B and S - [2003] FMCAfam 248

FEDERAL MAGISTRATES COURT OF AUSTRALIA

B & S

[2003] FMCAfam 248

CHILD SUPPORT – Application for departure from administrative assessment – whether Father should be granted relief from child support altogether to entitle him to a nil assessment or in the alternative a reduction in the amount of child support payable – whether this is appropriate in light of section 117(2)(i)(A) of the Child Support (Assessment) Act 1989 and where the original agreement between the parties whereby costs of contact were borne by the Mother and the significant costs associated with the contact between the Father and the child – child's proper needs.

Child Support (Assessment) Act 1989 (Cth), ss.98X, 117, 117(1), 117(1)(b)(2), 117(2), 117(2)(b)(i)(A), 117(2)(a)(iv), 117(3), 117(4), 117(5)
Family Law Act 1975(Cth)

Savory v Savory (1990) FLC 92-131
Gyselman & Gyselman (1992) FLC 92-279
Hides v Hatton (1997) FLC 91-759
Marlow v Marlow (1995) FLC 92-588
Houlihan v Houlihan (1991) FLC 92-248

Applicant:

M B

Respondent:

K S

File No:

MLM852 of 2003

Delivered on:

19 December 2003

Delivered at:

Melbourne (via telephone)

Hearing date:

29 May 2003

Judgment of:

Bryant CFM

REPRESENTATION

Counsel for the Applicant:

Mr B appeared in person

Solicitors for the Applicant:

Mr B appeared in person

Counsel for the Respondent:

Ms Vohra

Solicitors for the Respondent:

Arnold Dallas McPherson

ORDERS

That the father's application filed 20 March 2003 be dismissed.
That there be no reduction for the high costs of contact for the period

2 September 2002 to 1 December 2003
That for all subsequent child support periods, there be a departure from administrative assessment of child support payable by the father for the child by a deduction from whatever sum is payable by the liable parent as follows:
(a)by calculating to what extent the sum of $ A12,000.00 exceeds
5 per cent of the liable parent’s child support income;
(b)by calculating how much the payer needs to have earned in order to meet those excessive contact costs, applying the Australian tax scales;
(c)by reducing the child support otherwise payable by 18% of the sum in sub-paragraph (b) hereof.
That the application filed 30 April 2003 be otherwise dismissed.
That the exhibits be returned to the parties tendering the same at the expiration of 30 days from the date of these orders if no application for leave to appeal is filed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE(decision delivered via telephone)

MLM 852 of 2003

M B

Applicant

And

K S

Respondent

REASONS FOR JUDGMENT

Introduction

This is the father’s application for departure from a child support assessment which requires him to pay child support of $10,595 per annum ($203.75 per week) for the support of his daughter who is aged 12 and a half. He lives in New Zealand. The mother and his daughter live in Australia.
The father wants a new assessment. He seeks in essence that the costs involved in having contact with E in Australia should be offset against the child support otherwise payable. Alternatively, the child support should be significantly reduced on account of the high cost of contact. The mother opposes the application.

