J and K
[2004] FMCAfam 107
•10 March 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| J & K | [2004] FMCAfam 107 |
| FAMILY LAW – Spousal maintenance – where maintenance ordered by US Court – where amount of maintenance based on applicant’s then earnings – where applicant has relocated and now earns less – where capital position of parties on balance favours payee – whether orders should be varied where applicant has some available income. |
Family Law Act 1975, ss.75(2), 83
DJN & JLM (1998) FLC 92-816
Beck & Beck (No 2) (1983) FLC 91-38
| Applicant: | KJ |
| Respondent: | SK |
| File No: | PAM 310 of 2003 |
| Delivered on: | 10 March 2004 |
| Delivered at: | Parramatta |
| Hearing date: | 27 February 2004 |
| Judgment of: | Raphael FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Simpson |
| Solicitor for the Applicant: | Uther Webster & Evans |
| For the Respondent: | In person by telephone |
ORDERS
The applicant’s liability for spousal maintenance from 9 August 2002 until 1 February 2003 be varied and calculated at the rate of $500 per week.
The applicant’s responsibility for spousal maintenance from 1 February 2003 to 1 August 2003 be varied and calculated at $NIL.
The applicant’s liability for spousal maintenance from 1 August 2003 until 30 June 2007 be varied and calculated in the sum of US$360 per month or such other sum as is currently being paid to the applicant by way of retirement benefit from the DHHS.
The CSA to calculate arrears based upon the variations made in this order and taking into account the following payments made by the applicant to the respondent.
· 19 August 2002 - $926.10
· 2 September 2002 - $475
· 8 October 2002 - $975.00
· 11 November 2002 - $975.00
Together with all sums paid by the applicant to the CSA in partial payment of his liabilities.
Applicant to pay the Respondent all arrears calculated by the CSA within 28 days of the date of the letter notifying him of the amount of those arrears.
NOTE:The Court notes that it would appear to be in the best interests of the parties in order to avoid delay, currency conversion risk and other associated costs if the applicant and respondent could arrange for the payments hereby ordered to be made non-agency payments and, under the authority of the applicant, paid directly by the US government payer to the Respondent in the United States pursuant to an irrevocable order of the applicant subject only to any further order of this Court.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM 310 of 2003
| KJ |
Applicant
And
| SK |
Respondent
REASONS FOR JUDGMENT
These proceedings relate to spousal maintenance. The applicant seeks the following orders:
1.That the order for payment of Alimony by the applicant to SK pursuant to orders made by the circuit court for Montgomery County Maryland USA (Family Law No. 1216) and registered pursuant to the Child Support (Registration and Collection) (Overseas Related Maintenance Obligations) Regulations 2000 be discharged as at the date to which the order stands paid.
In the alternative but only in the event that the relief sought in paragraph 1 is refused
2.That the order be varied so as to reduce the amount payable by the applicant to Australian dollars $500 per calender month from 1 February 2002 to 1 February 2007.
The applicant is the payer and the respondent is the payee under the Maryland orders previously recited. By virtue of their registration under Regulation 11.2 of the Child Support (Registration and Collection Regulation) the husband’s obligation and the wife’s right to receive spousal maintenance comes within the jurisdiction of this court pursuant to Family Law Regulation 36. The application falls to be considered pursuant to s.83 Family Law Act 1975 and the law to be applied to the determination of the application is the law in force in Australia under the Family Law Act (Regulation 36(4)).
This matter was heard at Parramatta. The husband appeared by counsel, the wife appeared by telephone link as a self-represented litigant. The following applications and affidavits were before me:
·Husband’s Form 12 – filed 24 January 2003
·Wife’s Form 12B - filed 30 May 2003
·Wife’s Notice of Discontinuance – filed 4 August 2003 (Child Maintenance)
·Wife’s affidavit - filed 30 May 2003
·Husband’s affidavit - filed 13 February 2004
·Husband’s Form 17 – filed 13 February 2004
·Affidavit of KH sworn 24 February 2004.
Background
The Husband who is 57 years old married the wife who is 56 years old on the 25 October 1980. The husband is a medical practitioner specialising in Rheumatology. The wife has worked in the retail industry. In 1982 the parties moved to W DC where the husband attempted to set up practice as a specialist Rheumatologist utilising a bank loan designed for that purpose. He was not successful as a private physician. He began to take on extra work as an emergency room physician. On 21 October 1983 their only son was born. In 1985 the parties purchased a marital home in B, M for approximately US$219,000. The husband took on a third position with FDA to assist in paying the mortgage.
Between 1985 and 1994 the parties’ financial situation did not improve. The husband took out further loans. In 1994 the parties separated. In 1995 the husband commenced a relationship with a Ms B and closed his Rheumatology practice. By 1999 the husband’s financial situation had not improved significantly. He was still working two jobs in order to pay off the family’s debts. He came under the care of Dr Kaufman and commenced work with the FDA full time.
In November 1999 the husband met his current partner and on
20 August 2000 he filed for divorce. In that same year he secured full-time employment with the FDA and made arrangements with that organisation to continue working for them in Australia. He moved to Australia in May 2001. On 13 June 2001 orders were made in the US proceedings in relation to divorce, use and possession of the family home; marital property; alimony; child support and counsel fees. The relevant order in relation to alimony was that the husband pay to the wife US$3000 per month assessed upon the wife’s then needs and the husband’s ability to pay. At the time the husband was earning a salary of US $140,000 per annum. The court also ordered that the parties sell the matrimonial home which, it made clear in its judgment, had become a financial burden.
The husband is a specialist in analysis and evaluation of drugs. He believed that his qualifications would be in demand in Australia. He believed that he would be able to earn in Australia an amount almost equivalent to that he was being paid in the United States. In January 2002 his contract with the FDA came to an end and he commenced a position of medical director with a company known as M-T on a twelve month contract. He was paid $150,000 Australian dollars per annum, which he considered to be at the bottom of the range that he was expecting. His salary made it difficult for him to keep up the payments of US$3,000 per month and from March 2002 those payments became intermittent. In February 2003 his contract with M-T terminated. In order to assist him M-T allowed him to remain on with the company at a salary of $36,000 per annum. In the meantime the husband has received a share of his retirement pension benefits from the United States and the wife, believing that she would be in receipt of a regular payment of US$3,000 per month remortgaged her home to pay out her husband’s share. This left the husband with a capital of approximately A$130,000 which he invested in a property in S, NSW purchased with his current partner for A$225,000. Between February and August 2003 the Husband unsuccessfully sought employment and was actually unemployed from May to August 2003. In August 2003 the husband was offered and accepted a position as a clinical scientist and review officer at the U of N at a salary which is currently approximately A$60,000 per annum.
In his affidavit of 11 February 2004 the husband at [42] deposes to having made alimony payments of $3,000 per month through to March 2002 and thereafter the following payments:
April 2002 US$1,000
May 2002 US$1,061
June 2002 A$935
July 2002 A$975
August 2002 A$926
Sept 2002 A$475
Oct 2002 A$975
Nov 2002 A$975
Dec 2002 A$500
Jan 2003 A$500
Feb 2003 A$500
Mar 2003 A$500
Apr 2003 A$500
Dec 2003 A$200
Jan 2004 A$200
The husband receives an FDA annuity of US$746 per month which has been split evenly between himself and the wife pursuant to the MC orders. The husband’s one half of this annuity is banked into a US account the current balance of which is US $4,000.
Since the wife registered the M order with the Child Support Agency (“CSA”) the Husband’s liability to make the payments has been a liability to make the payments to the CSA. At the hearing it transpired that those payments which he had been making had not yet been transferred to the wife by the agency. The wife tendered a document emanating from the United States Bankruptcy Court (D of M) Case Number which indicated that she had applied for bankruptcy relief in the United States. In that document her total assets were said to be US$712, 973.59 and her liabilities US $425,384.21. These assets included US$63,000 unpaid alimony from April 2002. The wife’s evidence was that the bankruptcy filing had taken place on or about 16 January 2004 [Exhibit A]. The spousal maintenance notification from the CSA to the Husband dated 15 October 2002 indicated that his spousal maintenance was set at the rate of $5,488.77 per month from 9 August 2002. This was the calculation of the amount of $3000 per month at the then current exchange rate. At the current exchange rate of A$1 = US$0.78 that payment would only be $3,846.15. I was advised by counsel for the husband that there is no provision for altering the liability once calculated so as to take into account fluctuations in the exchange rate. Of course, I can make an order which takes into account this fluctuation.
Evidence
Both the husband and wife gave evidence. The wife informed me that she was currently working as an assistant store manager in a women’s fashion store earning US$710 per fortnight net, after tax and health insurance. It was not clear from her evidence whether the family home was now going to be sold or whether the bankruptcy proceedings had created some way of protecting her interest in that property. She was cross-examined as to her estimate of the value placed upon her moveable property. She agreed that in an insurance proposal she had suggested this had a value of $285,000 whereas in the bankruptcy document she stated it was only worth about $25,000. She explained this by advising that the proposal to the insurance company was on a replacement basis. It does appear from the bankruptcy document that the wife, if the family home was sold, had approximately US$220,000 free capital.
The husband’s evidence concerned his attempts to secure remunerative employment in Australia and his disappointment at not being able to do so. He finally took the only job that was available to him in which his skills could be utilised effectively. He has to travel from S to N although he would be using the home in S whilst working in N. You can see some support in his living expenses from his current partner who is also a Rheumatologist working within the public health system in New South Wales. I asked the husband whether he could qualify to enter practice as a specialist Rheumatologist in Australia. He reminded me that he had not been particularly successful in that field in the United States and pointed out that he would be required to undertake re-registration and examinations (presumably for the Royal College) which would be unrealistic at his age. He told me that the time it would take him to qualify as a Rheumatologist would probably be less than the time that it might take him to qualify as a General Practitioner. He felt that his skills really lay in the type of analytical evaluative work that he was currently doing.
Findings
I am satisfied that both parties gave truthful evidence. The wife was obviously under a disadvantage by not being represented but was restrained and her questions were relevant. I am satisfied that her current earnings, including her share of the annuity are approximately US$421 per week. I also find that she has available capital of approximately US$200,000. I am satisfied that the wife’s stated earnings are correct and they represent her current earning capacity.
In regard to the husband I accept his evidence concerning his financial position with the result, at the present time, that he is currently receiving A$1157 per week, including his annuity, from which he is paying tax and medical insurance for the benefit of his son in the United States leaving him with a net figure of A$723 per week. His capital position is that he has an interest in the property in S worth approximately $130,000 and a car worth approximately $9,000. I have looked at the applicant’s financial statements. He told the wife that he believed that some items of expenditure had been under provided for. It is difficult to say but it strikes me that the cost of the motor vehicle and the cost of professional papers (including their photocopying) might have been slightly exaggerated.
The Law
The law in relation to these proceedings was discussed seminally by the Full Court of the Family Court in DJN & JLM (1998) FLC 92-816. The case had a number of similarities to the one presently before me. It considers particularly the earning capacity of the husband in a situation where he had changed his occupation post-separation and as a result had a substantial diminution in his income. Interestingly in relation to this aspect of the matter, the Court reviewed a number of American cases. At 17.36 the Court said:
“Thus the test of “earning capacity” in Californian child support cases seems to be the ability to work and an opportunity to work. There are limitations in applying decisions as to earning capacity in Child Support cases. Such cases are concerned in ensuring an appropriate support for a child and because the duty to support children is generally recognised as a duty higher than any other duty other than self-support, child support cases need to be looked at in a different light to spousal support and property cases.
17.37 However there is some assistance to be gained from the various tests expounded in the several US jurisdictions referred to above. We are most attracted by the “ability” and the “opportunity” tests applied in California as at least the minimum test to be applied.
17.38 Once earning capacity has been established by making findings about ability and opportunity, there remains in spousal maintenance cases the questions posed by sections 72 and 74 as to what is “reasonable” and what is “proper”.
I do not believe that the husband in this case chose to leave his well-paying job in America and come to Australia and take up a much less well-paying job in order to defeat any claims his wife might have to spousal maintenance. In fact, he did not leave a well-paying job in America, he brought it with him. It was not unrealistic that this portability would not last. He then proceeded to get the best possible job that he could. At the time he took the position with M-T the Australian dollar had not commenced its rise against the US Dollar and the amount payable out of that salary in Australian dollar terms to comply with the order of the CSA represented almost 90% of the Husbands earnings after tax. I do not think that taking the job at M-T put the husband in a position where he was earning less than his capacity in Australia. It is unfortunate that that position did not work out. It would appear that the applicant’s abilities are more technical than interpersonal and that given his age and abilities the position which he now holds at the U of N may well represent his capacity to obtain income which could be used to provide maintenance for a wife: Beck & Beck (No 2) (1983) FLC 91-38 at 78.
The Child Support registration took place on 9 August 2002 so by the time the applicant received the letter of 15 October 2002 he was already in arrears in the sum of $11,980.62 by the CSA’s calculation. But according to the applicant, he had made payments (set out above) between April and October 2002.
In his submissions, the applicant’s counsel seeks a variation of the orders from the date the applicant left the FDA in January 2002. I do not think that it is appropriate to make any change in the orders until the date of registration on 9 August 2002. At that time he was working for M-T and being paid $150,000 per annum. Adopting the principles set out by the Full Court in DJM at 20.15:
“The obligation to pay maintenance is to be calculated after considering (inter alia) the commitments necessary for the support of the spouse from whom maintenance is sought and the necessary commitments of that spouse to the support of others that he or she has a duty to maintain. There must also be a consideration of the needs of the payee.”
At that time the payee’s needs were effected by her requirement to look after the couple’s only son who is now past the age at which child support is paid. I was not really provided with very much in the way of financial information that would assist me in making this back calculation. But doing the best I can I would note that an income of $150,000 per annum would give the applicant a net income of approximately $1,600 per week. He had no obligations to pay child support after October 2001 but bearing in mind the needs of the wife and her own earning capacity a figure of $500 per week from 9 August 2002 until February 2003 would be appropriate. Between February 2003 and May 2003 the applicant only earned at the rate of $36,000 per annum upon which he was liable to pay tax. I do not think, given the respective earning capacities of himself and his wife during this time, that any payments should be made. The period without payment should continue to August 2003 when he obtained his current position.
The Husband’s net earning from the U of N are not large. The reduction from the amount received from M-T or the FDA has been ameliorated slightly by the payments of pension (although that was always being paid). The Form 17 financial statement supplied by the husband indicated his expenditure was approximately $666 per week. As I have said, I think some of the expenditure elements may have been exaggerated slightly. There is still a significant (but not enormous) difference between the husband’s and the wife’s respective earnings.
Because this matter is to be determined in accordance with the law in force in Australia, it is appropriate that I have regard to matters set out at s.75(2) Family Law Act when considering any variation. In this case I note that both parties are in their mid-to-late 50’s and whilst they are both employed the prospects of any significant enhancement of their remuneration are not great. There would be a greater possibility of this occurring for the husband and if it did occur the wife may have reason to return to the court. Neither party has the care or control of a child under the age of 18 years. The wife’s financial situation is not good although in her statement to the bankruptcy court it would certainly seem that there is an excess of assets over liabilities. In Australian dollar terms the wife’s assets considerably exceed the husband’s. The wife claims she has some responsibility to continue to support their son. I note, however, that the father also provides payment for the son’s health benefits. The parties are sharing the husband’s superannuation benefits but I am not aware of any other benefits the wife is receiving.
It would seem from the evidence that the wife was living at a standard of living that was higher than she should have. I here refer to her continued living in the house in B which the court in M made clear should have been sold some considerable time ago. The husband suggests that if the wife sells the house she would be able to purchase a condominium, the upkeep of which she could afford on her current wages and her proportion of his superannuation benefit. The wife indicated a certain reluctance to leave the area in which she had been living for many years. I do not think the matters referred to in s.75(2)(h) and (j) are relevant but I do note there was a relatively lengthy marriage. The wife seems to have been able to return to the same type of employment as she had prior to the marriage. I note that the husband is receiving a certain amount of support from his partner and I have already noted the property division that has taken place pursuant to the orders of the M Court. I also note the original order of the Court in relation to spousal maintenance, a form of order which is more common in the United States than it is in Australia.
I have taken all these matters into account when considering whether or not to vary the spousal maintenance order. I am quite satisfied that the order needs variation because it no longer represents the situation that pertained when it was made. The question is whether it should be varied to nil or to some sum and if so what that sum should be. My view is that absent the United States pension the difference in net earnings between the parties is not so great that, taking into account the wife’s greater capital position, any payment of spousal maintenance should be made. But the husband does still receive one half of the US pension which is currently banking into a US bank account. It appears to represent a small excess of income over expenditure. The wife had received from the American Courts an order for the payment to her of a sum very much in excess of this figure. She had acted on the assumption that those orders would continue in deciding to re-finance her property and pay out her husband’s share. Her husband has now relocated and having done so is in a significantly worse financial position. Whilst I am satisfied that the husband did not relocate in order to avoid the responsibility placed upon him by the M Court the effect of the reduction in his salary has been to frustrate those orders which are no longer capable of compliance. I would take these matters into account pursuant to s.75(2)(o) and (p).
Orders
I think in the circumstances the most appropriate orders to make in this case are as follows:
(1)The applicant’s liability for spousal maintenance from 9 August 2002 until 1 February 2003 be varied and calculated at the rate of $500 per week.
(2)
The applicant’s responsibility for spousal maintenance from
1 February 2003 to 1 August 2003 be varied and calculated at $NIL.
(3)The applicant’s liability for spousal maintenance from 1 August 2003 until 30 June 2007 be varied and calculated in the sum of US$360 per month or such other sum as is currently being paid to the applicant by way of retirement benefit from the DHHS.
(4)The CSA to calculate arrears based upon the variations made in this order and taking into account the following payments made by the applicant to the respondent.
· 19 August 2002 - $926.10
· 2 September 2002 - $475
· 8 October 2002 - $975.00
· 11 November 2002 - $975.00
Together with all sums paid by the applicant to the CSA in partial payment of his liabilities.
(5)Applicant to pay the Respondent all arrears calculated by the CSA within 28 days of the date of the letter notifying him of the amount of those arrears.
NOTE: The Court notes that it would appear to be in the best interests of the parties in order to avoid delay, currency conversion risk and other associated costs if the applicant and respondent could arrange for the payments hereby ordered to be made non-agency payments and, under the authority of the applicant, paid directly by the US government payer to the Respondent in the United States pursuant to an irrevocable order of the applicant subject only to any further order of this Court.
Although the applicant has been partially successful in these proceedings the respondent has secured a continuing spousal maintenance payment. In the circumstances I do not believe it is a case in which it is appropriate to make an order for costs.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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