B and L
[2002] FMCAfam 157
•12 September 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| B & L | [2002] FMCAfam 157 |
| CHILD SUPPORT – Lump sum substitution order – where child support to initially be paid – whether certain payment should be credited as non-agency payments. Child Support (Assessment) Act 1989 ss.123, 124 Gyselman (1992) FLC 92-279 |
| Applicant: | S L B |
| Respondent: | R LL |
| File No: | ZM3705 of 2002 |
| Delivered on: | 12 September 2002 |
| Delivered at: | Melbourne |
| Hearing Dates: | 14 and 15 May 2002 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Ms R Wheeler |
| Solicitors for the Applicant: | Stedman Cameron |
| Counsel for the Respondent: | In person |
| Solicitors for the Respondent: | Mr R L |
ORDERS
THAT the husband’s oral application made on 14 May 2002 to have non-agency payments credited as Child Support be dismissed.
THAT for the period 1 July 2002 to 30 June 2007 the husband’s liability for child support for the children J L born 19 October 1989 and B L born 12 May 1993 be fixed at an annual rate of $5,200.00.
In substitution for periodic payments the husband pay the child support pursuant to Order 2 hereof by payment to the wife of a lump sum of $26,000.00 on or before 12 October 2002.
THAT the child support payable pursuant to Order 3 hereof is to be credited against the husband’s liability for child support and has an annual value of $5,200.00.
THAT pending the payment of the sum of $26,000.00 to the wife:
(a)the husband be restrained by injunction from transferring, encumbering or otherwise dealing with the property at 921 Mc Road W in the State of New South Wales other than in accordance with these Orders;
(b)the said property be and is hereby charged with all sums due to the wife pursuant to these Orders and the wife be at liberty to lodge a caveat over the said property to protect her interest; and
(c)the wife withdraw any caveat lodged at her expense upon payment to her of the sums due in accordance with these Orders.
THAT there be liberty to apply in relation to the implementation of these Orders.
THAT all Exhibits be returned to the party tendering them at the expiration of 30 days from the date of these Orders.
THAT all outstanding Applications otherwise be dismissed and removed from the List of Cases waiting finalisation.
THAT the husband pay the wife’s costs fixed in the sum of $5,650.00 pursuant to Schedule 1 of the Federal Magistrates Court Rules 2001 such costs to be paid on or before 12 October 2002.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
ZM3705 of 2001
| S L B |
Applicant
And
| R LL |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties are the parents of two boys, J L aged 12 and B L aged 9. They live with their mother who is married. The father lives 8½ hours drive from M in W, N S W. He has contact with the boys during school holidays. Originally the parties shared the cost of contact but over the last year the father has been responsible for collecting and returning the children for each period of contact, save for last Christmas when the mother and her husband took the children to the father’s residence at the commencement of contact.
There is an administrative assessment of child support in place which requires the father to pay child support at the monthly rate of $433.33 According to the records of the Child Support Agency which were tendered in evidence there are arrears as of 14 May 2002 of $12,531.31.
The mother who is the applicant wants a departure from that assessment and seeks that the father pay the weekly sum of $400.00. She seeks a departure because she asserts:
a)The child J, has special educational needs [Section 117(2) (a)(ii) Child Support (Assessment Act) 1989];
b)The children should be educated at a private school in a manner expected by the parents [Section 117(2)(b) (i)];
c)The present level of Child Support is inequitable and unjust having regard to the income, earning capacity and financial resources of the father [Section 117(2)(c)(i)];
d)Whether or not the present liability of the father is departed from, child support should be paid for a five year period in a lump sum. The basis for the lump sum payment is that the father has failed to make regular payments of child support since separation and that unless a lump sum payment is ordered, proper child support will not be paid to her [Section 125].
The Child Support Agency is collecting the child support payable by the father and at the moment is putting together a brief to send to the Australian Government Solicitor for enforcement. As a result of registration by the Mother of the Father’s liability pursuant to the provisions of the Child Support (Registration and Collection) Act 1988 all arrears of child support are currently a debt due to the Commonwealth [Section 30]. That situation can be changed by the mother advising the Agency that she no L wishes them to collect child support. If that occurs then the mother will be able to enforce payment of arrears herself.
I am satisfied that the Child Support Agency were served with the mother’s application and have chosen not to appear in these proceedings.
