Ackers and Ducley
[2010] FMCAfam 809
•30 July 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ACKERS & DUCLEY | [2010] FMCAfam 809 |
| CHILD SUPPORT – Application to set aside child support agreement – declared bankrupt after agreement registered – section 136 Child Support (Assessment Act) 1989 – agreement set aside – departure from administrative assessment of child support. |
| Child Support (Registration and Collection) Act 1988 (Cth), ss.17, 113, 113A, 116 Child Support (Assessment) Act 1989 (Cth), ss.80C, 80E, 95, 117, 136 Child Support Legislation Amendment (Reform of the Child Support Scheme -- New Formula and Other Measures) Act 2006 (Cth) |
| Daley & Daley [2009] FMCAfam 398; (2009) 41 Fam LR 351 Gallup & Gallup [2009] FMCAfam 839 Henricksen & Janz (No.3) [2008] FMCAfam 1343 Hides v Hatton (1997) FLC 92-759 In the Marriage of Gyselman (1991) 15 Fam LR 219; (1992) FLC 92-279 Simpson and Hamlin (1984) FLC 91-576 |
| Applicant: | MR ACKERS |
| Respondent: | MS DUCLEY |
| File Number: | MLC 6503 of 2008 |
| Judgment of: | Monahan FM |
| Hearing date: | 5 October 2009 |
| Date of Last Submission: | 12 May 2010 |
| Delivered at: | Sydney |
| Delivered on: | 30 July 2010 |
REPRESENTATION
| Counsel for the Applicant: | In Person |
| Solicitors for the Applicant: | In Person |
| Counsel for the Respondent: | Mr P. Davis |
| Solicitors for the Respondent: | Lennon Mazzeo |
ORDERS
The child support agreement dated 17 August 2004 (“the Child Support Agreement”) is set aside as of 1 February 2005.
Any arrears accrued since 1 February 2005 pursuant to the Child Support Agreement entered be discharged.
Subject to Order 4 herein, from 1 February 2005 MR ACKERS (“the husband”) pay child support to MS DUCLEY (“the wife”) for [X] born [in] 1996, [Y] born [in] 1998 and [Z] born [in] 2001 (“the children”) in accordance with the administrative assessment of child support.
Pursuant to s.117 of the Child Support (Assessment) Act 1989 there be a departure from the administrative assessment payable by the husband to the wife as follows:
(a)for the period commencing 1 July 2005 and ending 31 December 2007 the child support payable is set at the annual rate equivalent to $120 per child per week;
(b)for the period commencing 1 January 2008 and ending
31 December 2010 the child support payable is set at the annual rate equivalent to $140 per child per week; and
(c)for the period commencing 1 January 2011 and ending 24 May 2019 the amount in paragraph (b) be adjusted on 1 January each year in line with movements in the weighted average of the national weighted Consumer Price Index.
Any enforcement of the child support to be paid by the husband pursuant to these Orders be stayed for a period of three months from the date of these Orders.
The wife serve the Child Support Registrar with a sealed copy of these orders forthwith.
The parties have liberty to relist the matter in the event there are difficulties in the implementation of these orders by the Child Support Agency.
All extant child support applications are otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Ackers & Ducley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 6503 of 2008
| MR ACKERS |
Applicant
And
| MS DUCLEY |
Respondent
REASONS FOR JUDGMENT
As Corrected
Introduction
The applicant, MR ACKERS (“the husband”), and the respondent
MS DUCLEY (“the wife”), are in dispute in relation to a child support agreement they entered into in 2004 (“the Agreement”) and the husband’s failure to meet his obligations under the Agreement.
The husband has also initiated proceedings seeking various parenting orders, the proceedings for which are yet to be determined.
In his Amended Initiating Application filed 12 June 2009, the husband proposes orders that the agreement be discharged. The husband also seeks order that:
·following the discharge of the Agreement, the usual administrative provisions of the Child Support (Assessment) Act 1989 (“the Assessment Act”) apply; and
·that any arrears of child support payments, including penalties and interest, from 1 February 2005 to the date of the application be discharged.
In her Response filed 7 September 2009 the wife seeks an order dismissing the husband’s application. In addition, the wife seeks an order that the husband forthwith pay all amounts owing pursuant to the Agreement.
The wife asserts in her case outline document filed in Court on the first day of the hearing that:
“By a certificate issued by the Child Support Agency pursuant to section 116(2) of the Child Support Collection Act, the husband is indebted to the Child Support Agency in the sum of $129,236 as at 24 September 2009 in respect of arrears of child support, penalties and interest owing in respect of the three children described above.”
This certificate was not produced to the Court during the hearing but was annexed as an exhibit to the wife’s affidavit sworn and filed
12 April 2010.[1]
[1] See wife’s affidavit sworn and filed 12 May 2010, paragraph 5 and Exhibit “HD4”.
The matter initially came before me on 4 May 2009 and before Riethmuller FM on 25 May 2009. On 29 May 2009 Riethmuller FM made orders requiring the parties to attend a conciliation conference and also listing the child support proceedings for a final hearing before me. In addition, his Honour also approved interim consent minutes in relation to the child support proceedings. The interim consent minutes required the parties to file and serve material and to provide one another with a specified list of documents.
The matter next came before me on 29 July 2009 where orders were made vacating the existing conciliation conference date and providing the parties with a new conciliation conference date. In addition, orders were made:
·vacating the final hearing date for the child support proceedings;
·listing the child support proceedings for final hearing with priority;
·requiring the parties to file and serve further material; and
·for the wife to provide the husband with a specified list of documents.
The matter came before me again on 16 September 2009 where orders were made in relation to subpoenaed documents.
On 17 September 2009 the parties attended a Conciliation Conference before Registrar Rose but no agreement was reached.
The matter came before me for final hearing 5 October 2009. The husband appeared in person and the wife was legally represented at the final hearing by Mr P Davis of Counsel.
The matter did not conclude on 5 October 2009 and was adjourned part heard to 12 November 2009 for a further two days of hearing.
On 11 February 2010 I made the following orders to enable the Court to consider its powers under s.136 of the Assessment Act:
“6. The Respondent forthwith file and serve an affidavit annexing copies of the following Child Support Agency (“CSA”) documentation:
(a)CSA’s confirmation of registration of the relevant Child Support Agreement (“the agreement”);
(b)CSA’s determination (pursuant to Schedule 5, s.74(1) of the Child Support Legislation Amendment (Reform of the Child Support Scheme--New Formula and Other Measures) Act 2006) as to the status of the agreement following the changes introduced on 1 July 2008;
(c)CSA’s assessment for each child support period from the time of registration of the agreement until the date of the Final Hearing of the child support proceedings; and
(d)the CSA’s certificate issued under s.116(2) of the Child Support (Registration and Collection) Act 1988 (and referred to in the wife’s Case Outline document filed 5 October 2009) indicating that the Husband is indebted to the CSA in the sum of $129,236 as at 24 September 2009 in respect of arrears of child support, penalties and interest.
7. The Respondent forthwith request the CSA to provide her with estimated administrative assessments for each and every child support period as from the time the agreement was registered until the date of the Final Hearing of the child support proceedings and based upon the parties’ known taxable income on the assumption that there was no relevant child support agreement and upon receipt file and serve an affidavit annexing copies of these estimated
8.Any application to make further submissions as a result of the CSA material obtained and annexed to affidavits referred to in Orders 5 and 6 herein be made within seven (7) days of the date of filing and service of the said affidavits.
9.The child support proceedings be adjourned to this Court on 29 March 2010 at 10.00 am for Mention or Judgment Hearing.”
I also made various notations to the orders made on 11 February 2010 including the following:
“A.The Applicant was called outside Court at 9.50 am, 10.15 am and 10.30 am and there was no appearance.
B.Pursuant to rule 16.05(2)(a) of the Federal Magistrates Court Rules 2001, the Court may vary or set aside a judgment or Order made in the absence of a party.
…
D.Judgment in the child support proceedings is reserved and the documents to be provided in Orders 5 and 6 herein relate to the exercise of the Court’s power under s.136 of the Child Support (Assessment) Act 1989.
...”
When the matter returned to Court on 29 March 2010 both parties attended and I was advised by the wife’s solicitor that there had been problems obtaining the documents from the Child Support Agency (“the CSA”) as required by my orders made on 11 February 2010. Consequently, I adjourned the matter for mention on 12 May 2010 to provide the wife the opportunity of filing the requested affidavits.
The wife subsequently filed and served an affidavit on 12 April 2010 in compliance with the orders referred to above.
The matter returned before me on 12 May 2010 and on that occasion I adjourned the matter to a date to be fixed for judgment hearing. Neither party applied or sought to make any further submissions in accordance with the orders I had made on 11 February 2010.
Background
The husband was born [in] 1962 and was 47-years-old at the conclusion of the hearing. The wife was born [in] 1970 and was 39- years-old at the conclusion of the hearing.
The parties commenced cohabitation in late 1995 and subsequently married on 16 July 1998.
There are three children of the marriage, namely [X] born [in] 1996 (“[X]”), [Y] born [in] 1998 (“[Y]”) and [Z] born [in] 2001 (“[Z]”) (collectively “the children”).
The date of separation is a contentious issue. The husband states in his Case Outline filed 29 September 2009 that the parties’ final separation was on or around June 2002. The wife states in her ‘Case Outline’ filed 5 October 2009 that the parties’ final separation was October 2003. The parties subsequently divorced on 22 May 2005.
The parties agree that they entered into the Agreement in August 2004. Unfortunately the Agreement, a copy of which was annexed as “CA4” to the husband’s affidavit affirmed and filed 12 June 2009, does not appear to have been dated by the parties. This deficiency, among others, is discussed further below. That having been said, the parties signed Minutes of Consent Orders in relation to property matters on
4 August 2004 (“the Property Minutes”) that were formally approved by a Registrar of the Family Court on 17 August 2004.[2] The Property Minutes contain the following notation:
“B. That the husband and the wife had executed a child support agreement this day which shall remain on the Court file.”
Unfortunately, the Court could not locate the Agreement entered into by the parties’ in their earlier Court file (MLF5065 of 2003), and nor was there any evidence that same had been provided to the Court.
[2] See Annexure “CA3” to the husband’s affidavit affirmed and filed 12 June 2009.
It is clear that the Agreement produced to the Court was signed by the parties and witnessed and contained the following provisions:
·the husband was described as the “liable parent” in paragraph 2.1.1;
·the children were properly described in paragraph 2.1.2 and were further described as “eligible under the provisions of the Act” in paragraph 3.1;
·the recitals (paragraph 3) stated words to the effect that the wife was the eligible carer of the children;
·the recitals also stated that the Agreement was “intended by the parties to constitute a child support agreement pursuant to section 84 of the Act”;
·paragraphs 4.1 and 4.1.1 provided for the husband to pay the wife “the sum of $600 per week in respect of all the children” with such payments to be made to the wife’s nominated bank account, and with the first payment to be made on the date of the Agreement “and the final payment to be made upon the happening of a Child Support eliminating event in relation to the child as defined by section 12 of the Act”; and
·paragraph 4.4 provided “that the parties shall do all things and sign all documents necessary to cause this agreement to be registered with the Child Support Agency”.
It is also clear that the Agreement produced to the Court contained the following significant omissions:
·it was not dated in the spaces provided at the commencement of the Agreement;
·the address of the husband was not inserted in the spaces provided in paragraph 1 of the Agreement;
·the commencement date was not inserted in the spaces provided in paragraph 4.1.1 of the Agreement;
·the date that “the child support payment [sic] to be reviewed” was not inserted in the space provided in paragraph 4.2 of the Agreement; and
·the annual review dates were not inserted in the spaces provided in paragraph 4.3 of the Agreement.
It would appear that an application to register the Agreement with the CSA pursuant to the Assessment Act did not occur until August 2007. In her Affidavit sworn and filed on 7 September 2009 the wife annexes (as part of her Exhibit “HD1”),[3] a letter she received from the CSA dated 10 August 2007 indicating that they had accepted the application (presumably lodged by the wife) and allocated it “case number 229404662”. The acceptance document attached to the CSA letter confirms that the agreed payment amounts are $200 per child per week, with the first payment starting 23 February 2005, and the Agreement ended 24 May 2019. It is also noteworthy that the CSA document records the Agreement being “Made on: 17 August 2004”, the same day that the Property Minutes were formally approved by a Registrar of the Family Court.
[3] This is replicated in the wife’s affidavit sworn and filed on 12 April 2010 (Exhibit “HD1”).
By their letter dated 8 February 2008,[4] the CSA confirmed to the wife, and presumably to the husband in an identical letter, that they had reviewed the Agreement as required by changes to the legislation and had determined that it would continue after 30 June 2008. It is noteworthy that the letter also stated that “If you do not agree with the CSA’s decision, you may object” and there was no evidence presented to the Court that any objection was subsequently made by either party.
[4] See wife’s affidavit sworn and filed on 12 April 2010, paragraph 3 and Exhibit “HD2”.
Following separation, the husband re-partnered with a Ms M. At the time of the final hearing the husband asserts that he is no longer in a domestic relationship with Ms M.
The wife has re-partnered with Mr F and has a child arising from that relationship, namely [C].
Both the husband and the wife were in good health at the time of the hearing.
At the time of the hearing the husband was engaged in full time employment as [a tradesman] with [M] Pty Ltd trading as “[T]” (“[T]”). Since 4 May 2005 [T] has had a consultancy agreement with [D] “to [omitted]”.[5] The husband is the primary performer of this consultancy agreement for [T].
[5] See Exhibit “RW1”.
The wife is employed by her partner, Mr F, in his business as [F].
Issues
In this case the parties agree that:
·they entered into the Agreement that was accepted by the Child Support Registrar; and
·the Agreement was not obtained by fraud or a failure to disclose material information by either party, nor was it the result of undue influence, duress or unconscionable conduct by either party.
Broadly speaking, the following issues were in dispute at the hearing:
·whether the relevant the Agreement should be set aside for reasons associated with the husband being declared bankrupt on 1 February 2005; and
·the husband’s financial ability to pay child support for the children in accordance with the Agreement or otherwise.
Law
The law relating to the variation or discharge of the provisions of child support agreements, by court order, was significantly changed on
1 July 2008 as a result of the commencement of the Child Support Legislation Amendment (Reform of the Child Support Scheme -- New Formula and Other Measures) Act 2006 (Cth). As the husband’s application for these proceedings was filed on 25 March 2009, these most recent changes apply despite the Agreement having been entered into in 2004.[6]
[6] See Child Support Legislation Amendment (Reform of the Child Support Scheme--New Formula and Other Measures) Act 2006, Schedule 5, Part 2 section 73A(5). For a discussion see Venson v Venson [2009] FamCA 859 at [36]-[41] [per Austin J].
Setting aside a child support agreement
In order to succeed with his current application to set aside the Agreement, the husband acknowledges that he needs to satisfy the provisions of s.136 of the Assessment Act. A number of other sections of the Assessment Act are also relevant to the application of s.136, in particular ss.80C, 80E and 117.
At this point let me state that should the Court decide to set aside the Agreement, then any arrears owing pursuant to the Agreement would be discharged (but not any penalties owing to the CSA if applicable).