Background

The parties were married in the United Kingdom and E was born in the United Kingdom. In 1993 they migrated to New Zealand as a family. The father acquired employment with a small company called in Auckland. Also working for that company was Mr S who is the mother's present husband. The mother also worked for the same company and continues to work for them in Bendigo on a part-time basis.
In October 1995 the parties separated and subsequently the mother and Mr S began cohabitation. The parties were divorced in July 1998.
In late 1998 the mother made an application to the Family Court in New Zealand to relocate with E to Australia. It appears that the parties were able to reach agreement on most of the matters between them and the father consented to orders that E could relocate to Australia on certain conditions. In Reasons for Judgment given on 28 January 1999 Dooge J, said inter alia:
“In keeping with the way these parents have come to this Court about regulating their daughter's affairs, they have agreed in large measure on the contact that she must have on an ongoing basis with the father and I can record that they are agreed that she will travel four times a year from Australia to New Zealand for the sole purpose of having access with her father.
They are agreed that those access visits shall be between five and fourteen days duration, but there shall be no more than one access visit a year of more than ten days duration. They are agreed that in the event the father wishes to exercise additional access to the child in Australia, he shall provide the applicant with no less than twelve days notice to that effect.
The mother shall be responsible for all transportation costs to and from New Zealand and it has been agreed that the father shall be entitled to regular frequent telephone access with E.”
The parties were apparently unable to agree on whether there should be some security to ensure that contact occurred and other issues about information from the school and the Christmas arrangements in that particular year. The parties seem also to have ultimately reached agreement about the issue of security and the Reasons for Judgment say as follows:
That issue too has been resolved on the basis of a written undertaking by the applicant, to execute an unregistered second mortgage to the extent of AU $15,000 that would amply cover any costs in relation to enforcement of these orders in the first instance, it being evidence of this Court that the father is a man of resources, sufficient to be able to resource it in the first instance himself, to be recompensed by the sum protected under the unregistered mortgage at the expiration of any proceedings.
It is common ground that the mother initially moved to Brisbane and subsequently relocated to Bendigo in Victoria.
It is also a common ground that the contact took place in 1999, 2000 and 2001 including the Christmas school holidays. As part of the agreement between the parties the mother was to be responsible for the cost of the air fares whereby E would return to New Zealand four times a year. At the same time a child support assessment was raised under the provisions of the New Zealand Child Support legislation and child support was payable to the mother by the father.
Not all went smoothly with payment of child support and there was at least one review by the father. Nevertheless he was paying child support pursuant to administrative assessments throughout this period. The mother concedes that the father originally consented to E moving to Australia in 1998 on the basis that she agreed to waive all rights to any form of child support for her benefit.
In early 2002 two events occurred. First, the New Zealand Inland Revenue Department informed the parties that as a result of the reciprocal arrangement between Australia and New Zealand he was no longer liable for child support in New Zealand, but would be liable to pay child support based upon an Australian assessment. In his Affidavit sworn 20 February 2003 (para 2.8) the father says:
“I took this situation as a golden opportunity to become more involved in E's upbringing in the future. I contacted K and offered to be responsible for aspects of E's life such as paying for school uniform, medical fees, dental fees, school fees et cetera. I also offered to set up a fund for E's future, tertiary education and to reduce the overall financial burden on K. I offered to pay for some of the cost of travel between Australia and New Zealand.”
What occurred however is that the parties did not reach agreement about financial matters. As it transpired, until an assessment was made in Australia under the provisions of the Child Support (Assessment) Act 1989 the father did not pay child support between April and December 2002. However, the inability to reach agreement about financial matters extended equally to payment of the costs of contact.
The second matter that occurred in early 2002 was that it was apparent that E was not comfortable about the existing contact arrangements whereby she travelled to New Zealand for her contact with her father. E explained to her father that she felt excluded from school holiday activities with her friends when she travelled to New Zealand and wanted to have more flexible contact with her father and more weekend time rather than just holidays. Proceedings were commenced in the Family Court of Australia in relation to contact and they were resolved on 24 January 2003. The remaining issue between the parties, namely that of child support, was transferred to the Federal Magistrates Court at that time.
The arrangement reached between the parties for the father's contact with E is that he would have 35 days contact in each year. The orders were silent as to how and when those days would be taken. I infer, from the silence and from the evidence of the parties that this was largely to be at the father's discretion.
As no agreement could be reached by the parties about the financial arrangements, a child support assessment was sought by the mother and commenced on 2 September 2002.
Since April 2002 the father has been solely responsible for meeting the cost of travel to Australia and in 2002 of taking E to New Zealand.

