Kent and Kent (No.2)
[2008] FMCAfam 666
•27 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KENT & KENT (No.2) | [2008] FMCAfam 666 |
| FAMILY LAW – Costs in property and spousal maintenance proceedings – duration of final periodic spousal maintenance. |
| Family Law Act 1975, ss.79, 74(1), 117, 81, 72(1)(a), 82, 83(2) |
| Applicant: | MS KENT |
| Respondent: | MR KENT |
| File Number: | BRM 7880 of 2006 |
| Judgment of: | Orchiston FM |
| Hearing date: | 24 January 2008 |
| Date of Last Submission: | 29 May 2008 |
| Delivered at: | Sydney |
| Delivered on: | 27 June 2008 |
REPRESENTATION
| Solicitors for the Applicant: | Kennedy Spanner Lawyers |
| Solicitors for the Respondent: | Myer Pigdon Lawyers |
ORDERS
Each party shall bear its own costs of and incidental to the proceedings: Kent & Kent [2008] FMCAfam 7 (File No.: BRM 7880 of 2006) concerning the alteration of property interests and spousal maintenance.
Order 7 of 24 January 2008 in relation to spousal maintenance is discharged.
Simultaneously with Order 2 above, the husband shall henceforth pay to the wife the sum of $350.00 per week by way of spousal maintenance until such time as the youngest child, [D] born in 2001, commences her secondary schooling; and thereafter the husband shall pay to the wife the sum of $200.00 per week by way of spousal maintenance until all the children of the marriage, ([A] born in 1995; [B] born in 1997; [C] born in 1999; and [D]), have completed their secondary schooling or have attained the age of 18 years, whichever occurs first.
All outstanding applications otherwise be dismissed and the matter removed from the list of cases awaiting finalisation.
IT IS NOTED that publication of this judgment under the pseudonym Kent & Kent is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRM 7880 of 2006
| MS KENT |
Applicant
And
| MR KENT |
Respondent
REASONS FOR JUDGMENT
Issues
The issues for determination in this matter are:
i)whether any order should be made as to costs in the proceedings between the parties concerning alteration of property interests pursuant to s.79 of the Family Law Act 1975 Cth, (the Act), and spousal maintenance pursuant to s.74(1) of the Act.
ii)what should be the appropriate duration of final spousal maintenance in this case.
Background
The Court handed down its Reasons for Judgment on the property and spousal maintenance dispute between the parties on 24 January 2008 in Sydney (Reasons for Judgment of 24 January 2008). Ms Holly appeared for the applicant wife on that occasion. Ms Manfre appeared for the respondent husband. So far as is relevant, the Court made the following Orders on that occasion:
Order 6. The interim Orders made on 11 December 2006 in relation to spousal maintenance be discharged as at the date of settlement.
Order 7.Simultaneously with Order 6 above, the husband shall henceforth pay to the wife the sum of $350.00 per week by way of spousal maintenance, until otherwise determined by Order 11.
Order 10.Any application for costs be filed and served with supporting affidavits within twenty eight (28) days.
Order 11. Any application concerning the period for payment of spousal maintenance be filed and served with supporting affidavits within twenty eight (28) days.
On 24 January 2008, the Court heard preliminary submissions by the parties on the issue of the period for which spousal maintenance should be in place. Given the constraints on that occasion, (with Ms Holly and the wife appearing by telephone link from Queensland; and
Ms Manfre, whilst appearing before the Court in person in Sydney, the husband was in Queensland and not available to provide instructions to her), the Court invited the parties to make further written submissions on the issue.
The husband filed an application on 28 February 2008 in regard to costs and the duration of final spousal maintenance, with an affidavit in support by Linda Manfre, solicitor for the husband, dated 21 February 2008.
On 23 April, the Court made Orders setting aside Order 11 of
24 January 2008under Rule 16.05(2)(e) of the Federal Magistrates Court Rules 2001 Cth and substituting the following order:
Order 11.
The parties to file and serve any further written submissions on which they wish to rely in regard to the period of spousal maintenance within 28 days from the date of settlement [being 24 April 2008].
Both parties filed written submission in regard to both the costs application and the issue of the duration of final spousal maintenance.
Issue i): Costs
The Husband submits in regard to costs that:
It is submitted that each party should bear their own costs of these proceedings.
