to pay child support at the rate of $1595.25 per month for the period from 17 February 2009 until 16 May 2010.  This was $368.13 per week.

2. A further child support assessment issued on 23 July 2009 which required the husband to pay child support for the children at the monthly rate of $2144.25 for the period from 19 March 2009 to 12 July 2009.  This is $493.13 per week, at least according to the notice of assessment issued by the Child Support Registrar.

3. I am satisfied that there is jurisdiction for the Court to make an order for departure from the administrative assessment of child support pursuant to s 116(1)(b) of the Child Support (Assessment) Act 1989 (“the Assessment Act”). This provides, in effect, that a carer entitled to child support may, in respect of an administrative assessment of child support, apply to the Court if the carer is a party to an application pending in the Court and the Court is satisfied that it would be in the interests of the liable parent and the carer for the Court to consider whether an order should be made in the special circumstances of the case. In my view, it is clearly in the interests of both parents for the application for a child support departure order to be considered at the same time as the Court is considering the wife’s application for interim spousal maintenance. Otherwise there would have to be a separate determination of this in some form which would certainly involve the parties in inconvenience and probably additional expense.

The process

1. In determining an application for departure from a child support assessment the Court is to undertake the three-step process set out in the decision of the Full Court of this Court in the case of In the Marriage of Gyselman [1991] 15 Fam LR 219; [1992] FLC 92-279. This process requires the Court to consider:

   (1)Whether one or more of the grounds for departure in s 117(2) of the Assessment Act is established.

   If so:

   (2)Whether it is “just and equitable” within the meaning of s 117(4) to make a particular order and

   (3)Whether it is “otherwise proper” within the meaning of s 117(5) to make a particular order.

Is there a ground for departure?

1. It is submitted on behalf of the wife that the ground in s 117(2)(c) is available.

2. Sub-section 117(2)(c) of the Assessment Act in effect provides that the grounds for departure include that, in the special circumstances of the case, application in relation to the child of the provisions of the Assessment Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, earning capacity, property and financial resources of either parent or the child.

3. The meaning of the expression “in the special circumstances of the case” was considered by the Full Court of this Court in Gyselman (above).  The Full Court said (at Fam LR 225; FLC 79,065):

   … Whilst it is not possible to define with precision the meaning of that term (in the special circumstances of the case), as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary.  That is, the intention of the Legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.  In Savery’s case (at Fam LR 815; FLC 77,897), Kay J, adopting the view in In the Marriage of Philippe (1977) 4 Fam LR 153 at 155; (1978) FLC 90-433 at 77,202 in a different context, said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.

4. Subsection 4(1) of the Assessment Act provides that the principal object of the Act is to ensure that children receive a proper level of financial support from their parents.

5. The current child support assessment of $2144.25 per month is low when one considers the standard of living which the parties enjoyed during the course of their marriage, even taking into account the fact that the husband pays the children’s public school fees and levies, cost of their swimming and karate lessons and equipment and the cost of their private medical insurance. In any event, the amount of the assessment is so far short of what the proper costs of these children require that the Court must conclude that application of the child support formula has resulted in an unjust and inequitable determination of the level of financial support to be provided by the husband because of his income and financial resources. Accordingly, in my view the ground in s 117(2)(c) of the Act has been established.

Just and equitable

1. It is appropriate to consider whether it is just and equitable within the meaning of s 117(4) of the Assessment Act to make an order for departure from the assessment. This requires consideration of the matters set out in s 117(4) of the Act.

2. In relation to the proper needs of the children, in her financial statement the wife estimated the children’s average weekly expenses to be $1649.  But this was without attributing any of the rent to the children.  I propose to attribute $500 of the $1000 weekly rental to the children.

1. As indicated above, objection was taken on behalf of the husband to many of the wife’s estimates of cost items involved in the estimate of $1649.  In fact it was submitted on behalf of the husband that “they all look high”. 

2. I must say I do not agree with this submission but in my view the following estimates are too high.  These are food, telephone, clothing and shoes, children’s activities (noting that the husband has been paying for swimming and karate as indicated above), child minding, holidays, education expenses (these are no longer applicable), cleaning, repairs – furnishings and appliances, books and magazines, gifts and other necessary commitments.

3. Trimming these estimates leads to the conclusion that instead of the children’s costs being $1649, in my view their proper costs are $910 plus $500 as their share of the rent.  I shall round this off to $1400 per week.

4. The children have no capacity to provide for their support so it will be up to their parents to fund this.  But the wife has no capacity to contribute to this at least not before the parties complete their substantive financial dispute. 

5. In these circumstances, they can only look to their father to provide for their needs.  He says that he does not have the capacity to pay child support in any higher amount than he has been paying pursuant to the assessment.  I shall refer to this again below.

Otherwise proper

1. It is the parents who have the primary duty to provide for their children.  The wife is not in receipt of an income tested pension, allowance or benefit so such cannot affect a proper order.

Husband’s capacity to pay

1. The husband said that his gross weekly income was $7099 in May 2009, $5769 in August 2009 and that his after tax income was $3525.  The husband said that from this net income of $3525 he paid child support and rent of $1125 leaving him $1907 for all other weekly expenditure.

