R and N
[2001] FMCAfam 44
•1 June 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
R & N [2001] FMCAfam 44
MAINTENANCE – Spousal maintenance – arrears – assessment.
| Applicant: | D J R |
| Respondent: | S L N |
| File No: | ZM 2630 of 2000 |
| Delivered on: | 1 June 2001 |
| Delivered at: | Melbourne |
| Hearing Dates: | 26 April & 2 May 2001 |
| Judgment of: | Phipps FM |
REPRESENTATION
| Counsel for the Applicant: | Ms J Stewart |
| Solicitors for the Applicant: | Susan Snyder |
| Counsel for the Respondent: | M P Darling, |
| Solicitors for the Respondent: | Stedman Cameron |
ORDERS
THAT the husband pay the wife spousal maintenance of $400 per week, first payment 7 June 2001.
THAT the husband pay the wife the sum of $9,374.00 on or before
7 June 2001.THAT otherwise the order for spousal maintenance made by the Family Court of Australia 27 April 2001 is discharged and all arrears of maintenance under that order are discharged.
IT IS NOTED
That these orders are made on the basis that all payments made by the husband since 21 December 2001 are attributed to an assessment made under the Child Support (Assessment) Act.
FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE
ZM 2630 of 2000
D J R
Applicant Husband
And
S L N
Respondent Wife
REASONS FOR JUDGMENT
Background
The husband commenced proceedings in the Family Court of Australia on 19 April 2000 seeking property orders.
On 27 April 2000 the Family Court made an orders for urgent spousal maintenance for the wife of $700 per week, first payment 28 April 2000. On 21 December 2000 the Child Support Agency assessed the husband’s liability to pay child support from 21 December 2000 in the sum of $1,389.33 per month or $320 per week.
The husband ceased payments of spousal maintenance in December and the wife filed and served an enforcement summons. The husband filed an amended application seeking a discharge of the order for spousal maintenance. By order of the Family Court made on 3 April 2001 the husband’s Form 3 insofar as it relates to interim applications filed 28 November 2000, and the wife’s Form 3A response insofar as it relates to interim applications filed 10 January 2001, were transferred to the Federal Magistrates Court of Australia.
Both parties were represented by counsel and it was agreed at the outset of the hearing that what was before the court was:
a)The wife’s application for spousal maintenance;
b)The wife’s enforcement summons relating to arrears under the order for urgent spousal maintenance;
c)The question of interim contact to the child of the marriage;
d)The husband’s application for discharge of the urgent spousal maintenance order and therefore discharge of the arrears.
The hearing of the applications took place on 27 April and 2 May 2001. In the course of the hearing, the parties agreed on contact and consent orders were made at the conclusion of the hearing on 2 May. That left the maintenance matters to be decided.
The history of the parties’ relationship is a little complicated. This description is taken largely from one of the wife’s affidavits. The husband was born on 15 August 1966 and is now aged 34. The wife was born on 7 July 1963 and is now aged 37.
Their relationship commenced in 1992 and they lived together for various periods of up to five months until they became engaged and decided to live together in February 1998.
In February 1994 the wife purchased a house at 17 W Street, B and during the times when the parties lived together, it was in this house. In March 1996 the wife purchased a further house at 162 B Road, S and sold the W Street property to the husband. At that time the husband stayed at the W Street house and the wife moved to S. In early 1998 when they became engaged, the husband moved into the S house with the wife and the W Street property was rented out.
At the time the parties became engaged, at age 34 and 31, both were in well paid positions. The wife was the Victorian state manager of
S S Pty Ltd on a wage of $120,000 which included the provision of a BMW motor car.
The husband had a sales position with D C Pty Ltd on a salary plus commission.
In mid-1998 the wife was made redundant and was paid a redundancy package of about $50,000 which was paid off the mortgage on the B Road property. She did not seek further employment as at that time the parties were planning a family.
The parties married on 5 December 1998. The wife was pregnant at that time but suffered a miscarriage two weeks later. The parties separated on 23 December 1998, less than three weeks after the marriage.
The wife then obtained work with W G Limited and worked for about six months until that company was taken over. The parties reconciled in September 1999, but then separated again on 13 January 2000 at which time the wife was pregnant. The child S F-R was born on
28 June 2000 and so is now aged 10 months. The wife is still partially breast-feeding the child.
The law
Section 72 of the Family Law Act 1975 is as follows:
“A party to a marriage is liable to maintain the other party, to the extent that the firstmentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately –
(a)by reason of having the care and control of a child of the marriage who has not obtained the age of 18 years;
… having regard to any relevant matter referred to in
subsection 75(2).”There was no dispute that paragraph 72(a) applied in this case. The issue was the amount of spousal maintenance and whether the arrears should be discharged, whether wholly or in part. Section 75(2) set out the matters to be taken into account.