The father's case

The father's application for departure was filed on 20 March 2003. It is essentially an amended application. The father also filed an application on 20 April 2003 that the mother pay to him the sum of $1981 from the sum protected under the unregistered mortgage. This he asserted was because he was entitled to the costs in relation to enforcement of the original New Zealand orders. In this respect he relied upon the passage from the Reasons for Judgment given by Dooge J, that are quoted at para 5. The father argued that the use of the term “any proceedings” in that passage meant that any proceedings relating to E's contact or the cost of it was a proceeding for which he was entitled to be recompensed by the mother. I think that this is an entirely erroneous interpretation of the orders. It seemed to me quite clear that the orders were intended to provide a sum of money for security to ensure that contact orders were complied with and that E travelled to New Zealand to visit her father in accordance with those orders. The position between the parties is now an entirely different one. The arrangements for child support have changed and so have the conditions upon which contact is occurring. The parties have reached agreement to considerably alter the contact arrangements. There is no default by the mother of provisions which would entitle the father to call upon her to pay his costs. Whilst there is a legitimate argument for him to put before the Court that he should receive consideration for the costs of contact, that is an entirely different issue from the one envisaged in the Reasons for Judgment, namely a default by the mother. Accordingly at the commencement of the proceedings I indicated that that application would be dismissed.

The child support assessments

The current assessment commenced on 2 September 2002 and the father was assessed to pay AU$882.93 per month in child support. This was based on a child support income of AU$70,602. Both parties made application to depart from the assessment. The mother sought to increase the child support payable on account of the income of the father. This ground was not successful. The father sought to decrease the child support assessment on the basis of the high cost of contact. The application was refused and the senior case officer determined that the matters raised in the application were too complex to be dealt with under Part 6A of the Act and recommended that he apply to a Court having jurisdiction under Part 7 of the Act.
Subsequently an objection pursuant to s.98X of the Act by the father was refused.

The law

The provisions of s.117 of the Act empower a Court to make an order for departure from administrative assessment in special circumstances.
Section 117(1) provides as follows:
i)that in special circumstances of a case one or more of the grounds for departure outlined in s117(2) exist before a Court can make an order for departure;
that under s117 (1)(b)(2) it would be just and equitable, as regards to the child, the carer entitled to the support and the
ii)liable parent; and
iii)that it would be otherwise proper to make a particular departure order.
If these three conditions are satisfied then the Court should make the departure order sought. In Savory v Savory (1990) FLC 92-131 K J said that:
“Special circumstances –
were –
facts peculiar to the particular case which set it apart from other cases.”
In Gyselman v Gyselman (1992) FLC 92-279 the Full Court of the Family Court said as follows in relation to the phrase “special circumstances”:
Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.
Section 117(2) of the Act sets out the various grounds of departure. After considering the various bases for departure and whether or not in the special circumstances of the case it is appropriate for a departure order to be made, the Court must then consider s117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought.
Finally, it is necessary for the Court to consider s117(5) and determine whether or not it is proper to make a departure order.
In Gyselman (supra) the Full Court of the Family Court said at page 240:
As we have already indicated the exercise under s117 involves three steps. The first, which we have already examined is whether one or more of the grounds in sub-s(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 therefore clear that each of these steps must be addressed by the Court as a separate issue mainly:
a)whether or one or more of the grounds of departure in s.117 is established; if so:
b)whether it is just and equitable within the meaning of s.117(4) to make a particular order;
c)whether it is otherwise proper within the meaning of s.117(5) to make a particular order
Further, from a consideration of Hides v Hatton (1997) FLC 91-759 it is clear that the Court must follow this three stage process in respect of each year for which a departure order is sought.
The father relies upon s.117(2)(b)(i)(A) that in the special circumstances of this case his capacity to provide child support is compromised by the high cost of contact.
Section 117(3) provides that a parent’s costs involved in enabling the parent to have contact with a child can only be high for the purposes of subparagraph (2)(a)(iv) or sub-subparagraph (2)(b)(i)(A) if, during a child support period, they total more than 5% of the amount worked out by:
(a)dividing the parent's child support income amount for the period by 365; and
(b)multiplying the quotient by the number of days in the period.

The father's case

The father proposes to have nine trips from Auckland to Victoria each year for the purposes of exercising contact. This will enable him to have face to face contact with E at about six weekly intervals which he believes is an appropriate period of time in which to properly nurture their relationship. At the same time it will accommodate E’s wish to spend shorter rather than longer periods of time with him. He estimates that the total cost of the contact with E including phone and postal contact and his unpaid leave which he will have to take in order to spend 35 days with E, comes to AU$15,358. He contends that nine trips per year are necessary to provide a quality relationship with face to face contact between himself and E.
He seeks relief from child support altogether so that he will have a nil assessment. Alternatively he seeks a reduction in the amount of child support payable. The reasons that he advances are:
·because of s.117(2)(i)(A) of the Act;
·because the original agreement between the parties whereby he agreed to E relocating with the mother was made on the basis that the contact costs were met by her;
·his financial circumstances compared to those of the mother and Mr S;
·the significant cost of the contact.

The mother's case

The mother seeks that the application be dismissed. She contends that nine trips per annum is excessive and that it would be reasonable in all circumstances for the father to have face to face contact two to three times per year, four at the most. She concedes that even if contact took place only on four occasions per annum the cost of contact would exceed five per cent of the father’s child support income and bring the father within the provisions of s.117(2)(i)(A) of the Act. She contends that nevertheless it would not be just and equitable in the terms of the Act to extinguish or reduce the child support payable because the present amount being paid does not take into account a number of relevant matters which are:
a)the fact that the parties wanted E to attend a private Catholic School and the mother is responsible for her fees;
b)there are significant orthodontal expenses which have been incurred for E and being paid by the mother;
c)E shows an aptitude at sports and in particular both swimming and netball and there are expenses associated with these sports;
d)that the father's income is in fact higher than the amount of the current assessment.
She contends that as a matter of fact the expenses are not in the region of $15,000 as asserted by the father.

The child's proper expenses

There was little cross-examination by the father so there was little challenge to the mother’s evidence of E's expenses. The father supported her enrolment at a Catholic College. Whilst this support does not extend to the father's acceptance that he should be directly responsible for school fees, it does in my view mean that when taking into account E's reasonable expenses it is reasonable to include the fees which would be incurred. E is obviously good at sport and plays netball and belongs to a swimming club. The fees are reasonably incurred in relation to those sports. I find E's proper expenses are as follows:
a)food $60;
b)household supplies $10;
c)telephone $8;
d)petrol $30;
e)clothing and shoes (excluding school uniform) $21;
f)pocket money $5;
g)medical and dental $4;
h)entertainment and hobbies $10;
i)gifts $5;
j)hairdressing, toiletries $4,
k)total $157.
l)school fees, which includes camps $55.
m)Her uniform expenses for the current year total about $16 per week. However she has just started at this school and has been fully outfitted with a new uniform. I would expect that replacements would occur approximately once every three years and therefore she would have expenses of $5 per week.
n)She has netball expenses of $3.25
o)and swimming expenses of $12.
$157.00
55.00
5.00
3.25
12.00
Total: $232.25
In addition E has orthodontic treatment. It was conceded that the fees in total were $4580.00. The father asserted that it was in fact only $45 per week. I have considered the financial agreement entered into with the orthodontist. The father has calculated payment over a two year period however the agreement provides for the treatment over a 15 month period. If I include the extra month in which the deposit was paid there is a 16 month period over which the payments must be made. I have divided the sum by this amount and the weekly payments are $70. Thus E's proper needs total $302.25.

The mother's financial position

The mother has remarried and her husband, Mr S works in Melbourne during the week. She works part-time for the company, where both the father and mother worked in Auckland. Her job is part-time marketing assistant and involves accounts and clerical work. At present she does 10 hours per week. Last year she did more hours but the company has restructured and there is less work available to her. She needs to provide care before and after school and during school holidays for E. Her evidence was that whilst there might be other jobs which would allow her more hours during the week, it was difficult to find a job which gave her holiday periods so that E could be cared for. I accept that evidence. The mother has a half share in the home in which she and Mr S live in Bendigo and the property is encumbered by a mortgage of $100,000.

The father's financial position

The father’s child support assessment for the period 2 September 2002 to 1 December 2003 indicates a child support income amount of $70,602. The father's income is greater than this amount. His current income is $77,000 per annum plus a pension from the British Army of 4379 pounds per annum. The current exchange rate provides the father with a present income of $86,000. If child support were assessed on this sum his annual payment would be $12,286.80 and his weekly payment approximately $236. However, at 1 December he will be reassessed and his current income will be taken into account. The father lives in a home which is owned by a discretionary trust. I am satisfied that he effectively has control of the trust and although the assets of the trust which consist of half a car and contents are not in his name they are effectively under his control. He has a facility to borrow up to $70,000 but the only amount presently outstanding is $6910. He has savings of $5712. Based on an annual income of $A86,000, his weekly income is approximately $1653. Deducting his fixed expenditure of $956 (which includes child support) he is left with $697 per week. He is obviously in a better financial position than the mother.

Reasonable costs of contact

In this case the mother conceded that even if the father made the number of trips she suggested, the cost of contact would still be high costs and would come within s.117(3)
There are thus three issues to be determined:
a)what are the reasonable costs of contact and in particular how many trips per annum should be made for contact;
b)what amount of reduction in child support, if any, would be appropriate;
c)is it just and equitable and otherwise proper to make such a reduction.
The father's proposal for contact is that he have face to face contact with E by making nine trips per annum. There is some force in his argument that nine trips is appropriate as E told the family report counsellor that she preferred more frequent but shorter visits with her father. Both parties apparently accepted that the father would have to travel to Australia as E was uncomfortable in going to New Zealand. The father is hopeful that there will be some trips to New Zealand but seems to have accepted that contact would take place predominantly by him visiting E in Australia.
Since the child support assessment was made he has made trips in September 2002, January 2003, March 2003 and April 2003. Six weekly trips as proposed by him would involve a further three trips this year being a total of seven for the year.
I find it reasonable to expect that the father will have between six and nine trips per year for contact with E. I do not consider this unreasonable for the following reasons:
a)the orders contemplate frequent trips and do not limit the number of trips in which the 35 days per annum can be taken;
b)E's wishes and the previous difficulties with contact dictate that the father will need to make short and frequent trips if he is to maintain his relationship with E;
c)the current year is likely to involve approximately seven trips.
The cost of the trips is set out by the father and not significantly challenged. He asserted that the direct costs connected with the contact are as follows:
·nine trips per annum including air fares and
other expenses from Auckland to Bendigo      $6,795 ($755 per trip)
·cost of accommodation, car hire etc for
35 days  $5,815
·cost of maintaining phone contact with
E while in New Zealand   $342 per annum
Total:  $12,952
The father also sought to include the cost of his unpaid leave. He calculated this on the basis that his 35 contact days per year require him to take five weeks leave and he is only entitled to three weeks leave. I do not intend to include the unpaid leave in the cost of contact as this expense would be incurred even if he were having contact with E in New Zealand, although I accept that he might be able to maintain more regular contact on a weekend basis. This however would depend upon where they were living in proximity to each other.
The only expense that might vary in the father's costs of contact are the air fares depending upon how many trips he takes per annum. It may also be that he can obtain cheaper fares from time to time. On the other hand these may increase. He may not take nine trips per annum every year. In the circumstances in my view it is reasonable to allow a figure of $12,000 for the cost of contact on an annual basis.
In Marlow v Marlow (1995) FLC 92-588 and Houlihan v Houlihan (1991) FLC 92-248 K J, determined the appropriate approach to determine how the costs of contact should diminish child support in an appropriate case. His Honour held that:
“An appropriate approach in these cases is to see by what extent the cost of access exceeds the 5 per cent referred to as being within non high access costs, and then to see how much the payer needs to have earned in order to meet those excessive access costs, and then to deduct that sum from the gross child support amount.
In this case the father is paying child support at the rate of 27 per cent as he is contributing to support two children. So that for each pre tax dollar for which he is entitled to a discount because of the calculations I have just referred to, he will have his child support reduced by 27 per cent.” (Per K J, in Houlihan (supra) cited at page 81824 in Marlow v Marlow.)
Applying the formula applied by K J, in Marlow and Houlihan the position in this case would be as follows:
Child support income amount used for current assessment $70,602
5% = $3530
Costs of contact found to be $12,000
Amount by which the costs exceed 5% = $8470
Applying the Australian tax rate (of 47%) the father would need to earn $12,451.
For each pre tax dollar, the father is entitled to a discount of 18 per cent which would give him a discount of $2,241 per annum or $186.76 per month ($43 per week).

Is it just and equitable and otherwise proper to depart from the order?

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:-
– the nature of a duty of a parent to maintain a child (as stated in s 3); and
– the proper needs of the child; and
– the income, earning capacity, property and financial resources of a child; and
– the income, earning capacity, property and financial resources of each parent who is a party to the proceedings; and
– the commitments of each parent who is a party to the proceeding but are necessary to enable the parent to support:
his or herself; or
any other child or another person that the person has a duty to maintain; and
direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
– any hardship that would be caused:
2):
the child; or
the carer entitled to child support;
by the making of, or the refusal to make, the order; and
2):
the liable parent; or
any other child or another person that the liable parent has a duty to support; by the making of, the refusal to make the order.
The father's present income however, is not the amount in the assessment of $70,602 but is $86,000. If the father were paying child support based on his existing income of $86,000 he would be paying $13,367 per annum or $1113.90 per month. Applying the formula in Marlow and Houlihan he would be entitled to a reduction of $169.78 per month, leaving with him a payment of $944.12 per month. This sum exceeds the amount that he is presently paying as a consequence of his actual income being significantly higher than the income on which child support is currently being assessed.
I must consider the matter in the context of each of the child support periods in issue. There are two periods, the original assessment period from 2 September 2002 to 1 December 2003 and subsequent periods.

The period 2 September 2002 to 1 December 2003

Having considered the financial position of the parties, in my view it is not just and equitable to vary the existing child support assessment to take account of the high cost of contact in this period for the following reasons:
a)application of the Marlow formula produces a reduction of $2441.00, however the child support assessment for this period is based upon an income which is significantly less than the actual income of the father ($70,602.00 compared to $86.000.00). The difference in child support payable is $2772.00. ;
b)that in the calculations that I have set out by an application of the formula in Marlow and Houlihan I have used the Australian tax scales. It appears from the father's financial statement that the tax paid by him on his income of $1402 per week was $393. That is a tax rate of 32 per cent. Application of that tax rate would result in an even smaller reduction.
Thus in the current child support year I do not consider it would be just and equitable to vary the existing child support assessment.

Subsequent periods

The application by the father relates to the current child support assessment period. In large part the reason for my decision has been determined upon the fact that the father's income is significantly greater than his income in 2001/2 upon which the assessment was based. That position will change when he files his tax return and the next child support period is considered. My view is that once the child support assessment changes it would be appropriate for the discounting on the basis set out by K J in Marlow and Houlihan to be applied. In the circumstances of this case it is reasonable in my view that the father has the benefit of the application of Australian tax rates.
I have considered the argument of the father that it is not just and equitable for him to bear the sole burden of the cost of contact without any reduction in child support because the original arrangement whereby the mother relocated from New Zealand to Australia was on the basis that she was responsible for four trips back to New Zealand per annum.
I accept that this was a relevant consideration at the time of relocation. However, time does not stand still and circumstances are now different. I do not think it would be appropriate for me to apply an arrangement, in place for reasons which were relevant at the time but which because of changed circumstances is no longer appropriate.

Is it otherwise proper to make the orders?

In this case there is no reliance on the government to support E. Both parties are working and there is no need to consider this aspect further.

I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Bryant CFM

Associate: Peter Smith

Date: 19 December 2003