The father’s response
The father has a somewhat curious case in response to the mother’s application:
a)He asserts that he has paid significant lump sums to the mother since their separation which exceed the amounts that he has been obliged to pay pursuant to administrative assessments, and in which in fact, put him in credit until 2003;
b)He asserted that although the child J had some special needs they did not require the expenditure asserted by the mother:
c)He also submitted that there is no expectation that either of the children would attend a private school but if there was, then his earning capacity did not permit him to make a contribution to school fees.
Current child support liability
There are two relevant child support assessments in issue as far as the mother is concerned and from which she seeks to depart:
a)The first is for the period 1 October 2001 to 31 December 2001. The monthly liability of the Father pursuant to that assessment is $433.33;
b)The second assessment is from the period 1 January 2002 to
31 March 2003 at a monthly rate of $433.33.The assessments arise from a decision of a senior case officer made on 16 November 2001. Both parties were arguing for a change to the assessment. The father was asserting that there were high costs of contact which should reduce his liability and the mother was asserting that the assessment did not take into account extra costs associated with the children’s special needs and education, and further that the assessment did not take into account the earning capacity and property and financial resources of the father.
The result of the applications was that the senior case officer refused to make a determination in the matter, referring the parties to court.
A perusal of the reasons indicates that the senior case officer believed that the matter was “too complex” for determination within the limitations of the administrative process.
It is immediately clear from the reasons for the decision that the substantial arrears component and the father’s view that he should have credit from non-agency payments was a significant matter which to use the wording of the case officer, “interplay strongly with the other issues raised by both parents”. There are other comments made by the senior case officer about the process embarked upon by the parties before him. He says for example —
“I have already indicated that there is a very real issue as to making a finding as to Mr L’s real income and earning capacity. This matter has remained unresolved for some time and in my view is never going to be resolved satisfactorily at this level. In stating this it should be kept in mind that this process was never intended to replace the court but was implemented to deal with fairly simple matters in an expedient matter. Any determination in respect to Mr L’s income, earning capacity and financial resources cannot be determined with any simplicity”.
The case officer also indicates that the father may not appreciate the difference between earning capacity and income and that he is unable to make any reliable finding in respect of the husband’s ability to rely on financial resources to support the children. Finally, it is made clear in the decision that another factor to be taken into account is Mr L’s continual dissatisfaction with the findings as to the non-agency payments and the case officer says:
“This continues to be raised within this process, however, ultimately such dispute is one that is not one that was intended to be resolved in this process. When dissatisfied with an agency finding in this regard, again the appropriate place is the court”.
Orders sought by the mother
The mother seeks a departure from administrative assessment for a period of five years, which encompasses the two assessment periods to which I have referred (1 October 2001 to 31 March 2003) and a further period from 1 April 2003 to 31 March 2006. The amount sought by the mother is $400 per week.
The mother then seeks that having heard and determined the departure application that child support should be then paid in a lump sum for the five-year period ,being a payment of $100,000.
Orders sought by the father
At the commencement of the case the father informed me that he wanted the status quo to continue. The status quo is an assessment of $443.33 per month. Once the case was underway, however, it became apparent that the father was confused about the precise issues before the court and although those issues had been spelt out by the case officer in the decision to which I have referred, it is the father’s contention that he has made payments to the mother since separation which should be taken into account as non-agency payments. He informed me that once the mother’s application had been dealt with, he would return to the Child Support Agency to press his claims that they should be taken into account as non-agency payments. I explained to him what had been said by the Child Support Agency as to their lack of capacity to make a decision about the non-agency payments and that it was the court that should be determining these matters. He then indicated that he would present his case to the court on these issues and the orders that he then sought were:
c)A declaration that the father had made non-agency payments to the mother which put him in credit to 2003.
d)The child support assessments should be departed from and there should be a nil assessment for all relevant child support assessments up until the 30 June 2003.
Whilst it was not clear until the case commenced exactly what relief the father sought, the mother acknowledged that the issues of fact were well understood and that she was not prejudiced by this issue proceeding.
Issues to be determined
Having identified the matters in issue, the factual issues to be determined between the parties became apparent. They are as follows:
a)Are there any, and if so what payments that have been made by the father which could be treated as non agency payments;
b)Does J have special needs and are there expenses associated with them;
c)Is J being educated in a manner expected by his parents and if so, is this an expense the father can afford;
d)What is the father’s income and earning capacity and what constitutes his property and financial resources;
e)Are there facts by reason of which it can fairly be said that the father has not paid child support, notwithstanding assessments, so that a lump sum payment might be ordered;
f)If a lump sum was ordered, does the father have any capacity to pay such a sum.
Relevant law governing the application
The obligation to pay child support is created by the provisions of the Child Support (Assessment) Act 1989. Section 3 contains the obligation that parents maintain their children.
The objects of the Act include the object that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both their parents and that the parents share equitably in support of their children.
When considering a departure application the court must follow the three-step process described in Gyselman (1992) FLC 92-279. The court must be satisfied that in the special circumstances of this case, the current assessment would amount in an unjust and inequitable determination in the level of support provided by the father for the children because of his income earning capacity, property and financial resources, special needs of the children and/or the fact that the children had been educated in the manner expected by their parents. If one of the grounds for departure is established the court must be satisfied that it would be:
a)just and equitable as regards the child and the parties; and
b)otherwise proper to make a particular order under this division.
Each of those criteria must be applied to each of the relevant periods in dispute.
Uncontested facts
The mother and father cohabited between January 1988 and 21 December 1992 when they separated. They have two children, J L born 19 October 1989 and B L born 12 May 1993.
In the first year of their separation the father transferred his interest in the former matrimonial home owned by the parties to the mother. The transfer of land was stamped on 15 February 1995 and the consideration was expressed to be “pursuant to an agreement”. It is common ground that the agreement, whatever its terms, was not in writing. It is also common ground that notwithstanding the actual separation date is in dispute, the Mother assumed responsibility for the property shortly after separation. The Mother assumed responsibility for the mortgage but made no payment to the Father.
No valuation of the home was tendered which would enable the value at the time of the transfer to be identified. It was purchased for $105,000 in 1990 and the parties initially borrowed $90,000 of the purchase price. It was sold for $95,000 in 1999 and at the time of the sale there was $78,000 owing on the mortgage. At the time of the transfer to the mother in 1995 there was $91,000 owing on the mortgage. It seems clear there was a modest equity.
Although physical separation occurred in December 1992, the parties were still entertaining some prospect of reconciliation and had counselling for a period of about eight months. The husband accepted in October 1993 that there was no likelihood of reconciliation. The mother is adamant that separation occurred in October 1992 and it is clear that the parties did not live together after that time.
The parties had also borrowed from W W C U at the time they brought the house and the bridging loan was subsequently increased to include the purchase of a Ford Falcon motor vehicle as well as a utility purchased earlier.
At some time in late 1992 or early 1993, the husband injured his back in some way. In October 1993, the company for whom he worked, A S, offered redundancy to anyone who was interested and the father accepted a voluntary redundancy. He received a total amount of approximately $44,000.
From his redundancy payment his employer deducted the amount then owing to the Credit Union. The father said that $20,043 was paid out on the bridging loan when he received his redundancy. He was not able to produce any documentary evidence at the hearing in relation to what was paid out. The mother asserted that by virtue of the fact that repayments had been made of $179 per week in February 1993 that the amount could not have been $20,000 but was in the region of $10,000. At the conclusion of the hearing I reserved judgment and gave the father an opportunity within 14 days to file any documentary evidence which related to the discharge of the bridging loan.
From loan statements tendered by the Father after the hearing in accordance with orders I made, the following is apparent:
a)The parties initially borrowed $10,000;
b)On 11 July 1991 they increased the loan by $4,500;
c)On 10 August 1992 they borrowed a further $8,500;
d)On 10 August 1992 the loans were consolidated and the amount then owing was $19891.56;
e)At separation on 21 December 1992 the amount outstanding was $18,687.41;
f)The loan was paid out on 31 March 1993 from the Father’s redundancy payment;
g)Between separation and repayment, interest of $2,14.82 was paid; and
h)The total amount paid out by the Father after separation was $21,044.28.
After separation the mother applied for child support and an administrative assessment was made which required the father to pay child support. Arrears accrued pursuant to the assessment and by November 1998 they were $14,844.96.
At that time, the mother agreed to discharge all of the arrears and the parties agreed that the father would pay from that time on $100 per week ($50 per week per child) child support for the children. The agreement which appears to have been an oral one is corroborated by a letter from the Father’s solicitors to the Mother’s solicitors dated
8 September 1999 (annexure SLB3 of Mother’s Affidavit filed 15 March 2002).
In April 1999 the mother applied to the Child Support Agency for another assessment and that application was heard on 10 June. The father did not attend the hearing nor file a response. For the 1998/99 financial year, the father’s rate of child support had been assessed at nil based upon his taxable income for the relevant period, adjusted for inflation. For the period 1 July 1999 to 30 September 2000 the father was assessed to pay child support at the minimum rate of $260 per annum. The mother sought an increase in the current rate on the basis of the agreement to pay $100 per week upon discharge of the arrears. Upon receipt of some evidence as per his capacity and the agreement, a decision was made that the father should pay child support at the rate of $100 per week. The assessment period was from 3 November 1998 to 30 September 2001.
In April 2001 the mother made a further application to the Agency for an increase in the assessed amount. The father contended he no longer had the income or capacity to pay the amount of $100 per week. The result of the decision was that there should be no change to the level of child support.
Finally, on 7 August 2001 the father applied to vary the child support and the mother applied to increase it. I have made reference to that decision. The various issues to which I have referred were raised and the child support case officer made it clear that any further determination of the issues involved should be by the Court.
Contested facts
I will deal with the contested facts under the headings I have identified as the issues to be determined.
Are there any, and if so, what payments have been made by the father which should be treated as non-agency payments
Section 71 of the Child Support (Registration and Collection ) Act permits certain payments made by a liable parent for the children to be taken into account by the Agency as non-agency payments and credited against child support. With limited exceptions this can only occur where the payee agrees to the credit.
The father submits that he has made a number of payments which should be determined by the Court as payments to the mother of child support, and offset against any arrears. I propose to deal with them in relation to two distinct periods of time. The first is the period prior to November 1998 when the arrears were discharged and the second is the period after that time.
First period
The father claims that several payments should be taken into account. The first is the transfer of his interest to the mother in the former matrimonial home. He contended that pursuant to an agreement that the mother be entitled to 60 per cent and the father to 40 per cent, and that the father’s share was to be offset against any liability for child support until 2003. This amount (undefined) the father said represented $100 a week for a five-year period, a total of $26,000.
Secondly, the father said that he repaid the bridging loan to the W W C U of approximately $20,000 from his redundancy payment. He says that the arrears of child support were discharged because there was an arrangement whereby his discharge of the loan was in lieu of child support payments of $100 per week for a five-year period.
Thirdly, he said that a number of payments set out in Annexure F to his affidavit sworn 3 May 2002 which totalled $4,270, were payments of child support and should be credited. These payments were cheques provided to the wife by his parents. The mother said that the father’s late mother had set up a Trust and that between December 1996 and December 1997 she was given money for the children through that account, which was made available by the father’s mother, she said, because he was not paying child support. She asserted that she let the Child Support Agency know about the payments and to the best of her recollection, those amounts were credited against any arrears. She conceded that she had received cheques and believed they were credited as a non-agency payment. The father’s mother died in July 1999.
Fourthly, although not a non-agency payment, the father contends that the agency did not have any regard to periods of unemployment when administratively assessing child support. In particular he asserts he was unemployment between 9 July 1996 and 23 June 1997 and 1 July 1997 to 30 June 1998, a period of approximately 2 years.
Findings
As to the transfer of the house, the mother’s evidence was that the house was transferred to her and she agreed to take over the significant mortgage. It does not appear on the evidence available to me that there was ever other than a modest equity in the home and at the time of sale the equity was less than $17,000. It appears highly improbable that the father’s share could ever have been anything like $25,000 as he asserted. At the time the house was transferred, the wife was pregnant with their second child and said that it was her settlement. As to the loan to W W C U, the mother similarly denied any agreement. She said that the funds to pay it off came out of his redundancy from which she received nothing.
I am not satisfied that the husband’s equity in the home transferred to the wife constituted payments of child support for which he should be credited. If the husband’s figures are to be believed, then on two separate occasions agreements were reached which, given the differing times at which they were made, are contradictory. For example, if the first agreement in relation to the home, as the husband asserts, enabled him to offset child support until 2003 it is illogical for a second agreement in relation to the loan to cover a similar period.
The mother annexes to her affidavit sworn 14 March 2002 correspondence between her solicitors and the father’s solicitors shortly after the arrears were discharged. In a letter from his solicitors to the wife’s solicitors dated 8 September 1999, the father’s solicitors deal with the question of arrears which had arisen from the new assessment in November 1998. In particular, page 2 of the letter says:
“Our client advises us that he is prepared to accept responsibility for paying child support of $100 per week in accordance with the Child Support Assessment. Given that our client has satisfied his obligations to pay $3,800, please confirm whether the existing arrangement is to continue or whether your client wishes the Child Support Agency to collect all future payments.”
