S and K - [2003] FMCAfam 536

FEDERAL MAGISTRATES COURT OF AUSTRALIA

S & K

[2003] FMCAfam 536

FAMILY LAW – Child maintenance – variation – education expenses – proper needs – unilateral decision on the husband's part to renege on agreement in relation to child's school expenses.

COSTS – Husband ordered to pay costs in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001.

Family Law Act 1975 (Cth), ss.66B, 66H, 66S, 66S(3), 117, 117(1), 117(2), 117(2A), 117(2)(d), 117(2)(e), 117(2)(f), 117(2)(g), 117AA, 117C, 118,
Federal Magistrates Court Rules 2001, Rule, 21.15, Schedule 1

Penfold v Penfold (1980) 144 CLR 311
Mee v Ferguson (1986) FLC 91-716

Applicant:

S S

Respondent:

S K

File No:

MLM 5179 of 2003

Delivered on:

27 November 2003

Delivered at:

Melbourne

Hearing Date:

21 November 2003

Judgment of:

Bryant CFM

REPRESENTATION

Counsel for the Applicant:

Mr Crozier-Durham

Solicitors for the Applicant:

Nicholas Seudalis & Associates

Counsel for the Respondent:

In person

Solicitors for the Respondent:

In person

ORDERS

That the orders made by the Honourable Watt J on 27 May 1991 in relation to payment of maintenance for the child be discharged.
That the husband pay to the wife by way of maintenance for the child the sum of $646 per calendar month with effect from 1 December 2003, such sum to be increased in accordance with any increases in the consumer price index applicable to the Melbourne area with effect from 1 December 2004 and to be adjusted on 1 December in each year thereafter.
That the husband pay or cause to be paid one half of the tuition fees for H at L's College and any consolidation charge or other fee or payment required to be made in respect of the said child to the school for the year 2003 until the conclusion of her secondary education.
That the husband pay or cause to be paid one half of associated expenses with her education at L's College as billed by the school and including uniforms, music and/or sporting lessons and excursions within Australia.
That the husband pay the wife's costs of the proceedings pursuant to schedule 1 of the Federal Magistrates Court Rules 2001, such costs to be agreed and in default of agreement there be liberty to apply to relist the matter before me for determination of the quantum of costs.
That all applications otherwise be dismissed.
That the documents tendered by the parties be returned to them at the expiration of 30 days from the date of these orders.
It is certified that pursuant to rule 21.51 of the Federal Magistrates Court Rules this is an appropriate matter for the briefing of an advocate.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 5179 of 2003

S S

Applicant

and

S K

Respondent

REASONS FOR JUDGMENT

Introduction

This matter involves an application by the wife for variation of an order made on 27 May 1991 for maintenance for the child who I will refer to as H. At the time the order was made in May 1991 H was four. She is now 16. The orders provided that the husband pay maintenance for H in the sum of $60 per week with the cost of living increases and in the sum of $80 per week towards her creche fees.
The wife seeks to vary the orders as follows:
a)that the husband be responsible for and cause to be paid not less than one half of the tuition fees for H at L’s College and any consolidation charge or other fee required to be made;
b)that the husband cause to be paid not less than one half of all associated expenses with her education, including but not limited to school uniforms, music and/or sporting lessons, excursions, sports uniforms and overseas trips;
c)that the husband cause to be paid the minimum sum of $646 per calendar month in respect of her support with that sum to be increased in accordance with any increases in the consumer price index with effect from 1 July 2002.
She also seeks that the orders in relation to school fees and maintenance take effect from 1 January 2003.
The husband opposes the variation and seeks in his response that the application be dismissed. I will, however, deal with his specific proposals in more detail.

Background

The parties were married on 11 April 1987 and separated on 19 June 1989. A decree absolute of their marriage was granted on 28 June 1991. The husband is 58 and the wife is 45. Following their divorce the wife remarried, however, she has subsequently separated and was divorced from her husband in 2002. She has one child of that relationship, B who lives with her. She receives child support for B of $773.42 per month. Following her separation from Mr C, her husband, the wife purchased a home in Hampton. After their divorce she found the upkeep of the property expensive and moved to a newer unit in Moorabbin. She subsequently found that the unit was too cramped to work in, sold that property and moved to a property in Mordialloc which is larger. She currently lives in the property in Mordialloc with the two children, B and H. She has not repartnered at this stage and neither has Mr K.

The evidence

For her primary education H attended Shelford College as well as having two years at each of B B Primary School and G Primary School. She was offered a scholarship at F an Anglican Girls School, at the S campus for grades 5 and 6. This was a part scholarship and there were other fees to be paid. The parties agreed that the fees would be paid equally between them and they were.
H would have been required to move to the Brighton campus of Firbank for year 6. The husband and wife discussed her education and decided, first, that she was doing well at a private school, second, that she would have to move campuses anyway and that L’s College was a better option because it was a co-educational college, thirdly, that in order to ensure a place at L’s College it was better for her to start part-way through year 5 to ensure a place at L’s College.
On 18 April 1999 both parties signed an enrolment form and agreed to be responsible for the fees. They were required to sign again accepting responsibility for the fees each year. The husband signed until 2003. It is common ground that he refused to accept responsibility for one half of the fees in 2003. In about 2001 or 2002 the wife initiated a proposal for a move by H to B High School. It is common ground that she did not go but remained at L’s College. The parties have different versions of why this occurred. The husband said that the wife was uncertain that she could maintain her shares of the fees and thus wanted the change. The wife said that the husband was refusing to pay his share of the private school fees and she saw no option but to remove H and send her to a non-fee paying school. Before this happened, however, the father agreed to pay one half of the fees and she remained at L’s College.
The parties have paid H's fees and educational expenses equally until the last term in 2003 when the husband paid the entire amount. The wife says that he indicated that he would be getting money from the sale of a Queensland property and it was at least suggested that he might pay all of her future fees himself. He denies that proposal was ever put, but concedes that he said that his financial position was likely to improve upon sale of the Queensland property.
At the end of 2002 the father said he would not pay the fees in 2003. The reasons advanced are curious and a mixture of what seemed to me to be emotional reasons and some financial rationalisation. In October 2002 he concedes that he had every intention of paying 50 per cent of the school fees and incidentals for the balance of H's education but changed his mind. He says there were a number of things that caused him to change his mind. One was that H refused to see him and there was clearly some falling out between them. Secondly, that the wife was not paying what he regarded as her share of medical, hospital and dental bills for H. Thirdly, a request that he pay for a trip to Japan which was a school excursion which H could have gone on.
The parties have different versions about the Japan trip. The wife says that she simply raised it with the husband and asked him to talk to her about it. She says at all times the trip is going to cost between $3000 and $4000. The husband says that he was asked to pay $9000 for the trip. He says this, with the other matters to which I have referred, made him decide that he was not going to pay the school fees for the coming year. All of these, he says, contributed to his decision and he has seen H only once since October.
The particular offence which the husband seems to have taken occurred at H's speech night when he says the question of the Japan trip was raised with him. His version and perception is that he was only invited to the speech night so that he could be asked to pay for the trip. The wife denies this to be the case and, as I have said, she says that he was not asked to pay for the trip, that he was asked to discuss it.
It is clear that notwithstanding his prior intention to meet the school fees and pay the support that he had been paying, a combination of these events led the husband, as he admits, to change his mind. The case as presented by him purports to provide an economic rationalisation for this decision. He contends that the reason that he now refuses to pay the fees is that the financial position of both parties is precarious and that it is important that H have stability for the last two years of her schooling, year 11 and 12, which could be jeopardised if the parties became unable to pay the fees. He suggests that the wife's employment in the IT industry is precarious and she might not maintain her job and therefore not be able to meet her half of the fees.
This argument, it seems to me, ignores that for the last five years both parties have contributed equally to H's education expenses and the wife has paid the majority of the fees in 2003. He says that he has now formed the view that L’s College is an elitist school and that he no longer thinks it is an appropriate school for H to attend and will give her the wrong values. This is obviously not a view that he took prior to October 2002 and prior to the deterioration of his relationship with H.
In addition to the education expenses and incidentals that the husband was paying, he had also for some time being paying maintenance of $646 per month or $149 per week. He has reduced that sum significantly in 2003. In 2003 he has not met any educational expenses for H. The wife has obtained reduced tuition fees which with school levies total $10,624.75 for the year. She has paid $7750 and there is a balance of $2874 owing. In 2004, which will be year 11, the fees will be $14,026 and 50 per cent will be $7013. In 2005, which is year 12, the fees will be $14,160 and half of that will be $7080. A combination of one half of the school fees and expenses, together with the sum of $149 which was being paid by the husband last year, would require him to pay a total of about $290 per week.
The husband's case is that he will pay 50 per cent of H's education expenses at an appropriate school agreed by the parties. He does not accept that L’s College is any longer an appropriate school for H and suggests that she attend Mentone Secondary Girls School. At times his objection seemed to be that he should have a choice in the school rather than an objection to the fees themselves, but I infer that his choice, if given, would be to exclude L’s College or a school with commensurate fees. In his closing address the husband contended that maintenance paid to the wife was spent on her irresponsible lifestyle and not on H.

I should say at this point there was no evidence to support that.
The husband suggested that the wife had been irresponsible and failed to provide stability because of her frequent moves. I find that the wife's reason for changing her accommodation on each occasion was plausible and reasonable and not, as the husband suggests, because she could not provide stability or that she was financially irresponsible. The financial irresponsibility, as far as I can discern it, was really a contention that since their property settlement and the changes in their financial position he has accumulated significantly more assets than the wife and that her financial decisions which have placed her in presently an inferior capital position to him suggest an irresponsibility on her part. There was no evidence to support this contention and I reject it.
The proposal therefore that the husband was putting was that he pay $80 per week towards H's support plus 50 per cent of the school fees at a school of his choice which appears to be Mentone Secondary Girls School. He is also proposing to contribute to her medical, dental and optical expenses.
The application brought by the wife is brought pursuant to section 66S of the Family Law Act 1975. Before the court can vary a child maintenance order it must be satisfied that one or more of the matters specified in section 66S(3) has occurred; namely, that there has been a sufficient change of circumstances of a relevant person or the cost of living, or where the order was made the consent the amount ordered to be paid is not proper or adequate. In my view, both of these elements have been met. There has clearly been a significant change in the circumstances of H and the parties since 1991. To the extent that the order was a consent order, I am satisfied that, as it takes no account of school fees of any kind, it is not proper or adequate (see Carpenter v Carpenter (1995) FLC 92-583).

The relevant law

The law in relation to child maintenance is set out in subdivision D of Division 7 of Part VII of the Family Law Act. Section 66H sets out the approach to be taken in proceedings for child maintenance. That section provides that the court must consider the financial support necessary for the maintenance of a child first and then determine the financial contribution that should be made towards the support by the party or parties. In considering the financial support necessary for the child the court must take into account the objects of the act, the proper needs of the child and any income, earning capacity, property and financial resources of the child.
Section 66B sets out the objects which are to ensure that children receive a proper level of financial support from their parents, that they have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both their parents and that the parents share equitably in the support of their children.
In considering the proper needs of the child the court must have regard to the following:
i)the age of the child;
ii)the manner in which the child has been and in which the parties expect the child to be educated or trained; and
iii)any special needs of the child.
In considering what financial contribution must be made by the parties the court must consider the income, earning capacity, property and financial resources of each parties and the commitments of the parties or each of them in relation to commitments that are necessary to enable them to support themselves or any other person that they have a duty to maintain, the direct and indirect incurred by the parent or other person with whom the child lives in providing care for the child and any special circumstances which, if not taken into account in a particular case, would result in injustice or undue hardship to that person.

The child's proper needs

The wife set out the proper needs of H in her financial statement and those expenses were not challenged. Both H and B attend L’s. Excluding the school fees from the list of expenses, the expenses for the two children total $699. H's share would be $345. Accordingly, I find that, excluding school fees, H's weekly needs are $345.
H has some part‑time employment and averages about $60 per week. She works about eight hours a week at most at weekends. Taking this into account I find that her weekly needs which are required to be met by her parents are about $300 per week, excluding her school fees and expenses.

The wife's financial position

The wife is an IT consultant and earns $65,988 salary per annum. She has some other income. She has child support for B at $170 per week, family allowance benefit of $90, rental from an investment property of $178, some motor vehicle expenses paid by her employer of $115 and at present $80 per week from the husband for H. That equates to a total of $98,900 per annum, but of course includes the child support and motor vehicle expenses.
The home in which she lives has a value of $380,000 and a mortgage of $243,000. There is an equity of $137,000. She has an investment property in Bentleigh which is unencumbered and from which she receives the rental to which I have referred. She has some reasonably modest superannuation and she has a liability of $44,000.

