Casley and Casley - [2008] FMCAfam 1371

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CASLEY & CASLEY

[2008] FMCAfam 1371

FAMILY LAW – Property – child support.

Family Law Act 1975 (Cth), s.75(2)
Child Support (Assessment) Act1989 (Cth), ss.116(1)(b), 117

Hickey [2003] FLC 93-143
C v C [2005] FLC 93-220

Applicant:

MR CASLEY

Respondent:

MS CASLEY

File Number:

DGC 1760 OF 2007

Judgment of:

Phipps FM

Hearing dates:

7 & 8 May & 18 June 2008

Date of Last Submission:

18 June 2008

Delivered at:

Dandenong

Delivered on:

17 December 2008

REPRESENTATION

Counsel for the Applicant:

Mr Crozier-Durham

Solicitors for the Applicant:

Peninsula Law

Counsel for the Respondent:

Ms Buchanan

Solicitors for the Respondent:

Victoria Legal Aid

Counsel for the Independent Children’s Lawyer:

Mr Curtain

Solicitors for the Independent Children’s Lawyer:

Taylor Splatt

ORDERS

THAT the husband is declared to have the sole interest in the shareholders loan account in the names of Mr & Ms Casley with [A] Pty. Ltd.
THAT otherwise each party is declared to have no interest in items of property in the possession of the other and superannuation in the name of the other.
THAT there is departure from administrative assessment of child support for [X] born in 1997, [Y] born in 1997 and [Z] born in 2002 payable by the applicant MR CASLEY to the respondent

MS CASLEY;
(a)For all periods up to 17 December 2008 the child support income of the liable parent is varied so that the arrears of child support, after taking into account all amounts paid by the liable parent up to 17 December 2008 is nil;
(b)From 17 December 2008 to 31 December 2009 the child support income of the liable parent is varied to $30,000.

IT IS NOTED that publication of this judgment under the pseudonym Casley & Casley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
DANDENONG

DGC 1760 OF 2007

MR CASLEY

Applicant

And

MS CASLEY

Respondent

REASONS FOR JUDGMENT

Mr Casley and Ms Casley disagree about property settlement and superannuation split. They disagree on the assessment of the husband’s income for child support.
The specific issues in this case are:
The amount each received from sale of property and bank accounts
The husband’s income for child support assessment
The property issues must be placed in the context of the four step property consideration process.[1] The steps are:
What are the assets and liabilities?
What are the parties’ contributions?
What are the parties’ future needs?
Is the order just and equitable?
[1] Hickey [2003] FLC 93-143. For superannuation C v C [2005] FLC 93-220
Both parties have applied for departure orders in relation to child-support. Counsel for both parties acknowledge that the court has jurisdiction under s.116(1)(b) of the Child Support (Assessment) Act1989 (Cth). Both the husband and wife are parties to the property application before the court and it is in the interests of both parties to consider whether a departure order should be made in the special circumstances of the case. Both have applied.

Background

The husband was born in 1965 and is aged 43. The wife was born in 1966 and is aged 42.
The parties married in December 1996. They separated under the one roof in August 2004 and the wife left the matrimonial home on 27 December 2004 when she travelled to the United States for the first of four visits in connection with her interest in a group known as Wildly Wealthy Women. She returned from the last of them on 12 June 2005.
There are three children of the marriage, twins [X] and [Y] born in 1997 and [Z] born in 2002. Final children's orders by consent were made on 8 May 2008. The children live with the husband during school term each alternate Wednesday from the conclusion of school to commencement of school the following Monday or Tuesday if Monday is a holiday. They spend half of holidays with the husband and provision is made for Christmas, birthdays, Father’s Day and telephone communication.
At the commencement of the relationship the husband worked as a [occupation omitted]. He sold the truck and commenced a concreting business. He used a company [A] Pty. Ltd., for the business. The wife is a secondary school teacher and worked throughout the marriage.
At the commencement of the marriage the parties purchased a house at Property R. The Husband says he contributed $15,000 towards that purchase and that he had accumulated approximately $12,000 of superannuation prior to the marriage.
In 2004 the parties had two properties, Property S and Property N.
The parties reached an informal agreement about distribution of property. The wife received a total of $85,903. This was $36,903 from the sale of Property S in January 2005 and $49,000 by payment from the husband. The husband retained the matrimonial home at Property N and borrowed from his parents to pay the $49,000 to the wife.
The husband was unable to keep up payments on Property N and sold it for $367,500 in October 2006 with settlement in March 2007.

The amount each received from sale of property and bank accounts

Property S was sold for $211,000. The sale was settled on 5 January 2005. The balance was disbursed as follows:
a)$6,941 to [omitted] concrete;
b)$4,278.10 to [omitted] Sand and Soil;
c)$4,000 to [omitted] School;
d)$36,803.33 to the wife.
[Omitted] concrete and [omitted] Sand and Soil were debts of the husband's concreting business and the children attended [omitted] School.
The parties dispute what happened to the deposit of $10,105. Obviously the agent’s commission was paid out of that amount. The husband says the balance was payed to the wife. The wife says she did not receive it. The parties’ finances were run jointly until

27 December 2004
. No record of payment from the agent, who would have received the commission, was produced. An account from the agent of the receipt and disbursement of the deposit would have been sent to the parties. The probability is that this happened prior to 27 December 2004 and that the balance went into the joint account and was part of the $20,000 that the wife withdrew in December 2004 and January 2005 or was used for various family expenses. It is not a separate amount that the wife received.
The wife withdrew $18,290 in various amounts from the [A] Pty. Ltd. account between August 2004 and December 2004. The husband alleges that was money she used to fund her trips to the United States of America. The wife says that is not the case. She says she used the $36,000 she received from the sale of Property S. She says that the way family accounts were dealt with was that she paid everything. The husband’s business bills, telephone, mobile phone and family expenses were paid with her credit card and that she then payed the credit card account from the business account.
She says that although the parties separated under the one roof in September 2004 the parties’ finances were still operating jointly up until the 27th December 2004. For instance, she says her wage from teaching at school continued to go into the account, the last one about 16 December 2004.
The wife's evidence that the money was used to pay off the credit card amounts from time to time is consistent with the documents. That does not decide the issue. She might still have used it solely for her own purposes. However, the husband makes no more than an assertion that the wife used the money to go to the United States. The wife's evidence has some backing from the documents in the pattern of withdrawals. I do not consider that it should be treated as part of the matrimonial property. In any event, the conclusion I have reached means that this issue does not affect the result. The husband's proposal is that there should be no order for property, including superannuation, other than that each party retain what they have. The $20,000 would be treated as an amount which the wife has already received. It would only improve her position.
The property in Property N was sold for $367,500. Documents show what happened to that money. An account sale from Peter Damon Real Estate shows that they received a deposit of $36,750. After deduction of the commission and selling expenses the agents paid $25,285 to the husband. He paid that into an account in the name of his parents. That happened on 24 October 2006.
The statement of account from [C] Pty. Ltd. shows what happened to the balance. The statement’s date is 11 March 2007. After discharging the bank mortgage and various expenses the husband received $24,578.98.
The wife's argument is that the two amounts totalling $49,863.98 should be treated as property received by the husband and added back to become part of the property pool. That may be correct, but they need to be offset against the money the husband borrowed from his parents to pay $49,000 to the wife in January 2005. The husband says that he borrowed more from his parents after that, so that in March 2007 his debt was greater. Even if that is not correct, at least the amount of $49,000 has to be taken into account if the amount of $49,863.98 is to be treated as part of the matrimonial property pool. The two cancel each other out.
Not all documents were available, but the balance of the deposit, $25,285 was paid into a Commonwealth Net Bank account with a credit balance. The husband says this was his parents and it was in credit because they had borrowed money so that they could make it available to him. The account shows regular payments of $612.93 on the first of each month to RAMS Mortgage Co. I see no reason to disbelieve the husband.
Wherever the money from Property N was deposited, there is no doubt that the husband borrowed $49,000 from his parents to make the earlier payment to the wife. The husband says it was a loan not a gift, and again, I see no reason to doubt his evidence.
The [A] Pty. Ltd. accounts show loan accounts in the name

Mr & Ms Casley of about $23,000. The inference is that it represents dividends not payed at various times during the course of the marriage. The wife says they should be treated as property in the hands of the husband. The accounts of [A] Pty. Ltd. are described below under child support. [A] Pty. Ltd. does not have the funds to pay out the loans or the ability to borrow money. As appears below the husband’s partner, now the sole director and shareholder, believes the business will be able to pay its current obligations. They will conclude in 2011. She then hopes to start recovering the $30,000 she has invested. If the $23,000 is repaid it will be well after 2011.
The loan account needs to be dealt with to achieve financial finality between the parties. Financial finality can be achieved by a declaration that the wife have no further interest in any amount owed to the parties by the company. That means it all becomes the property of the husband. It needs to be valued.
The husband almost certainly will never require repayment. That may be because the company will never be able to repay. That is one contingency. If the loan bears interest the rate is not known. It must be discounted for future payment even if I assume it will be repaid. The time of any repayment is uncertain. I will value the loan by discounting it by 50%, so $11,500.

Conclusion about property

The consequence is that the matrimonial property pool is the money that has been paid to the wife, the amounts the husband received from the sale of Property N less the money he borrowed from his parents, the discounted loan, superannuation, cars, the husband’s boat and chattels. The wife's superannuation is $11,000 and the husband's $51,000. The wife has received $85,903.
The parties divided the chattels. They differ about valuations, but there is no expert valuation. The furniture and chattels were divided as agreed except that the wife was not given a refrigerator. Subsequently the husband gave her $800. The wife says that the refrigerator was purchased for $2,000. The husband has a boat, a car, and various tools. The parties differ about valuations, but again there is no expert valuation.
Leaving aside the cars, boat and chattels, the wife has $96,903 including superannuation. The husband has $62,000. The total is $158,903. That is about a 61/39% division.
Contributions on the second step in the property process are about equal, although possibly there could be a slight adjustment in favour of the husband for initial contribution. Adjustment for s.75(2) of the Family Law Act1975 (Cth) matters could be no more than 15% in the wife’s favour.
The wife received payment almost 4 years ago. The husband has no capital amount. In these circumstances the division of property which will be achieved by giving the husband sole interest in the company loan and otherwise leaving each with what they have; including superannuation is just and equitable.

Child Support

At the time of separation [A] Pty. Ltd. was the vehicle for the husband's concreting business. In early 2006 he decided to start a business called [K]. The business was that of providing safety education to children in primary schools. [A] Pty. Ltd. purchased a number of little cars and a truck for the transport of the cars.
The business was not successful. In 2006 the husband’s partner,

Ms W, loaned the business $30,000. She had received $50,000 from a property settlement with her former husband.
In 2007, according to both the husband and Ms W, the business was doing very badly and the husband considered liquidating it. So that she would not lose her $30,000, Ms W took over the business, that is, she became the sole director and shareholder.
The wife's case is, both for the purpose of the property settlement and the child support departure order, that the husband is the true owner of [A] Pty. Ltd. and [K]. This was the conclusion reached by the Social Security Appeals Tribunal.
The truck owned by [A] Pty. Ltd. is leased. The lease cost is $1179 a month until 2011. The small cars are financed by two loans one with repayments of $592.56 until 2011 and the other with payments of $458.69 until May 2011. The total monthly repayment is over $2,000.
Little money is made through use of the cars. The truck is now used for casual cartage. For a while it was moving poker machines, but it was not entirely suitable because it does not have a hoist. Now it is used in the delivery of wine and spirits.
Ms W was employed as a [omitted]. In October 2007 her son was seriously injured in a car accident. She has two other children. Her time is taken up in caring for her injured son. Her income consists off carers allowance from the Transport Accident Commission and Centrelink payments.
Her evidence is that she employs the husband to drive the truck and she pays him a wage of about $500 gross a week. In the husband's financial statement he says the wage is $494 a week.
The wife's submission is that the tribunal's approach is the correct one. It considered the husband the sole income earner in the business and so the effective owner.
Whether Ms W is the effective owner or the husband does not, given the conclusion I have reached, affect the result.
The wife applied for child support in February 2005. For the period

3 May 2006
to 2 August 2007 the husband was assessed to pay child support based on his child-support income amount of $30,560. This was based on his 2004/2005 taxable income multiplied by the inflation factor for that period.
In October 2006 the wife applied for an increase relying on the cost of privately educating the children and the husband’s income, and capacity, property and financial resources. She requested an increase to $11,637 per annum plus half the cost of childcare and half the cost of school fees. On 27 November 2006 a senior case officer of the Child Support Agency found the grounds established and decided that from 1 January 2007 to 31 December 2008 child support would be based on a child support income of $35,560.
The husband objected. The objection resulted in a determination of a child support income amount of $57,905 for the period 1 January 2007 to 31 December 2007. Both parties appealed to the Social Security Appeals Tribunal.
The Social Security Appeals Tribunal, on 31 August 2007 affirmed the decision under review. The Child Support Agency has assessed the husband’s child support income from 1 January 2008 as nil.
The tribunal, having decided that the husband was the effective owner of the business decided that the senior case officer’s approach was the correct one. The tribunal decided that the depreciation in [A] Pty. Ltd. account should be added back as money which was available to the husband. They relied on the principle that the taxable income of a parent who is self-employed may not be an accurate reflection of the earning capacity and financial resources. They decided that there was no evidence the husband was putting aside money for replacement of any vehicles and equipment represented by the depreciation, and so that money was available to him and added that to the $30,000 he was being paid as a salary by the business.
The tribunal relied on the [A] Pty. Ltd. financial documents. The 2005/2006 year showed a gross income of $175,817, cost of sales was $87,797, depreciation $19,236, motor vehicle cost $12,888 and all other expenses $82,146. The business made a loss of $27,004. The husband’s taxable income was $29,700.
According to the tribunal the 2006/2007 accounts show a total trading income of $67,326.19. Purchases for the year totalled $44,698.76. Gross profit from trading was $22,627.42 to which the tribunal added FBT employee contributions of $1,875.46 to make a total of $24,627.42. Expenses of $66,893.75 resulted in a loss of $42,390.97. Expenses included accountancy costs, $6,825, advertising, $3900.30, depreciation $20,573 (plant) and $1,911.99 (other), motor vehicle related costs approximately $11,500, telephone, $4,245.79 and superannuation $1,900.
The tribunal reached its decision by adding to the husband’s salary of $30,000, $20,000 for depreciation and $6,000 for personal car expenses paid by the company. This produced a child support assessment income of $57,905.
The flaw in this assessment is that it does not take into account the losses the company suffered. The allowance for depreciation in the accounts was not money which was available to the husband or his partner. For the 2006/2007 year the company made a loss of $42,390.97. If $26,000 is deducted there is still a loss of about $16,000. The depreciation allowance is not money otherwise available to the husband or his partner. In reality it has been spent on other expenses for the company.
A small amount of money was earned from the use of the cars at fetes. Payment for rides was in cash. The husband was challenged on whether that went into the business accounts. He said that it did because the business needed the money to survive. His evidence is believable. In any event, few events were attended and little money was earned.
[A] Pty. Ltd. owns a Pajero motor vehicle which had been used by the husband. This is the vehicle for which the tribunal made the allowance of $6,000. The vehicle has not been used by the husband for some time, and is now used by Ms W's parents. Since it is not used by the husband it is not a benefit to him.
The husband’s income is the $500 a week paid to him as a wage. He works four days a week. He says he does this because he has the children for five days in each fortnight and he wants to take them to school and pick them up rather than have them go to before and after school care.
Ms W says that one of her reasons for taking over the business was that the husband was a very poor business manager. She said, for instance, that he was paying business expenses with his personal credit card. She said she had experience in running businesses. She had run a [omitted] businesses.

She now has the company organized so that the leases will be paid off by 2011, and the business is paying the husband a wage. This is in contrast to the situation when the husband was running the business. He was borrowing money from his parents to keep it going and was considering liquidating it.
The children attend [omitted] School where they are on reduced fees. The wife teaches part-time at the school. She receives no payment, but the school takes the time she teaches as payment for the school fees. The bursary reduces the fees from $27,000 to $16,000 per year. Otherwise the wife works part-time in a [omitted] and receives Centrelink payments.
Section 117 of the Child Support (Assessment) Act1989 (Cth) must be satisfied before making a departure order. The court must be satisfied that one or more of the grounds for departure is made out. In this case the ground is the earning capacity of the husband. His earning capacity is not as found by the tribunal. Special circumstances exist in this case for that reason. He cannot pay child support based on the determined income, because he does not have that income. Therefore it is just and equitable as regards the children, the husband and wife and otherwise proper to make a different order.
It remains to assess his income earning ability. I consider that it must be assessed on the basis that he will continue in his current employment. It is unrealistic to assess it on the basis of some notional employment that he could obtain. The [K] investment may have been misguided, but it has been made and the financial commitments which come with it have to be met. By operating in the way Ms W describes, the business is meeting its commitments and paying the husband a wage. It could not do this without the husband. The husband's employment, for the next term, has to be as it is.
Hiring rates for the truck are $39 per hour. The wife submits that the husband could work longer hours and that his income should be assessed on the basis of that rate and a reasonable allowance for the expenses. That is unrealistic. Even if he is treated as the owner of the business, the evidence shows that he could not draw a higher wage and still meet the business commitments. The evidence shows that it has taken Ms W’s business skills to stabilize the company's finances. To suggest that the business could be operated in some other way which would enable the husband to have a higher income is unrealistic.
However, I cannot accept that his working only four days a week is realistic. I consider that his income should be assessed on the basis that he works five days a week. That means his gross income should be $625 a week. A 48 week working year gives a child-support income of $30,000.
The wife does not seek arrears. The husband does not seek an order that might mean a repayment. About a third of the husband's wage is being garnished which means he is paying at a higher rate than with a child support income of $30,000.
The husband submitted that assessment from 1 January 2008 should be left to administrative assessment by the Child Support Agency. That is not appropriate given that I have made a finding about his current income. The father’s income may change and so I will not fix it beyond 31 December 2009.
The just and equitable result is departure orders which fix the child-support income at $30,000 per year from the date of this judgment to 31 December 2009, and for all previous periods at an amount which means that from the date of this judgment there will be no arrears.

I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate: Jan Smith

Date: 16 December 2008