B and P
[2003] FMCAfam 199
•13 June 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| B & P | [2003] FMCAfam 199 |
| CHILD SUPPORT – Application for departure – liable parent’s earning capacity following retrenchment as PAYG wage earner and commencement of self-employment at lower income – whether special circumstances exist – payment of private school fees – whether special circumstances exist given parties’ changed financial situation since separation. Child Support (Assessment) Act 1989, ss.4, 114, 117 Rowe & Rowe Unreported decision of Fogarty, J., 12 December 1994 |
| Applicant: | S B |
| Respondent: | G A P |
| File No: | ADM 3134 of 2000 |
| Delivered on: | 13 June 2003 |
| Delivered at: | Darwin |
| Hearing date: | 16 May 2003 |
| Judgment of: | Brown FM |
REPRESENTATION
| The Applicant in person: | Ms S B |
| The Respondent in person: | Mr G P |
ORDERS
That there be a departure from the administrative assessment of child support payable by the respondent for the period from 1 October 2003 until 31 December 2004 and for such period the respondent’s child support income be deemed to be $7,500.00 for the period from
1 October 2003 until 31 December 2003 and be deemed to be $30,000.00 for the period from 1 January 2004 until 31 December 2004 unless the respondent’s monthly child support income from his employment and any other sources exceeds $2,500.00 in which event the provisions of the child support formula will apply to such income.A copy of the orders made today and these reasons for judgment be served upon the Regional Child Support Registrar, Adelaide.
That the applications are otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADM 3134 of 2000
| S B |
Applicant
And
| G A P |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings relate to child support and whether there should be any departure from the child support assessment procedure in respect of four children namely, A G P born the 5th of December 1984, J L P born the 30th of June 1987, M S P born the 20th of August 1989 and V J P born the 21st of October 1991.
The applicant in the proceedings is S B (“the applicant”), who is the mother of the four children concerned. The respondent to the proceedings is the children’s father, G A P (“the respondent”). By way of her form 63 application filed on the 19th of July, 2002, the applicant seeks departure orders from the applicable child support determinations for the year 2002 and all future child support years. The application is governed by the provisions of the Child Support (Assessment) Act 1989 (“the Act”) and in particular section 117 of the Act.
In support of her application for a departure order, the applicant relies on the two following grounds:
i)That the child support assessment does not reflect the income, property and financial resources of the applicant;
ii)The applicant incurs extra costs to care for, educate and train the children in the way that the parents intend.
Background
The parties married on the 15th of January 1983 and finally separated on the 25th of May 1997. The marriage between them has been dissolved for many years. The four children concerned have lived with the applicant since the parties separated. Sadly, it seems that there has been a good deal of conflict between the parties regarding arrangements for the care of the children. As a result, there have been a number of proceedings both in this Court and the Family Court at Adelaide regarding the respondent’s contact with the children and of particular importance in the context of the current proceedings, which schools the children should attend from time to time.
On the 6th of December 1999, Justice Burr made orders, with the consent of the parties, that allowed for the four children to live with the applicant and for the husband to have regular periodic contact with them on alternate weekends and in school holidays. In addition Justice Burr made the following order:
“The wife shall provide the husband with copies of school reports and other records of academic and sporting achievement as the children may obtain from time to time and, further, give the husband as much reasonable notice as possible of forthcoming academic and social events in the life of each of the children[1].”
[1] Order 7 of the orders of Justice Burr made the 6th of December 1999
The husband commenced contravention proceedings in respect of this latter order on the 13th of December, 2000. He alleged that he had not been given sufficient notice in respect of a change of school for the children concerned, although as is clear, there is no such specific requirement contained in the order concerned. As a result of this contravention application and other difficulties concerning contact, both parties commenced proceedings to alter the orders of the 6th of December 1999. These competing applications were ultimately resolved after the appointment of a child’s representative and the production of a family assessment, by orders that were made on the 17th of January 2002.
It is the applicant’s position that, as a result of the contravention proceedings, she was compelled to institute proceedings in order to enrol the children at the S V C School. The primary reason why it was necessary to change the place of schooling of the children concerned was that the applicant had remarried. Her current husband is V B, whom she married on the 9th of December 2000. As a result of her marriage, it was necessary for the applicant to move with the children to Hallett Cove and as a result the place of schooling of the children had to be changed.
The applicant’s application came before Registrar Radezevicius on the 30th of January 2001, when an order was apparently made permitting the applicant to enrol the children at the S V C School. The parties are in vehement dispute as to the significance of this order and in particular whether the applicant agreed, either explicitly or tacitly, to bear the necessary expenses involved in the children concerned having a private school education.
Since the applicant’s re-marriage, she and Mr B have had another child, J who was born on the 21st of April 2001. The applicant and Mr B are now expecting another child, who is due to be born in September of 2003. In the past, the applicant has worked as a chiropractor’s assistant on a part-time basis. However, due to gestational diabetes, she has been forced to leave this employment.
The respondent is a qualified electrician. He qualified in 1982 after a four-year apprenticeship. During much of the parties’ marriage, the respondent was employed as an electrician by the Julia Farr Centre, where he worked maintaining electric wheelchairs. The respondent worked for the Julia Farr Centre from 1991 until early 2000. When he left this employment he was earning a salary of approximately $32,000.00 per annum. As a result of a reorganisation within the relevant department at the Julia Farr Centre, the respondent was offered a redundancy package. As a result of his redundancy, the respondent began his own business as a self-employed electrician. He began this business in March of 2000. Since that time and to date, his annual income has been considerably less than that which he previously earned, whilst he was a PAYG taxpayer in the employ of the Julia Farr Centre.
The issues regarding the children’s attendance at private schools and this drop in the respondent’s income for the past 3 years are the major bones of contention between the parties and the reasons why the applicant has brought this application for departure.
The relevant assessments
From 1 January 2002 until 4 December 2002, Mr P was assessed to pay a monthly amount of child support for A, J, M and V of $299.00 per annum, based on a child support income of $12,618.00. The current child support assessment results in a payment of child support of $99.83 per month or $1198.00 per year for J, M and V based on a child support income of $16,059.00 per annum.
Both these assessments were subject to review by Senior Case Officer Short on the 26th of March 2002. The applicant filed a copy of Senior Case Officer Short’s reasons for decision in the matter. In the decision, the senior case officer noted that there had been 8 or 9 previous applications to change the administrative assessment of child support. The basis of the applicant’s request for a departure was in respect of the cost of educating the children concerned and because the assessment did not take into account the income, earning capacity, property and financial resources of both parents.
In respect of these two grounds for departure, Senior Case Officer Short said as follows:
“The application is based on reasons including reason three. Ms B suggests that it was the joint intention of the parents that the children have a private school education. It appears however that the children have changed private schools and that court proceedings were required in order to provide Ms B with authority to do so. There is a significant dispute between the parents as to what was said or indicated in Court in respect of the payment of fees.
Ms B also applied on reason eight suggesting that Mr P indicated in Court in January 2002 that he was a full-time worker. Ms B indicated that she had spoken to the proprietor of a particular electrical business who advised her that Mr P was an employee. Mr P said that he had spoken to this proprietor who denied this assertion. Mr P said that he is a sub-contractor and is consequently, and legitimately, able to claim a number of deductions that would not normally flow to an employee. This issue involves an examination of the relationship between Mr P and the relevant electrical firm.
There are also a great many other issues in dispute between the parties including matters related to Mr P lifestyle and his capacity to contribute to child support.”
Senior Case Officer Short came to the view that the issues raised in the application were too complex to be dealt with pursuant to Part 6A of the Act. Accordingly, pursuant to section 98E of the Act, Senior Case Officer Short refused to make any determination. This was the background to the applicant bringing proceedings in this Court.
The application
As I have already indicated, the applicant has acted on her own behalf throughout these proceedings. In her amended application filed on the 16th of April, 2003, the applicant seeks the following orders:
A. An order for child support according to the Child Support Agency calculation.
B. An order for $600.00 per month according to Mr P’s annual gross income in excess of $33,000.00.
C. An order for child support to meet with the “Lee and Lovering” scale as the Court sees fit.
Essentially, as the case unfolded before me, it became an examination of Mr P financial circumstances and particularly his motivation for seeking work as a self-employed electrician rather than as one employed for wages, who paid tax on a PAYG basis. It is Ms B’s position that as Mr P is capable of earning at least $33,000.00 per annum as an employed electrician and given the needs of his children, it is only just and equitable that the Court should make an assessment of child support on this basis.
The evidence
The applicant relied on the following documents:
i)Affidavits of herself filed on the 19th of July 2002; 20th of September 2002 and 2nd of December 2002
ii)A statement of her financial circumstances filed on the 2nd of December 2002.
Mr P relied on the following documents:
i)Two affidavits of himself sworn on the 11th of September 2002 and the 16th of December 2002;
ii)A statement of his financial circumstances filed on the 16th of December 2002.
In addition Mr P tendered a copy of his tax return for the year ending the 30th of June 2002; a copy of the financial statements, including the profit and loss statement for his business for the year ending the 30th of June, 2002; and the profit and loss statement for his business from July 2002 until February 2003.
The parties themselves were the only witnesses who were called to give evidence in the proceedings before me.
I formed the view that they were both honest and creditable witnesses. In particular, I did not believe that Mr P was concealing any details about his financial situation from either Ms B or the Court. To her credit, Ms B acknowledged in her submissions to me that the profit and loss statements tendered by Mr P had been properly prepared and reflected the true financial position of his business and the income he derived from it.
In what follows, findings of fact are made on the balance of probabilities, having regard to the evidence and my observations of the parties. In what follows, statements of fact constitute findings of fact.
The respondent was questioned about his financial circumstances.
I formed the view that he endeavoured to answer each question asked of him honestly. He has been a qualified electrician since 1982. He holds the necessary certificates to do both commercial and domestic wiring. Essentially, he can work on any electrical installation. Recently he completed the necessary course to obtain an AUSTEL license. This authorises him to install telephone wiring. I accept that he did the course to improve his qualifications, with a view to increasing his income earning capacity. He describes himself as a good and competent electrician.
Between 1991 and early 2000, he was employed at the Julia Farr Centre as an electrician, working primarily on repairing electric wheelchairs. At the end of his employment at the Centre, he was earning $32,000.00 per annum. The respondent was retrenched from the Julia Farr Centre, as a result of a reorganisation within his department. It was not as a result of the respondent himself resigning or any omission on his part in the work he did there. The retrenchment package he received has long since been consumed.
In March of 2000 he commenced his own business. The reason the respondent commenced his own business was that, following his retrenchment, he thought he would explore the opportunity, thus presented, of working for himself. It was also his view that, although the Julia Farr Centre offered him security, there had been no opportunity for advancement for him within its organisation. He wanted to do better. In time, the respondent hoped his own business would offer him greater financial rewards than those he had received from the Julia Farr Centre. However, to date that has not proved to be the case. I can well understand why a person in the position of the respondent would wish to explore the possibilities available to him of self-employment. Mr P did not embark upon a new career or wilfully abandon a secure and well-paid position. His hand was forced so far as his employment at the Julia Farr Centre was concerned. I do not believe that his decision to commence his own business was motivated by a desire to escape his responsibility to pay child support for his children.
No evidence has been provided to me as to the extent of employment opportunities for qualified electricians in the Adelaide area. Mr P indicated that generally speaking electricians charged between $40.00 and $60.00 per hour for their services. It was his practice to charge out his labour at an hourly rate of $50.00. No evidence was available to me as to how readily a qualified electrician could expect tot find work on a PAYG basis in Adelaide or what his or her per annum starting salary would be. Thus I have no knowledge of the employment market for qualified electricians in the Adelaide area.
At the present time, the respondent obtains most of his work from a firm called S.A. Beams. This firm is contacted by customers, who require electrical work done and the work is forwarded on to the respondent to perform as appropriate. The respondent works mainly as a subcontractor and pays a commission of 15% on each of his invoices rendered to S.A. Beams. He does not advertise the availability of his services himself but relies on S.A. Beams and word of mouth to get work. His work is mainly domestic and his hours of work vary according to demand. He chooses not to work during school holidays when the children are visiting him. However, I accept that he is available for work at all reasonable times. He describes his business as being “steady” but concedes that he could be working harder. Mr P indicated that he is paid in cash from time to time for his services. However, I accept that all such sums are declared. Mr P completes his own Business Activity Statements but relies on an accountant to prepare his accounts and his personal income tax returns. As has already been indicated, the applicant accepts that these accounts are bona fide.
Mr P’s tax return for the year ending the 30th of June 2002 indicates that he earned the sum of $16,059.00 from his business in that financial year. The profit and loss statement for the period indicates that he earned a total income of $33,726.85. The expenses related to the earning of this income were $17,667.67. In the previous financial year he earned $26,573.49, which after the deduction of expenses of $13,955.48, left him with a net profit before tax of $12,618.01. These figures are the ones, on which the child support he pays, are based. Accordingly, between 2001 and 2002 there has been a modest increase in turnover.
The respondent’s major expense in each year has been expenses related to the use of a motor vehicle. He leases a vehicle for his business, which he also uses for his own personal use.
In the current financial year for the eight months ending in February 2003, the respondent has earned an amount of $32,824.86, to which expenses of $20,095.25 relate, leaving a net profit of $12,729.61. If these figures are projected to the end of the financial year, it will leave the respondent with a net profit of about $19,000.00, again a modest increase on the past year. Accordingly, although the advances are small, the respondent’s business is developing. I have however no doubt that the ability of the respondent to deduct his motor vehicle expenses and some of his telephone is a considerable benefit to him. However, I do not believe that the evidence indicates that the respondent is minimising his income or deducting anything other than legitimate expenses from his gross income.
To my mind, the evidence indicates that the respondent is cautiously growing his business. Certainly he is not over-exerting himself or going to any extraordinary lengths to obtain work but nor is he declining business. His business is slow, steady and modest. The respondent’s ambitions are not great but it cannot be said that he is not utilising his skills. The essential question in this case is whether or not it is reasonable for him to continue to work in this manner, rather than to seek employment in some other capacity.
The respondent normally operates his business on the basis of an overdraft, which is normally about $6,000.00. He is unable to indicate exactly how much he draws from the business each week, but his statement of financial circumstances estimates his weekly income as being about $330.00. This includes a family payment of $24.00. This major asset is the house in which he lives situated at 9 W C, Mount Barker. He purchased this property in 1999 for the sum of $90,000.00, of which he borrowed $80,000.00. He estimates that the property is now worth $130,000.00. The mortgage is now $84,000.00. He pays the sum of $145.00 per week in order to maintain the mortgage. In my view, it is not unreasonable that the respondent should be purchasing a home for himself in this manner. In addition he has superannuation worth approximately $41,000.00 and household effects of modest value. He is clearly not in a strong financial position.
The applicant herself is not currently working. Until recently, she was employed as a chiropractor’s assistant and was receiving a modest weekly wage. She also received government benefits. Her husband is a sales representative and receives an annual salary of $33,800.00 together with the use of car and a mobile phone. The applicant owns no substantial assets. Her husband is the registered proprietor of the premises in which she, her children and Mr B live. On any view, financial circumstances in the B household are extremely tight. Mr B has no legal responsibility to support A, J, M or V. However, undoubtedly his income does substantially contribute to the financial support of these children.
One of the applicant’s major expenses each week relates to school fees of approximately $127.00. J and M are currently attending the T C College. The fees for this school are approximately $600.00 per term and there are four terms each year. There are other expenses in respect of the children’s books and uniforms. V is currently attending the P Primary School. This costs approximately $405.00 per term. A has completed his secondary school education. He is currently working as a shop assistant in a paint store and is hoping that he will be accepted into the Military College at Duntroon. In his last year of school he also attended a private school.
The children concerned have each attended a number of different schools, both private and public. The litigation of January 2001 concerned S V C School. Thereafter they went to A High School.
I have no doubt that the applicant has been diligent in seeking out what she believes are the best schools available for the children. The respondent has been informed of the change of schools when they have occurred. In part, the changes in schools have been dictated by the children’s special needs.
J suffers from mild dyslexia and as a result needs special support at school. Both M and V will require orthodontic treatment in future and both will need braces. The children will have their orthodontic needs catered for in the public health system but there will inevitably be some expense to the applicant. In addition, V has recently been psychological assessed and she too is likely to be suffering from dyslexia. Because of these needs, it is the applicant’s position that the respondent should contribute a greater amount of child support to her than that which he is currently paying. It is also her position that the parties agreed between themselves prior to their separation that each of the children would be privately educated.
The applicant is clearly a devoted parent, who wants the best educational outcome for each of her children. No doubt this has involved considerable financial sacrifice on her part in the past. It seems that prior to the parties’ separation, now some six years ago, the children attended both private and public schools from time to time.
I have no reason to doubt that the respondent, whilst the parties were married, was in agreement that the children should attend private schools, provided that this was in their best interests and within the parties’ financial means. Certainly, the children were attending private schools when the parties separated and, since that time, the respondent has made some contribution towards the payment of those fees. However, it is not clear to me that there was an explicit agreement between the parties, after they had separated, that the children would continue to attend private schools. No doubt this was the wish of both parties, but from the husband’s perspective it was dependent upon their respective financial positions. Given the parties comparatively modest means, the financial consequences of their separation were considerable for each of them. Since his retrenchment, the respondent’s financial situation has worsened.
I accept that the husband too wants the best educational outcome for the children. However, his position is that, through financial necessity, the parties are compelled to cut their coat according to their cloth and the fact that the children were in private schools at separation and that he has paid some fees since, do not necessarily suggest either an ongoing agreement between the parties that the children should continue to attend private schools or acquiescence on his part in this regard. In my view, it would be a different matter if the parties were in a more robust financial position. It seems clear to me that during the marriage between the parties, the fact of the children attending private schools required a considerable joint financial sacrifice. Once the parties separated, I accept that, from the respondent’s point of view, it was necessary for there to be some reassessment of this position. Certainly, I do not believe that the parties expressly agreed with one another that the children would continue in private education. From the respondent’s point of view, the decision depended very much on his financial position, although I accept he would have preferred the children to continue at private schools if possible. I accept his evidence that he intended to convey his position to the applicant during the course of the proceedings before Registrar Radezevicius on the 30th of January 2001.
In any event, the argument is somewhat academic, because it is the applicant’s principle position that the child support assessment should be based on the respondent receiving an income of $32,000.00 per annum or thereabouts and if a child support assessment was made on this basis, it would ease the burden currently falling on her shoulders of paying the school fees for J, M and V.
In essence, the applicant does not care on what basis the current assessment is changed, so long as it is increased. It being her position that she and indirectly her current husband have borne and continue to bear a disproportionate share of the burden of financially supporting the children and both justice and fairness demand that the respondent should change his employment and financial arrangements so that he can take up a more equitable share of the responsibility for providing financially for the children.
The applicable law
These proceedings are governed by the Child Support (Assessment) Act. Pursuant to section 3 of the Act, the parents of children have the primary duty to maintain their children. This duty has priority over all other commitments a parent may have, other than the necessary commitments to enable the parent to support him or her self, or any other child that that parent may have a duty to maintain.
The objects of the act are described in section 4(2) as being intended to ensure:
a)that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
b)that the level of financial support to be provided by parents for their children should be determined in accordance with the legislatively fixed standards; and
c)that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
d)that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them;….
The Commonwealth Parliament has seen fit to allow parties to negotiate outside of the confines of the Child Support (Assessment) Act and also to enable the Courts, in special circumstances, to depart from the administrative assessment of child support.
The provisions relating to departure are contained within Division 4 of Part VII of the Act. There are additional particular objects of this division outlined in section 114 which include ensuring:
(a) that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
(b) that parents share equitably in the support of their children.
The provisions of section 117 of the Child Support (Assessment) Act empower a Court to make an order for departure from administrative assessment in special circumstances. Section 117(1) provides as follows:
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.
If these three conditions are satisfied then the Court should make the departure order sought.
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 case”.
In the Marriage of Gyselman (1992) 15 FLR 219 at 225 the Full Court of the Family Court said as follows of 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.”
Accordingly, the intent of the Act is that a readily understood and accessible formula should be applied to the incomes of separated parents so that the child support payable by each of them may be easily calculated in an administrative manner. The basis of the formula is each of the parent’s taxable income from each relevant year[2]. The formula is not to be departed from unless “special circumstances” exist.
[2] See section 38 of the Act
In basic terms, the formula works as follows:
·First, the taxable income of the non-custodial parent is taken into account.
·Second, an amount is deducted from that income for the living expense of the non-custodial parent and any natural or adopted children living with that parent.
·Third, if the custodial parent’s taxable income exceeds average weekly earnings, plus a fixed allowance for child care costs, the excess reduces the non-custodial parents income.
·Finally, a percentage of the non-custodial parent’s remaining income is paid as support for the child or children involved.
·The Act provides for a range of modifications to the formula in cases where the care of children is split or shared by the child’s biological parents.
·An appeal lies to a Court, such as this one, where one of the parties considers that the application of the applicable formula provided by the Act has been incorrectly applied or interpreted.
Section 117(2) of the Act sets out the various grounds for departure. It is not necessary to outline each of the various ground available other than to say that in the present case the applicant relies on the following grounds:
2)That in the special circumstances of the case, the administrative assessment has resulted in an unjust and inequitable determination because of the income, earning capacity, property and financial resources of the respondent – section 117(2)(c)(i).
3)That in the special circumstances of the case, the costs of maintaining the child are significantly affected because the children concerned are being educated in the manner that was expected by their parents – section 117(2)(b)(ii).
After considering these various basis 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 section 117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought.
Section 117(4) of the Act reads as follows:
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 proceedings; 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)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 section 117(5) and determine where or not it is proper to make the departure order.
Section 117(5) 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.
In Gyselman (supra) the Full Court of the Family Court said at page 240 as follows:
“As we have already indicated, the exercise under section 117 involves three steps. The first, which we have already examined, is whether one or more of the grounds in subsection 2 has been made out. The legislation then requires the court to consider whether any proposed order is “just and equitable” and “otherwise proper”.
It is clear therefore that each of these three steps must be addressed by the court as a separate issue, namely:
1)Whether one or more of the grounds of departure in section 117 is established, if so:
2)Whether it is just and equitable within the meaning of section 117(4) to make a particular order; and
3)Whether it is otherwise proper within the meaning of section 117(5) to make a particular order.
At the core of the dispute between the parties in this matter is the earning capacity of the respondent and the extent of the obligation upon him to engage in activities that will enable him to generate the maximum amount of income from his employment pursuits. In this regard, the provisions of section 117(7) of the Act are relevant. It reads as follows:
In having regard to the income, earning capacity, property and financial resources of the child or a parent of the child, the court must:
(a)have regard to the capacity of the child or parent to earn or derive income, including any assets of , under the control of, or held for the benefit of, the child or parent that do not produce, but are capable of producing, income; and
(b)disregard:
(i)the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii)any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
It is Ms B’s position that Mr P is voluntarily under employed and, by implication, has chosen to escape his obligation to pay child support for his children. In essence she argues that Mr P’s income earning capacity is not being properly utilised by him and special circumstances exist whereby it is proper to substitute a higher figure for his current income as derived from his business. This issue was discussed at length by the Full Court of the Family Court in DJM v JLM[3] and was described as being a question “fraught with difficulty”. In DJM v JLM, the Court considered both Australian authorities and decisions of Courts in various jurisdictions of the United States of America, but particularly those of California. Other relevant cases, which are not referred to in DJM v JLM include Stojanovic & Stojanovic[4] and Bolton & Bolton[5].
[3] (1998) FLC 92-816
[4] (1990) FLC 92-134
[5] (1992) FLC 92-309
Stojanovic was a case concerned with the child maintenance provisions of the Family Law Act. The husband in the case, who had previously been a builder, had not been in employment for approximately 2 years and had been engaged as a full time student studying for his higher school certificate. Kay, J. considered that he had a capacity to engage in some form of employment and accordingly should pay some modest child maintenance. In Bolton, Cohen, J. was concerned with a child support case, where it was found that the husband had voluntarily left his employment in order to avoid an administrative assessment of child support. In the case, Cohen, J. found that this amounted to special circumstances to justify a departure from a nil assessment of child support.
In DJM v JLM the Full Court considered Rowe v Rowe[6]. This case had a fact situation that is broadly analogous to the present one. The issue in the case concerned the earning capacity of a father for the purposes of child support. He had been unemployed for a period of 8 months, then began a job selling carpet tiles, which he found uncongenial. He remained in this job for approximately 2 years, earning a salary of about $40,000.00 per annum. He then commenced a business with his new wife and earned approximately $15,000.00 per annum. Fogarty, J. found that the husband was not entitled to throw in his employment selling carpet tiles at the expense of his children. In essence, he was not fully utilising his full income earning capacity.
[6] Unreported decision of Fogarty,J. delivered the 12th of December 1994.
Scott & Scott[7] was also a case concerned with the child maintenance provisions of the Family Law Act, in which it was necessary for the Full Court to consider the earning capacity of the maintenance paying parent. In the case, the Full Court said as follows:
“In summary whilst the above cases establish that in some circumstances an unemployed parent without income may be held to have an earning capacity or financial resources sufficient to justify an order that he or she contribute to the support of his or her children, they are not authority for the proposition that in all such circumstances, such a conclusion must or should be reached. If they establish any principle of general application it is only that being unemployed and without income is not of itself necessarily an answer by a parent to an application for child maintenance. The circumstances in which the parent became unemployed or without income, the reasons for it, the nature of his/her pervious employment and the efforts (if any) which he or she has subsequently made to obtain employment are all relevant matters for consideration by the court in deciding whether the parent has any and what earning capacity such as to justify an order for child maintenance. Even in the absence of any current income or earning capacity, a parent may be required to pay maintenance for his/her children if he/she has property or financial resources which are or ought reasonably to be available for that purpose.
It is ultimately a question of fact, in each case, whether an unemployed parent without income or financial resources has any earning capacity, and if so the extent of it. However, we are of the view that such an unemployed parent with no particular qualifications or skills for employment could not be held, at least in times of high unemployment such as currently exists in this country, to have a current earning capacity sufficient to support an order for maintenance unless he/she has recently given up, without good reason, secure remunerative employment, or unless, having become involuntarily unemployed, he/she has made no reasonable efforts to obtain employment for at least a significant period of time[8].”
[7] (1994) FLC 92-457
[8] Scott & Scott (supra) at page 80,739
Scott & Scott was applied by Kay, J. in two unreported decisions, Scott v Stauder[9] and Wastle & Wooster[10]. In the former case Kay, J. concluded that it was reasonably open for the husband to change his career path with a view to seeking a more lucrative career in the long term. In the latter case, Kay, J. did not think that it was unreasonable, at least in the short term for a period of up to two years, for the husband to continue to try his hand on the professional golf circuit, given the possibility of him winning lucrative prizes at some stage in the future.
[9] Unreported decision of Kay, J. delivered 20 November 1996. This concerned a solicitor who had a job with the Director of Public Prosecutions who was earning a secure salary of $100,000.00 per annum. He left this position although he had a liability to pay maintenance in order to commence his own private practice.
[10] Unreported decision of Kay, J. delivered 23 July 1996. This concerned a husband with a liability to pay maintenance who was a professional golfer on the Asian professional golf circuit. On the circuit he was barely covering his expenses. There was evidence that indicated he could obtain secure employment as a teaching professional.
These two cases demonstrate the principle that, whether or not a change of career on the part of a maintenance or child support paying parent is reasonable or an indulgence, which should not be continued at the expense of the children concerned, is one that must be determined from all of the circumstances of the case. These circumstances can obviously include the bona fides of the career change and the prospects of an increase in the earnings in the longer term. It would also seem to be reasonable to consider the circumstances of the children concerned and the implications for them of a parent’s change in career direction. Over all it seems that the Court must consider whether a change of career is one that has been made in good faith.
Relationship breakdown is often a traumatic process for those concerned, especially when there are disputes concerning arrangements for the children involved. It is not uncommon for parties to reassess their career goals and terms of employment following separation. The Court must consider the reasonableness of any decision on the part of a parent against the background of the objects of the child support legislation and the heavy onus that is placed on parents to financially support their children by the legislation.
In this context the Full Court considered a number of decisions from jurisdictions within the United States of America, particularly Padilla[11], a decision of the Court of Appeal of California where the Court said as follows:
“ ‘…Earning capacity is composed of (1) the ability of work, including such factors as age, occupation, skills, education, health, background, work experience and qualifications; (2) the willingness to work exemplified through good faith efforts, due diligence and meaningful attempts to secure employment; and (3) an opportunity to work which means an employer who is willing to hire…
When the ability to work or the opportunity to work is lacking, earning capacity is absent and application of the standard is inappropriate. …When the payor is unwilling to pay and the other two factors are present, the court may apply the earnings capacity standard to deter the shirking of one’s family obligations. A parent’s motivation for reducing available income is irrelevant when the ability and opportunity to adequately and reasonably provide for the child are present, …
Once persons become parents, their desires for self-realization, self-fulfilment, personal job satisfaction and other commendable goals, must be considered in context of their responsibilities to provide for their children’s reasonable needs. If they decide they wish to lead a simpler life, change professions or start a business, they may do so, but only when they satisfy their primary responsibility: providing for the adequate and reasonable needs of their children[12].”
[11] Padilla 45 Cal. Rptr. 2d 555
[12] Quoted in DJM v JLM (supra) at page 85,271
The Full Court reached the conclusion that a parent has less latitude to consider career changes, where child support considerations were raised, than, for example, a husband or wife, who was liable to pay maintenance for a former spouse. This flowed from the child support legislation, which emphasised and prioritised the obligation of parents to support their children and which measured the level of financial support for those children according to the parent’s “capacity to provide financial support”. Accordingly, it is not always open to a parent to pursue some occupation that may appeal to him or her, if there is other more remunerative but possibly less congenial employment available to that parent that would afford him or her an opportunity to earn a higher income. The extent of the obligation on a parent to remain in an occupation that provides a particular level of income depends on the individual circumstances of the case concerned at the time. The Full Court said as follows:
“It is open to a court to give weight to the ability of a party to earn income especially where the opportunity clearly exists to utilise that ability. Whether it is or is not appropriate to require a party to work particular hours or work in a particular occupation is a question peculiarly within the province of a trial judge and needs to be measured on a case by case basis. …
A judge might accept that it is unreasonable to expect a parent to continue to work 80 hours per week whilst having obligations to care for one child, and whilst that parent is still earning more than sufficient for his or her own needs and the needs of that parent’s children. Alternatively, a judge might conclude, based on a proven work history, that such a work pattern is entirely reasonable in the circumstances. Ultimately the matter reverts to the exercise of discretion by the trial judge based on the individual circumstances of the case then being tried[13].”
[13] See DJM v JLM (supra) at page 85, 272
Thus capacity to earn a higher income does not only depend on the subjective features of the liable parent but also on the objective features of the job market in which that person is competing.
The second ground relied upon by the applicant relates to the costs of provision of the children’s private school fees. In this respect it is necessary to have regard to the provisions of section 117(6) of the Act which reads as follows:
In having regard to the proper needs of the child, the court must have regard to:
(a)The manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b)Any special needs of the child
It is the applicant’s position that both J and V have special needs in respect of their dyslexia, which require them to attend private schools. It is also her position that both parties expected the children to be privately educated. Accordingly, the expectations of the parents concerned are relevant considerations in assessing whether special circumstances exist to justify a departure from a child support assessment. Such expectations would necessarily seem to entail some agreement on the part of the parties concerned. In Paradine & Paradine[14], Gunn, J. said as follows:
“I do not disagree with the proposition that, speaking generally, a party should not be obliged to contribute towards private school fees unless he has consented to do so, or unless he has consented to the child attending that school. On the other hand, there may be cases where it would be appropriate for a party to be compelled to contribute towards private school fees even though he or she had not been consulted upon the matter or had not consented to the child attending a private school. For example, as conceded by counsel for the husband, where there is clear evidence that a child would derive a benefit from attending a private school as opposed to attending a public school, it may be appropriate to order a party to contribute towards school fees.[15]”
[14] Paradine & Paradine (1981) FLC 91-056
[15] Paradine & Paradine (supra) at page 76.457
I believe consideration such as those set out above are relevant when considering whether special circumstances exist to justify a departure from a child support assessment on the basis of private school fees.
Application of the law to the facts of the case
Whether there should be a departure on the basis of the respondent’s earning capacitya)
The evidence indicates that the respondent has properly declared all his income, from his business as an electrician, for the relevant child support periods. I am satisfied that his accounts have been properly prepared and he has no other undisclosed sources of income, apart from his business. I also accept that his deductions, from his gross income, are proper ones. At present, he receives a modest income of about $20,000.00 per annum. He receives some benefits from self-employment, in the form of the use of his car and telephone for private purposes. It is difficult to quantify these benefits in dollar terms. In my view, it would not be appropriate to compel him to sell his home. His equity in the property is not great and much of it seems to have accrued as a result of appreciation in property prices.
The question is whether there exist special circumstances in this case, by means of which the Court should impute to the respondent, a greater child support income than that that he currently derives from his business as an electrician. The basis of such imputation being either that he has a capacity to earn a larger income as PAYG employed electrician or that he is not currently working to his full capacity. The resolution of this question must involve an examination of Mr P bona fides in starting the business and at least a cursory evaluation of his potential to earn more. It is clear that special circumstances can exist where a person leaves employment to escape child support responsibility. The question, to use American terminology, is whether or not Mr P is a shirker.
Mr P has been employed as an electrician for all of his adult life. He was retrenched from his position at the Julia Farr Centre through no fault of his own. Certainly, he did not resign of his own volition. He had held this position for many years. His leaving of the position did not coincide with the end of the marriage between the parties but appears to relate to factors over which he had no control. In March of 2000, Mr P had no other alternative but to seek new forms of work for himself. His only work skills are those of an electrician. In those circumstances, it does not seem unreasonable, that he would want to try his hand at running his own business as an electrician both to see how he would fare and whether he enjoyed it or not. In this sense, I do not think that Mr P can be said to be a shirker. He did not voluntarily walk away from secure employment to follow his own whim or some other nebulous ambition. Further, I have received no evidence as to what the labour market was or is like in Adelaide for employed electricians.
I do not know how easily or otherwise the respondent could expect to get work as a salaried electrician.
I accept therefore that the respondent commenced his business in good faith and not out of some desire to escape child support. I simply have no evidence before me to gauge whatever employment opportunities existed for the respondent following his retrenchment. The evidence indicates that the business has grown slowly since it began. The respondent has acquired a qualification, with a view to widening his business. Although perhaps the respondent could be more aggressive in promoting his services, his arrangement with S.A. Beams does not appear to be an unreasonable one. I accept that the respondent is available for work at all reasonable times and his charge out rate is within commercial parameters. Accordingly, I do not accept that the respondent can be described as working in the business with “the hand brake on”. Although the growth in the business is small, its turnover has increased in each year since its inception.
The respondent concedes that he is not currently working to his full capacity. However, it is his position that both he and the children will accrue financial benefits in the long term, as the business is growing and will continue to grow. The question is whether the respondent should have the luxury of being able to develop his business at the expense of his children’s financial support in the short to medium term. It will be largely academic to the children if the respondent’s business begins to prosper in five years hence and, in that period, the burden of providing for them will fall more heavily on the applicant’s shoulders and so inevitably on to Mr B. The authorities are clear that a parent has less latitude to develop a career or business, when issues of child support are raised. The obligation for a parent to provide financial support for his or her children is a heavy one and can override a person’s quite legitimate desire to pursue other interests or work in a different manner. The difficulty in this case is that the respondent is pursuing the vocation he has always pursued. His previous employment is not available to him. The applicant accepts that his income as declared is correct. There is no evidence before me that indicates that the respondent could conduct his business more efficiently or more productively and so earn more money.