The husband's financial position

The husband is a financial adviser, but most of his income, in recent times at least, has come from investments. He says that he presently earns about $358 per week from his business but in the last financial year the majority of his income came from capital gains, from property sales and from some share trading. He anticipates rental from two properties, one in Brighton, in which he anticipates $795 per week, and one in Middle Park from which he anticipates $1850. He is not at present receiving rent for those properties. His fixed expenses are tax of $43 per week and mortgage payments in relation to the investment properties of $1679 and $717. He pays life insurance premiums of $28, income protection premiums at $73 and maintenance which he says is $71 for H.
Despite his modest income from his business as a financial adviser, he has met his one half of H's educational expenses and maintenance in excess of $600 per month without complaint until October 2002. There have been significant changes to his overall financial position in the sense of how his property holdings have been organised since late last year. In November 2002 he sold a property at South Melbourne for $457,702. He sold a unit in Elwood in about November or December 2002 for $320,000. The amount for the South Melbourne property was the net amount received after payment of expenses and repayment of the mortgage. The Elwood property appears not to have been encumbered.
On 19 March 2003 he contracted to sell a property in Queensland for $174,500. This also appears to have been unencumbered. On 17 January 2003 he purchased a property at 135 Richardson Street, Middle Park for $1,358,000. He obtained two mortgages. The mortgages total $1,737,000. He also purchased a property at Brighton which he values at $900,000. It is intended that both of these properties will be for the purpose of investment but neither are occupied at present.
He has a self-managed superannuation fund worth about $359,000 which includes as part of it the office from which he works. He has recently used his available cash resources to reduce his credit card debts. He entered into a contract to purchase a property in Tasmania and is now involved in litigation over that property in the Supreme Court of Tasmania. The contract was entered into in November 2002. As a result of that transaction he has paid a deposit of $70,000 and it appears is at least out of pocket to the extent of the deposit. He said in his evidence that prior to 2003 he offered to pay half the school fees and $80 per week and because that offer was rejected he went ahead with the purchase of the Middle Park property which he asserts that he could have then brought to an end.
He thus contends that his present financial situation is that he has investment properties with substantial borrowings and which are not let at the present time, that the cash flow to service the properties is high and that he thus has no ability to meet the school fees and the maintenance sought. He contends that he could not sell either of the properties, particularly Middle Park, without selling Brighton because the mortgage is secured over the properties and would have to be totally repaid. I find that proposition to be implausible and unbelievable. I cannot imagine that he could not if he sold one property and significantly reduced that debt obtain refinancing which enabled him to pay out the entire debt to refinance one of the properties with another lender.

He said that once the properties are tenanted he may get over what he described as his current hurdle and may be able to pay fees at L’s College. This contention was consistent with what I discerned to be a somewhat ambivalent attitude to the fees exhibited by the husband during the course of the evidence notwithstanding the orders that he seeks.
As far as school fees are concerned, the question of how the court should deal with school fees was dealt with by the Full Court of the Family Court in Mee v Ferguson (1986) FLC 91-716. The principles that emerged from the case in relation to school fees can be summarised as follows:
a)where the non-custodian has agreed to the child attending a private school, that person is liable to contribute to the fees involved for so long and to the extent that he or she has a reasonable financial capacity to do so;
b)where the non-custodian has not agreed to the child attending such a school he or she is not liable to contribute to those expenses unless there are reasons relating to the child's welfare which dictate attendance at that school rather than a non-private school, then the custodian is required to contribute to the extent that he or she has reasonable financial capacity to do so; and
c)the mere fact that a non-custodian can afford the fees or is a wealthy person is not in itself a reason for imposing that liability.
Having regard to the fact that H has attended L’s College for over five years and up until October when his relationship with H deteriorated the father has met one half of those fees and has accepted responsibility each year since 1999 to do so, I find that he has agreed to H attending L’s College. The question I need to determine in this case is whether there are reasons now arising from what the husband contends are his changed circumstances which would not enable him to pay the fees and therefore make it inappropriate to make such an order.
The husband's refusal to pay the fees appears to me to stem almost entirely from the deterioration of his relationship with H and the wife to some extent, rather than due to any financial imperative, although that is how he presents his case. In October 2002 he was prepared to pay half the school fees, books, uniforms, et cetera and the maintenance now being sought for the last two years of H's schooling. That maintenance was $646 per month of $149 per week. Since that time the husband has rearranged his financial affairs. He has done so in the knowledge that the wife continued to seek that he contribute to H's school fees. He has done so, I find, deliberately to put himself in a position in which it might make it more difficult for him to pay the fees.
If I am wrong about that, he has certainly done so in the knowledge that fees were being sought from him and in the knowledge that his current financial arrangements would make it more difficult for him to meet the fees from his income or from other capital sums available to him. The sale of the properties would have enabled him, had he not made the purchases he has made to put aside capital for the payment of school fees. His income has been derived from both his business and from capital now for several years. It would not be reasonable to impute to him an earning capacity from his business only. He has taken on debt of $1,700,000 since early 2003. This choice was entirely his. It was done at a time when he knew that he was being asked to contribute to H's school fees and maintenance as he had been doing prior to October 2002.
I find that he has demonstrated a capacity to pay for one half of school fees and incidental expenses and the sum of $150 per week. I note that in the last term of 2003 he demonstrated a capacity to pay all the school fees. The deliberate rearrangement of his financial affairs to make it more difficult to readily access funds to meet the fees does not detract, in my view, from his capacity to pay. He has capital and assets available to him and he has the means of arranging his affairs to make the payment. I accept that he has lost some money in the purchase of the property in Tasmania. That sum appears to at least be $70,000. However, given the sale of the properties and the other funds available to him, particularly capital which could have been set aside, this loss is not such as to greatly affect his overall capital position, nor to impede his capacity to meet half of the school fees and expenses.
H has attended at L’s College for five and a half years. She is now about to embark upon the last two years of her schooling. The parties agreed to her going to that school and other than the husband's reluctance now to continue his commitment, I find that there is no other reason why she should not continue at that school as it was the expectation of the parties that she would be educated for her secondary schooling at L’s College.
Part of the wife's application is that the maintenance sought should be paid from 1 January 2003. In my view, the commitment of the husband to school fees should date from the beginning of the year. However, as far as the maintenance is concerned, whilst he has unilaterally reduced the maintenance, the wife has managed and her income is a reasonably substantial one. I do not see any real value in creating more arrears at this stage and I do not propose to make an order for the maintenance to be backdated. As I said, however, it is appropriate, in my view, for the school fees and incidentals to be met by the husband for this year, as well as for 2004 and 2005.
Part of the wife's application seeks that the husband meet one half of overseas trips. This was one of the triggers at least it appears which caused the husband to take objection to the fees. Overseas trips can be expensive, and in my view, they should be a matter which the father has some ability to have a say in and some option as to payment. It does not appear to me to because appropriate to simply order him to pay one half of them. Otherwise I propose to make orders along the lines of the wife's application.

