Acuff and Carlson
[2006] FMCAfam 14
•30 January 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ACUFF & CARLSON | [2006] FMCAfam 14 |
| CHILD SUPPORT – Departure order – the income, earning capacity, property and financial resources of the parents – whether either party has an unused capacity to earn income. |
| Child Support (Assessment) Act 1989 (Cth), ss.4, 117 |
| Gilmour and Gilmour (1995) FLC 92-591 Liesert v Nutsch (1996) FLC 92-665 Bryant and Bryant (1996) FLC 92-690 Savery and Savery (1990) FLC 92-131 Gyselman and Gyselman (1992) FLC 92-279 DJM v LNM (1998) FLC 92-816 Spinks v Spinks (2002) FLC 98-016 |
| Applicant: | MS ACUFF |
| Respondent: | MR CARLSON |
| File Number: | HBM3108 of 2001 |
| Judgment of: | Roberts FM |
| Hearing dates: | 6 July & 5 December 2005 |
| Date of Last Submission: | 5 December 2005 |
| Delivered at: | Hobart |
| Delivered on: | 30 January 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Blissenden |
| Solicitors for the Applicant: | Avery Partners |
| Counsel for the Respondent: | Mr. M Trezise |
| Solicitors for the Respondent: | Dobson Mitchell & Allport |
ORDERS
That there be a departure from administrative assessment of child support payable by MR CARLSON (“the liable parent”) for the children [X] born [in] 1989, [Y] born [in] 1993 and [Z] born [in] 1996 as follows:
(a)That for the period 6 October 2003 to 30 June 2006 the liable parent’s child support income be fixed at an annual rate of fifty five thousand three hundred and eighty six dollars ($55,386).
That within seven days MS ACUFF is to forward a copy of these Orders to the Child Support Agency, and the Child Support Registrar is requested to make the necessary calculations and to amend the Child Support Register accordingly.
IT IS NOTED that publication of this judgment under the pseudonym Acuff & Carlson is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT HOBART |
HBM3108 of 2001
| MS ACUFF |
Applicant
And
| MR CARLSON |
Respondent
REASONS FOR JUDGMENT
Applications
These proceedings relate to child support and whether there should be any departure from the child support assessment procedure in relation to the children [X] born [in] 1989, [Y] born [in] 1993 and [Z] born [in] 1996.
MS ACUFF (“the Mother”) initially filed an Application in relation to child support on 18 March 2004. The Mother now relies on an Amended Application filed 2 May 2005. In that document she seeks an order that the child support payable by the Respondent for the period
6 October 2003 to 31 December 2005 be increased to $709.67 per month. She also seeks a further order that in addition to the child support payments of $709.67 per month the Father pay all fees associated with the attendance by the three children named in the Application at the [C] School at [K] in Tasmania.
MR CARLSON (“the Father”) filed his Response on 3 November 2004 at that time he was seeking Orders that reduced the child support assessment to nil and further that there be a departure from child support to provide that the Mother pay to him the sum of $125 per week “or such other sum as the Court considers appropriate”.
Somewhat unusually, both parties maintain that the other has an unused capacity to earn income and that should be taken into account pursuant to Section 117(2)(c)(i) of the Child Support (Assessment) Act1989 (“the Act”). That refers to “the income, earning capacity, property and financial resources of either parent or the child”.
This matter was initially heard on 6 July 2005 and the decision was reserved. On 8 November 2005 the Father made an application to
re-open his case in order to adduce evidence in relation to the Mother’s current employment circumstances and income. That Application was listed for 5 December 2005. On 5 December 2005 the parties consented to the reopening and the only evidence tendered by consent was a letter from the Mother’s solicitors to the Father’s solicitors dated
30 November 2005 which attached copies of a number of the Mother’s payslips from her employment with [omitted]. That letter and attachments is now Exhibit “F6” and I shall refer to it further below.
Background
The parties were married in 1987 and separated in 1998. They were divorced in 1999.
There are four children of the marriage the eldest child, [W] is now aged nearly nineteen years. He went to live with his father in December 2003 and really only visited his mother on occasions after that.
The three girls initially resided with their mother but on 27 March 2000 Orders were made in the Family Court of Australia which provided for a shared care arrangement.
The Father filed an Application in this Court on 14 November 2001 in which he sought variations to the shared care arrangement, but the parties have continued to share the care of the girls.
On 30 July 2002 the parties attended a Child Representative Conference with their legal representatives and agreement was reached in relation to the arrangements for the children. That arrangement was put into effect, but was only formalised by the Consent Orders that I made on 6 July 2005.