Section 136 of the Assessment Act states:
“(1)A party to either of the following agreements may apply to a court having jurisdiction under this Act for the court to set aside the agreement:
(a)a child support agreement that has been accepted by the Registrar under section 92 or 98U;
(b)a termination agreement, or a written agreement referred to in paragraph 80G(1)(b), that has been accepted by the Registrar under section 92.
(2)If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:
(a)that the party's agreement was obtained by fraud or a failure to disclose material information; or
(b)that another party to the agreement, or someone acting for another party:
(i) exerted undue influence or duress in obtaining that agreement; or
(ii) engaged in unconscionable or other conduct;
to such an extent that it would be unjust not to set aside the agreement; or
(c) in the case of a limited child support agreement:
(i) that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
(ii) that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement); or
(d)in the case of a binding child support agreement--that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.
(3)Subject to section 145 (Registrar may intervene in proceedings), the parties to a proceeding under subsection (1) are the parties to the agreement.
(4) If:
(a)the court sets aside a child support agreement under this section; and
(b)the court is satisfied as mentioned in paragraph 117(1)(b) (departure orders);
the court may make an order under Division 4 of Part 7[7] without an application having been made under section 116.
(5)If:
(a)the court sets aside a child support agreement under this section; and
(b)the court is not satisfied as mentioned in paragraph 117(1)(b) (departure orders); and
(c)the payee has received or will receive benefits pursuant to the agreement;
the court may still make an order that departs from the administrative assessment where it is just and equitable to do so, having regard to the benefits that the payee has already received pursuant to the agreement.”
[7] Division 4 of Part 7 of the Assessment Act deals with “orders for departure from administrative assessment in special circumstances”.
Binding or limited child support agreement
The letter from the CSA to the wife dated 10 August 2007[8] demonstrates that the Agreement was accepted by the Registrar’s delegate. It is also clear that the current legislation now distinguishes between what it now describes as a “binding” child support agreement or a “limited” child support agreement. The relevant definitions are found in ss.80C(2) and 80E(1) of the Assessment Act.
[8] See wife’s affidavit sworn and filed on 7 September 2010 (Exhibit “HD1”); also see wife’s affidavit sworn and filed on 12 April 2010 (Exhibit “HD1”).
Section 80C states:
“(1) An agreement is a binding child support agreement if:
(a) the agreement is binding on the parties to the agreement in accordance with subsection (2); and
(b) the agreement complies with subsection 81(2).
(2) For the purposes of subsection (1), an agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is in writing; and
(b) the agreement is signed by the parties to the agreement; and
(c) the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i) the effect of the agreement on the rights of that party;
(ii) the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and
(d) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(e) the agreement has not been terminated under section 80D; and
(f) after the agreement is signed, either the original agreement or a copy of the agreement is given to each party.”
Section 80E states:
“(1) An agreement is a limited child support agreement if:
(a) it is in writing; and
(b) it is signed by the parties to the agreement; and
(c) it complies with subsection 81(2); and
(d) either:
(i) it meets the conditions in subsection (2), (3) or (4), as the case requires, (assuming the agreement is accepted by the Registrar); or
(ii) it has been accepted by the Registrar under section 98U.”
The significant difference between the two types of child support agreements is the strict requirement for legal advice and proof of the giving of advice before an agreement can be considered binding.
It is also clear that the Agreement in this case was entered into between the parties, and registered with the CSA, prior to the commencement of the relevant provisions on 1 July 2008. Consequently, it is not surprising that there is an absence of certification or indeed any statement on the face of the Agreement to indicate whether it is “binding” or “limited”.
While the letter from the CSA to the wife dated 8 February 2008[9] fails to use to terminology “binding” or “limited”, it is noteworthy that the intention of the relevant transitional provisions[10] enacted as part of the reforms that took effect on 1 July 2008 appear to have created a deemed category[11] of “binding” child support agreements. The relevant transitional provisions provide for the following:
[9] See wife’s affidavit sworn and filed on 12 April 2010, Exhibit “HD2”.
[10] See Child Support Legislation Amendment (Reform of the Child Support Scheme--New Formula and Other Measures) Act 2006, Schedule 5, Part 2 paras.74-75.
[11] See Daley & Daley [2009] FMCAfam 398 at [98] (per Brown FM).
“74 Registrar to review all agreements
(1)Before 1 July 2008, the Registrar must:
(a)review every child support agreement made before that day that will be in force:
(i) immediately before that day; or
(ii) after that day; and
(b) determine in writing whether each such agreement is:
(i) to be taken to be a binding child support agreement; or
(ii) to be terminated.
(2)If, in accordance with subitem 73(5), the Registrar accepts a child support agreement on or after 1 July 2008 under the Assessment Act as in force immediately before that day, the Registrar must:
(a)review the agreement; and
(b)determine in writing whether the agreement is:
(i) to be taken to be a binding child support agreement; or
(ii) to be terminated.
(3)After the Registrar makes a determination under subitem (1) or (2), the Registrar must serve notice in writing of the determination on each of the parties to the agreement.
(4)The notice must include, or be accompanied by, a statement to the effect:
(a)that the party may, subject to the Registration and Collection Act, object to the decision (the original decision); and
(b)that if the party is aggrieved by a later decision on an objection to the original decision (no matter who lodges the objection), the party may apply, subject to that Act, to the SSAT for review of the later decision.
…
75 Effect of determinations
Effect of determinations
(1)If the Registrar makes a determination under subparagraph 74(1)(b)(i) or (2)(b)(i), then, for the purposes of the Assessment Act and the Registration and Collection Act, at the time specified in subitem (4) (if the agreement has not been previously terminated):
(a)the agreement is taken to be a binding child support agreement; and
(b)the amendments made by this Schedule do not affect the continuity of any assessment, in force at that time, of the annual rate of child support that is payable under the agreement.
(2)If the Registrar makes a determination under subparagraph 74(1)(b)(ii) or (2)(b)(ii), then, for the purposes of the Assessment Act and the Registration and Collection Act, for any day in a child support period that is on or after the time specified in subitem (4) (if the agreement has not been previously terminated), the agreement is terminated by force of this item.
(3)Subitems (1) and (2) do not affect the operation of provisions in an agreement that do not have effect for the purposes of the Assessment Act or the Registration and Collection Act.
When determinations take effect
(4)For the purposes of subitems (1) and (2), the following time is specified:
(a) if the determination is made under subparagraph 74(1)(b)(i)--the time that item 5 of this Schedule commences;
(b)otherwise--the latest of the following times:
(i) if the decision of the Registrar to make the determination becomes final--at the time when that decision becomes final;
(ii) if a decision of the SSAT relating to the Registrar's determination becomes final--at the time when that decision becomes final (within the meaning of subsection 110W(1) of the Registration and Collection Act);
(iii) if neither subparagraph (i) nor (ii) applies--at the time when a decision of a court relating to the Registrar's determination becomes final (within the meaning of subsection 110W(2) or (3) of that Act);
(iv) at the time when the agreement takes effect.
(5)For the purposes of subparagraph (4)(b)(i), a decision of the Registrar becomes final at the end of the period within which an application could have been made to the SSAT under section 80 of the Registration and Collection Act (as it applies because of subitem 74(6) of this Schedule).”
In other words the transitional provisions required the CSA to review all child support agreements existing before 1 July 2008 and advise the relevant parties whether the agreement was determined by the CSA to be a “binding” child support agreement or an agreement that would be “terminated”. Unless there was a successful objection to the CSA’s decision, any agreement not terminated after 30 June 2008 would be a “binding” agreement for the purpose of the legislation.
While both type of agreements may only be varied by the parties entering into a new child support agreement,[12] they may be set aside by the Court pursuant to the provisions of s.136(2) of the Assessment Act. The reason that the distinction between the two types of agreement is important is because of the consequences that follow from a party seeking to set aside either type of agreement.
[12] See Assessment Act, ss.80CA and 80F.
If an agreement is “limited”, then pursuant to s.136(2)(c)(i) of the Assessment Act, the test is whether there had been significant change such that it would be unjust not to set such an agreement aside.
If an agreement is “binding”, then pursuant to s.136(2)(d) it may only be set aside if there are exceptional circumstances that have arisen since the making of the agreement that will result in the applicant or the children suffering hardship if it is not set aside. Clearly the test for setting aside a binding agreement “is more stringent, requiring as it does the need for exceptional circumstances”.[13]
[13] Gallup & Gallup [2009] FMCAfam 839 at [39] (per Demack FM).
If the Court is satisfied that an agreement should be set aside, and that one or more of the grounds for departure exist whereby it is just and equitable and otherwise proper to make a particular order under Pt 7 Div 4 of the Assessment Act, then pursuant to s.136(4), the Court may make the particular order under without an application having been made under s.116.
Departure from administrative assessment
Section 117 sets out the matters “as to which court must be satisfied before making” a departure order in relation to administrative assessment. Sections 117(1) and (2) of the Assessment Act states:
“(1)Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b)the court is satisfied:
(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:
(A) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this Division;
the court may make the order.
(2)For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i) the duty of the parent to maintain any other child or another person; or
(ii) special needs of any other child or another person that the parent has a duty to maintain; or
(iii) commitments of the parent necessary to enable the parent to support:
(A)himself or herself; or
(B)any other child or another person that the parent has a duty to maintain; or
(iv) high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain;
(aa)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of the responsibility of the parent to maintain a resident child of the parent (see subsection (10));
(b)that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i) because of high costs involved in enabling a parent to spend time with, or communicate with, the child; or
(ia) because of special needs of the child; or
(ib) because of high child care costs in relation to the child; or
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.”
The matters to consider for the purposes of s.117(1)(b)(ii), are set out in s.117(4) which states:
“(4)In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d)the income, property and financial resources of each parent who is a party to the proceeding; and
(da)the earning capacity of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B)any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.”
It is also noteworthy that the precise words in s.136(2) differ from ss.117(4) and 117(5) of the Assessment Act. As the learned editors of the CCH Child Support Handbook observed at paragraph 16-100:
“… presumably these sections offer some guide to the meaning of the words “unjust” and “proper”. However, one would have expected the same words to be used if the definitions of s 117 were intended to be incorporated by reference. The Explanatory Memorandum provides no assistance on this issue.”[14]
[14] G Riethmuller, J Wade et al, Australian Family Law Child Support Handbook, CCH Australia Limited, Sydney, 2010 at page 30,623.
In the recent case of Daley & Daley [2009] FMCAfam 398; (2009) 41 Fam LR 351 Brown FM analysed the meaning of the words “exceptional circumstances” that appear in s.136(2). His Honour concluded at paragraph [88] that there is no qualitative difference between the phrase “exceptional circumstance” used in s.136 and the phrase “special circumstances” referred to in other parts of the Act, most particularly s.117.[15] Interestingly, in the decision of In the Marriage of Gyselman (1991) 15 Fam LR 219; (1992) FLC 92-279 the Full Court (Nicholson CJ, Fogarty and Nygh JJ) considered the relevant phrase in s.117 and found it to mean “something that is special or out of the ordinary”.[16]
[15] This view was adopted in M & M [2009] FMCAfam 1034 at [38] (per Hughes FM).
[16] Gyselman & Gyselman (1991) 15 Fam LR 219 at 225.
In contrast to the view expressed by Brown FM, in Henricksen & Janz (No.3) [2008] FMCAfam 1343 Wilson FM determined at paragraph [32] that there was indeed a difference between the two phrases:
“32. Further, even if the father demonstrated that the financial circumstances had changed, he has to show two additional matters to enliven the discretion in s.136(2)(d) Child Support (Assessment) Act. The first is that the change of circumstances was exceptional. Neither party referred to any judicial or other authority as to what this term meant. The word commonly means unusual or out of the ordinary. It is curious that the word ‘exceptional’ is used in s.136(2)(d) of the Act, whereas ‘special circumstances’ is used in s.117. That phrase has attracted judicial interpretation in cases such as Gyselman & Gyselman (1992) FLC 92-279 and Hides v Hatton (1997) FLC 92-759. Ordinarily consistency in the interpretation of terms in a statute is a fundamental construct of statutory interpretation. The use of a different term would signify that the draftsman of the legislation in s.136(2)(d) intended not to use the concept of special circumstances but rather something different. That view is reinforced by the language of s.136(4)(b), which presupposes a two step process: first, the proof of exceptional circumstances, so as to set the earlier agreement aside; and, secondly, the proof of special circumstances to fix a new method or amount of child support.”
More recently, in Gallup & Gallup [2009] FMCAfam 839 Demack FM stated at paragraph [52]:
““Exceptional”, it seems to me, carries with it something more than “special”. In its most basic sense, “exceptional” is derived from “except”. This provides the starting point for understanding that the word is meaning to exclude or create a barrier. Circumstances, then, which are “exceptional”, must be outside the normal experience, in such a way that they are the exception and something more than a minor abnormality. As the exceptional circumstances are arising in the context of change, the expression in Simpson and Hamlin [(1984) FLC 91-576 at 79,657] seems apt: that the change was such as to “take it out of and beyond the ordinary circumstances in which such change might be reasonable expected to occur.”
I am persuaded that the views expressed by Wilson FM and
Demack FM should be followed when analysing the evidence in light of ss.136(2)(d) and 136(4) of the Assessment Act. Consequently, the Court must be satisfied:·firstly, there are exceptional circumstances that justify setting aside the child support agreement (and if not the agreement will remain enforceable); and
·secondly, (assuming the agreement is set aside) there are special circumstances to depart from an administrative assessment of child support and fix a new method or amount of child support (and if not, an administrative assessment shall apply).
Enforcement of a child support liability
As previously stated, in her response the wife sought an order that the husband “forthwith pay all amounts owing pursuant to the child support agreement dated August 2004”. By their certificate issued under s.116(2) of the Child Support (Registration and Collection) Act 1988 (“the Registration and Collection Act”), the CSA states that, as at 24 September 2009, the husband owed the sum of $129,236 in respect of arrears of child support, penalties and interest.
The husband acknowledges that while he has not being paying child support in accordance with the Agreement, he has been regularly paying the sum of $55 per week ($18.33 per child per week) since January 2006. This is confirmed by the child support transaction statement issued by the CSA to the husband on 13 March 2009 for the period from 23 February 2005.[17] The transaction statement also shows that the husband paid other various amounts during 2005.
[17] See husband’s second affidavit, Annexure “CA6”.
Section 95(2) of the Assessment Act provides that if a child support agreement has been accepted by the Registrar of the CSA, and the agreement includes “provisions under which a party is to pay child support for a child to another party in the form of periodic amounts paid to the other party”,[18] then the “provisions have effect, for the purposes of Part 5, as if they were an order made by consent by a court under Division 4 of Part 7”. Under s.17(1) of the Registration and Collection Act, the husband’s liability to pay periodic support for the children is a “registrable maintenance liability”.
[18] Assessment Act, s.95(2)(a).
Child support debts may be recovered by the CSA Registrar or the “payee” (ie. the wife in this case).[19] Despite requests made by the wife, as evidenced by her solicitor’s letter to the CSA dated 1 September 2009 and annexed to her affidavit sworn and filed on 7 September 2009 and marked ‘HD-8’, the CSA has not taken steps to enforce the liability pursuant to s.113 of the Registration and Collection Act 1988. Section 113A of the Registration and Collection Act 1988 provides for a right of enforcement by the “payee” of a “registrable maintenance liability” provided the payee has given notice to the CSA as required by the section. Section 113A provides that:
[19] Registration and Collection Act 1988, ss 113 and 113A.
“(1)A payee of a registered maintenance liability may sue for and recover a debt due in relation to the liability if the payee notifies the Registrar in writing of his or her intention to institute a proceeding to recover the debt:
(a) at least 14 days before instituting the proceeding; or
(b)in exceptional circumstances--within such shorter period as the court allows.”
Consequently, s.113A requires the wife to comply with the notice requirements in advance of commencing proceedings in accordance with that provision. At this stage let me state that there is no evidence to satisfy me that the wife has complied with the notice requirements under s.113A.
Evidence of the parties
Both parties provided the Court with affidavit and oral evidence.
In addition, Ms M, the husband’s current employer, and until recently his domestic partner, gave oral evidence. Mr E, a former employer of the husband also gave oral evidence.
Applicant husband’s evidence
The following documents were relied upon by the husband:
·Amended Initiating Application (Family Law) filed on 12 June 2009;
·Husband’s Affidavit sworn on 16 March 2009 and filed on 25 March 2009 (“his first affidavit”);
·Husband’s Affidavit sworn and filed on 12 June 2009 (“his second affidavit”);
·Husband’s Affidavit sworn and filed on 16 September 2009 (“his third affidavit”);
·Husband’s Affidavit sworn and filed 29 October 2009 (“his fourth affidavit”);
·Amended Financial Statement sworn and filed on 29 September 2009 (“his amended financial statement”); and
·Outline of Case document filed on 29 September 2009.
In his first affidavit and his second affidavit, the husband asserts that there was a “significant change” in his circumstances due to him being declared bankrupt on 1 February 2005. His bankruptcy is verified by the extract document dated 1 February 2005 from the National Personal Insolvency Index (see Annexure “CA5” to his second affidavit). The husband was discharged from bankruptcy on 1 February 2008. The husband's bankrupt estate was certified as finalised on
28 April 2008 (as is evidenced by the Notice of Finalisation of Administration signed by Ms R, Trustee and dated 28 April 2008; see Annexure “9” to his first affidavit). The husband does not allege that there has been any significant change in the circumstances of any or all of his children.
In paragraphs 6 and 7 of his second affidavit the husband states:
“6. In February 2005 I was unable to meet the financial requirements of business and the demands set out in the property settlement.
7. I was made bankrupt on February 1st 2005. Due to the bankruptcy, I had lost my business, my properties and lost all other assets. [B] (Trustees overseeing the bankruptcy) took over all assets either owned by me personally or by the company and liquidated everything of value. The extract of my bankruptcy are annexed hereto and marked with the initials “CA5”.”
To support this assertion that his taxable income radically changed following his bankruptcy, the husband attached to his second affidavit copies of his Notices of Assessment for the end of the income tax years 2005, 2006 and 2007 (see Annexures “CA9-CA11” respectively). These notices disclose the husband’s taxable income as follows:
·for the financial year ending 30 June 2005: $7,230.
·for the financial year ending the 30 June 2006: $15,576
·for the financial year ending the 30 June 2007: $23,767.
In addition, the husband asserts in paragraphs 15 and 16 of his second affidavit that his estimated taxable income for the financial year ending 30 June 2008 is $22,115.42 and that his estimated taxable income (as at 5 May 2009) for the financial year ending 30 June 2009 is $18,269.26.
As to his current financial circumstances, the husband asserts in his amended financial statement that his total average weekly income is $480 and that his total weekly personal expenditure is $482. In addition, apart from disclosing gross superannuation entitlements totalling $42,473, the husband claims that the total value of all property owned by him is just $150. These amounts are identical to the amounts the husband discloses in his earlier financial statement filed 12 June 2009 with the exception that his total weekly personal expenditure which was then $472. These amounts are also identical in respect of average weekly income and gross superannuation entitlements that the husband disclosed in his earlier financial statement filed 25 March 2009.
Not surprisingly, the husband was cross-examined at some length in respect of his bankruptcy, his income earning capacity and financial circumstances and his professional and personal relationship with his current employer, Ms M.
In his opening statement, the husband stated:
“…I was made bankrupt five months after the child support agreement was entered into. I no longer own and operate a business that can generate large amounts of money that employed 15 plus staff in Victoria, Tasmania and New South Wales. I no longer own properties which were lost in the bankruptcy. I am now employed by Ms M, who owns and operates [M] Pty Limited, trading as [T]. I am on a salary and all my tax returns have been lodged, plus financial information was given to the trustees whilst I was bankrupt.”[20]
[20] Transcript, 5 October 2009, page 8, lines 4-11.
As stated, the husband was cross-examined at some length about his personal bankruptcy and “[T]” business. It was the wife’s case that the husband knew that his bankruptcy (due to large sums owing by his business to the Australian Taxation Office) was likely before he entered into the Agreement. She further proffered the theory that the husband engineered the re-establishment of [T] business following his bankruptcy and that he has manipulated and continues to manipulate his income using the appearance of a business owned by Ms M. On the first day of the hearing the husband was specifically asked by Mr Davis:
“You know Mr E?
‑‑‑Yes.
Yes. He is going to tell his Honour that you approached him some time in 2004 with the prospect of the fact that you might go bankrupt because you had some significant debts. If he gives that evidence, would you agree with that?
‑‑‑No, I would not.
All right. Did you approach him in 2004 about any business proposal?
‑‑‑Mr E was a previous employee of mine, no, I did not.
Okay. Well, I – Mr Ackers, he will say you did, and what he will say you said was – is that you have got some worrying business costs and expenses at the moment, you are thinking of going bankrupt for a whole range of reasons, would it be okay if he employed you for a number of years and kept on the name [T]. Now, this is all pretty specific stuff. Did you have a conversation along these lines with him?
‑‑‑No, I did not.
All right. So, just so his Honour understands this. If he gives that evidence he is either mistaken or lying, is he?
‑‑‑Yes, he is.
It wouldn’t be you that is mistaken or lying, would it?
‑‑‑No, it’s not.
You are the one with the motive to do it though, aren’t you?
‑‑‑No, I’m not.”[21]
The husband then went on to acknowledge that his bankruptcy trustee subsequently “sold” all the plant and equipment from [T] business to Ms M, the husband’s then domestic partner.[22] The husband also denied the assertion that he had entered into the “same scheme” with Ms M that he had proposed to Mr E following Mr E’s refusal to assist.[23]
[21] Ibid, page 21, lines 26-47.
[22] Ibid, page 22, lines 1-5.
[23] Ibid, page 34, lines 37-47.
Given these specific denials by the husband, I agreed to allow the parties to file further affidavit evidence prior to the matter returning for day two of the hearing on 12 November 2009.
Mr E subsequently gave evidence in his affidavit sworn 28 October 2009 and filed 29 October 2009 that directly contradicted the husband’s evidence on this issue. The husband subsequently sought to clarify this issue when his cross-examination resumed on day two of the hearing. The husband gave evidence that it was Mr E that approached him about acquiring [T] business in the event of the husband’s bankruptcy.[24] When Mr E was cross-examined by the husband this specific issue was not raised with him. Mr E did admit under cross-examination that following the husband’s bankruptcy, some 15 former employees of [T] business did commence working for him in his new business “[U]”.[25]
[24] Transcript, 12 November 2009, page 23, lines 12-39.
[25] Transcript, 13 November 2009, page 65, lines 15-47.
The husband was also cross-examined about how he came to pay $55 per week in child support. The husband asserted that the figure of $55 per week was suggested by the CSA[26] in a telephone conversation with the husband shortly after he was declared bankrupt:
“They hadn't done an accurate assessment because I was under … an agreement and there was no need to do an accurate assessment at the time. So the $55 was given as a recommendation, but they said to me straight away that I needed to go to court to get … the orders set aside.”[27]
[26] Transcript, 12 November 2009, page 48, lines 16-17.
[27] Ibid, page 48, lines 25-28.
The husband then confirmed that the verbal assessment he obtained from the CSA was based on his estimated income of $25,000 per annum.[28]
[28] Ibid, page 48, lines 45-47.
The husband was also cross-examined at some length in respect of [T] business and its consultancy agreements with [D] (“[D]”). The husband admitted under cross examination that [D] was [T]’s “biggest client” before and after the husband’s bankruptcy.[29] The husband also conceded that a consultancy agreement was entered into between [T] and [D] after the husband’s bankruptcy on 4 May 2005 (see Exhibit “RW1”). It is clear from the tendered document that although the agreement was entered into between [D] and [T], the husband signed the consultancy agreement and not Ms M. It is also clear from the tendered document that the consultancy was a one-year-plus term to commence on 9 May 2005 for an annual fee of:
[29] Transcript, 5 October 2009, page 24, lines 27-28.
“$80,000 excluding GST
Plus reimbursement of [D] related telephone costs and car expenses at 60 cents per KM - these are to be claimed by a company tax invoice with supporting documentation”
Further consultancy agreements were entered into between [D] and [T] on 14 March 2008 (“the 2008 agreement”) and 20 March 2009 (“the 2009 agreement”) (see Exhibit “RW6”). The 2008 agreement provided for a gross monthly fee of $7,917 to be paid (i.e. $95,004 per annum), plus expenses as set out in paragraph 6 of the 2008 agreement.
The 2009 agreement provided for a gross monthly fee of $8,155 to be paid (i.e. $97,860 per annum), plus expenses as set out in paragraph 6 of the 2009 agreement. Both these agreements were signed by Ms M on behalf of [T].
Under cross examination the husband agreed to the proposition that during the period 2005-2008 [T] received on average $100,000-$150,000 per annum including expenses under the terms of the consultancy agreements.[30] In relation to the husband’s travelling expense claims made pursuant to the consultancy agreements, the husband admitted that these may amount to a couple of thousand dollars a month.[31]
[30] Ibid, page 31, lines 10-13.
[31] Ibid, page 27, lines 5-6.
The husband also admitted under cross-examination that he had a credit card in the name of [T] and that he was a signatory to the [T] cheque account, but asserted that both were only used by him for the payment of business expenses at least “99.9 per cent” of the time.[32] In respect of the cheque account, the husband gave evidence on the first day of the hearing that he had not signed a cheque for “probably five years, four years”.[33] On the second day of the hearing the husband admitted that this particular statement was an error and that he had “probably have written two in the last three years”.[34]
[32] Ibid, page 27, lines 20-29, page 28, lines 23-33.
[33] Ibid, page 27, lines 23-24.
[34] Transcript, 12 November 2009, page 7, lines 26-27.
As to his personal relationship with Ms M, the husband denied they were currently in a domestic relationship. His recollection under cross examination was that he pays $200 per week rent to Ms M to reside with her and her son at her home.[35] It is noteworthy that in his amended financial statement the husband disclosed a payment of $180 per week.
[35] Ibid, page 33, lines 6-12.
As to his business relationship with Ms M, the husband denied that he was effectively in control of [T] business. More particularly, the husband gave evidence that that he had “no interest in running the business, invoicing, administrating the business at all”.[36] The husband did agree that Ms M had never attended any of the [omitted] jobs done by [T] because she was not a [tradesman],[37] and that, in relation to the consultancy agreements with [D], he has sent emails and invoices to [D] on behalf of [T] (see Exhibit “RW2”).[38] The husband further admitted [T] provided him with a mobile phone and a Mitsubishi car that was acquired for $55,000.[39] Moreover, he stated that the Australian Taxation Office and the CSA were aware of these benefits.[40]
[36] Ibid, page 34, lines 24-25.
[37] Ibid, page 29, lines 30-33.
[38] Ibid, page 44, lines 36-47.
[39] Ibid, page 50, line 5-7.
[40] Ibid, page 56, line 7-8.
On the second day of the hearing the husband also admitted that his mobile number and not Ms M’s phone number had appeared on [T]’s invoices. An example was the tendered (Invoice No. [1] to [D] dated
9 June 2006) as Exhibit “RW4”. The following exchange between the husband and Mr Davis is noteworthy:
“That telephone number is on the invoice. The … obvious ramification of that is that any query arising out of that invoice is going to be directed to the person whose telephone number is on it?
‑‑‑Correct.
So, if Ms M handles the bulk of your invoicing, why is her mobile phone number not on that invoice?
‑‑‑Because she works part-time as a real estate agent and part time in this. She doesn't need questions about invoicing when she is trying to sell a property or do other work. I will - I will take the message and she can ring you back - ring the customer back later. But if they want another job booked in, that's the number. I will talk to them about [omitted] problems, not her.
[T]'s telephone number has been changed, has it not? It has got a Telstra redirect automatic redial facility on it?
‑‑‑No.
Has it not?
‑‑‑It hasn't been changed, no. It's always had that number, Mr Davis.
I have not even told you the number yet. You might be assisted to wait for the question?
‑‑‑Okay.
The previous number of [T] was 1300[omitted], was it not?
‑‑‑Correct.
All right. So what happens when we ring that number?
‑‑‑It goes to my mobile.
Well, what I put - okay. When you said that the number of [T] has not been changed, [T] is no longer contactable on the 1300 number, is that correct?
‑‑‑It's not correct.
I see?
‑‑‑It’s always had that number and it still has that number.
Well, there have been a number of attempts to ring this number since the last hearing and it has an automatic Telstra message connected to it which redirects the call straight to your mobile phone, does it not?
‑‑‑That's correct.
So it has been changed?
‑‑‑No, it has always had that on. It has always - you ring the 1300 number, you will get this - you will get [T].”[41]
[41] Transcript, 12 November 2009, page 9, lines 11-45.
The husband was also asked about whether Ms M worked full-time for a [business omitted] in addition to her work with [T]:
“Just on a different note, throughout this entire period your domestic partner, Ms M, continues to work as a [omitted], does she not?
‑‑‑That’s correct.
So she is working virtually full time with [J]?
‑‑‑She – at the time I think it was Mr D.
All right. She has been employed throughout. That is basically her background, is it not?
‑‑‑Correct.
[Business omitted]. And she has been employed throughout the period of time that she has been a director of [M] Pty Limited, full time as an [omitted]?
‑‑‑No, that’s not correct.
Okay. Well, I will take you to certain [business omitted] that she has made in respect of – I think it’s – I will just read out to you the document that she has signed to see whether you agree. I think this is for one of the cars that you bought. You replaced a Jeep Cherokee at one stage with a Peugeot. Do you recall doing that?
‑‑‑I had nothing – that’s Ms M.
I know, but it sets out her employment?
‑‑‑Pardon me?
It sets out her employment?
‑‑‑Mm.
It says that:
“Ms M has been employed with [J] Pty Limited, formerly [Mr D], for the past 10 years as the [occupation omitted].”
Is that consistent with your knowledge of your domestic partner?
‑‑‑That’s correct.
And it says here that:
“… her duties in respect of [M] are that of [omitted].”
You agree with that?
‑‑‑Yes.[42]
[42] Ibid, page 25, lines 40-46, page 26, lines 1-31.
As previously stated Ms M also gave evidence on behalf of the husband. She confirmed that she acquired [T] business in 2005 and that she works at least two days a week “running” the business,[43] and expressly denied that the husband has “any control in running the business … or any direction of the business”.[44] Ms M also confirmed in her examination in chief by the husband that her relationship with him ceased in December 2008 for the following reason:
“Because I have gone through many years of – I feel for your situation but I have gone through many years of threats from your ex-wife and partner of violence, constant threats of violence; threats of money and threats of attacking my family to find out what money they have. It has just been never-ending and I cannot live like that any more.” [45]
[43] Ibid, page 52, lines 18-38.
[44] Ibid, page 53, lines 10-11.
[45] Ibid, page 55, lines 3-10.
During cross-examination by Mr Davis, Ms M qualified her evidence and admitted that her earlier statement alleging that “threats of violence” directed at her by the wife was “factually totally incorrect”.[46] Ms M maintained, however, that her decision to leave the husband was a as a result of the ongoing “stress” related to the husband’s parenting issues with the wife.[47]
[46] Ibid, page 60, line 15.
[47] Ibid, page 59, lines 15-21.
Ms M later admitted under cross-examination that as the husband could not purchase [T] business back in his name because he was an undischarged bankrupt, the “obvious solution to the problem” was for her to encourage the husband to buy back the business in Ms M’s name.[48] The witness did qualify her response by stating that the acquisition would also give her the option “to go part-time in my [business omitted] job” because she desired a change and wanted to run the [T] business.[49]
[48] Ibid, page 61, lines 13-17.
[49] Ibid, page 61, lines 21-23.
Ms M went on to deny the suggestion that, despite the income generated by the [D] consultancy agreement, the payment of the husband’s relatively low annual salary was designed to reduce his income for child support purposes.[50] While Ms M asserted that the husband was not the only person who could perform the work required by the [D] consultancy agreement, she admitted that the husband had been the only person to do so since she took over the business.[51]
[50] Ibid, page 73, lines 38-39.
[51] Ibid, page 79, lines 31-36.
Respondent Wife’s evidence
In support of her case the wife relied upon:
· Her Response filed on 7 September 2009;
·Wife’s Affidavit sworn and filed on 7 September 2009 (“her first affidavit”);
·Financial Statement sworn and filed on 7 September 2009 (“her financial statement”);
·Affidavit of Mr E sworn on 26 October 2009 and filed 29 October 2009 (“Mr E’s affidavit”);
·Outline of Case document filed 5 October 2009; and
·Wife’s Affidavit sworn and filed on 12 April 2010 (“her second affidavit”).
In paragraph 13 of her affidavit, the wife confirms that she sent the agreement to the CSA for registration in August 2007. She states:
“13. … I was told by the CSA on the 8th August 2007 that the applicant had contacted them to have the arrears discharged. He provided them with a copy of the orders made in August 2004 but I was told by the CSA that he failed to provide or mention that a child support agreement had been signed. When I contacted the CSA regarding the discharge I informed them of the signed agreement and the applicant's failure to comply with the orders entered into in August 2004. The CSA reinstated the payments as per the agreement ...”
The wife outlines the children circumstances, and the costs associated with their support, in paragraph 16-21 of her affidavit. This evidence was not challenged by the husband in cross-examination.
Although disputed by the husband, the wife also alleges that he has failed to comply with the final property orders made by consent in 2004. She also asserts her view as to the husband’s capacity to meet his child support obligations in paragraphs 23-33 of her affidavit.
Lastly, the wife details in paragraphs 34-36 of her affidavit, her attempts to have the CSA collect the outstanding child support owing by the husband.
In his cross examination of the wife, the husband asked a number of questions relating to the property orders he had entered into with the wife in 2004. He also asked a number of questions related to her financial capacity.
As stated previously, Mr E also gave evidence on behalf of the wife and was cross examined by the husband.
Discussion
I am satisfied that the parties entered the Agreement on 17 August 2004 and I am further satisfied that the CSA registered the Agreement on
10 August 2007. I am also satisfied that the Agreement provided for the husband to pay the wife child support of $200 per child per week, with the first payment to commence on 23 February 2005 and for the Agreement to end on 24 May 2019.
While there is nothing on the face of the Agreement to indicate whether it is “binding” or “limited” for the purposes of the Assessment Act, I am satisfied that the agreement is caught by the transitional provisions and the letter from the CSA to the wife dated 8 February 2008 (“the review letter”)[52] demonstrates that the Agreement is a “binding” agreement for the purposes of the relevant legislation. This arises because:
·the Agreement was reviewed by the CSA before 1 July 2008;
·the CSA made a determination that the agreement “will continue after 30 June 2008”; and
·there is no evidence that either party objected to the determination made in the review letter.
[52] See wife’s affidavit sworn and filed on 12 April 2010, Exhibit “HD2”.
The Court finds numerous aspects of the husband’s evidence unsatisfactory. In all the circumstances, the Court considers that the wife is, on balance, more likely to be a reliable witness than the husband. Consequently, the wife’s evidence is to be preferred when there is an inconsistency between the parties.
The Court was impressed with the evidence given by Mr E and to a much lesser extent the evidence given by Ms M. That having been said, Ms M was ultimately candid in her evidence as to why she became involved in [T] business. While the evidence supports her involvement in the management of the business, the Court finds that the husband is also significantly involved in the management of the business and primarily performs its obligations under the consultancy agreements with [D].
Having considered the matter in light of the all issues referred to so far, I am satisfied that the Agreement should be set aside. It is clear that the husband’s bankruptcy produced a significant and substantial change in his financial circumstances. It was not a business that was resurrected to its former glory following Ms M’s involvement.
I am also satisfied that the failure of the husband’s business, and husband’s subsequent bankruptcy, was an exceptional circumstance and that if the agreement is not set aside, the husband will suffer financial hardship if the considerable arrears payable under the agreement are enforced.
That having been said, it is also clear from the evidence that [T]’s major source of income from 9 May 2005 onwards flows from the consultancy agreements with [D] and that this fully engages the husband in his employment with [T].
The flow of the money to [T] business is not finding its way into the taxable income of the husband. Nevertheless, it is also clear from the evidence that the husband and Ms M have had the considerable benefit of this income. In addition to the reimbursement of related expenses, which on the husband’s evidence were significant, the consultancy agreements provided for the payment of $80,000 per annum (excluding GST) from 9 May 2005 until it was superseded by the 2008 agreement which provided for the payment of $95,004 per annum. The 2008 agreement was in turn superseded by the 2009 agreement which provided for the payment of $97,860 per annum.
It is also clear from the evidence that the level of involvement of Ms M in the performance of the consultancy agreements was relatively minimal. Given that the majority of the income derived from these agreements clearly benefits the husband, despite it being channelled through [T], the Court finds that it is income that is relevant to the husband and should be included for child support purposes.
The consequence of setting aside the child support agreement would mean that child support would then be paid by the husband in accordance with the administrative assessment. Therefore, the next question to determine is whether, there are special circumstances that justify a departure from the administrative assessment to be determined to enable a precise sum to be set for the annual rate of child support for a period of nearly 15 years (2004 to 2019).
At this stage let me state that such a departure determination would, in my view, ensure a period of stability and certainty for both parties and avoid the need for ongoing conversation and communication about the additional costs of schooling, extra curricula activities and the like.
For the Court to order a departure from the administrative assessment, it must be satisfied in relation to the following factors:
·that one or more of the grounds in s.117(2) of the Assessment Act are established;
·that it would be just and equitable to make the order; and
·that it would be otherwise proper to make the order.
In relation to the first factor, there are relevant issues in this case about:
·the husband’s income and earning capacity;[53] and
·the significant costs of the children’s schooling and their extra-curricula activities.[54]
[53] Assessment Act, s.117(2)(c).
[54] Assessment Act, s.117(2)(b).
As to the husband’s income and earning capacity, I refer to my previous comments about the income and earning capacity of the husband that flows from his near total performance of the consultancy agreements.
