M and M - [2003] FMCAfam 384

FEDERAL MAGISTRATES COURT OF AUSTRALIA

M & M

[2003] FMCAfam 384

FAMILY LAW – SPOUSAL MAINTENANCE – Application to discharge order – husband’s reduced income – relevance of legal and moral obligation to support adult children.

Applicant:

S B M

Respondent:

C M

File No:

(P)MLM 10186 of 2002

Delivered on:

3 September 2003

Delivered at:

Melbourne

Hearing dates:

27 & 28 August 2003

Judgment of:

Phipps FM

REPRESENTATION

Counsel for the Applicant:

Ms Vohra

Solicitors for the Applicant:

Testart Robinson

Counsel for the Respondent:

Ms Stewart

Solicitors for the Respondent:

David Stagg Tonkin & Co

ORDERS

That paragraphs 18 and 19 of the orders made on 6 October 1994 by the Family Court of Australia be varied to provide that the Husband pay to the Wife the sum of $500.00 per month, the first payment to be made on the same day of the month as currently paid.
That the Husband pay the Wife $5500.00 as arrears of maintenance and otherwise all arrears of maintenance be discharged.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

(P)MLM 10186 of 2002

S B M

Applicant

And

C M

Respondent

REASONS FOR JUDGMENT

Introduction

This is an application for discharge of an order for spousal maintenance and of arrears.
The parties were married on 25 November 1979. There are three children the marriage K 22, M 20 and G 18. The parties separated in 1994 and were divorced in December 1999.
Consent orders were made on 6 October 1994 dealing with children and property. The Wife retained the matrimonial home and the children lived with her. An order was made that the Husband pay the Wife by way of spousal maintenance $3400.00 per calendar month, to be increased by movements in the consumer price index 30 June each year.
Other orders were that the Husband continue to make its payments matrimonial home mortgage then approximately $40,000.00 and that the Husband pay the Wife $25,000.00 by June 1995 to repay a loan to the Wife by her brother to purchase a suitable motor vehicle. This amount has not been paid and the Husband accepts that it will have to be paid.
The application for discharge was filed in the Family Court on 4 March 2002. On 30 April 2002 a Registrar suspended the order for spousal maintenance. That order was made ex parte. On 11 June 2002 by consent the order suspending spousal maintenance was set aside and procedural orders were made. On 28 November 2002 by consent an order was made that until further order the spousal maintenance order be varied to provide that the Husband pay the Wife some of $1083.00 per calendar month first payment to be made 29 November 2002.
The Husband has applied to discharge the maintenance order and all arrears. As an alternative, he proposes $500.00 per calendar month and the discharge of all arrears. The Wife seeks $400.00 per week and $18,800.00 arrears. The calculation which $400.00 per week between February 2002 and November and $19.00 per week for health insurance. The orders made in October 1994 required the Husband to maintain private health insurance for the Wife and children as well as some other payments. There were issues about what had been paid and what the previous calculation might be going back to 1994. The Wife seeks only $18,800.00.
The Husband accepts that the Wife's physical condition is such that she cannot work. The spousal maintenance order was the only order by which the Husband paid money to the Wife. No separate child support payments have been made.
Until December 2002 the Husband was employed as a financial controller. The company by which he was employed was taken over and for a short period his income increased substantially. Shortly after the takeover it became apparent that the new company was insolvent. It went into administration. The Husband's employment status was changed to that of a contractor with reduced income and eventually came to an end in December 2002.
The Husband is qualified as an accountant. He has for some time had a part-time accounting practice. Currently it is his only paid employment. He gave evidence that he had applied for 40 positions and had received only two interviews. If he found a suitable position he expected to be paid about $120,000.00 per year. He is aged 47 years. With his age and background he said that he could not expect to obtain a lower paid job as an accountant. Employers would not want him in a lower paid position. They would suspect that he would leave as soon as he found something better. He is relying on his part-time accounting practice and income from an investment property. He is pursuing two projects. One is a textile technology in which he is working on the project with others. One of them is the inventor of a process which is a new method transferring images to fabric. They hope to make it a commercial project perhaps producing income in 12 months time.
The other project is an extension of the accounting practice. The Husband carries on the accounting practice with an associate. The businesses are incorporated. The associate does mostly basic work, business activity statements, keeping of accounts and taxation returns with the assistance of part-time book keepers. The Husband provides strategic and planning advice. Each takes the fees that they earn themselves. Expenses are paid by the company, but it has no net income of its own, income is all paid to the participants. They hope to form an alliance with a registered liquidator if a suitable one can be found.
At the time of the takeover of his employer the Husband received $176,000.00 for shares that he held. He invested $47,000.00 in a wine lease scheme. He said that this was the amount of capital gains tax he had to pay on the sale of shares. The wine lease scheme gave accelerated deductions, which cancelled out the capital gains tax. The wine lease is for a period of 10 years. Its projection was for profit in the third to tenth years, $6,000.00 to $9,000.00 per year. It made no profit in the third year because of the drought. He paid off the mortgage on his own home and the Wife's home, the former matrimonial home. In 2003 he sold a property owned at M. He received net $66,000.00. He paid $52,000.00 in reduction of the mortgage on the C investment property, he purchased a car for M and had $2000.00 to $3000.00 left after that. Two years earlier he had paid $6000.00 for a car for K.
An issue canvassed in evidence was the Wife's 1995 tax return. This was the tax year in which the property settlement took place. The return showed income of $23,000.00 for the Wife from the company where the Husband used to conduct his private practice. The Wife said she had not signed it. The Husband said she had. He had always prepared the tax return. He said that she had signed it. The property settlement included transfer of the Wife's interest in the company to the Husband. There may well have been a need for a tax return by her in that year in relation to income she earned from business. My impression of the Husband is that it is most unlikely that he would forge his Wife's signature on a tax return. To put the property settlement into effect, there would need to have been documents signed by the Wife. It may well be that she did sign the tax return and now does not remember. It is an issue which goes to credit only. It has no relevance to the financial position of the parties now. Given the conclusions I reach otherwise, it is not necessary to decide it.
M is attending university and is living in a share house. K and G are living together in a two-bedroom flat. K is employed with a net income of $400.00 per week and G is in year 12 at school.
The Husband pays M’s share of rent and the rent for two-bedroom flat. He pays household bills for M. He has paid the registration on the cars of K and M and he pays for the maintenance for M’s. K drives G as necessary. The Husband pays M’s and G’s university and school expenses and G’s living expenses.
Until January and February 2002 the children lived with the Wife in the former matrimonial home. In circumstances which are not necessary to investigate the three left suddenly, the oldest in January and the other two in February. The mother was not prepared to accommodate them any more. Subsequently she sold the house and has purchased a three-bedroom unit.
The Husband assisted the children in arranging the accommodation. He pays $87.00 per week for M’s accommodation and $225.00 per week for K’s and G’s. They lived with the father for about two months, but he said he was unable to accommodate them for longer.
The Husband has a partner and lives with her and her two children in a four-bedroom house. They are joint owners. He estimates its value at $410,000.00. It is unencumbered. He has an investment property in C. He estimates its value at $420,000.00 with a mortgage of $395,000.00. No valuation evidence was called. He has an investment in shares in a margin lending account, net value about $27,000.00 and about $4000.00 in a bank account. He estimates his tax liability at $14000..00 He has a BMW motor vehicle for which he says he has obtained a trade in value of $40,000.00. There is no valuation evidence. He has about $35,000.00 in preserved superannuation
The Husband's partner is employed and earns $340.00 per week. She receives $900.00 per month child support from the father of her two children.
The Wife has a partner. He is 72 and receives an age pension. He owns a house in the country which is unencumbered. The Wife owns her unit, which is unencumbered. Her income is of a disability pension, which is means tested and so must not be taken into account. She has $52,000.00 in the bank, a combination of the balance left over after the sale of the matrimonial home and purchase of the unit and frugal living on her part. She has increased her savings by $14,000.00 in about a year.
She currently spends 5 nights per week with her partner in his house and he 2 with her. She says that she does not like the country and wishes to be able to spend the majority of her time in her unit and perhaps the weekends with her partner. He would spend about the same time with her, so that they would be living together for about four days a week. She has been spending more time at her partner’s house to save money (including for legal costs) pending the outcome of the application.
The Wife's meets the threshold test for spousal maintenance contained in s.72 of the Family Law Act 1975. It is conceded that by reason of physical incapacity for appropriate gainful employment she cannot earn her own income.
Otherwise the matters to be taken into account are set out in s.75(2). Relevant matters are:
(a) the age and state of health of each of the parties;
(b) income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(d) commitments of each of the parties that are necessary to enable the party to support himself or herself;
(e) the responsibilities of either party to support any other person;
(g) when the parties have separated or the marriage has been dissolved, a standard living in all the circumstances is reasonable;
(m) since each party is cohabiting with another person-the financial circumstances relating to the cohabitation.
There are three principal issues. They are the Husband's capacity to earn income, to what extent his support for the children should be taken into account and whether it should be assumed that the Wife could rent her unit and obtain income.
It was submitted for the Wife that it should be assumed that the Husband's income earning capacity was about $120,000.00 per year. This was based on his evidence that that is what he could earn as a financial controller with a position similar to his last one.
I do not make that finding. I accept the Husband's evidence that he has made about forty applications and had two interviews and no job offers. I accept his evidence that he is unlikely to be offered a lower paid job.
I accept that the level of work in his accounting practice gives him two days per week and an income before the tax of about $40,000.00 per year. A submission that he could work longer hours assumes that the work is available. There is no evidence that it is.
He works two days a week in his income earning accounting practice and four days on the textile development. I accept that he is not restricting his income earning capacity by doing so. The accounting practice generates the level of work it does. He chooses to spend the balance of his time in a project which may, in the near term, produce income. I find that ceasing to work on this project would not produce more income which I could take into account in this application.
The wine lease is a financial resource and a potential source of income but not a current source.
Submissions were put about the Husband's legal and moral obligation to provide support for his adult children. The position he had to deal with in January and February was that the children were no longer to have a home and support provided through their mother. If they were to have parental support it had to come from him. G was under 18 and he had a legal obligation to support him. M is a university student with government support and modest ability to earn part-time income.
He is providing support for K who is working. A significant aspect is that she looks after G who is still at school, although now 18.
Submissions were put that he could accommodate G in the fourth bedroom in his home and that he could accommodate all three in the one premises and that would be cheaper. The evidence shows that there have been serious difficulties with at least M and G in the past. Both are now studying well. I find that the arrangements the Husband has made for the children were choices open to him given his moral and legal obligations towards them.
Given these findings he has little ability to pay spousal maintenance on the income and expenses he claims.. He gives his gross income as $1025.00 per week, including rent from the C property. It may be a little more or a little less. His expenses exceed that by a considerable amount. His evidence is that he has been making up the difference by selling assets. He does have reasonably substantial assets, more than the Wife, but it is his current income which must provide for spousal maintenance.
One discrete item of expenditure requires comment. The Husband leases a BMW motor car. These payments are $291.00 per week. He puts its value at $40,000.00 and the amount owing on lease well in excess of that. He entered into the lease at a time when he had had a considerable increase in income because of the takeover of his employer. At that time it did not affect his ability to pay maintenance. He is now legally committed to that lease. I accept that to terminate the lease would worsen his financial position not better it. It has to be accepted as one of his expenses for the purpose of assessing spousal maintenance.
I consider that I must take into account the Wife's current relationship. I consider that it is one of cohabitation. It has the ability to reduce her expenses. Given the findings I have made about the Husband's income and expenses this aspect is of little relevance.
The Husband's primary position was that the maintenance order should be discharged. As a secondary position he submitted that should be reduced to $500.00 per month. I take this as a concession that he would submit to such an order.
The Husband has greater financial resources and a potential to earn higher income. He is not at present. It was submitted that a time limit should be placed on the order. Because his income may increase substantially, even in the near future, I will not limit the time.
The Husband's financial position now, particularly in relation to his ability to earn income has been much the same since February 2002. He has paid maintenance of $250.00 per week under the order made on 28 November. I will assess the arrears on the basis of $500.00 per month between the February and November. That is 11 months, an amount of $5,500.00.
There will be an order that the maintenance order be varied to provide for the Husband to pay $500.00 a month, the arrears be fixed $5,500.00 and that otherwise arrears be discharged.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: