B and P - [2001] FMCAfam 159

FEDERAL MAGISTRATES COURT OF AUSTRALIA

B & P

[2001] FMCA fam 159

FAMILY LAW – Child support – Administrative assessment – Variation of departure order – Child Support (Assessment) Act 1989 Sect 117, Sect 3.

Applicant:

K A B

Respondent:

R N P

File No:

ZH2717 of 2001

Delivered on:

8 October 2001

Delivered at:

Hobart

Hearing Date:

5 & 7 September 2001

Judgment of:

Roberts FM

REPRESENTATION

Counsel for the Applicant:

Ms. B. Baker

Solicitors for the Applicant:

Murdoch Clarke

Counsel for the Respondent:

Mr. M. Trezise

Solicitors for the Respondent:

Trezise Partners

ORDERS

That the Orders of the Family Court of Australia of 6 June 1994 bearing number HB 472 of 1994 be and are hereby discharged with effect from midnight on 30 June 2001.
That R N P pay child support for the child G L P born 5 July 1993 for the period 1 July 2001 to 30 September 2002 at the rate of $5,200.00 per annum
That thereafter child support for the said child payable by the said R N P be administratively assessed pursuant to the provisions of the Child Support (Assessment) Act 1989 as amended.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
HOBART

ZH 2717 of 2001

K A B

Applicant

And

R N P

Respondent

REASONS FOR JUDGMENT

Background

On 6 June 1994 Orders were made in the Family Court of Australia by Hannon J which provided for a departure from administrative assessment of child support for the child G L P born 5 July 1993 (“the child”) and that until further order there be substituted for the annual rate of child support the sum of $10,000.00. The effect of this Order is that R N P (“the father”) has been required to pay $10,000.00 per annum to K A B (“the mother”) for the support of the child ever since those Orders were made. The evidence is that he has made such payments, even though he may have been late in making payment from time to time.
These proceedings were commenced by an Application filed by the mother on 25 July 2001 seeking to vary the Orders of Hannon J to increase the child support from $10,000.00 per annum to $14,000.00 per annum indexed to the Consumer Price Index.
The father is a cross-applicant, in that he filed an Application on

24 August 2001 seeking to have the amount ordered by Hannon J reduced to $5,200.00 per annum (i.e. $100.00 per week) with annual CPI adjustments commencing on 1 July 2002.
In the alternative, the father sought that Hannon J’s Orders be discharged and that there be an administrative assessment of child support.
In short, it is the mother’s case that the cost of supporting herself and the child have increased and that the father has assets and resources that would enable him to pay the increase sought.
The father’s case is that he does not have the assets and resources to pay increased child support. It is also his case that because he now has to support himself, his wife and his two children, the child support should be decreased.
The mother relies upon Section 117(2)(a)(iii) and Section 117(2)(c)(i) of the Child Support (Assessment) Act 1989 as the grounds for the departure that she seeks. As stated above, she says that her capacity to provide financial support for the child is significantly reduced because of her commitment necessary to enable her to support herself and that an administrative assessment would result in an unjust and inequitable determination of the level of financial support to be provided by the father because of his income, earning capacity, property and financial resources.
The father relies upon the provisions of Section 117(2)(a)(i). He says that in the special circumstances of this case his capacity to provide financial support for the child is significantly reduced because of his duty to maintain his two other children and his wife. His evidence is that he and his wife were married in October 1997 and now have two children of their own, a daughter aged two years and a son aged four months.
It is clear from Gilmour & Gilmour (1995) FLC 92-591 that I must apply the three step process that is required by Section 117 of the Child Support (Assessment) Act 1989 (“the Act”). I must satisfy myself as follows:
a)Whether one or more of the grounds for departure in Section 117(2) is established;
b)Whether it is “just and equitable” within the meaning of Section 117(4) to make a particular order; and
c)Whether it is “otherwise proper” within the meaning of Section 117(5) to make a particular order.

Evidence & findings

I was provided with a copy of Hannon J’s Judgment of 6 June 1994. It is clear from that Judgment that Hannon J found that at the date of the hearing the father had assets with a net value of $265,695.00 and his estimated income for the 1993/94 year would be $30,000.00.
In the hearing before me, the mother’s counsel attempted to persuade me that the net value of the husband’s property and financial resources exceeds $600,000.00. I do not come to that conclusion.
Because the husband is relying upon his need to support himself, his wife and his two children as a ground for reducing his child support for the child in these proceedings, it seems to me that I ought to combine the property available to both the husband and his wife (including their partnership assets) to ascertain what is available for their support. In this regard, I find that they are as follows:

Property

House and land........................................ $260,000.00
Furniture........................................................ $4,000.00
Cash.............................................................. $3,300.00
Deposit on new boat................................. $15,000.00
Debt re licence........................................... $20,000.00
Motor vehicles............................................ $24,800.00
Plant and equipment............................... $187,990.00
Total......................................................... $515,090.00

The charter boat that the husband runs for his business is included in the plant and equipment at depreciated values shown above. While I have no knowledge of whether the claimed depreciation is realistic, it seems to me that I must take the whole of the value of the plant and equipment into account
The liabilities are a mortgage of $50,000.00 and a finance company debt of $17,000.00, making a total of $67,000.00.
This means that in round figures the property of the father and his wife has a net value of $448,000.00.
That represents an increase in the value of the assets available to the father of nearly 70%. Clearly, that has exceeded the rate of inflation over the years.
The father puts this down to advantageous sales of crayfish licences and I accept that to be the case.
However, it is clear to me that the husband does not now have any such convenient asset that he could sell to use for child support. In this regard, I do not accept that anybody should be forced into a position of selling their house to pay child support, simply because the other parent does not own a house. Further, it is quite clear that the Child Support legislation is not intended to be a backdoor method of property redistribution.
The father is in partnership with his wife and the financial statements of the partnership for the year ended 30 June 2001 show that the partnership made a loss in the vicinity of $20,000.00. The mother’s counsel attempted to persuade me that I should ignore the depreciation claimed in the approximate sum of $40,000.00, thereby arriving at an income of $20,000.00. I fail to see how I can do that, because depreciation is claimed for very good reason. Business assets wear out and need to be replaced. Consequently, some provision must be made for their replacement.
The financial statements show that during the year ended 30 June 2001 the father and his wife each drew approximately $15,000.00 from the business, giving them a total of $30,000.00 in drawings to spend. However, two important factors arise from that. Firstly, that spending of $30,000.00 by them included the sum of $10,000.00 paid to the mother by way of child support, and secondly, the father says that he has only been able to make that payment by using capital. I accept that to be the case.
The mother is employed as a nurse. She does not work full-time, but I accept that she needs to be available to look after he daughter. She earns $28,000.00, although her salary package includes a “salary sacrifice” to superannuation of $3,000.00. This means that the taxable income available to her is $25,000.00. I note with interest that the mother claims a need for an increase in child support in the sum of $4,000.00 per annum at a time when she can afford to “sacrifice” $3,000.00 of her annual gross income entitlement.
To his credit, the father did not challenge the mother in relation to any of the expenditure that she claims in relation to the child. On the other hand, however, the father claims only the most meagre expenses for his other two children. He claims only $34.00 per week for food for those two children and $10.00 per week for medical and dental expenses, making a total of $44.00 per week. In his affidavit he stated: “We live very modestly and my new family have to “go without” quite ordinary services and facilities as a result of my obligations under the current Order I have been able to reduce our expenditure on food by catching fish from our boat. Our own personal clothing is always purchased second-hand and the clothing of our children has been given to us by relatives.” That evidence was not shaken in cross-examination.
The father’s evidence is that he needed to spend more time with his family and, in the main, that was why he sold his fishing licence. He now has a charter boat which runs for seven months of the year. During the winter months, the father spends more time assisting with the care of his children and he promotes his tourist charter business.
The mother’s counsel appeared to want me to take the view that the father should be running his charter boat business all year. I cannot do that, particularly as she did not cross-examine him in relation to why he did not run his charter boat business from May to September each year. To me, the answer is obvious and I find I can take judicial notice of the fact that the tourist industry is not good during the winter months in Tasmania.
The father is hopeful that he can improve his business by borrowing funds to purchase a larger boat. However, his initial approaches to his bank have met with a rejection and he has been told that he must lodge a written application with a supporting business plan in February 2002. On the strength of this, he has placed a deposit for the purchase of a larger boat. That was to ensure the possibility of a boat being built for him if he can borrow those funds. However, it is his evidence that most of that deposit of $15,000.00 will be refunded if he chooses not to proceed.
I have given careful consideration to the provisions of subsections (4) and (5) of Section 117 of the Act. Both of those subsections refer me to Section 3 of the Act, and that Section reads as follows:
SECTION 3DUTY OF PARENTS TO MAINTAIN THEIR CHILDREN
3(1)[Parents have primary duty to maintain child] The parents of a child have the primary duty to maintain the child.
3(2)[Priorities of duty] Without limiting subsection (1), the duty of a parent to maintain a child:
(a)Is not of lower priority than the duty of the parent to maintain any other child or another person; and
(b)Has priority over all commitments of the parent other than commitments necessary to enable the parent to support:
(i)     Himself or herself; and
(ii)     Any other child or another person that the parent has a duty to maintain; and
(c)Is not affected by:
(i)     The duty of any other person to maintain the child; or
(ii)     Any entitlement of the child or another person to an income tested pension, allowance or benefit.
It is clear that I must have due regard to the fact that the duty of the father to maintain his wife and two other children “is not of lower priority” than his duty to maintain the child that is the subject of these proceedings.
It is also clear to me that as things stand currently, a child support payment of $10,000.00 per annum gives priority to that child over the father’s other two children and his wife. That is clearly not what the Act intends.
Indeed, if I were basing my decision on income alone, I would find that even the father’s application to pay $5,200.00 is more than he can afford. However, that is his application and I am conscious of the fact that his asset situation is greater than that of the mother. Further, because he is in business, he should have some ability to manipulate his income.
It is also of some significance that if I were to apply the normal child support formula to the drawings of $30,000.00 that the father and his wife take from the business, that would provide an annual rate of child support of $1,276.00 per annum, when his need to maintain his other children is also taken into account.
The same formula applied to an income of $20,00.00 (assuming that there was no depreciation) would mean that the father would have to pay the absolute minimum annual rate of $260.00.
Having given very careful consideration to all these matters I find that a continuation of child support in the sum of $10,000.00 will cause hardship to the father as the liable parent and to his wife and two other children. Further, I find that hardship to be more significant than the hardship to be caused to the mother and the child by reducing the child support payable.
In all the circumstances, I consider that the father’s application to pay $5,200.00 per annum to be an appropriate amount. This is clearly more than he would have to pay if child support were based on his income alone. However, I note again that his asset situation is somewhat better than that of the mother and, being in business, he should have some ability to manipulate his income.
I have also given consideration to the period over which the sum of $5,200.00 per annum should be paid. It is clear that the Child Support (Assessment) Act has built into it review procedures that are less formal and less costly than court applications. It is therefore my intention to order that the sum of $5,200.00 per annum be paid for the period commencing 1 July 2001 and ending on 30 September 2002. Thereafter the administrative assessment provisions of the Child Support (Assessment) Act 1989 should apply.

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Rs FM

Associate:

Date: