C and G - [2002] FMCAfam 361

FEDERAL MAGISTRATES COURT OF AUSTRALIA

C & G

[2002] FMCAfam 361

CHILD SUPPORT – Income earning capacity – liable parent has funds available from his late mother’s estate – consideration of whether private school education expected – lump sum ordered where child support otherwise unlikely to be paid.

Child Support (Assessment) Act 1989 ss.6A; 6B; 4; 114; 115; 116; 117; 118; 119; 121; 123

Family Law Act 1975 s.94

McGuiness & Cowie (2002) FLC 98-018
Lightfoot & Hampson (1996) FLC 92-663

Ivanovich (1996) FLC 92-689
Dwyer and McGuire (1993) FLC 92-940
Prpic (1995) FLC 92-574
Gyselman (1992) FLC 92-279
Wylde & Ballard (1997) FLC 92-771
Mee & Ferguson (1986) FLC 91-716
DJM v JLM (1998) FLC 92-816
Ross & McDermott (1998) 23 FLR 613

NAAT and NABB v Minister for Immigration (2002) FMCA 136

Applicant:

S B C

Respondent:

M G

File No:

PAM4008 of 2001

Delivered on:

16 December 2002

Delivered at:

Parramatta

Hearing Date:

2 and 4 April 2002 and written submissions

Judgment of:

Ryan FM

REPRESENTATION

Solicitor Advocate for the Applicant:

Mr J Harman

Solicitors for the Applicant:

Harman & Co

Counsel for the Respondent:

Ms T Messner

Solicitors for the Respondent:

Colquhoun & Colquhoun

ORDERS

That the respondent father’s application for a departure of the administrative assessments of child support for the periods 1 January 2002 to 31 December 2002 and 1 January 2003 to 31 December 2003 are dismissed.
That the father pay child support for the child D G-C born 12 December 1990 for the period 1 January 2004 – 31 December 2008 at an annual rate of $7,800.
That the Registrar of the Child Support Agency give effect to the departures from administrative assessment in Order 2 hereof.
Orders 1, 2 and 3 made 29 November 2001 are varied to the extent necessary for the respondent to instruct his solicitors Messrs Colquhoun & Colquhoun to pay the sum of $50,986.60 from the monies currently secured by those orders to the mother’s solicitors Messrs Harman & Co to be held on trust by them in the names of the mother and the father as trustees upon trust to:
(a)Upon notice from the Child Support Agency pay to the Child Support Agency the amounts outstanding (if any) due pursuant to child support assessment(s) for the period 1 December 2001 to 31 December 2002;
(b)Pay to the Child Support Agency on a monthly basis in advance the amount due pursuant to child support assessment(s) created by the Child Support Agency for the period 1 January 2003 to 31 December 2003 (inclusive);
(c)Pay to the Child Support Agency on a monthly basis in advance the amount due pursuant to child support assessments created by the Child Support Agency in accordance with these orders for the period 1 January 2004 to 31 December 2008 (inclusive);
(d)Unless otherwise ordered by a court exercising jurisdiction under the Child Support (Assessment) Act 1989 as at 1 January 2009 disperse any monies then remaining:
(i)Firstly in payment of any outstanding fees to the Child Support Agency;
(ii)Any balance then remaining to the father.
That the monies secured and paid out pursuant to Order 4 of these orders is to be credited against the respondents father’s liability for child support for the administrative assessments for the following periods:
(a)1 December 2001 to 31 December 2002;
(b)1 January 2003 to 31 December 2003 (inclusive); and
(c)1 January 2004 to 31 December 2008 (inclusive).
That Messrs Harman and Co. shall invest the monies held in trust pursuant to Order 4 in a controlled monies interest bearing account.
Unless an appeal is lodged, upon compliance by the respondent father with Order 4 Orders 1, 2 and 3 made 29 November 2001 are discharged.
That all exhibits tendered in these proceedings be returned at the expiration of one calender month unless an Appeal is lodged.
That the Solicitor who issued any subpoena collects that subpoenaed material and returns it to the owner within seven (7) days.
All outstanding applications are dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PARRAMATTA

PAM4008 of 2001

S B C

Applicant

And

M G

Respondent

REASONS FOR JUDGMENT

The applications

This is an application for a departure order from an administrative assessment of child support and for the provision of a lump sum payment.
S B C (“the applicant”) filed her application on 22 November 2001. In essence she proposed that the relevant administrative assessments for the period 1 November 2001 to 30 June 2002 and 1 July 2002 to

31 December 2008 be departed from and that a lump sum substitution in the sum of $55,000.00 be ordered. Simultaneously she filed an application for an injunction to preserve a portion of the respondent’s inheritance from his late mother’s estate pending conclusion of the proceedings.
When she started the proceedings the applicant did so without first completing the review and objection procedures contained in Parts 6A and 6B Child Support (Assessment) Act 1989 (“the Act”). However, at about the same time that she filed her application the applicant also lodged a review challenging the operative administrative assessment. Before the hearing started, on 11 February 2002 the Child Support Review decision was made and fresh assessments issued. The fresh assessments covered the period 1 December 2001–31 December 2003. The assessments required that for the period 1 December 2001–

31 December 2002 the respondent pay child support at the annual rate of $4,186 and for the period 1 January 2003 to 31 December 2003 at the annual rate of $7,800.
M G (“the respondent”) lodged an objection to the decision of the child support review officer on 12 March 2002[1]. The objection had not been completed by the time the matter was called on for hearing.
[1] Exhibit N
In her outline of case document the applicant amended the orders sought by her. They are as follows:
1.That the application for departure from assessment as regards child support payable by the father for the period 1 December 2001 to 31 December 2003 be dismissed and such that child support shall then be payable by the father for that period in accordance with present administrative assessments and being:
(a)For the period 1 December 2001 to 31 December 2002 – an annual rate of $4,186.80; and
(b)For the period 1 January 2003 to 31 December 2003 – an annual rate of $7,800.
2.That there be a departure from administrative assessment for the period 1 January 2004 to 12 December 2008;
3.That an amended assessment issue for the period 1 January 2004 to 31 December 2008.
4.That for the period 1 January 2004 to 12 December 2008 that the father pay child support at the rate of $7,800 per annum.
5.That each of the parties shall forthwith do all things, sign all documents and give all consents, authorities and instructions necessary to authorise and direct the father’s solicitors Colquhoun & Colquhoun to release and disperse the funds presently held and maintained by them in a controlled monies account in trust on behalf of the parties, ( and pursuant to orders of this court 29 November 2001), as follows and in the following priority:
(a)In payment to the mother of a sum of $50,563.05;
(b)As to the balance then remaining to the father.
6.That the sum of $50,563.05 shall be credited against the father’s child support liability for the child D G-C born 12.12.1990 at a rate of:
(a) For the period 1 December 2001 to 31 December 2002–$4,168.80 per annum (or $79.89 per week); and
(b) Thereafter and until 12 December 2008 at a rate of $7,800 per annum (or $149.49 per week).
In the outline of case document filed on his behalf the respondent challenged the court’s jurisdiction to hear and determine the matter (because the Child Support Agency had not dealt with the objection procedure). However, in her opening address, his counsel invited the court to proceed to hear and determine the competing applications on the basis that the court’s jurisdiction had been properly invoked. In essence, this stance was taken because it was cost effective and hence expedient to do so. The parties had prepared for a hearing and wanted to have it. The respondent invited the court to make orders as follows:
1.That all previous orders be discharged.
2.That the applicant’s application for lump sum child support be dismissed.
3.That in lieu of a Child Support Assessment for the period commencing 1/1/2002 to 31/12/2003 the respondent pay to the applicant by way of child support for the child D G-C born 12/12/90 the sum of $300 per calendar month.
4.That in the event that order 2 is made the respondent will withdraw the objection lodged by him with the Child Support Agency on 12/3/02.
5.That by way of security for the payment of future child support the respondent will deposit the sum of $20,000 and interest bearing deposit account in the name of the applicant and respondent until the child D attains the age of 18 years.
6.That upon D attaining the age of 18 years the applicant and respondent will do all things and sign all documents necessary to enable the respondent to withdraw from the account in order 5 all sums remaining in that account.
7.That until D is 18 years old and in the event that the respondent does not comply with payment of his maintenance liability as ordered then as assessed for a period of 3 months then the applicant and respondent will do all things necessary and sign all documents to enable the applicant to withdraw from the account referred to in order 5 an amount equivalent to the arrears by way of payment of those arrears. [2]
[2] Exhibit A

Background facts

M G was born on 13 May 1962 and is 39 years old.
S C was born on 16 July 1970 and is 32 years old.
The parties married in May 1990 and separated on 19 December 1992. A Decree Nisi was ordered on 2 June 1994.
There is one child of their marriage, D G-C who was born on

12 December 1990. D has always lived with the applicant. Previously, the parties have been involved in proceedings at the Local Court Family Matters and the Family Court concerning, inter alia, parenting issues. The respondent exercises regular alternate weekend contact to D.
Between 7 September 1994 and 1 April 1998 the respondent paid to the applicant $833.64 child support. Although he alleged he had made non-agency payments directly to the applicant, I do not accept his evidence. In addition to these payments the only other monies received by the applicant have occurred when the Child Support Agency has intercepted and seized monies to which the respondent was otherwise entitled. On 1 September 1999 the Child Support Agency intercepted the respondent’s tax refund in the amount of $1,455.20. This was the first occasion that the respondent had lodged an individual tax return subsequent to the parties’ separation.
On 19 November 2001 the Child Support Agency intercepted the respondent’s tax refund for the 2000/2001 tax year. The Child Support Agency received $2,668.60 which was applied to the child support debt which then stood at $22, 465.45.
On 19 May 2001 the respondent’s mother Giuseppina passed away. The respondent had lived with his mother in her home at Haberfield. When her home was sold, in about November 2001 the respondent moved into rented accommodation. Initially, he rented premises with his brother G. Thereafter he has lived alone.
The Child Support Agency issued a s72 notice and $15,585 was taken from the respondent’s inheritance and paid to the applicant. At that point the respondent had paid all outstanding arrears (but not penalties for late payments) of child support.
On 29 November 2001 interim orders were entered by consent that required the respondent to pay $55,000 into a controlled monies account. The respondent was restrained “from dealing with, dispersing of or charging his interest in the said sum of $55,000 save pursuant to and in compliance with these orders”.

Jurisdiction

It is trite law that a court cannot assume jurisdiction over subject matter that it has not otherwise been invested with. When these proceedings first came before me for hearing the only proceedings were the child support applications to which I have already made reference. Thus, the respondent’s preliminary challenge to the court’s jurisdiction was at least arguable. At the parties request I took evidence assuming jurisdiction and if I was ultimately persuaded that jurisdiction was properly invoked the court would be in a position to finalise the matter. At the conclusion of the evidence the parties sought the opportunity to provide written submissions as to jurisdiction. These submissions supplemented the argument contained in the original case documents and oral argument taken during the hearing. The jurisdiction issue was this:
·Does s.116(1)(B) apply to an application for orders under Part 7 Division 5 if that application and the Division 4 Part 7 application are the only applications before the court;
·Can the court hear and determine the departure application at the same time as the lump sum application – s.115(c) and s.116(B); and
·Is the lump sum application an application pending within the meaning of s.115(c)?
This issue was one of particular controversy at the time the hearing concluded. At the close of submissions I was troubled by the respondent’s submission and I had serious doubts about the court’s jurisdiction. Before I could finalise my deliberation the controversy was resolved when Kay J, sitting as the Full Court of the Family Court on appeal[3] from a decision of a Federal Magistrate, delivered his decision in McGuiness & Cowie (2002) FLC 98-018. His Honour’s decision is binding authority in this court.
[3] pursuant to s94AAA(1) and s94AAA(3) Family Law Act. For a discussion of the binding nature of decisions made by a single judge sitting as a Full Court on appeal from the Federal Magistrates Court to the Federal Court see NAAT and NABB v Minister for Immigration 2002 FMCA 136. The relevant provisions of the Family Law Act and the Federal Court Act are identical.
Kay J analyses the apparently different approaches in Lightfoot &Hampson (1996) FLC 92-663 and Ivanovich (1996) FLC 92-689 to the question of whether, “the prohibition in s115 (and now repeated in s.116) somehow provides any bar to a court properly considering a lump sum application”. In his summary of conclusions Kay J says,
“I conclude that:
·The legislation provides no jurisdictional barrier to a court entertaining an application for the payment of child support by way of lump sum.
· There is no requirement to first approach the registrar via part 6A for relief that the registrar cannot give.
· There is no requirement to then object to the failure of the registrar to grant the relief as a necessary pre-curser to asking the court for such relief.
I further conclude that the court may entertain both a lump sum application and a departure application that are filed in the one document if it chooses to exercise its discretion to do so under s116”.
The significance of McGuiness & Cowie (supra) is immediately apparent. There, as is the case here, the only proceedings before the court were the child support departure and lump sum applications. Based on his Honour’s analysis, in spite of the incomplete part 6B process and in the absence of other pending proceedings, I am satisfied that the court has jurisdiction to hear the application even though s.116(A) has not been complied with. Thus, as Kay J observed at paragraph 95-712, the parties can avoid, “the pointless exercise” of completing a procedure that does not offer the relief ultimately sought.

Child support

The obligation to pay child support is created by the provisions of the Child Support (Assessment) Act 1989. Section 3 contains the obligation that parents maintain their children. The objects of the Act are found in section 4. Each of the objects need to be borne in mind when deciding an application under the Act. Section 4(3) of the Act recognises the desirability of parents reaching agreement for the financial support of their children. Sections 114 and 121 identify that the further objects of Divisions 4 and 5 of Part 7 include:
a)that the children have their proper needs met from reasonable and adequate shares in the income, earnings capacity, property and financial resources of both of their parents, and
b)that parents share equitably in the support of the children.
The Full Court of the Family Court in Gyselman (1992) FLC92-279 set out a three step process that courts must follow in determining an application for a departure order under s.117. The first step whether one or more of the grounds in s.117 is established. If so, the next step is whether it is just and equitable within the meaning of s.117(4) to make a particular order. The final consideration is whether it is otherwise proper within the meaning of s.117(5) to make a particular order.
In Lightfoot and Hampson (1996) FLC 92-663 and Wylde & Ballard (1997) FLC 92-771 the principals established in Mee & Ferguson (1986) FLC 91-716 are identified as relevant to a departure application that concerns costs associated with attendance at private fee paying schools. In essence, the principles that emerge from that case are as follows:
a)Where the non-custodian has agreed to the child attending a private school, that person is liable to contribute to the fees involved so long as and to the extent that he or she has a reasonable financial capacity to do so.
b)Where the non-custodian has not agreed to the child attending such a school, he or she is not liable to contribute to those expenses unless there are reasons relating to the child’s welfare which dictate attendance at that school, rather than a non-private school. In such a case the non-custodian is required to contribute to the extent that he or she has a reasonable financial capacity to do so.
c)The mere fact that a non-custodian can afford the fees or is a wealthy person is not in itself a reason for imposing that liability.
An issue in this matter is whether the court might properly base its decision on earning capacity rather than actual income. It is clear from DJM v JLM (1998) FLC 92-816 that a court can take into account earning capacity in situations other than those in which a person has deliberately weakened his or her economic position in an attempt to avoid their responsibility to pay child support. What distinguishes these cases from cases in which the court does focus on the actual and reduced income in calculating the level of child support seems to turn on whether the person acted reasonably in all the circumstances in taking the step that led to the reduced income.[4] What is reasonable must be determined not only in light of the particular facts but also in the light of the particular area of law involved. In child support cases an important part of the context for determining what is reasonable is the explicit statement of the objects of the Act in section 4 in which there is reference to the parents, “capacity to provide financial support”. Thus a different answer to the “what is reasonable” question, may be given in spouse maintenance compared to child support proceedings. Partly, this is because child support legislation prioritises the obligations of parents to support their children.
[4] See, for example, discussion in DJM v JLM (supra.).

Special circumstances of the case – Has the respondent shown a ground for departure?

Period 1 January 2002 to 31 December 2002.

Because changed assessments were issued after the proceedings started, which the applicant was happy with, she abandoned her application for departure orders for the first two periods the court is concerned about. Thus the respondent, as the cross applicant, became the applicant for a departure order for these first periods. His application is based upon s.117(2)(c)(i).

The applicant alleged that the respondent’s income was greater than disclosed and submitted that the court must also consider his earning capacity. The focus of the respondent’s case was on his actual income. It was also submitted on his behalf that the applicant’s income was other than as she alleged. The respondent’s commitments, as the analysis in Ross & McDermott (1998) 23 FLR 613 makes clear, must also be considered.
I find that the respondent’s financial circumstances are as follows. He is the owner of Barwatch Pty Ltd. This business was established two years ago. The respondent is its only director and shareholder. Thus he beneficially owns its income and assets. The business provides entertainers to clubs, hotels and other venues. This consists predominantly of karaoke, the business providing equipment or hiring it when more venues are booked than can be serviced from its own equipment.
L.F.L & Co prepared the business financial accounts for the year ended 30 June 2001.[5] The accounts are prepared upon the basis of documents and information given by the respondent. Its trading income was $290,355 for the year. The direct costs of sales were $153,442 leaving a gross profit from trading of $136,913. After identified total expenses of $136,104 were factored in, its operating profit is $809. $13,000 of the total wages bill of $62,105 is paid to the respondent. The applicant challenged the respondent’s record keeping, in the sense that not all income was accounted for. And also that he included personal expenses, in essence intermingling his personal and business affairs. For example, the respondent said he paid rent of $1625.00 per month or $19,500 per annum for his business premises. He claimed $27,388.00 in his profit and loss account for it. I do not accept his explanation that the difference relates to the hire of equipment. There is a discrete line item in the balance sheet for this expense, at $853. When pressed he agreed that the amount included payment of his private home rental, which is $320.00 per week or $16,640 per annum. He said that he paid tax based on his wages and rental payments paid on his behalf. Yet his taxable income for the same year was $19,800.00[6]. This comprised total income of $20,020 less expenses of $220. His wages, rental paid on his behalf alone total $29,640. He claims his own car expenses of $6,804.00. This is artificially high, given that his business is conducted solely in the Sydney central metropolitan region. The evidence did not suggest that he actually incurs the expense to the full extent claimed. Also, the business paid his car insurance and registration in full. This does recognise the personal use he has. Depreciation is claimed of $2,202.00 but the evidence does not suggest that this is an expense actually incurred.
[5] Exhibit L
[6] Annexure BB affidavit sworn 14 December 2001
Relevantly, he believes that the business is still expanding and he now has regular bookings each Wednesday, Thursday and Sunday. He expects a permanent booking for Fridays and Saturdays. Thus he spent $8,000 in January 2002 purchasing new equipment. That his optimism is well founded is reflected in its increased takings in January 2002 of $39,900 up from $33,000 in November 2001 and $15,379 in December 2001. Assuming, as he hopes, that that quarter’s income is roughly maintained for the remainder of the financial year the business would earn about $353,000 total income for the 2001/2002 financial year. An increase of $60,000.00 on the previous year. I am satisfied that it is likely to improve at least to this extent. Of course his expenses will increase too. The extent of this increase is difficult to ascertain. This is because I am satisfied that the respondent has substantially intermingled his personal and business financial affairs. He has maximised the business expenses by including personal expenses as business expenses during 2000/2001, a strategy it seems he continued up until the hearing. Thus I am satisfied that for the 2001/2002 financial year, as well as the entire period covered by this assessment the respondent’s income will exceed the previous years by at least $20,000. Unless he deliberately reduces the business’ turnover his personal income will not be less than $55,000 throughout the period.
In paragraphs 8 and 9 of his affidavit the respondent purports to account for the inheritance received from his late mother’s estate. In late 2001 he says he received $256,000 approximately from which he has paid out $170,712. This payment does not include the $55,000 held in trust by his solicitors. The schedule identified $8,500 paid for his mothers funeral, which was paid after his brothers agreed to compromise a debt he owed to the estate of $15,000. C.P.L and Co conducted the probate and sale of the estate asset. Correspondence from them reveals[7] that the respondent received $269,843.32 (less $12,916 to the CSA) as well as half of the nett deposit, which was $28,750 before commission and selling costs, as well as half of his mothers bank accounts, an extra $700 approximately. He received more than he disclosed in his affidavit.
[7] Exhibit K
He double counted the payment to the CSA in the table at paragraph 8. It was already paid when he calculated he received $256,000. The four beneficiaries entered into an agreement whereby G gave his interest in their mother’s estate to the respondent. This happened because G received significant financial support from the respondent. The effect of the agreement is that the mother’s estate was divided half as to the respondent and one-quarter to each of A and R. I infer from the fact that the respondent takes a half share that he had advanced about $140,000 over the years to G. He says that the agreement also protected his brother who is a spendthrift and gambler. None of the brothers gave evidence. Because of the significance of the transaction, one brother at least should have been able to corroborate the respondent’s evidence about the estate and why he took G’s interest in it.
From the inheritance the respondent has paid $100,000 to G including $20,000 to his children. It was paid on 6 December 2001. He says he felt a moral obligation to do so. Whatever his motivation in relation to his brother, niece and nephew it is clear that the Act places a primary obligation on parents to contribute to the support of their children[8] and the respondent should be regarded as having this money. G did not give evidence. This payment is inconsistent with the respondent’s evidence that he cannot make proper child support payments because his business is struggling. The fact that he was able to give G money over the years is also inconsistent with his evidence that he was unable to support himself for years, particularly the years after separation. It reinforces my comfortable satisfaction that irrespective of whether he received unemployment benefits the respondent had income that was neither revealed to the CSA nor to this court during the period post separation. Because of the amount that G gave the respondent the income was reasonably substantial.
[8] s3(2)(a)
Because the respondent wants to make further application for parenting orders, he paid $10,000 into his solicitors trust account. This is not a necessary expense. I am not satisfied that it is an expense that will be incurred. There are current orders and generally regular contact.
The respondent claimed that he had loaned the company funds at its establishment. This is reflected in the loan accounts but not in the business’ actual banking records, an irregularity that was not adequately explained. Additionally, on 27 November 2001 he says that he paid $56,000 (in a cheque from C.P.L) into his business account. He produced his deposit books but not the bank statements. The deposit book contains the notation “C.P.L not entered”[9]. An important qualification that is repeated in the account summary prepared by his employee.[10] If it was paid, the total income for the business increases from about $353,116 to approximately $400,000 for the 2001/2002 financial year.
[9] Exhibit O
[10] Exhibit Q
Often in family law proceedings a persons uncorroborated testimony is sufficiently compelling that the court accepts their evidence. I am not satisfied that I should do so with the respondent’s testimony concerning his financial affairs. Overall I am satisfied that he conducted his financial affairs for many years with the specific aim to avoid the payment of child support. He did not file a financial statement and presented only a selection of his current financial source documents. He has not adequately accounted for the treatment of G’s inheritance nor adequately explained discrepancies in the business financial accounts. Just as he can intermingle and manipulate his and the company's assets and liabilities, so too he can manipulate the treatment of income. I am not satisfied that he has paid $56,000 into the business account, and thus that money is not adequately accounted for in these proceedings. This discrepancy could have been easily resolved by providing the bank statements. Thus the respondent has cash assets of at least $135,000, including the money held in trust. It is likely that the monies paid over to G and his children have been spent. Whether or not they can be recovered is speculative.
His debts include $35,000 to M T, and otherwise the amounts identified in paragraph 8. In total these are about $50,000. I do not accept that he owes G anything. In essence, he tried to assert that $38,000 is held on trust for his brother. There is no reliable evidence by which I could find that a trust exists or its terms. It is more likely that G has repaid the money previously advanced to him by the respondent.
The terms of the T loan are identified in a hand written document[11]. The respondent was to pay out the loans upon the sale of his mother’s home. He did not do so. No adequate explanation is given of his reasons for failing to abide by the conditions of the loan. Neither he nor Mr T gave evidence that the agreement has been varied yet it must have been, at least in relation to payment of the balance outstanding. Thus I am not satisfied that the debt to Mr T is payable immediately. Should he wish to do so, the respondent could seek the lenders consent that he be permitted to make regular instalments, albeit at an interest rate of 10% from June 2002. Given their close friendship that consent maybe forthcoming. I am satisfied that only the taxation and St George Bank loans are immediately payable in full.
[11] Exhibit P
The focus of this analysis has been the respondent’s actual income. After he realised that the applicant was not going to reconcile it seems that he decided to give up earning an income as an employee. He had worked successfully in clubs as a manager/licensee in the early to mid 1990’s. In about 1995 he earned $40,000 per annum (for 8 months) while at Club P. Subsequently he has worked for his sister, he says, for no pay and also helped Mr T running a tavern. I was left in no doubt that from the time he left Club P the respondent decided not to earn an identifiable income that could be attached by the CSA. Thus, for no good reason he gave up the opportunity for promotion and to increase his income by being a reliable and increasingly experienced worker. He has many skills that make him a valuable employee in the hospitality industry, as a cook, a promoter, and entertainer and a manager.
Because he did not complete a financial statement it is difficult to determine the respondents expenses. He has rent of $320 per week although he is looking to rent a less expensive home. He told the CSA that as at 2 January 2002 his weekly expenses include groceries $80, $30 telephone and $20 clothing.[12] Until the sale of his mother’s home he did not incur accommodation expenses. He does not pay tax on his actual income, paying $2,493 or $48 per week in 2000/2001. Thus until his mothers house sold, the respondent had $495 (on $35,00 p/a or $673 p/w for 2000/2001) left after he paid his regular expenses. Added to this must be an amount for his car costs, unspecified personal expenses and expenses during contact. $150 seems appropriate given the extent of contact and amount claimed in the business financial statements. After the house was sold G shared the rent for a short time, I infer at least to the end of the year. During this period the respondent earned considerably more than the previous year. At $55,000 p/a or $1057 p/w he should pay much more tax than he is likely to pay.

I allow a notional $100 per week. Thus including the expenses identified earlier he has an excess of $357.69 income over expenses each week.
[12] Exhibit F
It is likely that the respondent will pay less than his true tax liability in the years to come. The Child Support Agency assessed the respondent’s income at $35,000 per annum for the period 1 December 2001 to 31 December 2002. This is a generous outcome to the respondent by reference to his earning capacity had he chosen to remain in the workforce rather than sidestep opportunities that would have meant he had to pay child support. It is also generous by reference to his actual income. I am satisfied that he could reasonably have been expected to earn an income in excess of average weekly earnings, which is approximately $41,000 per annum. It would be most unlikely that in the six years since he left Club P his income would only have increased by $1,000. Having regard to this and my earlier findings,

I am not satisfied that the respondent has established a ground for departure during the period 1 January 2002 to 31 December 2002.

Period 1 January 2003 to 31 December 2003

The next period is 1 January 2003 to 31 December 2003. The amount payable is $7,800 per annum or $150.00 per week. The respondent must earn $55,250 to produce such an assessment. As a consequence of my findings in the paragraph above, I am satisfied that the respondent has an earing capacity that is closely aligned to that used as the basis for the assessment. Because of the difficulties in the presentation of the respondent’s actual income and expenses, I am satisfied that I can do no more than find that he is likely to actually earn significantly more during the current and future child support periods than the preceding year. Because he has purchased additional equipment the profit margin is greater, as is the total income earned. Having regard to this and my earlier findings, I am not satisfied that the respondent has established a ground for departure during the period

1 January 2003 to 31 December 2003.

Future child support for the period 1 January 2004 to 31 December 2008?

I considered carefully whether the mother’s application for departure from future administrative assessment is properly before the court. Lindenmeyer J dealt with this issue in Dwyer v Maguire (1993) FLC 92-420. His Honour said:
“In any event I believe that the structure of the Act is such that once a valid application for departure has been made, it throws open for consideration by the court the question of departure from the administrative assessment provisions of the Act not only in respect of any current or past child support years, but also in respect of any future years. Although nothing in the Act says so specifically, I think it is clear by inference from provisions such as ss118(2), 119(1) and 119 (2). Section 118(2) provides that in the making of an order under s118 the court may make different provisions in relation to different child support years. Section 119(1) provides that upon a departure order becoming final, the Registrar must immediately take such action as is necessary to give effect to that order “in relation to any administrative assessment that has been made” (my emphasis), but s119(2) then goes on to provide “subsequently making an administrative assessment…. while the order is in force, the Registrar must act on the basis of the provisions of this Act as modified by the order.” (my emphasis) See also, regulation 9, which says that the court may make orders containing provisions of various kinds, including “(e) the period for which the variation is to remain in force”.
No valid distinction can be drawn because the initial departure applications are those sought by the respondent. The relevant issue is only that there is a departure application before the court that relates at least to an assessment. Having considered the respondent’s application I am satisfied that I can consider the mother’s applications.
I now turn to the first question that the applicant says must be answered in her case. Her application is mounted primarily on the basis of s.117(2)(b)(ii). Section 117(2)(c)(i) is argued as an alternate ground to establish the special circumstance test.
A pivotal issue in this part of the proceedings is whether D, by attending B Grammar School, will be educated in the manner expected by his parents. Hence, a considerable focus on the evidence concerned discussions between the parties as to D’s secondary education.
The words “in the manner that was expected” do not require an applicant to establish that the parties agreed that their child would be educated at a particular school. Rather, it is the type or style of education that is relevant. Type or style includes the cost associated with the provision of the child’s education. There are a vast variety of private fee paying and state funded schools. The differences can include a substantial dichotomy in the school fees that are payable as well as the form of education that a child will receive. I am satisfied that a party will be able to establish the ground if they can demonstrate agreement that the child receive an education of a particular type which includes agreement as to the costs the parties will incur for the child’s education. Agreement must be more than discussions during the child’s infancy that he or she will attend, relevantly a private fee paying school. The court will consider, inter alia, whether the parties completed enrolment forms, together placed the child on a school’s waiting list and whether in subsequent discussions maintained an agreement reached well prior to the actual enrolment date. Although it does not arise in this case, whether the child started at a school with both parties apparent consent. This list is not exhaustive. Each case will raise its own particular factual issues.
The applicant wants D to receive his high school education at the B Grammar School. She bears the evidentiary onus of establishing that D, by attending B Grammar School will receive an education that was expected by his parents. Its fees will be $1,846 per term.[13] Additional expenses will arise for uniforms, extra curricular activities and the standard expenses associated with this type of school. These expenses were implicitly acknowledged by the applicant, and other than related charges were not quantified. The applicant conceded that the parties had never reached a formal agreement that D attend B Grammar School or indeed any particular secondary school. Before D was 2 years old the applicant recalls a conversation in which the parties agreed that he would attend a private school. Much later, when the applicant moved to the Blue Mountains, there was vague discussion that she would return to Sydney in time for D to start high school. They discussed that D may attend a Catholic secondary school. They did not discuss any specific Catholic school. In preparation for the possibility that D may attend a Catholic secondary school he was confirmed in the Catholic religion. However, once the applicant moved to the Blue Mountains, in spite of the respondent’s objection, she decided to remain. They then had a general discussion that perhaps D would attend a country school. The respondent did not agree. The applicant asserts that the respondent had always wanted the child to attend a private primary school. In no small part because the applicant did not want him to this did not happen.
[13] Exhibit B

The respondent does not agree that the parties have discussed D’s schooling to the extent alleged by the applicant. I accept the respondent’s evidence that such discussions as they had concerning D’s schooling always included the condition that the parties later agreed that they could afford it. When the applicant raised the prospect of B Grammar School the respondent made it clear to her that he did not agree that the child attend this school. And also that he was not in a position to contribute to the costs of a private fee paying school of that type. Nonetheless the applicant enrolled the child and plans that he will attend there.
I have considered whether there is any reason relating to D’s welfare which dictate his attendance at a private school. The applicant does not like the proximate state or private schools. She advanced a variety of reasons why each of them was inappropriate. These included poor reputations scholastically, distance from home as well as one being generally acknowledged in the local community as “rough”. Some of the schools are about 45 minutes from her home travelling time. I do not accept that this is too far for a child to travel for high school. Her evidence was generally impressionistic and did not reveal a sound factual basis by which I could be satisfied that D would receive an inadequate education, for whatever reason, at his local schools. Much more precise and informative material was needed before I could be satisfied that there was sufficient reason to justify his attendance at B Grammar School in the face of the respondent’s objection to it.
The applicant has not established that by attending B Grammar School D would receive an education “in the manner that was expected” by the parties. Partly this is because their discussions were vague and were little more than aspirations that both parents hoped to provide for their son. Whether or not B Grammar School is an appropriate place for D to receive his secondary education is not the point. Because the respondent’s aspiration was always subject to his agreement that he had the capacity to afford the costs associated with private school education the applicant needed to obtain his specific acknowledgment that he agreed he could contribute. She was not entitled to make a unilateral decision based on vague and ill-defined discussions. Thus she has not established a ground for departure pursuant to s.117(2)(b)(ii).
The applicant seeks that the respondent pay child support for the child for these five years, assessed on the basis of a child support income of $55,250 per annum which produces approximately $150.00 per week. In having regard to section 117(c)(i) I must consider whether in the special circumstances of the case whether payment of child support in this amount from 1 January 2004 onwards would result in an unjust and inequitable determination of the level of financial support to be provided by the respondent because of his income, earning capacity, property and financial resources. I have made findings that the respondent has an earning capacity equivalent to this. He is likely to continue to do so. This is because the business is already growing well. Even if it does not expand his earning capacity can support the amount sought. I am also entitled to take into account his property and financial resources. He has cash assets that may reduce because he pays out Mr T. Because the business is likely to continue to succeed he may have sufficient income to establish further savings.
I am satisfied that in the special circumstances of this case were I not to depart from administrative assessment for a prospective period, the likelihood is that the respondent will not work by his own choice to his capacity. Additionally, he is likely to intermingle the business and personal expenses so that his child support does not exceed the $300 per month he agrees to pay. This in my view and in light of his earning capacity and assets would be inequitable and unjust. Accordingly, this ground is established.

Is it just and equitable to make a departure order?

The next question then, having established special circumstances, is whether it is just and equitable to make an order?
D does not have any income, property or financial resources of his own.
I have already made findings about the respondent’s income, assets and resources and do not repeat them.
The applicant is the proprietor of a small florist shop that trades as “L”. The business had operated for about 8 years when she bought it about 2.5 years ago. She paid $14,500 for it with money loaned to her by her mother. In its first year under her ownership its total sales were $27,769.32.[14] Sales were continuing at the same or a slightly increased rate in the next year. Because she is optimistic about its future she has taken a sub-lease in a store at L, no longer running the business from her residence. Her rent is $100 per week. The respondents counsel vigorously cross-examined her about the possible intermingling of her personal and business expenses. To little effect. Even accepting that she may have claimed more of her personal rent, car and telephone expenses as business expenses than was appropriate, the business expenses still exceed its income. This is a very small business indeed. Its income is earned by selling stock purchased at arms length. The cost of the flowers all but absorbs the entire income. When she received the seized child support money $6,000 of it was paid to meet outstanding business debts. As well she repaid $7,000 to her mother and $2,000 for outstanding council rates.
[14] Exhibit G
There is no reasonable comparability in turnover and manipulation of personal/business affairs between the applicant and the respondent. His is a much more substantial venture and the magnitude of intermingling of personal/business income and assets is far greater than the few matters identified during cross-examination of the applicant.
The applicant receives family allowance of $151.76[15] and a Centrelink Supporting Parents Benefit. In her financial statement she revealed that she was renting a house from her mother and had let her own home. By the time of the hearing she had returned to live in her own home. Thus she no longer received $197 rent and was no longer paying rent of $260 per week. Because she was no longer renting her supporting parents benefit of $208 per week reduced by $45. This is the amount she was receiving as rent assistance. At the time of the hearing she was not receiving regular child support.
[15] Exhibit C
I must disregard her DSS benefits for the purpose of establishing her income.[16] The business does not yet produce sufficient income to produce a positive return. It is unlikely to do so for a long time. The nature, size and location of the business make this outcome almost a certainty. Thus the applicant has no income that I can take into account. Her weekly fixed expenses are $200 mortgage, $14 rates and $23 visa card. She and D live alone. Her total average weekly expenses are $403 of which $148 are attributable to D. These are modest indeed and reflect how difficult her financial circumstances are. I have no doubt that because of his father’s poor attitude to child support D has had a lower standard of living than was necessary. This is immediately apparent from the breakdown of his weekly costs, for example $3 holidays, $13 clothing and shoes, $1 entertainment and hobbies, $2 books and periodicals and $2 gifts. At his age one normally sees considerably greater expenditure claimed and accepted as necessary costs. Given his age, I divided the fixed costs equally between D and his mother. Thus the child’s proper expenses are $266.50 a week. This is less than total weekly expenditure for an 11–13 year old using the Lee “expenditure survey” tables. The Lee amount is $287.56. The Lee table allows a greater sum for recreation, transport and clothing than the applicant claims. Eventually, and in the reasonably proximate future the applicant will find that D’s costs for these items are closer to the Lee tables than she currently claims. His expenses and proper needs will continue to increase as he gets older.
[16] s117(7)b(ii) Child Support Assessment Act
The applicant is the sole registered proprietor of her home at 33 Selby Street, Katoomba. It is worth $200,000. Otherwise she has a 2001 Mazda worth $27,000, $400 cash at the bank and personal belongings worth $3,000. The home is subject to a mortgage to FAI Insurance of $102,000 and she has a credit card debt of $1,000. The applicant has borrowed money from her mother to buy the business and also to meet other living costs. She owes her mother $26,000. This is not currently being repaid, as she can’t afford to do so. To some extent D’s grandmother has contributed indirectly to his support by assisting his mother financially. She has no obligation to support him: see s.117(7)(b)(i). When she purchased her car, the applicant was given $10,000 by her grandfather to do so. This is not repayable. She has $2,000 in GIO superannuation.
Both parties submit that they would suffer hardship if an order were made (the respondent) or refused (the applicant). Refusing to make the order will cause real hardship to the applicant and child. Other than the sum secured and paid out at $300 per month she is unlikely to ever receive any additional child support. She will need to rely on DSS benefits and her mother to help support D. I take this into account.

I do not accept that making the order sought would cause the respondent hardship. He says that the amount claimed is excessive and will take to great a proportion of his available income. It will require him to use capital, which is needed to prop up and grow his business. The impact would be to reduce his capacity to maintain savings. He claims that it may require him to wind up his business. I do not accept this claim. Rather it is a threat that reveals his previous determination to refuse a proper level of child support remains his likely future modus operandi. I am not satisfied that the impact claimed is properly described as hardship. Refusal of the applicant’s departure application will result in a manifestly disproportionate contribution by her to the child’s expenses.
The respondent proposes an outcome that will have him contribute $69 towards the child’s weekly expenses of $266. That, in my view, is neither just nor equitable. A just and equitable result, in the circumstances of this case where the respondent has a greater income and earning capacity than the applicant does, is that he contributes a greater share of the child’s future costs than the applicant does. That is just and equitable, indeed compelling, in circumstances where the applicant (and public purse) has carried the overwhelming financial burden of the child since separation. The respondent’s counsel emphasised that the applicant owns her own home while the respondent does not. It is highly likely that this outcome results from the following factors:
a)The applicant’s family have helped her financially;
b)She has lived frugally and tried to acquire a home for herself and D;
c)The respondent tried to hide income and avoid child support;
d)In doing so he could not acquire assets, such as a home, as this would attract the CSA’s and applicants attention.
I am satisfied that because the respondent’s lack of tangible assets is likely to directly result from his determination not to pay adequate child support that this outcome does not amount to hardship. It also conveniently ignores that he has substantial cash assets and paid out $100,000 when he had no obligation to do so.
Thus I will order that there is a departure for future years child support in the amount sought by the applicant.

Is it otherwise proper to make the order?

Both parties have an obligation to maintain D. The applicant makes a greater contribution to his necessary expenses than the respondent does, or proposes to make in future years. The order sought by the applicant would make the gap between the costs met by the parties for the child considerably smaller. Although the respondent has a greater income than the applicant does, this does not mean he must make an overwhelmingly greater contribution. In some cases it will; however this is not one of them. Because his future income and earning capacity is considerably greater than the applicant’s is in the future he must take on a greater contribution to D’s expenses that the applicant carries.
The order will likely result in a reduction to the applicant’s Supporting Parents Benefit and possibly also to her family allowance. D does not receive any payment of the type identified in s.117(5)(b)(i) or (ii).
I am also satisfied, for the reasons I have already given, that it is proper to make the departure order sought by the applicant.

Lump sum child support

The applicant seeks a lump sum payment of child support pursuant to section 123 and 124 of the Child Support (Assessment) Act1989. She seeks that, in addition to the current assessments, the respondent pay annual child support of $7,800 for the five years between 2004 and 2008 in a total amount of $39,000. She also seeks to maintain the assessments for the 1 January 2003 to 21 December 2003 period of $7,800 and 1 January 2001 to 31 December 2002. This is at the annual rate of $4,186.80. The total amount due under the current and ordered assessments is thus $50,986.60.
Section 123(1) of the Act provides that application may be made to a court exercising jurisdiction under the Act for an order that the liable parent provide child support otherwise than in the form of periodic amounts paid to the carer.
Before a court can make an order for substituted support, the court is required by section 124(1)(b) to be satisfied that it would be just and equitable as regards the child, the carer entitled to child support and the liable parent, and otherwise proper to make such an order. The court is required to have regard to the matters contained in section 124(2) and in determining whether it is “just and equitable” or “otherwise proper” the court must have regard to the matters contained in subsections 117(4), (5), (6), (7) and (8) of the Act. The court is not limited by those factors alone (see section 124(5)) which suggests that the court has a wide discretion in determining the application.
The Full Court of the Family Court of Australia in Prpic v Prpic (1995) FLC 92-574 at 81,688 said:
“Capitalisation orders may well be appropriate where there are difficulties in enforcement or where it is proper to sever the financial link between the parties. However, as a general rule, given that payments of child support depend upon circumstances prevailing from time to time, which circumstances cannot be predicted with any significant degree of certainty, it seems to us that the provision of child support by way of lump sum should not be considered to be a readily available alternative but one that is only exercised where there are circumstances that make it appropriate to do so. We would endorse the observations of Mushin J in Bendeich (1993) FLC 92-355 at 79,954 where His Honour said:
‘The rationale underlying the general approach of the court was that the longer a lump sum order operates the greater chance of change in circumstances necessitating a variation of that order, thereby making the order unjust. Those changed circumstances might be in relation to the liable parent, custodial parent or the children. Incomes may increase or decrease and the children may change their living arrangements from one parent to another’.”
Thus I have discretion to order a lump sum payment subject to being satisfied as to the matters which I have identified in the Act. It is also clear that I must exercise that discretion only when there are circumstances that make it appropriate to do so. Normally it is preferable for periodic support to be paid.
The facts relevant in this case to the exercise of my discretion are set out below:
a)The respondent relinquished $100,000 to G and his children when he had no obligation to do so.
b)The respondent failed to make child support payments in accordance with operative assessments over many years.
c)Other than $833, the only child support payments received by the applicant were payments seized by the CSA and paid to her.
d)Since at least 1995 the respondent has given up work as an employee so that he could avoid the CSA and make it difficult for the applicant to receive child support.
e)The respondent had a capacity to earn a reasonably good income during the intervening years and chose to forgo it. As well, he earned more than he disclosed to the CSA during the period.
f)The respondent contributed to his brothers support rather than meet his son’s needs.
g)The respondent intermingles his personal and business financial affairs so as to minimise child support payments.
h)The respondent intimated that unless orders are made in accordance with his application he may wind up his business and again become unemployed.[17]
[17] Exhibit M
From the respondent’s conduct, the only logical inference that can be drawn is that he has done his utmost to ensure that he pay as little child support as possible. He proffers now that the applicant has obtained an injunction preserving a portion of his late mother’s estate, that a fund be established from which child support is drawn down periodically if he defaults for 3 months. Thus he concedes in essence, that it is appropriate that the court preserve a fund, but opposes a capitalisation order. Unless a lump sum is ordered the respondent will continue to act in a manner which makes it difficult, or even impossible for the applicant to recover adequate and appropriate support for their son. The fund must be sufficient to meet the entire payments due because his non-compliance is so highly probable. Unless the payments are secure, the burden of supporting D will inevitably fall on the applicant, the taxpayer and possibly her family. D’s proper needs may well not be met. This is a case in which the circumstances make it entirely appropriate for a capitalisation order.
The applicant seeks that the child support be capitalised for the next five years, which she calculates at $39,000 as well as for the earlier periods identified in paragraph 67. Thus the total amount is $50,986.

I must be satisfied that to make such an order would be just and equitable as regards the child and the parties. It is important that there be a fund available for payment of the respondent’s obligations in circumstances in which I do not consider that he will otherwise meet make them. However, it is possible that there could be circumstances that might create an unfairness to the respondent or to the applicant if there is no ability within that period to seek a departure. Those conditions would have to be significantly different from the present. Any potential injustice however, can be overcome by providing that the respondent deposit the appropriate lump sum into a trust account in the names of both parties to be held by the applicant’s solicitors, in an interest bearing account, upon trust to pay to the applicant (via the CSA) monthly in advance. This could be a direct debit instruction given to the bank. In the event that either party was successful in having a court at some future time depart from the existing orders, then the remaining funds will be available and no potential injustice can arise. I am satisfied that if this occurs, it is just and equitable as between the parties and the child. The sum payable should be $50,986.60. If there is any balance remaining at the end of the period it can be returned to the respondent. The respondent’s counsel submitted that any capitalised amount should have a discount because of the early payment. Had the court ordered payment in full and in advance as the applicant proposed the submission had some substance. However the order will result in the monies being paid into an interest bearing account the balance of which will be paid to the respondent at the end of the orders. Because the payments will be made periodically and he will have the benefit of interest paid the sum should not be discounted.

The respondent claims that this will cause him hardship because he needs this money to continue to grow the business. I am satisfied that the business is growing sufficiently apace without this extra capital that the potential loss of income does not amount to hardship. The respondent can still produce a personal income from the business of at least $55,000 per annum without this fund. He has the capacity to arrange to repay the T loan by making instalments payments should he choose to do so. The hardship to the applicant if the capitalisation order is refused is immediately apparent. Almost certainly the respondent will default and the $20,000 fund he proposes will not secure the applicant’s entitlement to child support to its full extent. This will result in hardship to the applicant and to the child.
The security proposed by the applicant is necessary in this case. After so many years of default and avoidance of his child support obligations it is proper to order the capitalised payment. Thus for the reasons already given I am satisfied that it is otherwise proper to make such an order.

I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of Ryan FM

Associate:

Date: 16 December 2002