2. I accept that the husband’s wife Mrs Wignall has a gross weekly income of $1482 which after payment of tax, a HECS liability and a personal loan leaves her $919 per week.  Mrs Wignall contributes approximately $150 per week towards food, utilities, holidays, household and living expenses and what the husband describes as the children’s clothing.  I must say that, unless I have misunderstood this evidence, this appears to be a most modest contribution to the expenses of the household.

3. The most difficult aspect of this case is to feel confident about the prospects of the parties’ business in the near future.  The business has been able to support this family in enjoying a very comfortable standard of living in the past.  But the husband said that the Global Financial Crisis has had a very serious and deleterious effect on the business in terms of its revenue.  For example, the husband said that during the period from the end of the 2008 financial year to the end of March 2009 revenue for the business has reduced by 16 percent and accounts written have reduced by 33 percent.  He said that staff numbers have had to be significantly reduced and that staff have been moved to working a nine day fortnight.  He said that whereas the business previously was conducted from 200 staff positions, 45 have been made redundant and another 23 redundancies are planned.  He said that he has had to reduce his own salary and to make ends meet in terms of his personal expenditure he has had to increase the use of his credit card.  He said that his wife has increased her work to full time employment.  He said that he is seriously concerned about the capacity of the business to continue to trade. 

4. In this regard the husband said that there is a risk that the company auditors will qualify the statutory accounts on the basis of going concern, that this was a difficulty last financial year and that the company’s financial position has deteriorated significantly since last year.  The husband said that the HSBC, which has provided the financial facility which enables the company to operate, relies on those statutory accounts and the auditors report as a condition of continuing to offer the facility.  The husband said that the company would potentially breach the HSBC’s requirements in September and each ensuing month thereafter.

5. Learned counsel for the husband referred to a document which was Annexure N to the wife’s affidavit sworn on 30 July 2009 which is a document prepared by the chief finance officer for the parties’ business Mr M and which included a document headed 2009 / 2010 forecast.  In particular, attention was drawn to the bottom line of the table which was a forecast of managerial profit and in particular to the forecast position as at the beginning of the new financial year in 2010.  At that point the business forecast for managerial profit was $131.  It was submitted in effect that if this forecast was realised, the business would be in a parlous situation.

6. But on the other hand learned senior counsel for the wife used the same document to inspire some confidence that financial matters were not quite as dire as presented on behalf of the husband.  Learned senior counsel for the wife drew attention to the fact that forecast managerial profit of $131 was forecast on the basis that there would be depreciation of $713 652.  It was suggested that in fact the husband, in these circumstances, should be able to arrange funding to meet a proper order of the Court by being able to make arrangements for a payment from the business ultimately to be entered against his loan account, and that this could be done without creating a tax problem.  But it was submitted that the husband should not be too concerned about borrowing money from the company in order to do this in circumstances where there is reason to look forward to improved prospects for the business. 

7. On the other hand it was submitted on behalf of the husband that the conditions under which the HSBC facility is made available might not permit such a loan account to be created.  Learned senior counsel for the wife submitted that if this was a problem then the wife would formally join with the husband to make an application for HSBC to relax any such condition. 

8. Doing the best that I can in these somewhat difficult circumstances I propose to put in place orders which will require the husband to pay the needs of the wife and the children as I have found them to be although I shall round off the wife’s needs to $1100 per week.

9. In relation to departure from administrative assessment of child support as indicated above, the proper needs of the children are $1400 per week.  But because I shall be making orders retrospective to February 2009 I shall reduce the amount to $1200 per week.  I also propose to provide that the relevant period of operation of the order shall be from 17 February 2009 until 31 December 2010.  This is because the parties’ circumstances might well change next year especially when they resolve their substantive dispute.

10. This will require the husband to rearrange his financial affairs and it might be necessary for him to make an application to HSBC to relax the requirements of their facility as envisaged above.  If such was to prove impossible, it might become necessary for the husband to make a further application to this Court upon appropriate evidence about his endeavours to comply with the orders.

Private school fees

1. As indicated above, the wife has also sought an order to the effect that the husband pay to C School the non-refundable enrolment fee of $5700 as and when it shall fall due.

2. It is common ground that some years ago the parties entered the boys’ names on waiting lists at C School, S School and some other schools.

3. A letter from an official at C School to the parties in April 2009 informed them that the School was in the process of arranging interviews for entry by T at Year 7 in 2012.  The letter also indicated that if a place was offered to T following interview the School would require a non-refundable enrolment fee of $5700.

4. The wife is most desirous of pursuing this opportunity for T but she is unable to pay the $5700 fee.

5. The husband said that the boys names were placed on the waiting lists at these private schools at a time when both he and the wife were employed in highly paid positions their combined incomes at the time being approximately $400 000.  The husband said that in circumstances where their financial position has deteriorated he no longer has confidence that they would be able to commit themselves to the expenditure involved in enrolment of the boys at private schools.  In any event, the husband has the view that either a selective school, or a good comprehensive public school education would be suitable for the children.

6. I am afraid that I am not persuaded at this time that the financial circumstances of the parties are such that this Court should use its authority to require the husband, against his expressed wishes, to take this first step in committing the parties to fund a private school education for the boys, or at least for T.  I do not propose to make the order sought by the wife in this regard, at least not at this stage.

I certify that the preceding fifty-three (53) paragraphs are a true copy of the Reasons for Judgment of Judicial Registrar W P Johnston.

Associate:     

Date:              27 November 2009