As to the costs of the children’s schooling and their extra curricula activities, the Court must consider the evidence in light of the matters referred to in s.117(4) of the Assessment Act.
There is evidence from the wife about the significant costs of the children’s schooling and their extra curricula activities. I refer in particular to paragraphs 19-21 of her affidavit and Part N of her financial statement noting that this evidence was not challenged by the husband in cross-examination:
“19. [Y] attends football and cricket and [Z] attends dancing and my new partner and I pay for this. All children go to private schools. [X] attends [A] School. The tuition fees $4014 pa, books are an additional $900 and uniforms cost $1200. [Y] and [Z] attend [S] School. Tuition fees are $3029 pa, books are an additional $400 and uniform costs $800 for the both.
20. In total, it is my best estimate that my partner and I spent $1200 per week on all three children. My new partner and I do so, as we want the best of the children.
21. The applicant currently contributes $55 per week in child support for all three children. He has contributed this amount since January 2006. Prior to this date, he was contributing the amount of $1200 from 24.10.2003 to 19.11.2004 and $600 from 26.11.2004 to 17.12.2004. No contributions were made during 2005.”
Based upon the wife’s unchallenged evidence, the husband is currently meeting less than 5% of the costs associated with the children’s schooling and their extra curricular activities with his payment of $55 per week.
In relation to the second factor, both parties have a duty to maintain the children. I am satisfied that the children’s proper needs include the costs associated with their schooling in addition to ordinary living expenses. There is no evidence before me that the children are in receipt of any income or have any earning capacity. There is also no evidence before me that the children have any property or financial resources available to them.
In contrast, there is evidence before me as to the respective income, earning capacity and necessary commitments of the parties.
As previously stated, the husband’s assessed or asserted taxable income for the relevant financial years is as follows:
·year ending 30 June 2005: $7,230;
·year ending 30 June 2006: $15,576;
·year ending 30 June 2007: $23,767;
·year ending 30 June 2008: $22,115.42; and
·year ending 30 June 2009 is $18,269.26.
Also it is clear from the evidence that the husband and Ms M have benefitted financially from the consultancy agreements with [D] despite these monies being channelled through an entity. If the Court assumes 85 percent of the income received under the consultancy agreements is attributed to the husband, then the husband’s financial capacity would be:
·approximately $68,000 for the financial years ending 30 June 2006, 2007 and 2008; and
·approximately $80,000 in the financial year ending 30 June 2009 and the 2009/2010 financial year.
As there was no evidence that the consultancy agreements were at risk of being discontinued, it can be expected that the husband’s earning capacity will continue and modestly increase over the next nine years until his child support liabilities cease.
Although no taxation assessments for the wife were tendered, the husband attached to his third affidavit,[55] the wife’s draft tax returns for the financial years ending 30 June 2003 - 30 June 2007 inclusive. I accept her evidence that she had no income between 2002 to the end of the financial year 2006.[56] I also accept her evidence that for the financial year ending 30 June 2007, her accountant has calculated a taxable income estimate of $11,979.[57]
[55] See Annexure “CA30”.
[56] Transcript, 13 November 2009, page 56, lines 7-8.
[57] Ibid, lines 17-21.
Although her estimated taxable income is not yet available for the financial years ending 2008 or 2009, the wife gave evidence that she is earning weekly income from her employment in her partner’s business of $2,500 gross (or about $1,750 after tax).[58] Although it is not entirely clear from the wife’s evidence when she commenced employment with her partner’s firm, it appears that her stated income would be relevant for the financial years ending 30 June in 2008 and 2009 respectively. In other words, the wife’s potential taxable income for the 2008 and 2009 financial years would be in the order of $130,000 per annum and presumably this will continue, if not increase, over the next nine years.
[58] See wife’s Financial Statement, Part D, item 9 and Part G item 19; see also Transcript, 13 November 2009, page 56, lines 21-23.
If the husband’s assessed or asserted taxable income for the relevant financial years applies to an administrative assessment of child support, then I calculate the estimated liability for the financial years 1 July 2005 to 30 June 2009 as follows:
·2005/2006: $509.76 [32% x $1,593 (i.e. $15,576-$13,983)];
·2006/2007: $2,976.96 [32% x $9,303 [i.e. $23,767-$14,646)];
·2007/2008: $2,155.84 [32% x $6,737 (i.e. $22,115 -$15,378]; and
·2008/2009: minimum amount only payable as husband’s taxable income is $18,269 and the self support amount was $18,252.[59]
[59] In addition, the wife’s child support income would be relevant.
Unfortunately, the CSA was unable to provide such estimates “as this information is not on record”.[60]
[60] See letter from Child Support Agency to the wife dated 19 March 2010 (being Annexure “HD7” to the wife’s second affidavit).
In light of the wife’s unchallenged evidence in respect of the children’s schooling and related extra-curricula costs, I am satisfied that the children would suffer hardship should an administrative assessment of child support be based on the husband’s declared income.
After taking into account all of the financial circumstances of the parties, and the children’s needs, I am satisfied that a reasonable amount of child support to be paid by the husband to the wife in the period 1 July 2005 – 31 December 2007 would be the annual amount equivalent of $120 per child per week (ie. approximately $18,720 annually). This is some $12,480 less than the equivalent annual amount provided for in the agreement (ie. $200 per child per week). Child support should be increased to an annual amount equivalent to $140 per child per week in the period 1 January 2008 – 31 December 2010 (ie. approximately to $21,840 per year). As from 1 January 2011, and each year thereafter, the annual amount equivalent to the weekly amount should be adjusted on 1 January each year in line with movements in the weighted average of the Consumer Price Index for Victoria. The husband’s overall child support payments will, of course, decline when [X] turns 18 on [date omitted] 2014 and [Y] turns 18 years on [date omitted] 2016. Subject to the happening of any other child support terminating event, the husband’s child support liability will cease upon [Z] turning 18 on [date omitted] 2019.
In relation to the third factor that it would be otherwise proper to make an order, I note again that both parties have a duty to maintain their children and that there is no Commonwealth income-tested pension, allowance or benefit relevant to this dispute.
Based upon their respective income and earning capacity, I am satisfied that the contributions outlined above by the husband (ie. 35% towards the children’s current costs estimated at $1200 per week) is proper.
Conclusion
As stated, I am satisfied that there were exceptional circumstances that arose after the making of the agreement and that the husband would suffer hardship in the event the agreement was not set aside. Consequently I will do so.
I am also satisfied that it is just and equitable and otherwise proper to depart from administrative assessment for the period commencing 1 July 2005 and ending on 24 May 2019.
Consequently, the husband shall pay child support to the wife as follows:
(a)for the period commencing 1 July 2005 and ending 31 December 2007 the child support payable is set at the rate equivalent to $120 per child per week;
(b)for the period commencing 1 January 2008 and ending 31 December 2010 the child support payable is set at the rate equivalent to $140 per child per week; and
(c)for the period commencing 1 January 2011 and ending 24 May 2019 the amount in paragraph (b) shall be adjusted on 1 January each year in line with movements in the weighted average of the national weighted Consumer Price Index.
The husband should be given an opportunity to re-arrange his financial affairs to meet his past child support obligations. Consequently, I will allow him three months to pay his outstanding child support liabilities.
There will be final orders and notations of the Court to reflect this decision and I will direct the wife to forthwith serve the CSA with a sealed copy of the orders.
I certify that the preceding one hundred and twenty-eight (128) paragraphs are a true copy of the reasons for judgment of Monahan FM
Associate
Date: 30 July 2010
CORRECTIONS
Order 4(c) – Line 4 delete “Consumer Price Index for Victoria” and insert “national weighted Consumer Price Index”.
Paragraph 126(c) – Line 4 delete “Consumer Price Index for Victoria” and insert “national weighted Consumer Price Index”.
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