In this case each of the matters set out in section 75(2) are relevant except, (h) the extent to which the payment of maintenance would increase the earning capacity of the wife by enabling her to undertake a course of educational training or to establish a business or otherwise to obtain an adequate income, (j) extent to which the wife has contributed to the income-earning capacity, property and the financial resources of the other party, although this has some marginal relevance, (m) cohabitation by one party with another and (n) terms of any property order under section 79.
The wife’s expenses and needs
The wife’s expenses set out in her financial statement filed 10 January 2001 were not challenged except for two matters. The need for her to make mortgage payments in the immediate future was an issue, and there was a transposition error in the item for car registration leading to what was put as a $50 overstatement. There are errors in the adding up for the wife’s average weekly expenses. The individual items in the totals column do correctly add up the individual items in the wife’s share column and the child’s share column. The total is then $581 which leads to a different result to the $50 transposition error which was identified. The expenses are as follows:
Fixed expenditure
Mortgage instalments $403.00
Rates $19.00
Insurance premiums $12.00
Minimum credit card payments $38.00
TOTAL $472.00
Average weekly expenses are:
Food $150.00
Household supplies $27.00
House repairs $15.00
Gas $30.00
Electricity $18.00
Telephone $15.00
Car:
— Petrol $55.00
— Registration $9.00
— Maintenance $40.00
— Insurance $14.00
Fares / car parking $5.00
Clothing and shoes $38.00
Medical and dental $23.00
Entertainment / hobbies $20.00
Holidays $20.00
Chemist / pharmaceutical expenses $6.00
Repairs – furnishings – appliances $10.00
Dry cleaning $3.00
Books and periodicals $4.00
Gifts $5.00
Hairdressing / toiletries $15.00
Water $26.00
Land tax $20.00
Council rates $13.00
TOTAL $581.00
Total all expenses: $1,053.00
When the amount of mortgage instalments, $403.00, is subtracted from the total, the result is $650.00. When the child support payment is subtracted from that, the result is $330.00.
Counsel for the husband was prepared to concede $308.00. This was on the basis of allowing for the $50.00 transposition error in registration and then subtracting the mortgage payment and the child support payment. The calculation needing the $330.00 is the same calculation starting with the individual items of expense of the wife and so eliminating the sum addition errors.
The submission that the wife’s mortgage payments should not be taken into account were this:
The wife, by paying her redundancy payment of about $50,000 into her mortgage account and the paying in the past more in periodical payments than she was obliged to do, had a drawn-down facility on her mortgage of $16,259.00 at the time of hearing. She had paid her redundancy payment into the mortgage account rather than a separate bank account, and she reduced her overall interest liability. She could then draw on her mortgage account as she wished, and she has been doing this for ordinary living expenses.
Counsel for the husband put it that the court should treat her as having that $16,259.00 available to her for living expenses. The parties each have property applications before the Family Court which would result in either an overall order or overall settlement taking into account the wife’s house in B Road which was mortgaged, and the husband’s property in B which was also mortgaged. The argument put was that money used by the wife for maintenance can be adjusted in the property settlement.
The husband’s financial circumstances
The husband is employed as a salesman with D C. He is paid monthly. The monthly payment contains three components, a base salary, commission and a car allowance.
His base salary from 1 April is $7,372.30 per month. Prior to that, since March 2000, the base salary had been $7,071.79 and prior to that since October 1999 it was $6,735.01.
Commission was based on a three-monthly cycle. His manager gave him a sales target for each three-month period. It was fixed by the manager and varied from time to time. In each of the first two months of each period he was paid 30 percent of the commission due on the target for that period and then in the third month the adjustment was made against the actual figures.
The third element is a car allowance of $10,000 per year paid at the rate of $833.33 a month or $833.34 a month, so that the total makes $10,000 for the year. The husband is required to provide his own vehicle. The monthly allowance is paid on the basis that it is tax-free, but it is then for the husband to claim and justify the deduction in his own tax return.
D C, the husband’s employer, had two schemes by which employees could acquire shares and options in D C. Shares could be purchased by salary sacrifice and options were issued as bonuses or incentives.
The shares are listed on a stock exchange in the United States of America and therefore valued in US dollars.
The husband had purchased shares and used them in a margin trading account. His financial statement sworn 17 February 2000 disclosed the following shares:
D C (3544) $209,546.00
D.I.G.S (100) $933.00
China Corp (100) $12,936.00
Against that he had a liability for margin borrowing on the shares account of $141,552.00. Since then, the D.I.G.S. shares and China Corp shares have dropped in value to be virtually worthless. The husband had sold a substantial number of the D shares so as to eliminate his margin borrowing liability and obtain money to meet his expenses. In his financial statement sworn 24 November 2000 he sets out the number of D C shares as 447 with a value of $15.450.00 and in his evidence he said that he now held 337 D shares.
Part of the margin trading account arrangement was a cheque account in America and therefore written in US dollars. The way in which it operated with the margin trading account was that shares could be sold and he could write a cheque for the US dollar amount of the proceeds of that sale. He had done this on two occasions to obtain money for use in Australia.
The stock option scheme made 10 percent of each of the options granted available for exercise each year. They did not have to be exercised immediately. The husband had been granted 9,600 options on 22 November 1996 at an exercise price of US$3.070400. In January and April of 2001 he exercised his right to 7,680 options. This meant that he had to pay the option price of US$3.070400. In January, the share price was US$24.25 and in April US$25.34. There was some cross-examination about how this was financed and what that meant the proceeds were. The summary sheet for options was exhibited and it showed that the net proceeds the husband was entitled to (that is, after paying the option price of US$3.070400 per share) was US$167,760.51, approximately $335,521.02, if a conversion rate of A50 cents to US$1 is used.
At the time of the hearing, the husband said that he was attempting to have these shares transferred into his margin trading account so that he had access to their value through his US dollar cheque account.
If the value of US $25.00 is assumed for the 337 D shares, then the same approximate conversion rate used, that is another $16,850 and so a total of about $350,000 for the D shares.
The other benefit the husband receives from his employment is a superannuation payment of $145.00 per week. Commission forms a substantial part of the husband’s income. Commissions since December 2000 have been as follows:
December 2000 $4,243.05
January 2001 $4,243.05
February 2001 NIL
March 2001 $3,566.58
April 2001 $3,987.33
These mean that for the December/January/February quarter 2001, the husband received a total commission of $8,486.00 ($4,243.05 plus $4,243.05). This equates to a weekly commission of $707.00 ($8,486.00 divided by 12 weeks).
April and May total $7,553.91 ($3,566 plus $3,987.00). This equates to a weekly commission of $9,544.00 ($7,553.00 divided by 8 weeks). This results in weekly income as follows:
Weekly base income $1,701.30
Average commission $825.00
Car allowance $192.00
TOTAL $2,718.30
In addition to this, there is the superannuation payment of $145.00.
Figures put forward on behalf of the wife for the 12 months prior to the urgent spousal maintenance order made on 29 April 2000 including the $833.33 per month resulted in an amount of $4,064.00. This was done by taking total remuneration from March 1999 to April 2000 ($211,250.00 per annum and dividing it by 52).
In this period, the husband was also receiving surplus of rental for mortgage payments for the house in W Street of $71.00, so that it was put on behalf of the wife that in that period there was an average weekly income of $4,135.00.
A similar exercise done for the 12 months prior to 17 February 2000 resulted in a weekly income of $4,066.42.
I consider that the appropriate figure to take is that calculated on the last few months, that is the figure of $2,718.30. This does not include the superannuation payment of $145.00 per week.
In support of this is another calculation made on behalf of the wife for average income over the 12 months prior to 24 November 2000. This calculation was $2,623.34 per month. The calculation for six months was also done November 2000 to April 2001 which came to $2,511.83.
The base rate of pay increased from 1 April 2001 which points towards the figure of $2,718.30 per week as the correct one.
The husband’s fixed weekly expenditure as set out in his financial statement is as follows:
Income tax $843.00
Superannuation $145.00
Mortgage $250.00
Rates $10.00
House contents $8.00
Motor vehicle hire purchase $246.00
Loan repayments $114.00
Credit card repayments $150.00
Health insurance $36.00
Child support $320.00
TOTAL $2,122.00
The husband’s variable weekly expenses claimed after concessions made at the commencement of the hearing are as follows:
Food $105.00
House repairs $15.00
Gas $15.00
Electricity $20.00
Heating/water rates $25.00
Telephone $20.00
Car/petrol $140.00
Registration $9.00
Maintenance $53.00
Insurance (car) $29.00
Clothing $40.00
Medical and dental $10.00
Entertainment $50.00
Holidays $20.00
Repairs $20.00
Dry cleaning $12.00
Books $12.00
Gifts $52.00
Hairdressing $15.00
Horses $64.00
TOTAL $777.00
The parties were in dispute about how the husband’s car expenses should be dealt with. The total expenses are $477.00 per week or $24,804.00 per year. A calculation was then done on the basis that 70 percent could be justified as a tax deduction so that that proportion could be business expenses and the balance would be a personal component, about $140.00 per week. The calculation of the husband’s expenses was then done on the basis that his car expenses were only $140.00 per week.
This produces a false result because it ignores what is then the business component of the expenses. However characterised, the husband has to pay all of those expenses out of his own pocket. He receives $10,000 per year from his employer, but if he spends more than that, which he does, he still has to pay all of the expenses. He receives a tax deduction for some of those expenses, but the way to account for that is to incorporate it in calculation of the taxation expense the husband must pay.
Accordingly, the husband’s total expenses are $2,999.00 per week. This is more than he has earned and this explains why his borrowings have been increasing. His evidence was that since the time the urgent spousal maintenance order was made, he has spent his salary and allowances including commission, $10,000 obtained from selling shares and he has borrowed an additional $25,000.
The husband has two American Express cards. He uses the American Express account for both business and personal expenditure. Business expenditure is refunded by his employer. He has travel and accommodation expenses and entertainment expenses. There was some cross-examination about these, with a suggestion that some of these were in fact personal expenses. I consider that the husband satisfactorily answered each of the matters put to him.
Another matter dealt with was the husband’s recreational horse riding. He owns a horse and a horse float. The horse float was a recent purchase. He did own three horses but two have been sold.
The horse he still owns is agisted. His evidence was that it was of little value. The horse float he said that it had a cracked roof and if it was to be resold, would need to be repainted because it had his name on it and again of little value.
The husband’s income cannot meet the needs of both the wife and himself. I have to take into account the other financial resources available to both parties. The wife has available to her a draw-down facility of about $16,000. The husband has available shares to the value of over $300,000, readily convertible into cash. I treat the shares obtained as a result of exercise of the options as being readily convertible. The husband’s evidence was that he was, at the time of the hearing, attempting to have them transferred into his existing account where he could access their proceeds using his United States dollars cheque account.
I assess spousal maintenance on the basis that the wife’s current inability to earn income is because of the care of a very young child, and that that circumstance will change. Her draw-down facility of $16,000 is $300 per week over one year and $150 per week over two years. Hopefully, within one year and certainly within two, property matters will be resolved. This will necessarily require a re-assessment of the spousal maintenance issue. I do not think it is reasonable to expect the wife to use all of her draw-down facility over a period of one year. There needs some flexibility and some allowance for unexpected expenses. Taking all of the above into account, I fix spousal maintenance at $400 per week. This means the husband’s expenses exceed his income. Over a 12 month period, maintenance will be an amount of approximately $20,800. Even if this amount of spousal maintenance continues for two years, $40,800 is an amount which the husband is able to find from his resources. Re-assessment of the amount should take place within that time.
Arrears of maintenance
The husband made his last payment of $700 under the urgent spousal maintenance order on 11 December 2000. His liability for child support of $320 per week commenced on 21 December 2000. It is common ground that since 18 December 2000 all payments made by the husband have been for child support. There is some issue over arrears of child support payments, but that is not a matter for this court. There was considerable amount of debate about the amount of arrears of spousal maintenance. In the end, there was a difference between the parties of $700. The husband said he made one more weekly payment than the wife acknowledged. Both agreed that in addition to weekly payments the husband in August 2000 had paid $500 for repairs to the wife’s car and $1,375 to purchase a washing machine, and in October 2000 he paid $35,100 for the wife’s house and contents insurance.
The proper approach I consider is to assess arrears on the basis that the proper amount for the husband to pay for maintenance from
21 December 2000 is $400 per week and so order him to pay the arrears so calculated as a lump sum and otherwise discharge the urgent spousal maintenance order and any further liability for arrears.
The difference between the husband and wife of $700 has come about because some payments were made in cash. The wife produced a list showing the date on which she said each payment was made. I consider her recollection and records are better than the husband’s. The husband made his last $700 payment on
11 December 2000, an amount which was due on 8 December 2000. He gave a cheque for $700 on 18 December 2000 but that was dishonoured because a payment to the husband had not reached his account. The amount due to 18 December 2000 was 36 payments at $700 per week, a total of $25,200. The husband has paid 32 payments, plus the amounts for repair to car, washing machine and insurance. Commencing on 29 December 2000 until 1 June 2000 there are 22 weeks at $400 per week.
The result is this:
36 weeks @ $700 $25,200.00
22 weeks @ $400 $8,800.00
$34,000.00
Less paid
32 payments @ $700 $22,400.00
Car repairs $500.00
Washing machine $1,375.00
Insurance $351.00
$24,626.00
Amount due $9,374.00
The husband has the ability to pay this amount. The orders made, therefore are spousal maintenance of $400 per week commencing
7 June 2001, payment of the amount of $9,374 by 7 June 2001, otherwise discharge the urgent spousal maintenance order made by the Family Court of Australia on 27 April 2000 and all arrears of maintenance under that order. I note that the arrears are calculated on the basis that all payments made by the husband since
21 December in 2001 are attributed to the assessment made under the Child Support (Assessment) Act.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Phipps FM
Associate:
Date:
0
0
0