Zema and Kristo

[2016] FamCA 195

FAMILY COURT OF AUSTRALIA

ZEMA & KRISTO [2016] FamCA 195

FAMILY LAW – PROPERTY – interim orders – spousal maintenance – where the husband seeks a variation of the orders that provide for the husband to pay to the wife interim spousal maintenance – where the husband asserts a level of incapacity that prevents him from undertaking duties historically required of him – where consideration is given to the right of a spouse to maintenance – where each party challenges the other’s reasonably living expenses – where there is a taxation liability – where the Court is satisfied that the husband has an obligation in respect of his current partner and their child – where an order is made to reduce the total sum of interim spousal maintenance.

Family Law Act 1975 (Cth) s 72, 75

Stein & Stein (2000) FLC 93-004

APPLICANT: Mr Zema

RESPONDENT: Ms Kristo

FILE NUMBER: ADC 1306 of 2014

DATE DELIVERED: 1 April 2016

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 22 February 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mrs Tinning

SOLICITOR FOR THE APPLICANT: Barnes Brinsley Shaw Lawyers

COUNSEL FOR THE RESPONDENT: Ms Lewis

SOLICITOR FOR THE RESPONDENT: Tindall Gask Bentley

UPON NOTING that the husband continues to pay to the wife the sum of $200 per week by way of privately agreed child support

Orders

1. As and from 4 April 2016 Order 1 of Orders made on 2 September 2014 be varied such that the husband pay to the wife by way of interim spousal maintenance the sum of TWO HUNDRED AND TWO DOLLARS ($202) per week.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Zema & Kristo has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT

FILE NUMBER: ADC 1306  of 2014

Mr Zema

Applicant

And

Ms Kristo

Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. By Amended Application in a Case filed 7 December 2015 Mr Zema (“the husband”) seeks a variation of the orders made by Judge Harland on 2 September 2014 that provide for the husband to pay to the wife by way of interim spousal maintenance the sum of $450 per week. The husband seeks that the weekly sum be reduced to $150 per week. 

2. The husband’s application is supported by the following documents:-

   a)Affidavit of the husband filed 13 November 2015

   b)Financial Statement of the husband filed 13 November 2015

   c)Affidavit of the husband filed 7 December 2015

   d)Affidavit of the husband filed 10 February 2016

   e)Affidavit of Mr I, Accountant filed 10 February 2016

   f)Affidavit of the husband filed 18 February 2016

3. In her Affidavit filed 10 February 2016 Ms Kristo (“the wife”) seeks an order dismissing the husband’s application.

4. The wife’s application is supported by the following documents:-

   a)Affidavit of the wife filed 10 February 2016

   b)Financial Statement filed 10 February 2016

5. The proceedings first came before me on 7 December 2015 following an order of Judge Harland in the Federal Circuit Court transferring the matter to the Family Court of Australia.

6. On 11 December 2015 I delivered judgment in relation to interim children’s issues. The husband’s application for a variation to the spousal maintenance order was heard on 22 February 2016.  Judgment was reserved.

Background

1. The husband was born in 1983 and is 32 years old. The wife was born in 1985 and is 31 years old.

2. The parties married in 2007, separated on 9 October 2013 and divorced on 9 January 2015.

3. There is one child of the marriage, B, born in 2011 (“the child”).

4. At the date of separation, the wife moved out of the former matrimonial home and into her parents’ home. The wife and the child continue to live with the wife’s parents.

5. The husband lives with his partner, Ms J. They have one small child and their second child is due in June of this year.

Financial matters

1. The father has an interest in Zema Pty Ltd (“Zema Pty Ltd”) which is owned and operated by him together with his father and brother in law.

2. The Zema Pty Ltd Unit Trust (“the Unit Trust”) operates as a service trust to the following three trusts:-

   a)The Mr Zema Trust;

   b)The Mr Zema Family Trust; and

   c)L Family Trust.

3. The income from the Unit Trust is distributed equally to the three trusts. The husband and wife are trustees of the Mr Zema Trust, the husband’s parents are trustees of the Mr Zema Family Trust and the husband’s sister and brother in law are trustees of the L Family Trust.

4. The husband asserts that he no longer has the financial capacity to pay the wife interim spousal maintenance in the amount of $450 per week. It is the husband’s position that of recent date his income has significantly decreased. The husband is promoting an order that he continue to pay the wife spousal maintenance but at the reduced sum of $150 per week.

5. The husband primarily relies upon his affidavit filed on 13 November 2015. It is paragraph 24 onward which outlines the change to his current circumstances. Annexure B is a copy of the husband’s income tax return for the year ending 30 June 2015. At the hearing counsel for the father tendered the husband’s Notice of Assessment for that year. It is marked Exhibit ‘1’. The Notice of Assessment indicates that the husband’s return for the 2015 financial year was $88,488.

6. For the financial year ending 30 June 2013 the husband’s income was approximately $124,226 plus drawings of approximately $30,732.

7. The husband’s application is supported by the affidavit of Mr I of K Accountants filed 10 February 2016 which also outlines the husband’s income for the 2015 financial year.

8. The total net income the husband received via the Mr Zema Trust for the 2015 financial year was $89,049. This includes drawings from Zema Pty Ltd and rental income from the property situate at M Street, Suburb C (“the M Street property”).

9. The M Street property was purchased by the parties in about September 2010.  The property is currently tenanted and receives a rental income of $320 per week. The rental income is applied to repayment of the Commonwealth Bank home loan. The parties have historically made weekly loan repayments of approximately $450 per week, which is more than the required weekly payment. The parties have therefore accumulated a redraw facility which is currently being drawn down to meet the loan repayments.

10. Part G of the husband’s financial statement records a personal expenditure of $215 per week in payment of the Commonwealth Bank home loan. It is the wife’s submission that this liability is not being serviced. In her affidavit the wife outlines that between 11 October 2013 and 26 November 2015 the husband made no repayments. Since late November 2015 the husband has made three payments each in the amount of $905. It is the husband’s intention to maintain regular repayment of the Commonwealth Bank home loan.

11. The husband asserts that in addition to the income he received from the Mr Zema Trust, his family have advanced him monies to assist with meeting his financial commitments. It is his position that these loans were on the basis that the monies will be repaid. For the 2015 financial year a total of $7,716.40 was paid to the husband from the Unit Trust by way of loan.

12. In summary, the husband received a total of $93,000 from the Unit Trust in the 2015 financial year, $85,283 by way of drawings and $7,716 by way of loan.

13. Mr I suggests that the husband continues to receive monies from his family by way of loan, and outlines that the Unit Trust has loaned the husband an additional $4,500 this financial year.

14. In terms of property interests of the parties, the property in which the husband currently resides is the former matrimonial home. This is registered in the joint names of the parties and their interest is freehold.

15. In about early 2011 the parties purchased a block of land at O Street, Suburb P (“the Suburb P property”). The Suburb P property is registered in the joint names of the parties. The property comprises of a shed, concrete slab, rainwater tank, septic tank, plumping and electrics.

16. In about August 2013 the parties obtained a loan from Citibank for approximately $250,000 which is secured against the former matrimonial home. This was intended to fund the purchase of a warehouse. The loan has not been draw on and the funds are currently held in a Citibank offset account.

Tax liability

1. The husband outlines his tax liability in his affidavit filed 10 February 2016. The husband previously negotiated a payment plan with the Australian Taxation Office (“ATO”) with respect to tax owing for the 2014 financial year, whereby the husband would pay $1300 per month ($300 per week) in reduction of the tax liability. The payment plan has recently ceased as the husband paid the entirety of his tax liability for the 2014 financial year.

2. The husband’s tax liability in respect of the 2015 financial year is $33,896. According to Mr I a debt of this size is generally required to be repaid within 12 months. The ATO has approved a payment plan whereby the husband is required to make repayments of $2000 per month. Acceptance of the payment plan is annexed to Mr I’s affidavit and marked NA3.  This payment equates to approximately $461.55 per week. The first payment was due and paid by the husband on 5 February 2016. It is the husband’s evidence that the liability should be paid within 17 months.

3. Mr I highlights the probability that if the husband is accruing a tax liability on the income he currently generates and that this will need to be paid as and when it falls due. Though the husband asserts in his financial statement weekly income tax of $398 it is the wife’s submission that this liability is not being serviced.

4. In November 2015 the husband received a taxation return of $14,986. At the hearing counsel for the husband submitted that he used the funds to pay credit card liabilities. Counsel for the wife submits that apart from one payment made on 25 November 2016 in the amount of $7467 there is no evidence from the husband as to how the remainder of the return was spent.

Application for spousal maintenance

1. Section 72(1) of the Family Law Act 1975 (Cth) (“the Act”) provides:

   Right of spouse to maintenance

   (1)           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 whether:

   (a)            by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;

   (b)            by reason of age or physical or mental incapacity for appropriate gainful employment; or

   (c)            for any other adequate reason.

   having regard to any relevant matters referred to in subsection 75(2).

2. The wife says that she suffers from poor health.  She has the assistance of her medical practitioner and her psychologist. 

3. She has been diagnosed with Crohn’s disease and has received advice that her stress and anxiety have the potential to exacerbate her medical condition.

4. She appears to suffer from the following conditions and symptoms:-

   ·Nausea and vomiting

   ·Sleep disturbance

   ·Panic attacks

   ·Chronic stress and anxiety

   ·Weight loss

5. She attends for regular medical assessment and treatment together with counselling and anxiety focussed therapy.

6. The husband does not challenge that the wife suffers from the various medical and psychological complaints as set out.  He concedes that for the purposes of the interim proceedings only, it is unlikely that the wife is able to financially maintain and support herself without the assistance of her family.  Clearly, whilst the husband seeks to reduce the extent of the current financial obligation, he still concedes that it is appropriate she receive some level of support.

7. In her financial statement, the wife deposes her total average weekly income to be $1,132.  This includes $482 in government benefits, $200 in child maintenance and $450 received by way of Court ordered spousal maintenance.  In terms of personal expenditure, the wife pays $100 per week board to her parents and the total of her other expenditure as set out in Part N of her Financial Statement is $986.  This figure is calculated by adding together the expenses for and on behalf of the wife and for the child, apportioning where necessary the entire household and other expenses as they relate to both the wife and the child.

8. Whilst there is the obvious temptation to include the items of expenditure for and on behalf of the child as part of the wife’s total household expenditure and bring to account as income the child support assessed or paid by the husband, to do so distorts the task of determining the wife’s financial need that she seeks to be satisfied by an order of spousal maintenance.

9. In determining the wife’s entitlement, regard must be had to the provisions of s 75(2) of the Act. Whilst it is true that s 75(2)(d) provides:-

   commitments of each of the parties that are necessary to enable the party to support:

   (i)himself or herself; and

   (ii)a child or another person that the party has a duty to maintain;…

   the Full Court in Stein & Stein (2000) FLC 93-004 as follows:-

   [49]It seems to us that in the context of an application for spousal maintenance and consideration in s 75(2)(d) of

   “the commitments of each of the parties are necessary to enable the party to support…a child…the party has a duty to maintain”

   has a greater significance in determining the capacity of a payer to provide support rather than in determining the extent to which the other party requires support.  In a maintenance case if, for example, a husband is called upon to pay maintenance for his wife, the Court must determine his capacity to pay that maintenance having regard to his obligation to support his children.  The level of support that the wife needs for herself is not dependent upon the level of support she must give to others.  In a property case however, the extent to which a division of property may be seen as being appropriate might only properly be measured by examining all the demands that each spouse has to meet.

10. I do not consider that the expenses in respect of the child or even a shortfall in meeting those expenses when any child support is brought to account can be categorised as the wife’s proper expenses for the purposes of determining an award of spousal maintenance.

11. The matter is made more complicated by the absence of any current evidence which supports the items of expenditure although the husband’s counsel was really only concerned with the wife’s expenditure on clothing and shoes at $110, medical, dental and optical expenses at $108 and hairdressing and toiletries at $75.

12. I am however entitled to bring to account the standard of living that had previously been enjoyed by the parties and to make appropriate adjustments where I do not consider the items are either necessary to support the wife or reasonable.

13. The wife has significant ongoing medical, psychological and potentially psychiatric expenses.  She makes the point that when she starts her psychiatric counselling, there will be a $39 per appointment consultation fee.

14. Whilst somewhat arbitrary, but bringing to account the circumstances of this case, I propose to reduce the clothing and shoes attributed to the wife by $40 and hairdressing and toiletries by $25.

15. Whilst there is no evidence that the wife pays board to her parents, the reality is that it is not unreasonable for a payment of board to be requested to cover the expenses of the wife and child in circumstances where she does not claim gas, electricity, heating, fuel or other accommodation related expenses, nor any rent component.  The wife’s expenses would in all probability be significantly higher if she did not have the advantage of the ability to remain temporarily in her parents’ home.

16. Accordingly, the expenses for the wife that I bring to account is the total of Part G namely $100 and Part N adjusted to $492 with a zero income for the purposes of the determination of the wife’s application given that $482 per week is by way of family tax benefit and pension, $200 is the amount paid towards the child support of the child and $450 is for current spousal maintenance payment which is the subject of challenge.  It is noted that the husband does offer $150 per week.

17. In his Financial Statement, the husband deposes his average weekly income to be $2,021.  This includes a distribution from the Mr Zema Trust and rental income. Under his expenses, the husband claims weekly income tax in the amount of $398 per week in addition to his payment plan with the ATO regarding outstanding tax liability in the sum of $461 per week. The husband also claims payment of the Commonwealth Bank loan in the amount of $215 per week. Under Part N the husband claims a total of $950 in average weekly expenses. The husband asserts his total weekly expenditure from all sources to be $2275. It deems that the husband’s reasonable expenditure exceeds his income.

18. The wife challenges the husband’s alleged expenses. Firstly, she says that the husband does not pay the income tax for the current year estimated at $398 and nor has he been paying the mortgage on the M Street property.  Put simply, the figure for income tax and the M Street property mortgage should be excluded from the personal expenditure of the husband namely, over and above any other adjustment the husband’s expenditure in Part G of his Financial Statement should be reduced by $613.

19. The husband’s income has been considered by reference to the 2015 financial year.

20. The profit and loss statement for the Mr Zema Trust confirms for the 2015 financial year there were trust distributions from the Unit Trust of $89,440.  In addition, rent was received of $16,640 from the M Street property.  There were then various trust expenses which relate not just to the conduct of the trust, but also expenses in respect of the M Street property.  The most significant expense was interest paid of $10,026.88.  The net profit for the Mr Zema Trust was $89,049.20  The Mr Zema Trust profit and loss statement reveals a distribution of $88,633.20 to the husband and $416 to the child of the parties.  Whilst not arithmetically perfect, the distribution to the husband would equate to an income before tax by way of trust distribution of $1,704 as opposed to the current weekly amount as set out in the financial statement of $1,701.

21. This figure brings to account the rent that the Mr Zema Trust receives from the M Street property and accordingly, the sum of $320 that now appears in Part D of the Financial Statement should be excluded.  The total income of the husband is therefore $1,704.

22. The wife argues that the husband is not actually paying his tax and is not obliged to do so until well beyond the end of each financial year when a financial position of the Mr Zema Trust and the husband are determined.  There is no evidence that the husband puts money aside and accordingly, with whatever level of accuracy might be achieved by the husband, the income tax that he seeks to include in Part G is not actually being paid.  Whilst there is some sense in the wife’s approach, if accepted, any outstanding tax liability by the husband for the 2016 financial year would properly be considered as a liability that should be brought to account against the property interests of the parties.

23. That said, there is an obvious error in the amount claimed to be paid to the ATO by way of a payment plan currently listed at $300.  It is agreed that the correct sum is $461 being the weekly average of the agreed debt to the ATO of $20,000.

24. The husband seeks to claim $215 by way of mortgage payments in respect of the M Street property.  The interest component according to the profit and loss statements for the Mr Zema Trust is $10,026.88.  There appears to be no dispute that for an extended period of time the Mr Zema Trust did not pay the interest, but rather the husband was content to utilise the draw down facility that was standing in substantial credit to the Mr Zema Trust.  As at the hearing, the husband had apparently made three payments.  He says that the current payments (taking into account minor interest variations) are $215 per week or $11,180 for the year.  To some extent the difference is immaterial in that the wife says that no payment should be made by the husband, acknowledging that ultimately it may be to the parties detriment by depleting the surplus funds accumulated on the mortgage.

1. On balance, I consider that there is merit in the wife’s submission.  Different considerations may well apply if the evidence had suggested a continuing payment by the husband since separation.  In any event, it may be that the potentially parlous financial position of the parties may require a consideration as to whether property held or controlled by them should properly be considered for sale, thereby reducing the financial burden on each of them.

2. The inclusion of $53 being the expense for land tax, council rates, insurance, ESL and water supply for the M Street property should be excluded given that it has been brought to account in the Mr Zema Trust calculations.

3. Accordingly, the personal expenditure of the husband excluding Part N considerations should be adjusted to $810.25.

4. In considering the expenses as set out in Part N, it is noted that the total sum of $950 per week is apportioned between the husband, his current partner, their child (born in 2015) and his partner’s two children by a former relationship.

5. I am satisfied that the husband has an obligation in respect of his partner and their child.  There is little information as to whether he has an obligation to maintain his partner’s children, although I accept that to some extent he does.  His affidavit of 13 November 2015 advises that his partner receives a Centrelink benefit of $100 per week and child support of $100 per week from her former husband.

6. It seems to me that if I am unable to separate the expenses attributable to his child with his current partner and her children, then it is reasonable to bring to account the money that she receives as part of the income available to the husband.  I consider however that there should be some adjustment attributed to the children and his partner as follows:-

   ·Clothing and shoes for children reduced to $20

   ·Children’s activities reduced to $25

   ·Gifts for other adults reduced to $10

   This makes a total of $55 which would reduce the Part N expenses to $895 with a total attributed to the husband’s expenses of $1,702 as against a total income of $1,904, resulting in a surplus amount of $202 available to satisfy the wife’s spousal maintenance claim.

7. I do not ignore the husband’s financial circumstances.  At present he asserts that there is a level of incapacity that prevents him from undertaking duties historically required of him.

8. Nonetheless and for the present, the family structure is such that he receives one third of the income generated by Zema Pty Ltd.  In the 2014 financial year the husband’s income via the Mr Zema Trust was significantly higher.  No evidence has been presented to me as to the financial performance of the company in the current financial year, but I am satisfied in the absence of evidence to the contrary, it is reasonable to assume the husband’s income will be no less than was received by him in 2015.

I certify that the preceding sixty three (63) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 1 April 2016.

Associate: 

Date:  1 April 2016