The Wife submits in this regard that:
It is noted that the Respondent Husband submits both parties should bear their own costs of the proceedings. This submission is not contested and agreed to by the Applicant Wife.
I accept the submissions of the parties. I consider that, in accordance with s.117 of the Act, it is appropriate in the circumstances of this case that each party bear its own costs.
Issue ii): Duration of final periodic spousal maintenance
Oral submissions
In oral submissions on 24 January 2008, Ms Manfre submitted that any spousal maintenance order which continued until the youngest child attended high school was “too long a period” and that:
the mother could certainly obtain part-time employment even within school hours. I appreciate the children are still quite young; the younger two in particular. And in our view there is a concern about basing it on the ages of the children notwithstanding I appreciate that affects the mother’s capacity to go to work (transcript 24/1/08 p 6).
Ms Holly submitted that such an order “would certainly be just and equitable”. She further submitted that:
The wife’s need to retrain is paramount and that does take time. With (indistinct) prominent where she lives within a rural area (indistinct) with regard to the children it would be quite difficult for her to commute into Toowoomba … for any easy access to employment. So it will take her some time to get herself back into it where she can be employable … That is part of the problem in the rural area in that (indistinct) part-time work for people without suitable qualifications as well (transcript p 5-7).
In regard to whether the Court should consider a graduated order, Ms Holly submitted that:
[she] would definitely need a minimum of two to three years to gain grade 12 qualifications … And I was looking at full time incomes for that period of time and then gradually reducing it depending on the level of child care that she would require as well for the youngest in three years time from now and requiring a fair amount of child care.
Written submissions
It is helpful to set out the full text of the respective written submissions of the parties on this issue.
In regard to the duration of final periodic spousal maintenance, Mr Kennedy for the applicant wife submits that:
(1)Your Honour found as an undisputed fact at Clause 79 of the Reasons for Judgement that for the financial year 2005/06 the Respondent Husband earned $197,770.00 and in the 2006/07 financial year the Respondent Husband earned $270,400.00 (gross).
(2)Your Honour has found at Clause 91 of the Reasons for Judgement that the Applicant Wife’s present and future earnings capacity are modest.
(3)Your Honour has found at Clause 92 that whilst the Applicant Wife wishes to complete her year 12 secondary education to assist her future prospects in the workplace, the Applicant Wife clearly has the primary responsibility for the care of the four children and the significant constraints which this imposes on her time and availability for both work and study.
(4)Your Honour has found at Clause 93 of the Reasons for Judgement that the Respondent Husband is in a much better position than the Applicant Wife to generate future income and provide for his superannuation.
(5)Further at Clause 94 of the Reasons for Judgement Your Honour has found that the Respondent Husband will still be in a far stronger financial position than the Applicant Wife and will continue to enjoy a standard of living reasonably similar to that he has previously enjoyed.
(6)Your Honour has found at Clause 95 of the Reasons for Judgement that there has been and will continue to be a material diminution in the standard of living from that previously enjoyed by the Applicant Wife.
(7)Your Honour also found at Clause 96 of the Reasons for Judgement that the monthly child support payment of $2,677.17 paid by the Respondent Husband is relatively modest compared with his income given that the child support is assessed on a maximum gross income of $109,135.00 which is less than half his gross income of $270,400.00 for the 2006/07 financial year. Your Honour also found at Clause 96 that under the Parenting Consent Order the Respondent Husband has access to the children every third week which will do little to reduce the ongoing cost to the Applicant Wife in raising the children.
(8)It is submitted that the Respondent Husband’s contact with the children every third week has a significant impact also on the Applicant Wife’s ability to obtain employment were she so able to do.
(9)At Clause 97 of the Reasons for Judgement Your Honour did not include in any adjustment under Section 75 (2) FLA any loading for lump sum maintenance to the Applicant Wife. The issue of spousal maintenance was left solely to be dealt with under the provisions of a Periodic Spousal Maintenance Order.
(10)Leaving the spousal maintenance to be dealt with by way of a Periodic Spousal Maintenance Order is appropriate given the relatively modest net asset position of the parties when taking into account the significant annual income of the Respondent Husband.