The transactions that took place between the parties were never formally documented. Negotiations seem to have occurred without formal resolution. A letter dated 29 March 1993 from the father’s solicitors to the mother’s solicitor (Exhibit W7) gives some indication of how the father was approaching the matter. The letter contained the following proposal
“2. Property settlement:
(a)our client is prepared to transfer all his right title and interest in the property at 37 R Road, K to you client. Your client is to accept sole responsibility for the mortgage to the ministry of housing and is to obtain our clients release or discharge from all and any obligations under that mortgage
(b)as has already been acknowledged by you our client transferred ownership of the 1986 Ford Falcon motor vehicle to your client and we are instructed that she has in fact sold the vehicle for sum $7,000.00 and bought another vehicle. Our client is happy for your client to obtain the proceeds of sale and retain the vehicle she now has. In exchange, our client is to retain ownership and title to his 1983 Nissan Ute;
(c)your client can retain all of the furniture, goods and chattels currently still in the matrimonial home save and except for the video cam-corder which is to have been returned to him. We are instructed that our client has taken very little from the property and has only taken small quantity of tools and gardening implements from the property;
(d)there is the personal loan of $13,000 currently outstanding to the W W C U being monies that were borrowed in order to purchase the above mentioned motor vehicles for the parties. The debt is clearly a joint debt incurred during the course of the relationship. Our client is currently meeting the repayments of $117.00 per week. Our client is prepared to continue to meet the payment son the personal loan, subject to it being taken into account in respect to the maintenance that he is required to pay. As it is a joint debt prior to separation, it is in our view, clearly a debt that must be taken into account in determining our clients disposable income and therefore maintenance liability”.
He did not thereafter pay maintenance for her and it appears that no formal agreement was ever reached. The father took a redundancy package and paid out the loan without any formal resolution of these issues.
Two things are clear from the offer contained in the letter:
a)The transfer of the former matrimonial home and car was to constitute a property settlement for the mother.
b)The father wanted the loan payment (now revealed to be about $21,000) to be taken into account as maintenance.
It is not possible now to “construct” some sort of property settlement between the parties, however, I can confidently find from the letter that it was never intended that the transfer of the former matrimonial home or car to the mother was intended to be in lieu of child support.
The issue of the loan is more problematic. Certainly with the father’s contention in 1993 that he should have credit for these payments, in some form. The mother denies any such agreement. However, in November 1998 the mother agreed to discharge all arrears which were then $14,844.96. Although this is not quite the $21,000.00 the father asserts was the sum he should have been credited, he received a substantial benefit at that time, which in my view adequately compensated him for the loan payments. This sum seems to have been accepted by him at that time.
The two letters suggest that whilst the father was contending in 1993 that he should have some credit for the loan repayments that he had made, by 1999 when significant arrears had been discharged, he was focusing on other issues and not contending for the position that he now puts forward. In any event, I am satisfied that the discharge of the arrears in November 1998 did provide the father with a significant benefit which would offset a claim for the loan payments to be taken into account as payment of child support.
I find that in fact father had accepted this position by 1999 and that his current claim for the loan payments to be taken into account as child support and credited to the year 2003 are a recent invention in response to the current arrears.
I accept the mother’s version of events in preference to that of the father. I find that they both agreed to “wipe the slate clean” in November 1998 and the father agreed to continue payments of $100.00 per week by way of child support as part of that agreement.
The records from the Child Support Agency (Exhibit W7) between May 1996 up until November 1998 indicate that there were only two payments received from the father during that time. One was in May 1996 when there was a non-agency payment of $200.00 and the second was a payment in December 1993. Otherwise the father made no payments of child support during this period.
As to the father’s contentions that payments had been made on his behalf which should be credited to him, the mother accepted that she had received payments from a St George bank account between
5 March 1996 and December 1997 from the Trust account established by the husband’s family which was in the names of S. Brockman and RA L . A periodic payment advice produced by the father shows that at one stage there were periodic payments of $100.00 being made to the mother but that document was amended to reduce that commitment to $50.00.
The mother asserts that she did give the father credit for the payments made to her on behalf of the children but believed they were less than the total amount claimed by him. The father produced a list of payments which totalled $4270.00 but no accounts to verify that those payments has been produced. The mother asserts that he was given credit for the payments Exhibit W6 which is a history from the Child Support Agency shows that he received credit for $1941.98 on 4 July 1996 and $200.00 on 22 June 1996. Without some form of bank statements to substantiate the payments the father asserts he made I am not prepared to accept that payments of $4270.00 were made during this period. The reasons I do not accept the father’s evidence without corroboration are:
a)the mother has denied the amounts as alleged by the father, were all received by her;
b)the father could have produced some evidence but did not do so;
c)there is no mention of these payments in the letter written in 1999 by the father’s solicitors to the mother’s solicitors. In fact in 1999 the letter is suggestive that previous issues between the parties have been overtaken by the discharge of the arrears.
As to the period of unemployment claimed by the father from July 1996 to June 1998, which he says were not taken into account by the agency, the records from the agency show that there were nil assessments from July 1995 to December 1998. Clearly the father’s unemployment was taken into account and his assertion to the contrary is without foundation.
The position since November 1998
The second period in which the father seeks credits payments made is the period since November 1998. The father claims:
a)payments of $602.00 in total of payments on behalf of the children. These payments seem to have come from the Trust account operated by the father and his brother. In view of the minimal amounts being received by the mother I am not prepared to find that these were payments of regular child support for which the father should be given credit. First the money did not in any event come directly from the father, but more importantly they were payments for specific items from a Trust account operated by the father and another member of his family who clearly was aware of the specific benefit of these payments to the children;
b)The payments made from the Commonwealth Bank account to the mother. The father claims that all of the amounts in his Commonwealth Bank account number in the names of I and L in trust for J L and B L were payments of child support to the mother. The account however is not a record of what was paid to the mother. It is obvious from the account that regular payments were being made into it and some payments were being paid out by cheque. The payments out of the account total $4180.00. The mother’s evidence was that she had given credit for these payments and had told the agency that they were being received and that they were for the support of the children. The agency has credited a total of almost $3062.35 as direct payments between April 1999 and May 2001 and indirect payments of $1600.00. The sums total about $4662.00 which is more than the payments out of the father’s account, and corresponds with the mothers’ evidence.
c)Gifts by the father to the children. The father paid for part of the cost of a motorbike for J. Receipts produced by the father indicated that between October and December 1998 he paid $1000.00, $200.00 and $1100.00. The mother said he paid in total $800.00 and that she made some contribution as well. Whether the father paid $1100.00 or $800.00 the motorbike was clearly a gift for J and should not be taken into account as a regular payment of child support. I accept the mother’s evidence that she did not request its purchase and I’m satisfied that at no time did she agree that the motorbike would be acquired by the father for J, in circumstances which would reduce his child support obligation.
As a result I see no reason to credit any sums against child support payable by the husband beyond those that have already been recorded by the agency since November 1998.
Thus, in relation to the father’s case to have non-agency payments credited to him I am not satisfied that he has established that any other payments should be credited for either of the two periods.
Mother’s case for departure
At present the father has a commitment of $433.30 per month by way of child support. The father contends that he has the capacity to pay this sum (but argues for the reasons explained above, that he is in credit until 2003).
The mother contends that he has a greater income earning capacity and has assets and financial sources which should be taken into account in assessing the level of child support.
The father asserts that he receives $330.00 per week by way of wages and the use of the company truck from the building company which he asserted was owned by his father. His evidence was that this sum is equivalent to about two to three days work per week and that he is physically able to do more hours but his capacity to do so is limited by the amount of time the company require him. It seems that the company which a family concern builds houses for sale.
The company, L R M Pty Ltd is one in which the father and his father are the equal shareholders. The father said that he believes that his father has the majority of the shares but he accepted that the records of the ACCC indicate that he is an equal shareholder.
He did not have financial statements for the company available at the hearing but pursuant to orders I made permitting late tender of documents he has now provided them for the end of 30 June 2001. No financial statements were produced for the 2002 year or the current year.
The father says that it is difficult to find work as he lives in a remote area. He is qualified as a rigger to work on the waterfront using heavy machinery but that work is not available to him in the rural area in which he is presently living.
The father owns a house worth $130,000.00 which was gifted to him by his mother. It is unencumbered.
The financial accounts provided by the father do not give a particularly helpful picture of the financial position of the company or the father’s actual position. The accounts if taken at face value indicate that the company is running at a loss. It appears that the husband’s father has a significant loan account with the company which as at 30 March 2002 is $297,570.00. This amount is to be repaid to him upon the sale of the property. The company accounts as at 30 June 2001 indicates stock on hand at $114,506.00. This represents the house being built by the company. The extent to which there will be a profit available to the father after repayment to his father of company loans will depend upon the profit generated by sale of the house. There is no evidence of any current valuation which would assist me in making a finding as to what could be expected for the property or the father’s share.
There is no other evidence that the husband has earned anything more significant than his present wages since his redundancy in 1993.
I cannot be satisfied on the evidence the husband has any income greater than disclosed by him at the present time. This position may change in the event that the property currently under construction is sold at profit. In view of the husband’s modest assets even allowing for an equal interest in the company, I am not able to find that the father’s liability to pay child support should be increased by reason of his assets or financial sources.
The husband’s earning capacity remains equally problematic. The husband on his own admission is capable of earning an income of about $55,000 (which was his previous income) as a waterside worker. However, he appears to have injured his back and accepted a redundancy in circumstances in which the organisation was looking to make workers redundant. He has not worked in that capacity since 1993 and lives in an area where that work of that nature is simply not available. There is no evidence that the husband has deliberately not tried to work or that he has jobs available to him in the region in which he lives which he has deliberately rejected. Whilst it is no doubt the case that the choice of locale of his residence would make it more difficult for him to get employment he has now been living there for a number of years and I cannot infer any greater income earning capacity to him on the evidence before me.
I also take into account that the Father is bearing almost all of the travel costs of transporting the children to and from contact visits and pays for a mobile phone for one of the children. He has expenses for their support when they are with him.
Does J have special needs and is there an expense associated with them?
The Wife asserts that J is talented musically. He plays the cello. The father agrees but challenges the need that he has extra or special expenses associated with his talent.
J received a partial musical scholarship to E C. There are school fees which the Mother must pay as a consequence of his attendance at E C. The total cost of maintaining the children is $502.00 per week, and unchallenged. These expenses include school fees at E C.
The mother’s financial position
The Mother lives with the two boys and her Husband and his daughter. She now has full-time employment and earns $480.00 to $500.00 per week from her employment as a Registered Nurse at the A H. The home in which she lives has a mortgage of $50,000.00 and a value of approximately $175,000.00. She has had the sole responsibility for the support of the two boys as the Father has paid very little child support, and on his own admission, nothing since 1999.
Was there an expectation that the boys would have a private school education?
The question of school fees was dealt with by the Full Court of the Family Court in Mee v Ferguson (1986) FLC 91-716. The principles that emerge from the case in relation to school fees can be summarised as follows:
a)Where the non-custodian has agreed to the child attending a private school, that person is liable to contribute to the fees involved so long and to the extent that he or she has a reasonable financial capacity to continue to do so;
b)Where the non-custodian has not agreed to the child attending such a school, he or she is not liable to contribute to those expenses unless there are reasons relating to the child’s welfare which dictate attendance at that school rather than a non-private school. Then the non-custodian is required to contribute to the extent that he or she has a reasonable financial capacity to do so;
c)The mere fact that a non-custodian can afford the fees or is a wealthy person is not in itself a reason for imposing that liability.
Although Mee v Ferguson was decided prior to the introduction of the Child Support (Assessment) Act 1989, the reasoning has been applied to child support cases (Lightfoot and Hampson (1996) FLC 92-663 and Wild v Ballard (1997) FLC 92-771.
The evidence
There was little disagreement between the parties that the Husband and Wife did not discuss the issue of private school fees directly. I find that the Husband has in the past told J that he would go to C G S for the last three years of his schooling. The father attended C G, but only for the last three years of his secondary schooling. J is now only in the first year of his secondary schooling.
I am not satisfied that the Mother has established that there was an expectation that the boys would attend C G, except perhaps, for the last three years of secondary schooling and with the proviso that it could be afforded.
Neither of the boys has yet reached that stage and on the evidence of the Father’s income, which is presently available, I could not find that he has the capacity to contribute to private school fees in any event.
I am not satisfied that either of the parties has established a ground for departure. Thus, both the Application of the Father and the Mother for departure from the existing assessments must fail.
Substitution for periodic payments
Generally child support is paid from taxable income unless there are circumstances which warrant some different approach.
The law
Section 123(1) of the Act provides that application may be made to a Court exercising jurisdiction under the Act for an order that the liable parent provide child support otherwise than in the form of periodic amounts paid to the carer. The court must, before determining such an application, hear and determine any application for departure from administrative assessment under section 117.
