Vincent and Carr
[2011] FMCAfam 633
•24 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VINCENT & CARR | [2011] FMCAfam 633 |
| FAMILY LAW – Child maintenance – children aged 9 & 8 – father employed overseas – change of circumstances since making of interim order – further interim hearing – nature of interim hearing – application fixed for final hearing in September 2011 – private school fees – manner in which the children are being educated – parties’ expectations in respect of children’s education – matters to be considered. |
| Family Law Act 1975, ss.66J, 66Q, 66S |
| Carr & Vincent (No.2) [2009] FMCAfam 648 |
| Applicant: | MS VINCENT |
| Respondent: | MR CARR |
| File Number: | ADC 2680 of 2008 |
| Judgment of: | Brown FM |
| Hearing date: | 17 June 2011 |
| Date of Last Submission: | 17 June 2011 |
| Delivered at: | Adelaide |
| Delivered on: | 24 June 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr McQuade |
| Solicitors for the Applicant: | C M Tucker & Associates |
| Counsel for the Respondent: | Mr Noble |
| Solicitors for the Respondent: | Judith Jordan |
ORDERS
Order 3 of the orders made on 26 June 2009 be discharged.
The final hearing of the parties’ respective applications in respect of child maintenance is confirmed for 6, 7 & 8 September 2011.
The interim applications are otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Vincent & Carr is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 2680 of 2008
| MS VINCENT |
Applicant
And
| MR CARR |
Respondent
REASONS FOR JUDGMENT
Introduction
On 26 June 2009, I made interim orders concerned with the financial support of two children – [X] born [in] 2002 and [Y] born [in] 2003. The parents of the children are the parties to these proceedings,
Ms Vincent, their mother and Mr Carr, their father.
At the time of the orders, Mr Carr, although an Australian citizen was not a permanent resident of this country. He worked offshore, in Japan, as an [occupation omitted] and was paid in US dollars. Accordingly, his financial situation was not amenable to an assessment pursuant to the regime inaugurated by the Child Support (Assessment) Act 1989. In addition, Australia and Japan do not share an international maintenance agreement. As a result, any assessment of child maintenance payable by Mr Carr in respect of [X] and [Y] falls to be assessed pursuant to the provisions of the Family Law Act 1975.
Ms Vincent and the children live in suburban Adelaide. The children attend [S] College and partake in many extra curricular activities. Their standard of living and education have depended on regular and significant financial contributions from Mr Carr, who has been able to make such contributions because he has enjoyed a high salary and has not been liable to pay tax in Japan, the United States or Australia.
The parties themselves have been involved in protracted and vitriolic litigation, not only in this court about issues to do with the financial support of [X] and [Y], but also in the District Court of South Australia regarding issues of property between them. Mr Carr and Ms Vincent have never been married. Accordingly, matters relating to the division of property owned by them have fallen to be decided pursuant to the provisions of the Domestic Partners Property Act 1966 (SA).
I have also been involved in determining arrangements for the father to spend time with [X] and [Y]. These arrangements have been fraught with all manner of difficulties arising from the logistical issues of
Mr Carr having to come to Australia to see the children and the parties’ mistrustful relationship, which has precluded them from being able to negotiate constructively about these issues.
I am yet to deal with a number of contravention applications brought by Mr Carr, which deal with allegations made by him that Ms Vincent has unreasonably failed to discharge her obligations in respect of a number of final orders, which I have previously made, regarding the father spending time with [X] and [Y] in Adelaide.
It has been previously agreed between the parties that there must be a detailed and comprehensive hearing, involving cross-examination of the parties themselves and a thorough scrutiny of their respective financial circumstances, before any final orders can be made about the long term financial support required by [X] and [Y]. The parties had also agreed that it was appropriate that this hearing should be scheduled to take place after the finalisation of the de facto property proceedings in the District Court.
On 21 February 2011 his Honour Judge Barrett delivered judgment in the de facto relationship proceedings between the parties and made orders dividing their property. Accordingly it was appropriate that this court come to deal with Ms Vincent’s outstanding application for a final and long term child maintenance order to be made in her favour payable by Mr Carr.
