Pether & Kay

[2008] FamCA 619

FAMILY COURT OF AUSTRALIA

PETHER & KAY [2008] FamCA 619

FAMILY LAW – CHILD SUPPORT - Application for departure - Hearing before Child Support Assessment available

FAMILY LAW – SPOUSAL MAINTENANCE

FAMILY LAW – COSTS - Between parties - Payment to ensure continuation of wife's legal representation

Family Law Act 1975 (Cth)
Child Support (Assessment) Act 1989 (Cth)

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

APPLICANT: Mr Pether

RESPONDENT: Ms Kay

FILE NUMBER: SYC 8380 of 2007

DATE DELIVERED: 30 May 2008

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Judicial Registrar Johnston

HEARING DATE: 20 May 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richardson SC

SOLICITOR FOR THE APPLICANT: Barkus Edwards Doolan

COUNSEL FOR THE RESPONDENT: Mr Tockar

SOLICITOR FOR THE RESPONDENT: Musgrave Peach Family Lawyers

The Orders shall be as follows:

1. That pending further order the husband be restrained from causing or permitting any changes to the nomination of the wife as beneficiary of the F Trust and from altering the amount ($2,000 per week) currently distributed to the wife and that that payment be apportioned as to $1,000 per week to the wife by way of interim spouse maintenance and $1,000 by way of credit towards the husband’s child support liability.

2. The husband pay or cause to be paid as and when same falls due, and indemnify the wife in respect of all income tax incurred by the wife in respect of the trust distributions to the wife from the F Trust.

3. By way of further interim spouse maintenance, pending further order the husband continue to pay as and when same fall due, all premiums for health insurance in respect of the wife at the highest rate.

4. That there be departure from the current assessment of child support liability in relation to the children M born in October 2002 and L born in October 2006 so that in lieu thereof the husband shall pay child support for the children at the annual rate of $72,800 in the monthly amount of $6066.66 for the period from 20 May 2008 to 30 June 2009 as well as paying all premiums for health insurance for the children at the highest rate.

5. Within 30 days, the husband pay or cause to be paid to the wife’s solicitor the sum of $50,000, such sum to be held by the wife’s solicitor in a controlled monies interest bearing account to be drawn down for the payment of legal costs and disbursements incurred by the wife as and when they fall due for payment, with the characterisation of that payment to be determined by the trial judge.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8380 of 2007

MR PETHER

Applicant

And

MS KAY

Respondent

REASONS FOR JUDGMENT

Introduction and Applications  

1. Mr Pether and Ms Kay were divorced on 24 January 2008. For convenience I shall refer to them as “the husband” and “the wife” respectively. They have been unable to resolve a number of matters in dispute between them concerning their financial relationship.

2. The first order sought by the wife is to the effect that the husband pay to her solicitors the sum of $75,000 for the purposes of assisting the wife to pay her legal costs and disbursements in these proceedings. The wife also seeks an order to the effect that the husband be restrained from causing or permitting any change to the nomination of the wife as beneficiary of the F Trust and from altering the amount ($2,000 per week) currently distributed to the wife and such payment be apportioned in the amount of $1,550 per week to the wife by way of interim spouse maintenance and $450 by way of interim departure from child support assessment. The wife also seeks an order to the effect that the current child support assessment be departed from so that in lieu of the current child support liability the husband be liable to pay child support in the amount of $1,000 per week per child (net of tax). The wife also seeks an order to the effect that the husband pay all premiums for heath insurance in respect of herself and the children at the highest rate.

Background  

1. The wife was born in August 1972 and the husband was born in October 1972. They married in November 1997 and separated on 7 May 2006. They were divorced on 24 January 2008 as I have said.

2. There are two children of the marriage M born in October 2002 and L born in October 2006. The children are therefore aged 5 years and 18 months respectively.

3. The husband is a successful professional. He is an partner in H Practice. He earns a substantial income which in the last financial year was approximately $950,000. Prior to the birth of the children the wife had worked as an executive. She ceased full time employment when she became pregnant with the parties’ elder child and has not returned to full time employment since that time. In August 2007 the wife obtained employment at M Agency. She works part time two or three days a week from 10am until 4pm for which she earns approximately $240 gross per week.

4. The parties had owned a home at D. This home was sold in mid 2007 the net sale proceeds being approximately $982,000. These monies have been invested in a joint account with the Commonwealth Bank. The wife has incurred a capital gains tax liability in respect of the sale of that property in the amount of approximately $63,057. I understand that the husband has paid, or will pay, this tax.

5. The wife and children are living in rented accommodation in another Sydney suburb and the husband is also living in rented accommodation. The parties also own a property at V in New South Wales although it is common ground that there is little, if any, equity in that property.

Preliminary Costs

1. As indicated above the wife is seeking payment from the husband of the sum of $75,000 to be held by the wife’s solicitor in a controlled monies interest bearing account to be drawn down for payment of her legal costs and disbursements as they fall due. It is conceded by the husband that the wife have the benefit of $75,000 for this purpose. But it is submitted on behalf of the husband that the source of such payment ought to be the monies representing the net proceeds of sale of the former matrimonial home in the controlled monies account.

2. The wife’s solicitors have estimated that the wife will be required to pay legal costs in the vicinity of $20,000 for preparation of her case to conclusion of the conciliation conference. This includes the costs of these interlocutory proceedings. The wife’s solicitors have informed her that in the event that she does not pay their monthly accounts within seven days of issue the solicitors would not continue to act for her.

3. The wife has a savings account with the Commonwealth Bank, the balance of which is approximately $22,000. This money represents the balance of $40,000 which was distributed to the wife by the F Trust in August 2007. The wife says that she has been using the money from that distribution to fund a shortfall in her income to meet her expenses and those of the children and to pay legal fees incurred to date.

4. There is ample power under the Family Law Act for the Court to make an order such as that which the wife is seeking. The power pursuant to section 117, 114 or section 83 would be sufficient for this purpose. And there is other power. In any event the husband does not challenge the need for the wife to have a fund which she can use to finance the preparation of her case. It is submitted on behalf of the wife that in circumstances were the husband is in receipt of a high income, out of which he is able to pay his own legal costs, it could only be reasonable in the circumstances for him also to make money available from his bank account to assist her in meeting her legal costs.

5. In my view the husband has a capacity to provide money to the wife to satisfy any proper order of the Court. I shall refer to this in further detail below. In my view, in circumstances where the husband has at his disposal a fund of approximately $77,000 as well as more income available to him than is required to meet his necessary expenditure, it would be reasonable for him to be required to pay part of such available funds to the wife for the purpose sought by her. In my view, in circumstances where there is a very significant disparity between the parties, in terms of their income earning capacities the Court should be cautious about requiring payment of monies for the purposes of the wife’s legal costs out of the parties’ capital. It is too early at this stage to predict what part of the available capital might ultimately be required to satisfy a final property order in favour of the wife in the circumstances where the value of the husband’s interest in his legal partnership remains unclear.

6. Having said this, however, I am not persuaded that it is necessary at this point for the amount of preliminary costs which it would be reasonable to make available to the wife is $75,000, at least not from the husband’s account. The parties are still at a relatively early stage of proceedings. Whether such an amount would be required remains unknown.

7. In these circumstances, in my view it would be reasonable to require the husband to pay an amount of $50,000 out of his bank account to a controlled monies account for the purpose of putting the wife into funds to assist in payment of her legal costs and disbursements. In the event that the wife should require further funds, she could either use some of the funds in the controlled monies account or make a further application.

Spousal Maintenance

1. As indicated above the wife is seeking an order the effect of which would be to require the husband to pay to her by way of interim spousal maintenance the sum of $1550 per week. It is common ground that the husband has arranged payment by the F Trust to the wife of the sum of $2,000 per week. The husband has indicated that he will continue to cause such a payment to be made. The husband says that such payment should be sufficient to provide for the wife’s needs and for those of the children.

2. Subsection 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 herself or himself adequately for one of the reasons specified in the sub-section. The reasons specified include by reason of having the care and control of a child of the marriage who has not attained the age of eighteen years. Clearly the wife is the primary parent for the two young children of this marriage. There is no issue that she is unable to support herself adequately, at least at this interim stage of the proceedings. There is also no issue that the husband has the capacity to pay in accordance with a reasonable level of the wife’s needs. Accordingly, the only issue is the quantum of the interim spousal maintenance to be paid by the husband for the wife.

3. In her financial statement the wife estimated that her weekly needs come to the amount of $1589. There was a strong challenge to many of the items included in these estimates but learned senior counsel for the wife submitted that the husband is in no position to challenge the reasonableness of the wife’s estimates. This was said to be in circumstances where the husband has failed to fulfil his obligations under the Family Law Rules by failing to disclose in his financial statement details of his weekly personal expenditure. It was said that, because of this failure, the Court is not in a position to be able to form a view about the level of the husband’s standard of living. Accordingly, it was said that the husband cannot complain if the Court sets the level of interim spousal maintenance in accordance with what she claims.

4. I must say that I am not persuaded by this submission on behalf of the wife. Looking at the matter broadly, the husband earns a very high income, certainly by general community standards, this being in the vicinity of $950,000 gross per annum. His surplus of income available each week compared with his necessary expenditure is in excess of $6,300. In these circumstances, as I have indicated above, I regard the husband as having the capacity to pay in accordance with any proper order of the Court. The question therefore becomes, what is a proper level of interim spousal maintenance for the husband to pay for the wife.

5. I do not accept that it is reasonable for the husband to be required to pay an amount of $1550 per week as sought by the wife. The husband said in his affidavit that during the 2005/2006 financial year the approximate amount expended by the family each week for living expenses including $850 rent was $2,065.

6. Some of the wife’s estimates were demonstrated to have been exaggerated particularly her estimates for utilities. But many of the other items are much higher than one sees regularly in financial statements in similar proceedings in this Court, even bearing in mind the high level of income available to this family. Doing the best that I can at this interim stage, in my view the appropriate level of costs of the wife to achieve a reasonable standard of living in all the circumstances of this family are $1,150 per week. I am satisfied that the wife should be able to continue to earn, say, $150 per week after tax. Accordingly, in my view her reasonable weekly needs are an additional $1,000 per week.

7. In these circumstances, in my view, $1,000 of the $2,000 which the husband causes to be paid each week through the Trust should be attributed to interim spousal maintenance.

Child Support Departure

1. As indicated above, the wife is seeking orders departing from the current administrative assessment of child support with the effect that the husband pay by way of child support for the two children, amounts which would total $2,450 for both of them.

2. A child support assessment issued on 20 May 2008 which requires the husband to pay child support for the two children in the monthly amount of $553.42. The assessment has been based on the Child Support Registrar attributing to the husband a child support income amount of $113,763 which is the maximum child support income as referred to in the legislation. The Child Support Registrar has also attributed to the wife a child support income amount of $315,461. I infer that the wife had a taxable income in the financial year 2006/2007 in this amount presumably resulting from an assessment of a capital gain in respect to the sale of the former matrimonial home, and/or perhaps a distribution from the F Trust.

3. In her financial statement the wife estimates that the weekly costs of the children in her household come to $2,396. The monthly amount of child support under the assessment of $553.42 is $127.71 for the two children on a weekly basis.

4. At the outset of the hearing there was a submission on behalf of the husband to the effect that the Court would not have jurisdiction to make an order for a child support departure because at the time that the wife’s child support departure application was filed there was not in existence a child support assessment. When the matter was first mentioned learned senior counsel for the wife informed the Court that the wife anticipated having a copy of the child support assessment by the time the hearing commenced. This turned out to be the position. In these circumstances I suggested to learned counsel for the husband that it would be sensible for the child support departure application to be dealt with at the same time as hearing the interim spousal maintenance and preliminary costs proceedings. The husband conceded that it would be in the interests of the parties and the children for the Court to also consider the child support departure proceedings. If this had not been the case, it seems to me that the Court would have been in the position of probably facing an urgent maintenance order application pursuant to s. 139(1) of the Child Support Assessment Act 1989 (“the Assessment Act”). In any event I would have thought that the jurisdiction for the Court to exercise a power under the child support legislation would have to be available to the Court at the time of actually exercising that power. There can be no issue that as at the time the Court exercises its powers to make orders pursuant to the Assessment Act the necessary pre-requisite, that is the existence of a child support assessment, is in existence.

The applicable law

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 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.

   (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. 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.

2. 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 FamLR 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 FamLR815;FLC77,897), Kay J, adopting the view in in the Marriage of Philippe (1977)4FamLR153 at 155;(1978)FLC90-433 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.

3. 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. For a father who is in receipt of income in the vicinity of $950,000 a year to be assessed under the legislative formula to have a child support liability for his two children of $127.71 per week, one would have thought that the legislative formula had failed to achieve that principal object. In my view clearly this is the case. This appears to have occurred because on the one hand the husband has been assessed using a child support income amount of $113,763 which is the maximum child support income amount under the legislation and on the other hand the wife has been regarded as having a child support income amount of $315,461 as I have said.

4. In my view, application of the formula has resulted in an unjust and inequitable determination of the level of financial support to be provided by the husband for the children. In these circumstances, I am satisfied that a ground has been established for a departure from the administrative assessment.

Just and Equitable

1. Subsection 117(4) of the Assessment Act provides that in determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order the court is to consider a number of matters. These include that it is the parents of the child who have the primary duty to maintain the child, the proper needs of the child, the income, earning capacity, property and financial resources of the child, the income, earning capacity, property and financial resources and financial commitments of each parent, direct and indirect costs incurred by the wife in providing care for the child and any hardship that would be caused by the making of, or the refusal to make, an order.

2. The wife estimates in her financial statement that the average weekly expenses which form the proper needs of the two children come to a total of $2,396 per week. There was a strong challenge to this overall cost and to many of the individual items of expenditure involved in coming to the total. As was the case in respect of the interim spousal maintenance application, learned counsel for the husband referred to the husband’s evidence that during the 2006 financial year approximately $2000 was expended each week for the whole family including rent at a higher level than that required for the current accommodation of the wife and children. As was the case with the spousal maintenance application, many of the estimates were at a level well above what one usually sees in such applications to this Court. But regard must be had to the high level of income received by the husband. Of course this has enabled this family to enjoy a standard of living well above what one usually sees in the community. Nevertheless, in my view, it is more probable then not that many of the items of estimated expenditure have been exaggerated.

3. In addition, the wife has included $500 per week for the costs of a part time nanny which she estimates she would like for three days per week to assist her to continue with her current employment. It was submitted on behalf of the husband that it would make no sense to allow the wife $500 per week for this purpose to enable her to earn approximately $240 per week. On the other hand, learned senior counsel for the wife submitted that it would be in the husband’s longer term interests to encourage the wife to develop employment skills and experience and if this comes at a price then so be it.

4. I must say that I am not persuaded by the submission on behalf of the wife at this point. What the longer term interests of the whole family require is in my view a matter more appropriate for consideration in the context of the substantive financial proceedings. To the extent that it might be appropriate to vary an order made at this point in relation to child support, that could be done at that later time. But in view of the wife working part time I shall allow a modest amount per week for child-minding.

5. At this time, in my view the proper costs of these children on a weekly basis are $1400.

6. Clearly the husband has the capacity to pay the totality of the children’s costs. The wife, in my view, has no reasonable capacity to pay such costs. She could only do so from capital and she requires her modest capital for other purposes. Clearly there would be hardship to the children in the event that a departure order was not made.

Otherwise proper

1. In her financial statement the wife has not included any amount as received by her by way of a government benefit. In these circumstances the making of a departure order could not have any effect on any government benefit.

2. In all the circumstances, I propose to make a child support departure order to the effect that the husband’s liability for child support for the two children is $1400 per week. 

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Judicial Registrar Johnston.

Associate: 

Date:  30 May 2008