The eldest child is no longer at school. He has started an apprenticeship in Launceston.
The three girls still attend the [C] School at [K] in Tasmania and the father has been responsible for payment of those school fees since the Mother moved the children from another Christian School in Hobart in 1999. The school fees total $6,970 per annum or $134 per week. Because the parties have a shared care arrangement, the Child Support Agency (“the CSA”) treats half of those school fees as a non-agency payment (“NAP”) made by the Father on behalf of the Mother.
The Child Support Assessments in this matter for various periods have been as follows:
Period
Monthly Amount
10/08/03 – 05/10/03
$709.67
06/10/03 – 30/09/04
$161.92
06/10/03 – 07/04/04
$161.92
08/04/04 – 30/09/04
$77.00
08/04/04 – 12/04/04
$77.00
13/04/04 – 30/09/04
$0.00
01/10/04 – 18/08/04
$0.00
29/03/05 – 31/12/05
$144.33
However, on 3 May 2005 the CSA wrote to the Mother to inform her that the Father’s periodic payments had been reduced to $66.39 per fortnight commencing on 5 May 2005. That is a reduction in the child support payable from $144.33 per month to $137.35 per month.
The law
The provisions of Section 117 of the Act empower a Court to make an order for departure from administrative assessment in special circumstances.
The approach that this court must adopt in relation to periodic child support has been well settled by decisions of the Full Court of the Family Court of Australia in Gilmour and Gilmour (1995) FLC 92-591, Liesert v Nutsch (1996) FLC 92-665 and Bryant and Bryant (1996) FLC 92-690. It is clear that I must apply the three-stage process that is required under Section 117 of the Child Support (Assessment) Act 1989 and I must be satisfied that:
a)one or more of the grounds for departure in sub-section 117(2) is established;
b)it is “just and equitable'' within the meaning of sub-section 117(4) to make a particular order; and
c)it is “otherwise proper'' within the meaning of sub-section 117(5) to make a particular order.
Section 117(2) of the Act sets out the various grounds for departure. In Savery and Savery (1990) FLC 92-131 Kay J said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases.”
In Gyselman and Gyselman (1992) FLC 92-279 at page 79,065, the Full Court of the Family Court said as follows in relation to the phrase “special circumstances”:
Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.
After considering these various bases for departure and whether or not in the special circumstances of the case it is appropriate for a departure order to be made, the Court must then consider subsection 117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought. It reads:
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, earning capacity, property and financial resources 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.
Finally, it is necessary for the Court to consider subsection 117(5) and determine whether or not it is proper to make the departure order. It reads as follows:
In determining whether it would be otherwise proper 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, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
It is clear that each of the three steps referred to above must be addressed separately.
The parties’ financial circumstances
The Mother
The Mother filed a Form 13 Financial Statement which she had sworn on 29 April 2005. In that document she showed her income on page 3A for when she was not working and on page 3B for when she was working.
In her oral evidence she clarified the funds received by her. The Family Tax Benefits amount to $529.90 per fortnight and the Parenting Allowance was $476.30 per fortnight. She also receives a Pharmaceutical Allowance of $5.80 per fortnight.
The child support payable by the Father is $63.39 per fortnight. However, she does not receive that as a result of the NAP in relation to the payment of school fees by the Father.
The result was that when she was not working, the Mother received $1,012 per fortnight, or $506 per week.
When she was working, her Family Tax Benefit and Parenting Allowance were reduced. Her Financial Statement showed that, with average weekly wages of $399, she received a total of $808 per week.
The further evidence in relation to her employment that was admitted by consent on 5 December 2005 (Exhibit “F6”) showed that her average income working for [omitted] was $315 per week (and not $399 as shown in her Financial Statement). I do not have evidence of the consequent increase in the government benefits that she receives but I conclude that her income would still be very similar to that shown in page 3B of her Financial Statement.
The Mother pays rent but she also receives some rental assistance.
At Part N of her Financial Statement the Mother set out her expenses, which included expenses for the children totalling $312 per week. That included $200 for food, which I consider to be a little excessive, given that the children are only with the Mother every second week. All other expenses detailed by her appear to be reasonable and the expenditure claimed by her is within the limits that one would expect in the light of the published research in relation to the costs of raising children.
The Mother has minimal assets. Indeed, her only asset of any significance is her motor vehicle which she estimates is worth $3,500. However, her evidence was that she needed to borrow money to purchase that vehicle. At the time of swearing her Financial Statement, she estimated her loan liabilities to be $2,500.
It was the Mother’s evidence that she is registered with a number of employment agencies and she is actively seeking employment. However, she is seeking employment that fits in with her desire to be available to the children after school. Ideally, the hours of work that she seeks is between 9.00 a.m. and 3.00 p.m.
As at 30 November 2005 the Mother was employed with [omitted]. That commenced on 18 July 2005 and between that date and
20 November 2005 her average gross per week was $315. She was employed principally as a [omitted] although for the period 3 to 14 October 2005 she was employed from 9.00 a.m. until 5.00 p.m. in an administrative position while another employee was on leave.
As at 30 November 2005 she did not know what level of employment she would have in the future apart from working from 9.00 a.m. until 5.00 p.m. on five days during December.
The Father
Prior to October 2003 the Father was employed full-time as a public servant. His child support was assessed on a child support income of $55,386.
The Father took long service leave in May 2003 and after he returned he negotiated with his employer to reduce his working hours to 50%. He is still a full-time employee but he only works a 50% load. That reduction in hours has had a consequent reduction in his income.
His Financial Statement shows his weekly gross income to be $560 per week (in round figures). He is married and his Financial Statement shows that his wife earns $270 per week.
After he conceded some reductions in his expenses in relation to food and clothing and shoes for the children, the expenditure on the children (excluding education expenses) is $281 per week.
While I believe that he has underestimated in relation to food, he has probably overestimated the costs in other areas. However, the total claimed expenditure is also within the range that one would expect in the light of the published research. I also note that it is not very different from the total claimed by the Mother.
The Father’s net asset position is considerably better than that of the Mother.
He and his current wife are the joint owners of a home which he estimates to be worth $250,000. It is not subject to a mortgage.
At the time of swearing his Financial Statement in November 2004 he had savings of $33,100. However, by the time the hearing commenced that had reduced to $1,600. Some of the reduction in funds resulted from payments he had made for his business (to which I will refer later) and an overseas trip.
He has a motor vehicle which he estimated to be worth $5,500.
He has two credit card liabilities. His Visa card liability was $11,012 at the time that he completed his Financial Statement but that had been reduced to $5,337 by 6 July 2005. Similarly, a Mastercard liability of $12,702 at the time of completing his Financial Statement had been reduced to $8,928 by the start of the hearing.
Given that the Father reduced his savings by $31,500, but he only reduced his credit card debts by $9,449 during the same period, it appears that he has disposed of a net sum exceeding $20,000 in a period of approximately six months. It is his evidence that much of that went into his new business.
In relation to the business, the Father estimates in his Financial Statement that it is worth $3,750. In my view that is a significant underestimate of its value.
Between October 2002 and April 2004 the Husband sold real estate from which he cleared in excess of $318,000. In the period between August 2003 and April 2004, when he was paying only $162.92 per month by way of child support, he cleared $218,000 from the sale of two properties. The Husband says that he paid off debts and paid off his mortgage with those funds and the rest went into his new business.
It is because of the substantial payments into his business referred to at paragraphs 44 and 46 above, and the fact that the business owns a vehicle which cost $9,000, that I am of the view that the business is worth significantly more than the claimed sum of $3,750.
I am fortified in this view by the Father’s own evidence-in-chief. He said:
I am absolutely confident that it’s a viable business, there’s no question about that. Its sales in the last three or four months have been very steady and I’ve got forward orders and current jobs on the go and I am confident that it will be cashflow positive some time next year.
Unfortunately, the Father had not lodged a tax return for the company for the year ended 30 June 2004 and the books were not in a sufficiently organised state for him to provide the Court with any meaningful information. When he was asked in cross-examination whether the business had made a profit he said:
I think if I do the books, get the books sorted out, it will show its going to turn around, if not turn around very soon. I’ve made a number of sales. How much profit came out of those sales, I can’t yet say.
One could not help but get the feeling that it was perhaps convenient for the Father in relation to these Child Support proceedings that the books of the business were in some disarray.
Even though I do not have enough information to be able to attribute a realistic value to the Father’s business, I am confident that it is worth significantly more than the sum of $3,750 that he attributed to it.
The parties’ earning capacities
The Mother
It is the Father’s view that the Mother has an under-utilised earning capacity.
He instructed his counsel to show the Mother a lengthy series of job advertisements, that had appeared in newspapers, on the internet and in other places (Exhibit “F5”), to ascertain whether she was capable of applying for any of the jobs and whether or not she had done so.
I am satisfied with the Mother’s answers that in many instances she was not qualified to undertake such employment, and that a back injury that she sustained a long time ago limits the type of employment that she can do.
Although I do not have any medical evidence in relation the Mother’s back injury, it is quite clear that the Father conceded that she had sustained an injury to her back. He said that she was injured prior to the time that they met and that he had encouraged her to make a claim for compensation. He stated that she received some compensation payments for home assistance in the late 1980’s and early 1990’s. He also conceded that, in the context of family law property settlement negotiations, he had asserted that her “potentially significant damages claim” was a financial resource.
In my view, it is a logical finding on the balance of probabilities that the Mother’s back injury limits the type of employment that she can undertake.
The Mother’s evidence is that she has done various TAFE courses to improve her ability to obtain employment. Those courses generally related to office administration. At the time of giving evidence in July 2005, she was doing a two year counselling course. However, that was part-time so it would take significantly longer than two years to be completed.
By reference to the various job advertisements in Exhibit “F5”, the Father’s counsel attempted to persuade me that the Mother was not making sufficient effort to find suitable for employment. In my view, the flaw in that submission is that job advertisements per se do not tell the whole story, because I have no evidence of how many other applicants there were for any particular job. Consequently, I do not know whether the Mother would have had any chance of obtaining that employment, even if she was well qualified and able to undertake it.
Having considered the evidence, I am satisfied that the Mother has been making reasonable efforts to obtain employment and that she does not have an under-utilised earning capacity.
The Father
Because the Father has reduced his employment hours by half and therefore his gross income by that proportion, it is quite clear that he has an earning capacity that is significantly better than what he is actually earning. Indeed, it is not difficult to come to the conclusion that for the purposes of child support his annual income would be $55,386. However, it is another matter to attribute that income to him and I shall consider that further below.
Application of the law to these facts
It is necessary to follow the three step departure process in respect of this matter.
In my view, the fact that the Father has an earning capacity that is significantly above his disclosed earnings provides the “special circumstances” for the Court to come to the conclusion that a ground is established for departure pursuant to subsection 117(2) of the Act.
It is therefore necessary to examine whether it is “just and equitable” within the meaning of subsection 117(4) to make a departure order.
There is no doubt that the Father voluntarily reduced his income so it is important to look at the reasons for doing that in the process of establishing whether or not it would be “just and equitable” to make a departure order.
In DJM v LNM (1998) FLC 92-816 the Full Court of the Family Court of Australia said the following at paragraph 17.43 on page 85,272:
A judge might reasonably say that a parent should be working longer hours or in more lucrative employment to meet child support obligations. A spouse is only required to support the other spouse to the extent that he or she is reasonably able to do so. This requirement does not impute the same degree of compulsion about it that the child support and child maintenance tests express. Thus a parent may be required or expected to work long hours or at more than one job if the parent has the capacity and opportunity to do so, and if the children need greater support than they would receive if the parent was only to work shorter hours. At the same time it might not be reasonable to expect an estranged spouse to avail himself or herself of such opportunities so as to provide maintenance for the other spouse. In the latter case it is a question of what is reasonable in the circumstances.
In Spinks v Spinks (2002) FLC 98-016, Chisholm J was sitting as the Full Court on appeal from a decision of a Federal Magistrate. At first instance, the Federal Magistrate had said:
In my opinion when a liable parent moves from a higher paid job to a lower paid job and seeks a reduction in child support in consequence the onus will be on that parent to show a basis upon which the court should disregard to his or her earning capacity as demonstrated by the earnings generated by the first job and have regard only to the income received in the second job. Without attempting to be exhaustive the following scenarios might discharge that onus:
(a)where the parent goes from a well paid but insecure position to a lower paid but secure position;
(b)where the higher pay obtained in the former job was a result of dangerous working conditions or excessive hours worked which could not be sustained in the long term;
(c)where the new position had sufficient potential for longer term prosperity such that the ultimate benefits that might accrue to the children in the longer term would justify short term sacrifices.
In paragraph 32 of his decision dismissing the appeal, Chisolm J said:
However the authorities provide guidance as to the sort of factors that are important when the court comes to consider what weight to give to the person's earning capacity as distinct from the actual income. It is clear that where the person deliberately weakens his or her financial position in order to reduce liability for child support, the court may focus on the earning capacity. It is also clear that there are circumstances in which a person can reasonably move to a position of lower income, and the court will focus on the actual income rather than the higher income foregone.
He went on to say:
35. I therefore do not accept the submission that the as a matter of law the court can have regard to earning capacity rather than actual income only in cases of “deviousness” . To put it another way, I do not accept the proposition expressed in the appellant's written submissions, that it is sufficient for him to show that the change of circumstance was “bona fide”.