In 2009, it was her position that this order should take the form of a lump sum and be in an amount of $598,000.00. If such a sum was ordered, its effect would be to sever all on-going financial connections between her and Mr Carr. Given the outcome of the proceedings before Judge Barrett it is not possible that such an outcome be secured as a corollary of those proceedings.
A hearing of the final maintenance arrangements for [X] and [Y], as well as the contravention applications made by Mr Carr, had been scheduled for early May 2011 in this court. As is well known, there was a major earthquake in Japan in March of this year. This natural disaster impacted significantly on Mr Carr’s personal circumstances. For this reason and for other reasons related to Ms Vincent’s circumstances, the hearing of May 2011 was vacated and rescheduled for 6, 7 and 8 September 2011.
In the meantime, on 15 April 2011, Ms Vincent commenced interim proceedings to alter the order made on 26 June 2009. Mr Carr has responded to this application on 25 May 2011. He also wishes the orders varied. Both assert that there has been a significant change of relevant circumstances.
The parties’ most significant asset is their former family home located at [F]. This property was valued at $680,000.00 in the District Court proceedings and was purchased in Ms Vincent’s name so that the Australian Taxation Office would not have grounds to consider that
Mr Carr was a resident of Australia for income tax purposes.
The property was subject to a mortgage in favour of a bank based in Singapore. Judge Barrett found the extent of this liability to be just under A$220,000.00, as at November 2007, which was the date of the parties’ final separation.
Originally, this mortgage was expressed to be in US dollars, but in August 2007, Mr Carr changed the currency of the loan into Japanese Yen. He also changed the terms of the loan in 2008 so that it became an interest only loan.
These two decisions created considerable controversy between the parties. With the benefit of hindsight, it was not a sensible decision to change the mortgage into Japanese Yen, as the value of this currency has declined against the dollar. This has meant that the parties’ liability, in respect of the mortgage, has increased between the date of separation and the date of the orders of Judge Barrett.
It should be noted that Judge Barrett did not consider Mr Carr’s decision to change the currency specified in the mortgage as being either reckless or sinister. However, he did determine that Ms Vincent should not be penalised by this decision, which Judge Barrett found had been made without input from her.
Ultimately, Judge Barrett determined that the parties various assets, including the [F] property, should be shared equally between them, after Mr Carr had compensated Ms Vincent in respect of the diminution in the equity held in the property arising from his decision to change the currency of the mortgage from US dollars to Japanese Yen.
Ms Vincent wished to retain the [F] property. The result of Judge Barrett’s decision was that she was required to pay the sum of around $82,500.00 to Mr Carr to acquire his equitable interest in the property. This has left her with a mortgage of around $400,000.00, after the discharge of the previous mortgage, which Mr Carr guaranteed and paid the interest arising on it only.
On 26 June 2009, I ordered Mr Carr to pay child maintenance to
Ms Vincent, in respect of [X] and [Y] in a manner which had four components. These components were the ones essentially proposed by him and were based on him having an income of around A$276,536.00 per annum, on which he was not liable to pay tax. The components were as follows:
·He pay all the children’s tuition fees to enable them to attend [S] College (a sum or around $20,000.00 per annum for both children);
·The father pay the children’s top cover health insurance;
·The father pay the monthly interest only payments on the first mortgage secured against the [F] property (around $6,000.00 per annum)[1]; and
·A sum of $1,700.00 per month or $20,400.00 per annum.
[1] This was the applicable interest rate at the time of the interim hearing in June of 2009. It is common ground between the parties that in more recent times the amount of interest only paid by Mr Carr in respect of the mortgage has been in the vicinity of $600 per month.
In the period since the 2009 orders were made, both parties assert that there have been considerable changes in their respective circumstances, which warrant the revisiting of the interim maintenance arrangements for [X] and [Y], which cannot await the final hearing scheduled for early September. These proceedings are concerned with these matters.
However, at this stage, the proceedings remain interim. What that means is that any orders made by me at this stage will stay in place until such time as the parties’ respective substantive applications have been finally determined, which is anticipated to be in September of this year.
From the mother’s perspective, the most significant change of circumstances is that she has now acquired financial responsibility for a mortgage, which is not currently an interest only arrangement. She has deposed that she is liable for a sum of $622.00 per week to provide accommodation for her and the children, which is secure and familiar to them. On the other hand, Mr Carr has been relieved of his obligation to pay the previous interest only mortgage of around $600.00 per month.
Accordingly Ms Vincent seeks orders that the order requiring Mr Carr to pay the interest only mortgage be discharged and in lieu thereof he pay her the sum of $600.00 per month direct. It would be her submission that this outcome would have the same financial effect as the current orders.
The husband’s position is that his financial circumstances have recently taken a marked turn for the worse. In particular, due to the crisis in Japan, he and his young family have moved to Malaysia. In addition, he asserts that his annual salary has markedly declined.
As a consequence, it is the father’s position that he be discharged in respect of his responsibility to pay the children’s [S] College school fees and his liability to provide direct financial support for [X] and [Y] be limited to a monthly amount of A$1,700 or A$20,400 per annum. It is his position that the parties are no longer in a financial position to fund the children’s education at [S] College.
The legal principles applicable
I have previously outlined the provisions of the Family Law Act 1975 which are applicable to these proceedings.[2] Essentially, I am empowered to make such child maintenance order as I consider to be “proper” in the circumstances prevailing in the case, given the financial circumstances of the parties concerned; the needs of the particular children affected; and the manner in which those children are being educated.
[2] See Carr & Vincent (No.2) [2009] FMCAfam 648 at paragraphs 37 – 48. I adopt that summary of the applicable legal principles for the purposes of the current proceedings.
Pursuant to section 66Q, I have authority to make an urgent child maintenance order, pending the final disposal of proceedings between the parents concerned. I am satisfied that there are circumstances arising in this case, which necessitate such an urgent hearing.
Some restrictions apply in respect of the modification of any pre-existing child maintenance order. Pursuant to section 66S, the court is restrained from varying such order unless there is just cause for so doing arising from a change in circumstances of either the child concerned or the circumstances of either the liable or receiving parent of the child maintenance order concerned.
Change of circumstances
a) The mother’s circumstances
In June of 2009, I found that the mother received an income of $46,696.00 per annum. Her recently filed statement of financial circumstances indicates a modest increase to around $50,000.00 per annum. She receives government benefits, in the form of Tax Benefits A and B, amounting to around $5,000.00 per annum.
Ms Vincent’s recently filed evidence indicates that the children’s basis tuition fees for [S] College have now increased to around $27,500.00 per annum. In addition, they continue to engage in other significant extra curricular activities and their books and uniforms represent a significant expense.
Ms Vincent remains committed to the children attending at [S] College, where she asserts they are happy and well settled. In addition, she wishes the children to continue their various extra curricular activities, which include sailing, tennis, ice skating, scouts, gymnastics, horse riding, swimming and art. Needless to say, there are significant financial implications attached to these activities.
It is Ms Vincent’s evidence that the decision for the children to attend [S] College, from the commencement of their primary school onwards, was one which was made mutually by her and Mr Carr, during the period of their relationship and, as such, is not one which should be easily revisited or, so far as Mr Carr is concerned, easily resiled from.
It is Ms Vincent’s evidence that she does not have the financial capacity to pay the children’s [S] College fees. In addition, it is her position that, even with the regular payments of cash from Mr Carr, she is not able to balance her current recurrent level of expenditure with the income which she receives.
Ms Vincent concedes that she has utilised her home, from time to time, to provide accommodation for international school students and receives a sum of $240.00 per week from each such student to provide for their board and lodging. Since December of 2009, she has accommodated between one and three such students.
Last year, she received a sum of approximately $19,800.00 from these students. However, it is her assertion that she does not make a profit from the international students concerned, after the necessary outgoings relating to their board and lodging are taken into account.
Ms Vincent’s position is that she is currently in straitened financial circumstances. Her major asset is the [F] property, which, as previously indicated, is subject to a mortgage in the sum of around $400,000.00. She hold shares worth around $13,000.00 and has access to savings, held in the children’s names, in an amount of $15,000.00.
She estimates her recurrent living expenses, for herself and the children, as being $1,144.00 per week. Her other weekly expenses, for the use of her motor vehicle and insurance and the like, account for another $500.00 before regard is had for her recurrent mortgage payments. Accordingly, it is her position that her expenses exceed her income by a marked degree.
b) The father’s circumstances
Mr Carr married his current wife, a Japanese national, in November 2007. The couple have two children born in June 2008 and March of 2011 respectively.
Mr Carr continues to work for [C], an American corporation based in Honolulu. This company has contracted his services to [A], a Japanese [company]. Mr Carr deposed, on 19 May 2011, that he did not know whether his arrangement with [A] would be continued after 20 May 2011. I have not been provided with any updated evidence in respect of this issue.
Regardless of this, it is Mr Carr’s evidence that his salary, if his services remain contracted to [A], is likely to be in the vicinity of A$151,000 to A$161,000 per annum, which is a significant reduction on his level of earnings as recorded by me in 2009.
I have been provided with payslips from [C], in respect of Mr Carr. These show that for the calendar year ending 31 December 2010, he received a gross salary of $196,543.88, which after deductions translated to an amount of $189,864.91. I assume that these figures refer to US dollars. It is also likely to be the case that, over the course of 2010, the referable amount in Australian dollars will have changed significantly due to currency fluctuations.
The most recent pay statement, which I have for Mr Carr, indicates that he had earned US$56,602.01 up to 30 April 2011, a period of around seventeen weeks. This equates to a gross salary of US$3,329.53 per week. I acknowledge that I must be cautious about exchange rates, but with the Australian dollar currently trading above parity with the US dollar, this equates to a sum of A$3,134.86 or around A$163,000.00 per annum.
In his statement of financial circumstances, Mr Carr has indicated that his average weekly income amounts to $2,822.00 or around $147,000.00 per annum. It is also his evidence that he is currently experiencing difficulty in preparing an accurate financial statement due to ongoing changes in his personal and financial circumstances.
Following the earthquake in Japan on 9 March 2011, he and his family moved to live in Okinawa, due to concerns about possible radiation exposure for his young children. However, Mr Carr was forced to retain accommodation for himself, in Tokyo, in connection with his employment, as he [works] out of Japan. Accordingly, for a period of time he has had significant accommodation expenses due to his duplication of residences.
More recently again, Mr Carr has decided to relocate his family to Kuala Lumpur, Malaysia. This will mean he will have to commute back and forth to work in Japan and may mean that he will be compelled to obtain alternative employment with a [company] based in either the Middle East or South East Asia.
Such [companies] have differing employment conditions in respect of levels of remuneration and training requirements. Many of them require the provision of a cash sum as a deposit against the costs of mandatory [occupation omitted] training. These deposits are potentially significant and are apparently not negotiable. However, what will be the nature and terms of Mr Carr’s employment, from mid-2011 onwards, is unclear to me.
In addition, in order to maintain a visa for him and his dependants to live in Malaysia, Mr Carr deposes that it will be necessary for him to lodge a deposit of $90,000.00 with the Malaysian authorities. Mr Carr has indicated that he is uncertain, at this juncture, what will be his level of recurrent expenditure to provide for himself and his family, upon their relocation to Kuala Lumpur.
Counsel for the mother submits that it is likely to be less than in Japan. However, I am not in a position to resolve this particular issue. I have no way of knowing how much it will cost Mr Carr to live reasonably in Kuala Lumpur. It is Mr Carr’s current position that he has few financial resources and his current level of expenditure exceeds his level of income.
Mr Carr has received his entitlements pursuant to the orders of Judge Barrett. This equated to a sum of around $76,700.00. From this sum he has paid the [S] College school fees up to the conclusion of term 2, 2011. He also deposes that he has paid the recurrent child maintenance, ordered by me in June of 2010, at the rate of $1,700.00 per month, until the end of August 2011.
It is Mr Carr’s position that it is impossible for him to continue to pay the entirety of the [S] College fees, as well as a recurrent monthly amount of child maintenance fixed in the sum of $1,700.00, on his current salary.
Accordingly, whilst it would be his preference, if it were at all possible, for the children to continue at [S] College, he contends that the parties (and in the absence of agreement), the court, need to consider alternative schools for the children, particularly in the public sector.
It is his assertion that there are a number of suitable schools in the vicinity of the children’s home.
It is also Mr Carr’s position that he has utilised a large proportion of the moneys received by him in respect of the settlement of the [F] property to pay outstanding legal fees arising from both the District Court proceedings and proceedings in this court. He anticipates that the remainder of his settlement moneys will be used to fund the forthcoming trial scheduled for September this year.
Mr Carr expresses significant doubt about the veracity of Ms Vincent’s evidence that her taking in student borders does not result in any appreciable financial benefit. It is her view that she would not have embarked on the enterprise if it was not financially remunerative for her.
It has been his position, throughout the proceedings, that Ms Vincent has not been completely frank about her financial situation. It is also her view that she is incapable of moderating her expenditure, particularly in respect of [X] and [Y], to meet the new reality of her financial situation.
Essentially, it is Mr Carr’s position that the parties can no longer afford the lifestyle and education which [X] and [Y] have enjoyed up to this stage. As such, considerations of financial necessity must dictate that they are removed from [S] College as soon as possible.
It is Mr Carr’s evidence that he currently has realizable assets amounting to around $90,000.00. This includes the balance of the proceeds of his interest in the [F] property which he calculates to be around $44,000.00. His superannuation entitlements amount to $183,667.00.
Mr Carr calculates the recurrent level of his expenditure for himself, wife and two children as being in the vicinity of $1,500.00 per week. As at mid May of 2011, when he was financing accommodation in both Okinawa and Tokyo, his accommodation expenses were $1,159.00 per week. The total amount of the child maintenance payable by him to Ms Vincent (including school fees) amounted to $984.00 per week. Accordingly, it is also his position that currently his expenses exceed his income to a marked degree.
Conclusions
The financial circumstances of Mr Carr are complex and uncertain. It may be the case, as Mr McQuade contends, that the living expenses for his family may be cheaper in Malaysia than in Japan. However, it may prove to be the case that he will have other significant outlays as a result of his decision to move his family from Japan.
At present, I am unable to gauge accurately what is likely to be
Mr Carr’s ongoing level of income. This is because I do not know who will be his employer and what will be the basis of his employment in the medium to long term.
It is clear however that, of late, his rate of remuneration has fallen significantly to what it was in the first part of 2009, when I made the orders for the financial support of [X] and [Y], which he essentially proposed and which had been in place since the parties finally separated in late 2007. Doing the best I can with the somewhat imprecise figures available to me, I calculate the decline as being in the vicinity of thirty percent.
Accordingly I accept that, on the basis of the untested evidence available to me, during the course of the short interim hearing, it seems likely that Mr Carr will have very significant difficulties in continuing to meet the maintenance liability previously imposed in respect of [X] and [Y].
I do however acknowledge that I am uncertain as to what are the ongoing implications of Mr Carr not having to pay tax on his salary. I am also unable to calculate definitively what are the effects of exchange rate fluctuations on his financial affairs. However, even in rough terms, on the basis of a gross salary of at best $200,000.00, an on-going maintenance liability of $47,400.00 ($20,400.00 cash and $27,000.00 school fees) seems a burden which Mr Carr will not be able to discharge, given his other financial responsibilities to his wife and children.
Although I acknowledge that, on a prima facie basis, Ms Vincent’s financial affairs appear equally fraught, on this basis, I am not prepared to accede to her request to vary the orders of June 2009 to increase the recurrent cash payment payable to her by a further $600.00. I am fortified in this view by the fact that the final hearing of the parties’ competing applications is only about three months away.
This consideration also informs my view as to what is appropriately done about Mr Carr’s ongoing liability in respect of the [S] College fees. This is likely to be the most controversial issue at large between the parties. It is also likely to have a significant emotional component so far as Ms Vincent is concerned and a potential impact on [X] and [Y]. As such, in my view, it is an issue which needs to be approached cautiously and, as such, one which should be broached only when all the available evidence is to hand and it has been assessed appropriately by the court.
Mr Carr, to his credit, has paid the children’s school fees up to the end of Term 2 of 2011. The final hearing will take place mid way through Term 3. I would imagine the most apposite time for the children to change school, if this must occur as a result of financial necessity, would be at the commencement of the school year in 2012.