Costs

I have an application for costs arising from the decision that I have just handed down. Costs are set out in section 117 of the Family Law Act. Section 117(1) says that subject to subsection (2) and section 117AA and section 118 each party to the proceedings under this act shall bear his or her own costs. The High Court in Penfold v Penfold (1980) 144 CLR 311 have said that the section does not create a presumption in any way, that is, it does not create a presumption that costs will or will not be paid. It is a matter in any particular case for the court to consider whether it is appropriate for an order for costs to be made.
In considering whether a costs order should be made I am required to consider the matters in section 117(2A). I am first required to consider the financial circumstances of each of the parties to each of the proceedings. I have already dealt with their financial circumstances. The husband is in a significantly better capital position than the wife. She is in a better income position than he. He has by his own choice made arrangements which put him in the position he is presently in.
Secondly, I am required to consider whether either party is in receipt of legal aid, which is not the case here. Thirdly, I am required to consider the conduct of the parties in relation to the proceedings. This generally relates to the preparation of the proceedings. There is nothing submitted to me relevant under this subsection. Subsection (d) requires me to consider whether the proceedings were necessitated by the failure of a party to comply with previous orders. There is no submission that is the case here. Subsection (e) requires me to consider whether any party has been wholly unsuccessful in the proceedings. In my view, the wife has been largely successful and accordingly the husband has been largely unsuccessful.
I do not understand the husband's submission that he was always prepared to pay 50 per cent of school fees at a school of choice and therefore that has been achieved. This case was run clearly on the basis that the school fees being sought were those at L’s College and that has clearly been opposed by the husband. I take into account therefore that the wife has been largely successful. Subsection (f) requires me to consider any offers under section 117C in writing or otherwise. No submission has been made that any offer has been made. Subsection (g) requires me to consider any other matter that is considered relevant.
There are under this subheading some relevant matters in my view. The first is that these proceedings came about because the husband decided unilaterally that he would renege upon an agreement between the parties in relation to H's schooling. He concedes that prior to October 2002 the expectation was that the parties would continue to meet half the school fees and that he would pay maintenance for her. If he had not ceased doing that and had not reneged upon that agreement this application would not have been necessary. I also take into account that the husband has appeared for himself and the wife has incurred legal costs, although I accept that the husband as a self-employed person will have by necessity have spent time in preparing for this matter and attending at the hearing which would otherwise have been spent on his practice.
In large part, however, my decision that it is an appropriate case for costs is because of the largely successful nature of the wife's application and the way in which that application needed to be brought. What I propose to do in relation to costs is make an order that the husband pay the wife's costs in accordance with Schedule 1 of the Federal Magistrates Rules 2001 to be agreed, and if not agreed, there be liberty to relist the matter before me. The scale for fees in the Federal Magistrates Court is different from that in the Family Court and is a lump sum scale. There is no provision for taxation under the rules, but if necessary I will determine the quantum of costs if they cannot otherwise be agreed.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Bryant CFM

Associate: Peter Smith

Date: 1 December 2003