36. The critical point is that there are cases, as shown by Rowe and the discussion in DMJ, in which the court will give weight to the earning capacity rather than the actual income even though it is not shown that the person's economic decline resulted from an attempt to avoid child support responsibilities.
37. What, then, distinguishes those cases from cases in which the court does focus on the actual (reduced) income? Sometimes, judges try to formulate the applicable principle, as was done in McCord. The Federal Magistrate also did so, in paragraph 32, quoted above. I am not sure that any single authoritative formula emerges from DMJ. Clearly the facts of each case must be considered. Ultimately, although the judges' language varies from case to case, the decisions seem to turn on whether the person acted reasonably in all the circumstances in taking the step that led to the reduced income. What is reasonable must be determined not only in the light of the particular facts, but also, as DMJ makes clear, in the light of the particular area of law involved. In child support cases, as the Federal Magistrate quite rightly pointed out, an important part of the context for determining what is reasonable is the explicit statement of the objects of the Act in s 4, in which there is a reference to the parents' capacity .
38. For myself, I would be cautious in attempting to formulate what it would require for a person to show that it is reasonable to take on a lower paid position. The danger is that one might use a formula that would exclude a novel situation that might involve a reasonable step.
During cross-examination the Father explained his reasons for reducing his working hours. He said:
The reduction in my working hours to 50 per cent loading also accommodates my ability to have them (the children) during every school holiday throughout the year on the weeks when they are with me, not just the four weeks that I have accumulated annual leave. It also allows me to have them on public holidays and student free days. It also allows me to pick them up after school, take them to dancing, give them afternoon tea, talk to them, to play with them, rather than pick them up on the way home, give them tea and stuff them in bed, which is what the regime was. It was wholly unsatisfactory …
The Father’s evidence was that, prior to his application to this Court to vary Orders of the Family Court of Australia, it was necessary for the children to go to the Mother after school during the weeks that they were with him and for him to collect them from her after work. Clearly, he did not like that.
When he was cross-examined further, it became apparent that the Father could have made alternative arrangements for the care of the children after school which did not involve care by the Mother or them attending at his place of employment. On occasions his wife had been available to assist, as had his parents.
When I consider the reasoning in DJM v LNM and Spinks, I come to the conclusion that for the purposes of the child support legislation, it was not reasonable for the Father to reduce his hours to 50%. While that may have been convenient to him in relation to his care of the children (and it has certainly allowed him to invest significantly more time in his business), it has resulted in a significant reduction in the child support available for the children when they are in the Mother’s care.
I am therefore of the view that for the purpose of Chid Support Assessment his child support income should be set at the level which applied before he voluntarily reduced his hours of employment. I note that some changes may soon made to the Child Support legislation, so it would be more appropriate to specify a child support income in any departure order rather than the amount of child support to be paid.
I now turn to consider whether there should be an order that the Father should be solely responsible for the payment of the school fees. It is clear that the Mother does not wish to have her child support reduced by the NAP.
The evidence before the Court was that the Mother moved the children from one Christian School to another and I accept the Father’s evidence that it was a joint decision to have the children enrolled at such a school. It is therefore clear that the children are being educated in the manner in which both parties would like them to be educated. In my view it is therefore not appropriate to make any orders requiring the Father to be solely responsible for those fees. If the Mother’s contribution to those fees is the result of a NAP then that is appropriate.
When I consider the provisions of Subsection 117(5) of the Act and the fact that a departure order of the type referred to above has the potential to reduce the payment of Commonwealth Benefits to the Mother, it is clear to me that the making of such a departure order is “otherwise proper”.
Conclusions
In the light of the above, I conclude that there should be a departure order which provides that the Father’s child support income be fixed at $55,396.
The Mother is seeking that there be a departure order for the periods
6 October 2003to 31 December 2005. In my view that should be extended to 30 June 2006. For various reasons, this matter has taken some time to conclude and if I were to make an order that expired on 31 December 2005, the parties would immediately be back on the child support “treadmill” of applications to the CSA, decisions, objections, and court applications. In my view it is in their interests to avoid that at least for some months.
I am also of the view that I am not limited to the period specified in the Mother’s application and that an extension to 30 June 2006 accords with the principal object of the Act as found in Section 4 that children should receive a proper level of financial support from their parents.
One would hope that the Father will have his business running well enough and its books in order to enable a suitable level of child support to be assessed pursuant to the relevant administrative formula from
1 July 2006onwards.
I appreciate that these Orders will result in significant arrears being owed by the Father. However, his financial circumstances are significantly better than those of the Mother and I have no doubt that he has a capacity to pay those arrears even if it is necessary for him to resort to borrowing.
I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of Roberts FM
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