In assessing the financial support required for any child, pursuant to the provisions of section 66J of the Family Law Act 1975, the court is required to consider what are the child’s proper needs. One such need is the “manner in which the child is being, and in which the parents expected the child to be educated.”
It is Ms Vincent’s position that when [X] and [Y] were enrolled at [S] College, she and Mr Carr had a joint expectation that the children would continue at the College until they had completed their secondary education. As such, she is strongly opposed to there being a change in the children’s manner of education, either at this stage or later.
In my view, I must be careful in respect of dealing with this important issue of the parties’ educational intent in respect of [X] and [Y] at this interim stage, when necessarily the evidence in relation to the issue is untried and it is difficult for me to form a comprehensive understanding of the parties’ respective financial circumstances and capacity to provide for the children.
Given the school fees are currently up to date and the final hearing is imminent, I do not propose to discharge Mr Carr’s liability to pay the children’s school fees, which he initially voluntarily assumed, at this interim stage. I do not think that such an outcome would be in the best interests of the children concerned. If the children are to change schools, because their current level of education is beyond the means of their parents, the issue must be carefully managed, particularly given the volatile and mistrustful relationship currently prevailing between the parties.
The proper time to make such a decision is following the final hearing. In my view, it is premature to make it now. In the short term, Mr Carr has sufficient financial reserves to pay the next term’s school fees and possibly also to the end of the current school year.
No submissions were made to me concerning the cost of providing for the children’s health insurance requirements. The mother asserts that the father has ceased paying the health insurance. In these circumstances, I do not propose to discharge this aspect of the orders which were made on 26 June 2009.
In respect of the issue of order 3, which deals with the payment of the mortgage secured against the [F] property, I accept that there has been a significant change of circumstances, in respect of both parties. The major change being that Mr Carr has no interest in the property any longer, as result of the judgement delivered by Judge Barrett.
In addition, on a prima facie basis, Mr Carr’s financial circumstances have markedly deteriorated. As a consequence of the conclusion of the District Court proceedings, Ms Vincent has acquired Mr Carr’s interest in the property and has assumed a significant mortgage liability as a result.
In taking on this responsibility, I assume she has calculated that she has the capacity to maintain her liability in the longer term, now that the proprietary aspect of the parties’ relationship has been concluded. It does not seem to me to be proper that Mr Carr should be compelled to continue contributing towards the mortgage indefinitely, given the change in his financial circumstances. For this reason I propose to discharge order 3 of the orders of 26 June 2009.
In the earlier judgement, I calculated the children’s recurrent financial needs as being somewhere in the vicinity of $2,340.00 per month, not including school fees. I determined that this figure should be divided 70/30% between the parties to reflect the marked differential in their financial capacity. The resulting figure was not markedly divorced from the sum which would have been calculated to be paid pursuant to the child support formula if Mr Carr had been a resident of Australia.
I also indicated that it may be necessary for Ms Vincent to consider some economies, so far as the children’s extramural activities were concerned. It would seem that she has not as yet been able to grasp the nettle of this difficult and contentious issue. Mr Carr does not believe that many of the activities in which the children currently engage can be regarded as necessary to their education.
The issue of the children’s ongoing lifestyle and how it should be funded remains a major issue in contention between the parties. The mother asserts that she pays a sum of around $123.70 per week in respect of the children’s extracurricular activities or around $6,400.00 per annum. In addition she calculates she pays a sum of around $210.00 per week or about $10,000.00 per annum in respect of school expenses, which are not met by the children’s basis tuition fees. These liabilities, if correctly calculated, represent a significant proportion of her declared income.
For the reasons enumerated above, the questions of what type of education the children should receive; what type of activities it should encompass; and how it should be funded; require a more thorough and nuanced hearing than that available in an interim or truncated hearing.
Pending final hearing, notwithstanding the fact that Mr Carr’s finances have apparently taken a turn for the worse, it appears to me to be proper that the status quo for the provision for the children should essentially stay in place, but for the aspect dealing with the now discharged mortgage.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: P Smith
Date: 24 June 2011