Before the Court can make an order for substituted support, the Court is required by section 124 to be satisfied that it would be just and equitable as regards the child, the carer entitled to Child Support and the liable parent, and otherwise proper to make such an order. The Court is required to have regard to the matters contained in section 124(2) and in determining whether it is “just and equitable” or “otherwise proper” the Court must have regard to the matters contained in subsections 117(4), (5), (6), (7) and (8) of the Act. The Court is not limited by those factors alone [see section 124(5)] which suggests that the Court has a wide discretion in determining the application.
The Full Court of the Family Court of Australia in Prpic v Prpic (1995) FLC 92-574 at 81,688 said:
“Capitalisation orders may well be appropriate where there are difficulties in enforcement or where it is proper to sever the financial link between the parties. However, as a general rule, given that payments of child support depend upon circumstances prevailing from time to time, which circumstances cannot be predicted with any significant degree of certainty, it seems to us that the provision of child support by way of lump sum should not be considered to be a readily available alternative but one that is only exercised where there are circumstances that make it appropriate to do so. We would endorse the observations of Mushin J in Bendeich (1993) FLC 92-355 at 79,954 where his Honour said:
‘The rationale underlying the general approach of the court was that the L a lump sum order operates the greater chance of change in circumstances necessitating a variation of that order, thereby making the order unjust. Those changed circumstances might be in relation to the liable parent, custodial parent or the children. Incomes may increase or decrease and the children may change their living arrangements from one parent to another.’ ”
It is clear that I have discretion to order a lump sum subject to being satisfied as to the matters which I have identified in the Act, but it is also clear that I must exercise that discretion only when there are circumstances which make it appropriate to do so and that normally it is preferable for periodic support to be paid.
In this case the Father has paid virtually no child support. He has continued to argue that he should be given credit for payments which
I have rejected. He has made some payments, but they have been from money provided by his family for the purpose of his children and it is clear that after his mother’s death and the cessation of the assistance of his family in making payments, he has paid nothing.
The records from the child support agency indicate that from October 1993 to April 2000, no payments were made.
Between April 2000 and July 2001, payments totalling $4180.00 were made from the account of the father and his brother. Nothing has been paid since that time. I find that the Father is unlikely to pay any child support unless it is paid in a lump sum.
His continued claims to be in credit make it unlikely that he will voluntarily pay the child support despite my findings that he is not entitled to any credits..
Payment of a lump sum is the only way the mother is likely to receive the child support which the father is required to pay. A further indication of his attitude, if one is needed, is that at the outset of the case he was content to argue for the existing status quo (an assessment of $433.00 per month ) and return to the Child Support Agency to argue about the non-agency payments. It was only at my prompting that he agreed to pursue this matter so that it could be the subject of a judicial determination, notwithstanding that the child support case officer had made it quite clear that the issue would require a judicial determination.
The lump sum should be for a period of 5 years from the date of these orders. The Court has power to make an order beyond the year of assessment (Dwyer & McGuire (1993) FLC 92–420).
The period for which I intend to provide for payment is from 1 July 2002 to 30 June 2007 at the rate of $5,200.00 per annum, which is a lump sum of $26,000.00.
Before making a substituted Order, the Court is required by section 124(3) to be satisfied that it would be just and equitable with regard to the child, the carer entitled to child support and the liable parent.
A lump sum is appropriate for the reasons that I have already outlined.
I find that it is the only way that the Mother is likely to receive any child support. The father has an unencumbered house and as he has employment is likely to have the capacity to borrow to meet this sum. He has an interest in the company which employs him and potentially a half interest in that company. I am not satisfied that a full picture of the father’s involvement in the company or funds which might be available to him has emerged. Whatever the position precisely may be, it is likely that the father has some ability to borrow funds to pay the mother, either personally or with the assistance of the company. If not, then he may have to sell the property in which he lives to meet his liabilities and it is clear that there is sufficient equity in the property for him to do so. It is a matter for him how he is able to arrange his financial affairs but his obligations to pay child support must take precedence over other commitments beyond those which are set out in the legislation.
The Court is also required to consider whether it is proper to make such an Order [section 124(4)]. As the Mother is otherwise supporting the children, in this case it is fortunate that the Mother does not have to fall back on the community to provide support for the children. Nevertheless, it is the duty of the parents to maintain a child as stated in section 3 of the Act and it is the parents who have the primary obligation to do so. I am satisfied that unless I make an order for substitution of a lump sum for periodic maintenance the Father will not carry out his obligation to provide support for the children.
I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Peter Smith
Date: 12 September 2002
0
0
0