The applicant’s position is clear. The respondent earned $32,000.00 per annum whilst at Julia Farr. Therefore, he should be able to earn a similar amount now. If this means that he should seek a job for wages, so be it. He has had over three years to develop the business. It is not sinking but nor is it flourishing. Accordingly, the time is ripe for the respondent to seek alternative employment. There is no reason to prevent the respondent seeking such employment, other than that this is not his preference. The difficulty with this argument is that there is no firm evidence that the respondent would be able to obtain a similar level of remuneration, if he closed his business and sought employment.
However, the way the respondent has presently arranged his business affairs, results in the production of a risible amount of child support for the children concerned. An amount of less than $100.00 per month for three children will provide little in the way of financial sustenance for them, amounting, as it does, to $7.70 per child per week. The respondent, by his actions, demonstrates a cavalier disregard for the well being of his children. He may be a loving and concerned parent, but he seems to have displayed a scant regard for how they are to be financially maintained. He is prepared to make little, if any personal sacrifice on their behalf. This does him no credit. I am left with the inescapable conclusion that Mr P is content to allow others to bear the preponderant burden of financially supporting his children. In this case, that person will be Mr B, a person who has no legal obligation to support them.
I am satisfied that special circumstances can exist to justify a departure order pursuant to section 117(2), even where a liable parent has been retrenched from employment through no fault of his own and for valid reasons has embarked on alternative employment, in which he is fully engaged, but which provides modest income. Those circumstances can encompass the following matters, as they do in the present case – firstly that the alternative income is patently inadequate to maintain financially the children concerned and secondly the burden that is thus placed on the other parent concerned to maintain the children and indeed on any other person, such as Mr B in this case. These conclusions must follow from a consideration of the matters set out in section 117(4) and (5) of the Act. Justice and equity demand that both parties should support their children and it is not proper for a third party, such as Mr B, to be compelled to take up that burden in their absence.
The question is whether such special circumstances exist in this case. The difficulty is establishing an equitable yardstick against which to measure the respondent’s earning capacity, when I have found that it was not unreasonable for the respondent to have commenced his own business and that he is fully engaged in it. However, I bear in mind that, he has had a period in excess of three years to develop this business. In my view, it would not be reasonable to allow the respondent an indefinite period of time in which to gradually grow the business at the expense of the children. The only such yardstick in this case is the respondent’s previous level of remuneration of about $30,000.00 per annum at the Julia Farr Centre, although I do believe that, in the exercise of my discretion, I can have some limited regard to the current average rate of weekly wages in South Australia, which stands at $850.96[16]. The respondent is healthy. He is in his early 40’s. He has qualifications and extensive experience. The burden on him to provide for his children is one which he should not easily be able to evade. In all those circumstances, I am satisfied that special circumstances are made out in this case to justify a departure from the current administrative assessment of child support on the basis that it does not properly reflect the respondent’s earning capacity.
[16] Australian Bureau of Statistics, February 2003 – Average weekly earnings – South Australia – All Persons - Ordinary time - $850.96. NB The rate for males is $884.60 per week.
Although, I have considerable misgivings about arbitrarily increasing the amount of child support payable by the respondent, when I have not heard definitive evidence as to the state of the job market for electricians in South Australia at the present time, I do not believe that it would be just and equitable, so far as the applicant and the children in this matter are concerned, to allow the current assessment to stand, which is in my view woefully inadequate to meet the children’s proper needs. I accept that it will be difficult and inconvenient for the respondent to either increase his income from his business in the short term or for him to seek other employment. However, that inconvenience and difficulty is outweighed by the pressing financial needs of the children concerned. It is also proper, so far as section 117(5) of the Act is concerned for the burden for the children’s financial support to be borne in part by the respondent rather than by Mr B or indeed the public purse.
In my view, the competing interests of the children and the respondent can be balanced by allowing the respondent a period of time in which to make the changes to his business or to seek alternative employment. I am going to allow the respondent a period of approximately three months to make these transitions. I am satisfied that the respondent does have the necessary attributes and skills to obtain other employment or indeed to obtain additional contracts in his present position. he may have to be more diligent in his attempts to find work. Although, the respondent may consider it harsh, I believe that it is appropriate that the Court apply a spur to encourage the respondent to make these necessary changes.
In my view, having considered all the circumstances of this difficult case, it is appropriate to make orders that will result in the assessment of child support payable by the respondent on the basis of an annual child support income of $30,000.00, which is roughly equal to the sum he was receiving at the Julia Farr Centre. The departure order should commence from 1 October 2003. In my view, it would be inequitable to back date the departure order to 1 January 2002, as the applicant seeks, given the respondent’s present straightened financial circumstances and his inability to satisfy such an order.
b) Whether there should be a departure on the basis of the manner of the children’s education
I do not believe that there exist special circumstances in this case to justify a departure on this ground. I accept that the applicant believes that the attendance of the children at private schools is in their best interests and that during the parties’ marriage, they both wished for the children to attend private schools. However, upon the parties’ separation, there were drastic changes in their financial circumstances and necessarily the expectations of the parties, but particularly the respondent, changed. In any event, the consideration of this ground for departure is rendered otiose by my findings in respect of the other ground for departure pursued by the applicant.
For all these reasons, the orders of the Court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: Lynnette Chin
Date: 13 June 2003
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