(11)At paragraph 119 Your Honour has accepted that based on the following:
· The Applicant Wife’s low income relative to her projected expenses;
· The Applicant Wife’s parental responsibilities for four relatively young children;
· The restrictions that this and her rural location place on her ability to find employment; and
· Her need to retrain;
the circumstances of this case do not impugn the provisions of Section 81 of the Family Law Act.
(12)The ongoing need to provide for parenting of the four children in circumstances of their age and the limited physical support provided by the Respondent Husband, it is submitted, warrant the periodic spousal maintenance as contained in the Order to be not adjusted to any significant degree at all.
(13)It is a finding of Your Honour that it is likely that the significant disparity in income between the Respondent Husband and Applicant Wife will continue and it is submitted that it is unlikely to ever change, notwithstanding any income earned by the Applicant Wife in the future.
(14)At Clause 143 of Your Honour’s Reasons for Judgement your Honour listed the following forming the basis of your finding with respect to the payment of periodic spousal maintenance:
(a)The Applicant Wife’s ongoing role in caring for the four children;
(b)The significant limitation these responsibilities place on her capacity to obtain meaningful employment taking into account also her location and possible travel times to any work;
(c)Her lack of any immediate skills to readily re-enter the workforce and her need to undertake some further course of education;
(d)Her need to ensure a reasonable standard of living;
(e)The Respondent Husband’s conceded capacity to pay spousal maintenance as well as child support, and;
(f)The capacity of the Respondent Husband to apply in the future to have the Maintenance Order varied if his or the Applicant Wife’s financial circumstances were to change materially.
(15)It is submitted that Your Honour’s findings at Clause 143 of your Reasons for Judgement and specifically from sub-paragraph (a) through to sub-paragraph (e) inclusive cannot be challenged on the evidence that was received by the Court. At sub-paragraph (f) Your Honour has identified the path that the Respondent Husband can follow to vary the Maintenance Order in the future.
(16)Given that the Property Order that has already been made did not comprise any lump sump spousal maintenance component for the reasons contained in Your Honour’s Reasons for Judgement, it is entirely appropriate for the weekly spousal maintenance payment of $350.00 to continue until such time as an event occurs arising under Section 82 of the Family Law Act.
(17)The payment of $350.00 per week by way of spousal maintenance by the Respondent Husband represents a payment of $18,200.00 per annum to the Applicant Wife. The evidence received by the Court with respect to the Applicant Wife’s income earning capacity resulted in the Spousal Maintenance Order and its quantum being made. If the Court is minded to implement some mechanism taking into account the Applicant Wife’s net income in the future (if any) and does not seek to rely solely on the provisions contained in Section 82 of the Family Law Act then it is submitted on behalf of the Applicant Wife that the only fair way of dealing with the matter is to implement a formula allowing for a reduction of the spousal maintenance to be paid by the Respondent Husband by a percentage of the net income after tax received by the Applicant Wife. That the Applicant Wife may receive an income in the future does not in any way negate the findings of this Honourable Court so far as they relate to the following:
·The Applicant Wife’s significant care of the children;
· The significant disparity in income earning capacity of the Respondent Husband and the Applicant Wife;
· The current living arrangements of the Applicant Wife being so far from town; and
· The significant and continuing living standard differential between the Respondent Husband and the Applicant Wife.
(18)It is submitted that if the Court does not accept the Applicant Wife’s submission that there should be no graduated reduction in the spousal maintenance payable by the Respondent Husband, then utilising the above mechanism (referred to in the immediately proceeding submission), the reduction of the spousal maintenance payable by the Respondent Husband could be by an amount calculated to be no more than 25% of the net income (after tax) that was received annually by the Applicant Wife. In order to effect such a mechanism, the Applicant Wife would be required by Order to provide to the Respondent Husband annually the Notice of Taxation Assessment issued by the Australian Taxation Office and 25% of the net income disclosed on that Notice of Taxation Assessment would comprise the reduction from the $18,200.00 spousal maintenance payable by the Respondent Husband for the following year. The reduced spousal maintenance payable for the following year would be paid weekly by the Respondent Husband.
(19)It is noted that there has been no provision to index the spousal maintenance so over a number of years the worth of the $350.00 spousal maintenance will be reduced significantly in any event by inflation.
Ms Manfre submits in regard to the duration of final periodic spousal maintenance that:
It is submitted that no order should be made for final spouse maintenance and that the wife’s application be dismissed in this regard. However, as this Honourable Court proposes that such an order be made, it is submitted that any order for final spouse maintenance for a minimum period not exceeding 6 months from the date of any such Order.
The children of the marriage have each attained school age. The wife has capacity to obtain gainful employment during school hours. Whilst it is proposed by the wife that she intends to undertake studies to complete year 12 of secondary education to assist her future prospects in the work place, there was no indication as to when the wife proposed to commence such studies, the duration of those studies or whether such studies would be undertaken on a part time or full time basis.
It is submitted that the wife is in good health and it is conceded in the evidence that the wife has undertaken paid employment, albeit on a part time basis prior to and since separation.
Given this Honourable Court proposes to make an order for final spousal maintenance it is submitted on behalf of the husband that any such order should respectfully be limited to a period of six months from the date of the Order.
Consideration of submissions
I have carefully considered the respective oral and written submissions of both parties. I do not propose to restate all my findings and reasons made in regard to the Order made for spousal maintenance in my Reasons for Judgment of 24 January 2008. Rather, I now adopt my reasoning therein in regard to the issue of periodic spousal maintenance in the present context. I also note that Mr Kennedy has accurately referred to those key matters in his above written submissions. Nonetheless, I consider that it is helpful to refer again to some of the following key parts of my Reasons for Judgment as they touch upon the present issue:
… the circumstances of the case take it outside the terms of s.81, taking into account, in particular, the amount the wife will receive out of the reasonably modest pool of assets, the wife’s low income relative to her projected expenses, her parental responsibilities for four relatively young children, the restrictions that this and her rural location place on her ability to find employment, and her need to re-train. I consider these are good reasons why the wife has not sought to obtain employment since the separation and that she should not be criticized for not having done so in the past (paragraph 119).
… apart from the lump sum property settlement, and Child Support payments for the children, the wife is restricted to Family Assistance payments and a minimal income from [her] and children folding and delivering pamphlets. I consider that in these circumstances she is unable to support herself adequately, given her necessary personal weekly expenditure, as accepted above, and that she would have some mortgage commitment over the Toowoomba property (paragraph 127).
… it is not disputed that the wife has and will continue to have the primary care and control of the four children of the marriage, currently aged 12, 10, 8 and 6, other than every third weekend … … I consider that in this case, by reason of the wife having the care and control of four relatively young children, she has only a very limited earning capacity and is unable to financially support herself adequately (paragraphs 128, 130).
In the present case the net matrimonial assets are reasonably modest, and the husband has a very substantial and continuing earning capacity, unlike the wife (paragraph 134).
I refer again to the fact that while the husband pays child support for the four children at the highest level required by the Child Support Agency, being $2,677.17 per month, this amount is relatively modest compared with his income, given that Child Support is assessed on a maximum gross income of $109,135, which is less than half his gross income of $270,400 for the 2006-07 financial year.. The wife will therefore have to meet from her income and payments from the husband, the on-going costs in raising the children (paragraph 136).
I further consider that the payment of spousal maintenance would considerably assist in ensuring that the standard of living of the wife in all the circumstances is “reasonable”. Conversely, lack of this periodic payment could leave her with an unreasonably low standard of living (paragraph 137).
I consider that the principles in Bailey & Bailey are applicable to the present case, taking into account the respective incomes of the parties, the responsibilities of the wife to the four children of the marriage, and her desire to increase her earning capacity by completing Year 12 of secondary school. The provision of spousal maintenance will clearly assist the wife in becoming more self-supporting (paragraph 140).
The Court concluded on that occasion that:
In conclusion, I am satisfied that this is an appropriate case in which the Court should exercise its discretion to make an order for the husband to pay spousal maintenance on the basis of:
(a)the wife’s on-going role in caring for the 4 children,
(b)the significant limitations these responsibilities place on her capacity to obtain meaningful employment taking into account also her location and possible travel times to any work,
(c)her lack of any immediate skills to readily re-enter the workforce, and her need to undertake some further course of education,
(d)her need to ensure a reasonable standard of living
(e)the husband’s conceded capacity to pay spousal maintenance as well as child support, and
(f)the capacity of the husband to apply in the future to have the maintenance order varied if his or her financial circumstances were to change materially (paragraph 143).
This Court has already determined that the circumstances of the present case justify an Order being made for spousal maintenance for the wife for the reasons identified in my Reasons for Judgment of 24 January 2008. The husband’s primary submission therefore, that no Order be made, is not relevant to the present issue. The Husband effectively concedes this point, and makes the secondary submission that the duration of any such final order should be limited to a period of 6 months from the date of the Order.
Whilst recognising that the rationale of s.81 of the Act is to provide financial finality between the parities as far as is practicable and to avoid further proceedings between them, and that there is a need to ensure that no Order, in itself, provides a disincentive to the wife to seek to obtain financial independence, I do not accept that a 6 months order, as the husband suggests, would in any way address the wife’s need for maintenance to ensure her reasonable financial support for the same reasons as set out in my Reasons for Judgment of 24 January 2008.
I have considered the wife’s primary submission that there be no time limit placed on the final Order for spousal maintenance. I do not consider that such an Order would provide sufficient incentive to the wife to seek financial independence, (even after she has retrained and the children have achieved adulthood), which may therefore defeat the purpose of s.81 of the Act.
I have also considered the wife’s secondary submission that the Court base the duration of the Order on the taxable income of the wife.
Mr Kennedy proposes in this regard that a formula be implemented to take into account the wife’s future net income and to reduce the spousal maintenance payments made by the husband based on a percentage of the net after tax income of the wife. This amount calculated would be no more than 25% of the annual after tax net income received by the wife. The wife would be required by Order to provide to the husband an annual Notice of Taxation Assessment issued by the Australian Taxation Office. The husband’s spousal maintenance payment of $18,200 for the following year would then be reduced, he suggests, by 25% of the wife’s net annual income. The reduced spousal maintenance for the following year would then be paid weekly by the husband.
I consider that this submission has some merit in that it provides clear safeguards for the wife’s financial support in that spousal maintenance would continue for such period as she is in need. Equally however, I am of the view that the proposed Order may provide too strong a disincentive to the wife to seek and attain financial independence as early as is reasonably practicable in all the circumstances.
I consider therefore, based on the same factors as identified in my Reasons for Judgment of 24 January 2008, that the preferable duration of the final Order in this case is one which balances both the wife’s legitimate needs for financial support against the need to attain financial independence between the parties as soon as is viable as envisaged by s.81 of the Act.
Section 72(1)(a) of the Act expressly refers to a party being “unable to support herself or himself adequately … by reason of having the care and control of a child of the marriage who has not attained the age of 18 years” [emphasis added]. I am very mindful in this case that the wife will continue to have the primary ongoing care of the 4 children, with a period of some 12 years from now until the youngest child reaches the age of 18years.
I am also mindful of the statutory safeguards under s.82 and s.83(2) of the Act which provide respectively for the cessation of such orders in defined circumstances, such as the death or remarriage of a party; and for the modification of a spousal maintenance order where the circumstances of either party have so changed as to justify a variation being made.
Any such order therefore must take into account the factors identified in my Reasons for Judgment of 24 January 2008, and including the number and ages of the children; the respective time spent with each parent and the primary role played by the wife in this regard; the rural residence of the wife and children; the constraints these matters pose on the wife’s capacity to obtain and maintain gainful employment, (although it is acknowledged that she has undertaken some modest paid employment on a part-time basis prior to and since separation); her need to undertake some further study or training to be able to readily re-enter the workforce in a meaningful capacity (although I accept the husband’s submission that there was no detailed plan put before the Court on this matter as to when the wife proposes to commence such studies, whether on a full or part-time basis, and their duration); that the wife is in good health (as pointed to in the husband’s submissions); the wife’s need to ensure a reasonable standard of living and the evident disparity in present and future earning capacity of the parties; and that, as the wife submits, no allowance for indexing for inflation has been built into the existing spousal maintenance Order.
Conclusion
Taking all these matters into account, I consider that a graduated Order for final spousal maintenance payable to the wife by the husband is warranted in this case, to ensure her proper maintenance, in the amount of $350 per week until the youngest child commences secondary school, and then reduced to $200 per week until all the children of the relationship have left secondary school, or attained the age of 18 years, whichever occurs first.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Orchiston FM
Associate: Duncan Maconachie
Date: 27 June 2008
0