Christian & Donald

[2004] FamCA 1171

FAMILY LAW ACT 1975

IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA                  Appeal No EA57 of 2004
AT SYDNEY  File No CAF564 of 2000

BETWEEN:

CHRISTIAN
Appellant Father
- and -

DONALD
Respondent Mother

REASONS FOR JUDGMENT

CORAM:  BRYANT CJ, FINN & KAY JJ
DATE OF HEARING:                 13 September 2004
DATE OF JUDGMENT:             21 December 2004

APPEARANCES: The Appellant Father in person.

Mr Eley of Counsel, instructed by McGuinness Eley, Solicitors

CHRISTIAN & DONALD EA57 of 2004

Coram: Bryant CJ, Finn & Kay JJ

Date of Hearing: 13 September 2004
Date of Judgment: 21 December 2004

CATCHWORDS LEAVE TO APPEAL - CHILD SUPPORT – Departure – Capital disparity – Where wife awarded an extra 20% in division of property for care of the children – Where residence of two children subsequently shifted to the husband and one child to a shared residence arrangement – Whether court should take capital disparity into account under s 117(2)(c)(i) or s 117(2)(c)(ii) of the Child Support Assessment Act – Whether unjust to require wife to deplete capital to pay child support

This was the husband’s application for leave to appeal and his appeal against child support orders made by Coleman J on 14 May 2004.

The parties married in 1979 and separated in 2001. There were five children born of the marriage. The proceedings before Coleman J concerned child support payable in respect of the three youngest children, L, born in 1988, N, born in 1990 and T, born in 1995.

In December 2001, Moore J ordered that the children reside with the wife and that the wife, as part of the division of property, receive an extra 20% of the pool, or around $60,000, on account of her responsibility for the future care for the children.

Subsequent to the making of those orders, residence of the children changed, with L and N moving in with the husband and T living with each of the parties on a week about basis.

In February 2004, a number of administrative assessments of child support issued to the parties. The proceedings before Coleman J concerned the husband’s application for a departure from those assessments and his appeal against the decision of the Child Support Registrar.

In his departure application, the husband sought to rely on s 117(2)(c)(ii) of the Assessment Act to increase the wife’s child support liability, arguing that the court was entitled, under that ground, to take into account the effect of the property settlement. He also sought to increase the wife’s child support liability on the basis she had a greater earning capacity than she was currently exercising, and could increase her work load from part- to full time. In addition, the husband sought orders that the wife pay half of the children’s education costs.

Coleman J held that while s 117(2)(c)(ii) did not have the effect contended for by the husband, it did entitle the court to take into account the reality that part of the property settlement received by the wife was for an obligation she no longer had. Where the wife’s circumstances were modest, however, his Honour held that it would be unjust to require the wife to resort to her capital to pay child support, but that a notional adjustment of the wife’s child support income by a notional interest component would be appropriate. His Honour set the notional interest rate at 3 per cent.

In respect of the wife’s earning capacity, his Honour found that both parties were exercising a capacity for gainful employment that was reasonable.

His Honour went on to make orders requiring the wife to pay one half of the children’s school fees and varying the child support income amounts for both parties. The effect of that variation was to leave the wife with a liability to pay the husband an annual rate of $14.76 or $0.28 per week for the support of L and N.

The husband appealed, on the basis that:

The trial Judge had erred in his application of s 117(2)(c)(ii) of the Assessment Act
The trial Judge erred by limiting the additional costs of educating the children to those costs attributable to school fees only
The trial Judge erred in finding that the wife was exercising a reasonable earning capacity; and
The trial Judge erred in adjusting the husband’s child support income amount

In granting leave and allowing the appeal on the first ground only, the Full Court held:

Per Bryant CJ and Kay J

Section 117 of the Assessment Act empowers the court to make a departure order if it is satisfied that one or more of the grounds in subsection (2) is made out, and 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 purpose of s 117(2)(c)(ii) is clear. Where there has already been a payment or a transfer or settlement of property made by the liable parent for the benefit of the child, then that is a factor that may be taken into account in determining whether or not it is appropriate to adjust the child support that that parent would otherwise be liable to pay.
The section is designed to alleviate the burden of a parent having to effectively pay twice for the child, once by the means of a transfer of property and then again by payment of periodic child support.
The section does not entitle the Court to take into account transfers of property made to a liable parent to justify increasing their child support liability should the residence of the children change after the property orders have been made.
To the extent that the trial Judge sought to rely upon s 117(2)(c)(ii) to notionally adjust the wife’s child support income to account for the capital imbalance between the parties he was in error. The appropriate place for the consideration of a capital imbalance is under s 117(2)(c)(i) of the Assessment Act.

In re-exercising the discretion, the Full Court held

In circumstances where the wife had liquid assets during the relevant period, and where two of her children were being fully supported by the husband and one was being fully supported by her, and taking into account the capital disparity between the parties, the wife should pay the husband a further $5,000 for the entire period in question.

Per Finn J

Leave to appeal should not be granted on any of the bases advanced. While the trial Judge may have erred in his interpretation of s 117(2)(c)(ii) and while the correct place for the court to consider any capital imbalance is in s 117(2)(c)(i), even if the correct approach was employed, it is not clear that would be just to require a wife in modest circumstances to have recourse to her capital to pay child support. Accordingly, no useful purpose would be served in granting the husband leave to appeal.

Leave to appeal granted and appeal allowed in part.
Costs certificates awarded to both parties.

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

BRYANT CJ and KAY J

This is the father's application for leave to appeal and his appeal against child support orders made by Coleman J on 14 May 2004. The father seeks to increase the amount of child support payable to him by the mother of the parties' children.

Background

The parties are the parents of children, S born in 1984, O born 1986, L born 1988, N born 1990 and T born 1995.

At the time of the hearing of the applications that were before the trial Judge in April 2004 S and O had already turned 18 and were no longer subject to any extant child support assessment. L and N were living with the father and T was living with the mother.

The proceedings before the trial Judge consisted of a departure application and an appeal against the decision of the Child Support Registrar (referred to by the trial Judge as “The Review Application”).

The Review Application sought orders in the following terms:

“1.       That for the child support period beginning 1 July 2003
           N and
           L
are in the sole care of the father and that child support payable by or to him on the basis of that care shall be assessed as from 1 July 2003.

2.That for the child support period beginning 1 July 2003
O [sic]
is in the sole care of his mother until 15 November 2003, when he left the care of the mother.”

The Departure Application sought orders in the following terms:

“EDUCATION COSTS
1.That the mother pay one half the [sic] of the education costs for the 4 children, O, L, N and T, which includes school, college or apprenticeship fees, uniform costs, school camps and other documented school and educated costs from 1 July 2003 to the end of the child support period. Those amounts are to be paid by the respondent to the applicant within 7 days of presentation of a receipt or receipts to the respondent detailing that cost or those costs. If that amount or those amounts are unpaid after 7 days the sum outstanding is to attract interest from the date shown on the receipt at the rate set per annum by the … Supreme Court for post judgement (sic) debts and that interest shall become a debt recoverable from the mother.

INCOME OF O
2.That the income of O is to be taken into account in assessment of the child support payable by the father for the period 1 July 2003 to 15 November 2003. That income equivalent to an annual sum of $10,110 will result in setting the statutory percentage to 20% to be applied in calculation of child support payable by the father for the two children, T and O, in the sole care of the mother for the period from 1 July 2003 to 15 November 2003.

PROPERTY TRANSFERRED FOR THE CARE OF CHILDREN
3.That an annualised sum representing property received for the care of children by the mother, that are now in the care of the father, of $7,262.44 per child in the father’s care, this financial year 2003-2004, be added to the mother’s child support assessment payable to the father.
4.That the sum per child specified in order 3 change on 1 July 2004 and each year following in accordance with the percentage annual increase or decrease in median house prices in … declared by the … Real Estate Institute of Australia in the preceding 12 months.

EARNING CAPACITY OF THE MOTHER
5.That from 1 July 2003, the mother’s income is assessed at a full time teacher’s position, teaching in an … independent school with 11 years experience as at 30 June 2003 and 12 years experience from 1 January 2004 and the income level be set in accordance with the document, or its replacement or equivalent, called ‘Consolidated Document re Independent Sector – Teachers’ Terms and Conditions, Association of Independent Schools of … – Award Service’ and the section of the document labelled ‘Salaries and Allowances.’
And it is noted that the mother’s income is set at:
           $57,274 from 1 July 2003 to 31 December 2003
           $59,084 from 1 January 2004 to 31 January 2004
           $60,265 from 1 February 2004 to 31 May 2004
$61,169 from 1 June 2004 until change in the teachers award reflected in above document and or due to increase in years of teaching experience by the mother.

PAYMENT OF ARREARS ASSESSED
5.[sic] That the mother pay to the father the gross sum assessed by the Child Support Registrar following these orders within 14 days of receipt of the notice from the Registrar of that assessment from the cash assets reasonably available to the mother either directly or by leverage against her property. In the event that sum remain unpaid after 14 days, that sum is to attract interest from the date of the Registrar’s notice at the rate set per annum by the Supreme Court for post judgement (sic) debts and that interest shall become a debt recoverable from the mother.”

There were four Notices of Assessment relevant to the application before the trial Judge. They had issued on 17 February 2004 and provided as follows:

· For the period 16 November 2003 to 15 January 2004 the mother was assessed as having a liability to pay to the father for the support of the children L and N a monthly amount of $78.67. The component parts of that assessment indicated that the father's child support income amount was $29,936 and the mother's was $27,348.

· For the period 16 January 2004 to 7 November 2004 a nil assessment issued in respect of the mother's liability to the father for L and N. In the latter assessment the mother's child support income amount was reduced to $19,945 based on her estimate of taxable income.

· For the period 16 November 2003 to 15 January 2004 a nil assessment issued in respect of the amount payable by the father to the mother for the child T.

· For the period 16 January 2004 to 31 January 2005 the father was assessed and required to pay $23.83 per month to the mother for the child T.

Peculiarly, in the latter assessment the mother's child support income amount was said to be $20,000 which differed marginally ($55) from the child support income amount used in assessing the mother's liability to the father.

The orders made by Coleman J that are the subject matter of the appeal, as it was argued before us, are as follows:

”1.That no child support arrears payable by either party to the other in respect of the child O, who was born on … March 1986 be recoverable or enforceable by or against either party.
2.That, by consent, the assessment of child support on 17 February 2004 with respect to the child T, who was born on … July 1995, be varied to nil by departure as and from the date to which the current assessment stands paid.
3.That all current child assessments issued on 17 February 2004 with respect to the child L, who was born on … May 1988, and N, who was born on … October 1990, be departed from for the period 1 July 2003 to 7 November 2004 by substituting a child support income of $36,000 for the husband, and a child support income of $27,948 for the wife in lieu of the income figures upon which such assessments were based.
4.That the Child Support Registrar issue amended Notices of Assessment to reflect Order 3 hereof.
5.That the parties each pay one half of arrears of school fees payable to … School.
6.That the parties each pay one half of school fees for the children L, N and T at … School, Pending Further Order of the Family Court.
7.That costs be reserved.”

The main effect of those orders was to impose upon the mother a liability to pay both retrospectively and prospectively one half of the arrears of school fees for the children L, N and T. In the proceedings before us the father's complaint relating to the school fees is that the order should have also included incidental expenses such as books, uniforms and excursions.

The other effect of the order was to vary the child support income amounts of both the father and the mother for the whole of the period from 1 July 2003 to 7 November 2004. The effect of altering the child support income amounts for each of the parties was to leave the mother liable to pay child support to the father for L and N for the whole of the period at an annual rate of $14.76 or $0.28 per week. In passing we query whether it was at all appropriate to make a departure order varying the component amounts used to calculate the child support due where the difference between the original assessment ($nil) and the amended assessment was such a negligible amount.

In support of his leave application and the appeal the father initially sought to argue seven grounds of appeal. In the course of argument before us he abandoned Ground 6 that related to an agreement the parties had reached that a nil assessment issue in respect of the father's liability for the child T.

Before turning to the substantial points sought to be argued by the father it is perhaps convenient to now deal with briefly with Grounds 5 and 7.

Ground 5 related to an argument by the father that the trial Judge was in error in not dealing with some matters in relation to the child O who had already turned 18. It is however quite clear that the parties had reached an agreement before the trial Judge that issues relating to O would play no part in the proceedings.

The trial Judge indicated at the beginning of the proceedings that it seemed inappropriate to deal with O given his age and the husband agreed. His Honour said:

"Right. Now O - is O - do we all agree that O's no part of any of this now?
MS McGUINNESS: Yes
MR Christian:          He’s left as of the fifth---
HIS HONOUR:        He's out of it? Forget about it
MR Christian:          Sixth of - well there is the date, sir, that---
HIS HONOUR:        Yes, I understand all that but it doesn't need to be that complicated. If he's out of it I don't care why he's out of it. So we don't need to worry about him. Then we've got L, 16. So he's rising 16 isn't he, L
MR Christian:          Yes."

And then at page 233 in final addresses in his opening remarks the father said

"Your Honour, I acknowledge that you’ve already dealt with the situation with O so I make no submission in that regard."

In his written submissions in support of his appeal the father suggested that any consent that he had given to removing O from the considerations before the trial Judge was not freely given.

The father is a legal practitioner. From the manner in which he has prepared his submissions and the manner in which he made oral submissions to us he is clearly an articulate and intelligent man. There is nothing at all in the transcript that would suggest that it is open for us to find that any consent to the course adopted by the trial Judge was somehow reached as a result of undue or inappropriate pressure by the trial Judge. In the circumstances, which include the additional hurdle of the necessity to obtain leave to appeal, this ground cannot possibly succeed.

Ground 7 concerned itself with the issue of the period that the orders were to run given the inconsistent concluding dates of the assessments. The mother's obligation to the father for L and N was to conclude on 7 November 2004 while the father's obligations to the mother in respect of the child T was to conclude on 31 January 2005.

The father suggested that for the sake of consistency, having regard to the normal child support assessment periods and the fact that there had been a significant change in T's living arrangements as and from 2 June 2004 in that he was now spending a week about with each parent, it would be appropriate that all of the assessments were co-ordinated and that the orders for periodic assessment should cease to have effect as and from 30 September 2004.

This timing issue was ultimately a matter of consent before us although the father sought to resile from it during his final address.

We think there is substance in the father's initial position and having regard to the agreement given to it by the mother's representative we intend to vary the order of Coleman J to shorten the departure period for all children to 30 September 2004. The Registrar will then be at liberty to issue fresh assessments in relation to all three children commencing 1 October 2004.

The remaining four grounds are as follows (headings inserted for ease of identification).

Capital imbalance

· The court has erred in fact and/or law in the application of section 117(2)(c)(ii) of the Child Support (Assessment) Act 1989 regarding the value of property transferred and percentage of value of that property transferred to the mother for the care of children that are now in the care of the father;

Education costs

· The court has erred in law in the application of section 117(2)(b)(ii) of the Child Support (Assessment) Act 1989 by limiting the additional costs of educating the child or children of the assessment to those costs attributable to private school fees only.

Mother’s earning capacity

· The court has erred in law and/or fact concerning the mother's earning capacity under section 117(2)(c)(i) of the Child Support (Assessment) Act 1989 regarding the mother's ability and opportunity to generate a full time income and her willingness to undertake appropriate work.

Father’s child support income

· (a) The court has erred in law in considering and then adjusting the father's income, the court lacking jurisdiction to do so under section 110(1A) or s 116(1A) of the Child Support (Assessment) Act 1989; and,

(b) The court has denied natural justice to the father in finding on any matter effecting an adjustment of the father's child support income.

Section 117 of the Child Support (Assessment) Act 1989.

In order to better understand the arguments advanced by the father, we think it appropriate to now set out the somewhat lengthy provisions of s 117 that empowers the Court to make a departure order and prescribes the matters that the Court must give attention to.

“Matters as to which court must be satisfied before making order
(1) Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and

(b) the court is satisfied:
(i)that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii)that it would be:
(A)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;

to make a particular order under this Division;

the court may make the order.
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i)the duty of the parent to maintain any other child or another person; or
(ii)special needs of any other child or another person that the parent has a duty to maintain; or
(iii)commitments of the parent necessary to enable the parent to support:
(A)himself or herself; or
(B)any other child or another person that the parent has a duty to maintain; or

(iv)high costs involved in enabling a parent to have contact with any other child or another person that the parent has a duty to maintain;

(b)that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i) because of:
(A)high costs involved in enabling a parent to have contact with the child; or
(B)special needs of the child; or
(C)high child care costs in relation to the child; or

(ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents;

(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i)because of the income, earning capacity, property and financial resources of either parent or the child; or
(ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child; or
(iii)because an amount (the additional amount ) of a liable parent's child support income amount was earned, derived or received by the liable parent for the benefit of a resident child or resident children of the liable parent; or
(iv)because an amount (the additional amount ) of an entitled carer's child support income amount was earned, derived or received by the entitled carer for the benefit of a resident child or resident children of the entitled carer.

…
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3); and

(b) the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d)the income, earning capacity, property and financial resources of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii)any other child or another person that the person has a duty to maintain; and

(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and

(g)      any hardship that would be caused:
(i)        to:
(A)      the child; or
(B)      the carer entitled to child support;
by the making of, or the refusal to make, the order; and

(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.

(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.

(6) In having regard to the proper needs of the child, the court must have regard to:
(a)the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b)any special needs of the child.

(7) In having regard to the income, earning capacity, property and financial resources of the child or a parent of the child, the court must:
(a)have regard to the capacity of the child or parent to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child or parent that do not produce, but are capable of producing, income; and

(b) disregard:
(i)the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii)any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.

(8) In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care.
(9) Subsections (4) to (8) (inclusive) do not limit other matters to which the court may have regard.”

Capital imbalance

In the course of submissions concerning issues surrounding the question of capital imbalance we indicated that we were of the view that there was unlikely to be any substance in the ground as pleaded but if there was any error in the manner in which the trial Judge had approached his task that error was likely to be found in the failure of the trial Judge to pay proper attention to the resources that were available to each of the parties. Any sustainable complaint lay in respect of an error under the application of s 117(2)(c)(i) rather than 117(2)(c)(ii) of the Child Support (Assessment) Act 1989

The substance of that complaint had already been encapsulated in paragraph 45 of the father's written summary of argument before us where he said:

"In this case it was argued at trial that: the mother has all the assets and an earning capacity; the father has none of the assets and an earning capacity based on the needs of his children; the mother has a liability to support the children now with the father; and in these circumstances the application of provisions of the Act relating to administrative assessment result in an unjust and inequitable determination."

Although we did not seek to have the father formally amend his Notice of Appeal, no objection was taken by counsel for the mother when argument was subsequently directed to the provisions of s 117(2)(c)(i) rather than 117(2)(c)(ii). Indeed, counsel for the mother made substantive submissions relating to the issues raised as a result of our redirecting the focus to that subsection.

In the circumstances we propose to deal with this matter on the implied basis that the grounds of appeal included the matter encapsulated in the father's summary of argument.

We are empowered under s 94(2) of the Family Law Act when hearing an appeal, to make any order that we think should have been made at first instance. The rules of natural justice require that a party to an appeal be given an opportunity to be heard if an order is likely to be made adverse to their interests. As already indicated counsel for the mother took no formal objection to the lack of a specific ground dealing with the matter that had troubled us in the course of argument.

The issue relating to the transfer of capital had been sought to be run by the father along these lines. On 10 December 2001 at the hearing of property proceedings between the parties Moore J ordered that a pool of assets of $301,000 be divided as to 70 per cent in favour of the mother and 30 per cent in favour of the father. At that time all of the four boys were living with their mother. Her Honour found that there had been an equality of contribution towards the asset pool but that the mother would have an earning capacity "much less than that of her former husband…while ever that [the care of the children] continues". Her Honour then went on to say (at paragraph 158):

"I am of the view that the years of the wife's greater responsibility for the children would be properly recognised by a further adjustment in her favour of 20 % of the net assets calculated earlier."

At some time after her Honour made the property adjustment in the mother's favour the children L and N moved to live with their father.

Much of the father's focus in the child support proceedings centred on this imbalance in the distribution of capital between the parties in the property proceedings. He has filed an application under s 79A of the Family Law Act to set aside the property proceedings presumably on the basis contained in s 79A(1)(d) that provides the court may set aside a property order if it is satisfied (inter alia) that:

"in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or,…the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order..."

The father's submissions before the trial Judge and before us were that the provisions of s 117(2)(c)(ii) of the Child Support (Assessment) Act enable this property settlement to be taken into account in his favour when he was seeking a child support order against the mother.

The discussion surrounding the competing submissions on this topic does not form a large part of his Honour's judgment. In paragraph 5 his Honour identifies the existence of the s 79A application and says:

“The parties to the proceedings have a long and unfortunate history of litigation in this Court. Apart from the applications under consideration, there remain pending for determination contested proceedings with respect to residence of one child of the parties and a contested application by the husband for orders pursuant to s 79A of the Family Law Act 1975 (Cth) (‘he Act’. Though a separate application, which falls for determination on its merits according to the relevant statutory provisions and case law in relation thereto, to some extent at least the latter application overlaps one of the departure grounds sought to be advanced by the husband in the present proceedings.”

His Honour refers to it again in passing in paragraph 18 where he says

" …As will be seen, part of the husband’s case in these proceedings, and presumably in his pending s 79A application, involves a submission that a significant component of the wife’s property settlement entitlement was referable to an expectation which has not been realised.”

and then returns to it in paragraph 64 where he says:

“As has been acknowledged earlier, nothing done in these proceedings derogates from the husband’s entitlement to pursue his s 79A application. Whilst s 117(2)(c) does not have the effect for which the husband contends, it does enable this Court to have regard to the reality that a proportion of the wife’s property settlement award was in respect of an obligation she does not now have. Of the $60,200 awarded to the wife by Moore J in December 2001, approximately $20,000 could be thus viewed. The evidence is sufficient to enliven the provisions of s 117(2)(c)(ii). To notionally adjust the wife’s income for child support purposes by a notional interest component would in the circumstances be appropriate. The difficulty is in determining an interest rate. A rate of approximately 3 per cent is paid by the Commonwealth Bank on a Cash Management Call Account, for between $20,000 - $49,999. Notional interest of $600 per annum could thus be added to the wife’s income for child support purposes. The wife would not pay tax on such interest given her business losses.”

We think that both the father's submissions in relation to the proper approach to the capital imbalance and the manner in which the trial Judge treated it in the above passage are incorrect.

As can be seen from the words of the section set out above, s 117 of the Child Support (Assessment) Act empowers a court to make a departure order if it is satisfied of the existence of one or more of the grounds mentioned in sub-section (2) and is further 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 grounds for departure set out under s 117(2) include (emphasis added):

“(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i)because of the income, earning capacity, property and financial resources of either parent or the child; or
(ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child;”

The purpose of sub-section 117(2)(c)(ii) is clear. Where there has already been a payment or a transfer or settlement of property made by the liable parent for the benefit of the child, then that is a factor that may be taken into account in determining whether or not it is appropriate to adjust the child support that would otherwise be liable to be paid by that parent. The section is designed to alleviate the burden of a parent having to effectively pay twice for the child, once by means of a transfer of property and then again by payment of periodic child support. The words of the section are clear. It applies only to transfers made by the liable parent. It does not apply in the manner that was urged upon us in this case by the father. He submits that the transfers of property made by the carer parent to the liable parent ought result in the carer parent being entitled to receive a greater payment of child support than would otherwise be payable should the children change house after the property orders have been made.

Although we are of the view that the words of the section are clear and unambiguous, we are fortified in our interpretation by the Minister’s Second Reading Speech in the Senate on 29 August 1989 where he said (emphasis added):

“These grounds for departure broadly relate to cases where: first, a parent’s capacity to provide support for a child is reduced by special needs or commitments of the parent or another person the parent has a legal duty to support; second, where the costs of supporting a child are affected because of the special needs of the child or because the child is being care for, educated or trained in the manner that was expected by his or her parents or because of the high costs of access of either parent to the child; and third, where the assessment is inequitable because the income, earning capacity, property or financial resources of either parent or of the child which have not been taken into account as “income” under the formula or because earlier payments and transfers or settlements of property made by the liable parent to the child, the eligible custodian or to a third person for the benefit of the child would mean that the formula assessment does not produce a fair result”.

Similarly we are of the view that the trial Judge erred in purporting to make a notional adjustment to the wife’s child support income by utilising s 117(2)(c)(ii) as justification for such an approach.

The appropriate place for the Court to take into account any imbalance in the capital structure of the parties is contained in s 117(2)(c)(i) rather than 117(2)(c)(ii).

Sections 3 and 4 of the Child Support (Assessment) Act provide as follows:

“3. Duty of parents to maintain their children
(1)The parents of a child have the primary duty to maintain the child.
(2)Without limiting subsection (1), the duty of a parent to maintain a child:
(a)is not of lower priority than the duty of the parent to maintain any other child or another person; and
(b)has priority over all commitments of the parent other than commitments necessary to enable the parent to support:
(i) himself or herself; and
(ii)any other child or another person that the parent has a duty to maintain; and

(c) is not affected by:
(i)the duty of any other person to maintain the child; or
(ii)any entitlement of the child or another person to an income tested pension, allowance or benefit.

4. Objects of Act
(1)The principal object of this Act is to ensure that children receive a proper level of financial support from their parents.
(2)Particular objects of this Act include ensuring:
(a)that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
(b)that the level of financial support to be provided by parents for their children should be determined in accordance with the legislatively fixed standards; and
(c)that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
(d)that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them; and

(e)that Australia is in a position to give effect to its obligations under international agreements or arrangements relating to maintenance obligations arising from family relationship, parentage or marriage.

(3) It is the intention of the Parliament that this Act should be construed, to the greatest extent consistent with the attainment of its objects:
(a)to permit parents to make private arrangements for the financial support of their children; and

(b) to limit interferences with the privacy of persons.”

It is clear from those provisions that the primary obligation to support children falls upon their parents and that obligation has priority over all commitments other than those necessary to enable the parent to support themselves or any other person they have a duty to maintain.

The objects set out in s 4 are less clear in that some of them are contradictory. The first object is that parents with like capacity should provide like amounts of financial support. The second object is that the level of financial support should be determined in accordance with legislatively fixed standards. The conflict between those two objectives is however that the legislatively fixed standards are calculated on income rather than capacity. The creation of an income based formula furthers both objects (c) and (d) but again perhaps at the expense of object (a).

Recognising that there will be many cases in which implementation of a formula based upon taxable income may result in an assessment that does not adequately reflect a just and equitable outcome between the parents, the Act establishes a review mechanism which is ultimately overseen by the Court. The Court's overarching power to make departure orders is driven by additional particular objects in both Division 4 and Division 5 of Part VII of the Act which objects include ensuring (s 114):

“(a)that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents, and
(b)that the parents share equitably in the support of their children.”

It can immediately be seen these are wider bases than the objects set out in s 3 of the Act.

Once the matter has reached the Court on the basis of a departure application that has met the jurisdictional requirements set out in s 116 of the Act, before making a departure order the Court must be satisfied that a ground for departure exists and that it is just and equitable within the meaning of the section and otherwise proper within the meaning of the section to make the order.

Section 117(4) sets out the criteria which the Court must have regard to in determining whether it is just and equitable to make an order. There is nothing in s 117(4) that gives any indication as to the primacy to be given to income and earning capacity over property and financial resources in determining what would be a just and equitable order.

The evidence before the trial Judge and the evidence before us was that in December 2001 Moore J had found the parties' assets to be worth $301,000 and divided them as to 70 per cent to the mother and 30 per cent to the father.

The father asserted before Coleman J and before us that he was now virtually bereft of any capital or assets of value. Exactly what had become of his share of the property proceedings before Moore J remained, in the eyes of Coleman J to be satisfactorily explained. His Honour said:

“63.The husband’s constant assertion that he ‘has nothing’, and, inferentially, ‘got nothing’ from the orders made by Moore J in December 2001 does not advance his case. The husband, for good and sufficient reason, as Moore J explained in detail, was awarded approximately $90,000. His income at that time exceeded that of the wife several times over. No adjustment in the wife’s favour appears to have resulted from that. What the husband has done with the money since that time has been entirely of his choosing…”

The mother's statement of financial circumstances had asserted that she owned a 50 per cent interest in property at R that she had acquired with her present husband. Her interest in the property was said to be $145,500. Under the heading of "Liabilities" she said that there was a mortgage on the property of $55,000, "Portfolio Loan - St George Bank. 50%".

The trial Judge found that the mother had sold the home that had been awarded to her in the property settlement of 2001 for something between $460,000 and $480,000. “She was surprisingly vague in this respect.” He found that according to her calculations after payment of expenses relating to the property the net fund remaining would accordingly be in the order of $320,000 to $340,000. He found that the mother and her present husband had then purchased the land at R for $287,000 and that after the payment of stamp duties that should have left her with somewhere between $25,000 and $45,000 in cash. His Honour's finding was that that money had been expended to the point where less than $4,000 remains.

The mother had given evidence that she and her present husband had decided to sell their home, acquire some other land and build upon it a kit home. In the meantime they were going to live on the land in a mobile home and caravan. His Honour said:

“48.The evidence does not reveal the wife’s decision to sell her former residence as having been due to financial strictures. Her decision to purchase alternate premises, on a small acreage, appears to be more a matter of a lifestyle decision than a necessity. There is no evidence that the property is, or ever could be, a living area. Moving to the premises has, on the wife’s own evidence, greatly increased her travel expenses.
49.The wife and her present husband have secured a finance facility of $110,000, which they have not yet drawn upon, with which to construct a house on the property. It could reasonably be said that the wife’s position in terms of equity, will be virtually identical, once the loan has been fully drawn down, to that which prevailed at her former residence. It could reasonably be said that the wife would have expended in excess of $400,000, but certainly not more than the net proceeds of sale of her former residence, and have replaced a mortgage of $115,000 with one of $110,000. The change of residence has thus resulted in neither a financial advantage or disadvantage for the wife.
50.As the Court understands her case, the wife is not seeking to assert that the change of residence has resulted in a financial detriment which should be taken into account to her advantage for child support purposes. To the extent that the husband might assert that her position has been improved as a result of the sale and re-purchase, the evidence does not establish that to be the case.”

Whilst it appeared clear from the mother's evidence that there had been a significant capital growth in the real estate that she had retained as a result of the property settlement it was never the subject of a discussion before the trial Judge nor before us as to the extent to which her present husband would be entitled to share in the change in that position. The mother's evidence was that aided by her husband she had had to draw significantly on her other resources to support the children when they were in her care.

In response to a question by the father suggesting that part of the property settlement had been particularly provided to her for the support of the children she said:

"But the issue is that although I have the asset that was basically tied up in the house I couldn't feed the children with the bricks from the house and I couldn't educate them with the bricks from the house, so I had to use the assets or the money I received from working and my husband's finances to look after the care of the children and to educate them, and that is what we drew on to care for the children at that time. So, we were basically devoiding ourselves of any financial gain to support the children because we couldn't use the asset because we needed the five bedroom house for the children to live in."

There was an attempt to touch upon the matter subsequently in the cross-examination of the mother where the following exchange took place:

"MR Christian:         Mrs Donald, who owns the R property?---Jointly owned or I don't know the legal terms, but my husband and I own it.
It's a joint tenancy is it? So if he dies you get the property back in your name. If you die it all goes to him?---Yes.
What contribution do you say that he's made to acquire half interest in that property?
MS McGUINNESS: Objection, relevance.
HIS HONOUR:        It's not relevant, Mr Christian, the half interest is more than amply abundant to satisfy any order you could conceivably obtain in this or any application you currently have before the Court, so it's not relevant.
MR Christian:          Thank you, your Honour.
The B property was your property, it wasn't considered Mr D's was it?---It was in my name.
Did you consider it belonged to Mr D?---In as far as he contributed to the well being of the children in their education expenses once we were married I considered it to be his share, jointly his property even though it wasn't in his name.
Are you aware that it became before his Honour. His Honour, present today, he said that the B house - back in August 2002:
The B house belongs to you and the kids

to the mother and the kids.
MS McGUINNESS: Objection again, relevance.
HIS HONOUR:        What's the relevance of this?
MR Christian:          Your Honour, I'm concerned that the property is being dissipated but if it's not - and I'm not suggesting - - -
HIS HONOUR:        It doesn't matter if it is as long as there is sufficient to meet any order that you could conceivably secure from a Court in any application you currently have that's all you need to worry yourself about. There's an abundance - I mean there is at least $140,000 of equity, putting aside any question of resulting trusts or the like, which is far more than any order you might ever secure. So, next question?"

In these proceedings both parties have urged us to substitute our own order for that of the trial Judge in the event that we were to allow the appeal. Neither party sensibly wishes to have the matter relitigated given that it concerns the amount of child support to be paid over a period of some 15 months in circumstances where the parties have extremely limited funds.

Our task is, however, made all the more difficult by reason of the manner in which the case was approached particularly by the father at trial and in his written submissions before us. He spent a lot of energy and time focussing on what he saw as the inequality of the situation that a property settlement had been made in his wife's favour based upon the presumption that the children would remain living with her and that subsequent events have seen most of the children moving to his home. He has made a number of calculations on how the inequity of that situation can be corrected through the child support scheme.

Some of his base assumptions, particularly those put in cross-examination were grossly inaccurate. When cross-examining the mother he spoke of her having received $200,000 more than he did. He put to her that the pool of assets was $500,000 and that she had received 40 per cent more than he, she had therefore received $200,000 for the support of the children. The finding of Moore J was that the pool of assets was $300,000 not $500,000 and that the mother was entitled to 50 per cent of that pool by way of contribution. Any adjustment for s 75(2) factors was 20 per cent of that pool namely $60,000.

There was virtually no focus at the trial before Coleman J on the considerations that his Honour was required to pay attention to under s 117(4). There were scant findings as to the proper needs of each of the children. There were no findings as to the commitments of each parent that were necessary to enable that parent to support himself or herself or any other child or other person that they had a duty to maintain. There were no findings as to the direct or indirect costs incurred by the carer entitled to child support in providing care for the child. There were no findings as to the hardship that would be caused by the making or refusal of the making of an order. There were no findings as to the extent of the mother’s equity on the R property allowing for any interest her present husband might have. There were no findings as to the reasonableness of the father divesting himself of his modest capital after Moore J’s orders were made.

The lack of those findings makes our task all the more difficult. However, we repeat that we have been invited by both parties to exercise the discretion rather than remit the matter back for rehearing. We have been so invited on the evidence that is in the appeal book and on the agreed position that since 2 June 2004 the child T has been living with each of the parents on a week about basis. Our attention has also been drawn to the Lee and Lovering tables which provide updated figures on the research done relating to the cost of keeping children.

His Honour’s view as to any imbalance in capital resources was expressed in para 63 where he said:

“…the wife’s circumstances being no more than reasonable and modest, to have recourse to her capital to pay child support would be unjust.”

We are in disagreement with the conclusion reached by the trial Judge that as the mother's circumstances were no more than reasonable and modest, it would be unjust to have recourse to her capital to pay child support during the period in question.

In Hampson v Lightfoot (1997) FLC 92-775; 22 Fam LR 366, the Full Court held that where a father had disposed of substantial sums of money that were available during the relevant period, and which could have been applied to child support, this amounted to a “special circumstance” justifying a departure from administrative assessment under s 117(2)(c)(i) of the Act. At trial, Barblett DCJ dismissed the mother’s application on the basis that there were no special circumstances which would warrant the making of a departure order.

In allowing the appeal, the Full Court (per Nicholson CJ, Finn and Tolcon JJ), accepted the argument advanced by counsel for the mother, that in making this finding the trial Judge had failed to consider the objects of the Assessment Act. The Court said (at FLC 84,560; Fam LR 379):

“…when one has regard to the objects of the legislation, it is difficult to see why a parent who is proved to have had the capacity to pay child support, but who has failed to do so and has squandered or otherwise disposed of his or her assets, should be treated in the same way as a parent who has not done so.
…
We think it clear that a result of this mother receiving no child support would be an unjust and inequitable determination of the level of financial support to be provided by the father for the child because of the property and financial resources to which he has had access during the relevant period within the meaning of s 117(2)(c)(i) of the Assessment Act. We think that when regard is had to these matters, coupled with the fact that there is a present disparity of assets in his favour and the modest amount of support sought by the mother, namely $25,000, the appropriate test is more than satisfied”.

In Dwyer v McGuire (1993) FLC 92-420; 17 Fam LR 42 (a case in which a mother sought a departure on s117(2)(c)(i) grounds from a nil assessment against a father who was asset rich but income poor) Lindenmayer J said (at FLC 80,319; Fam LR 56):

“In any event, having thus identified the availability of substantial property and financial resources, and having taken account of the income versus asset base of the partnership, it is, in my opinion, unnecessary for the court to seek to identify any specific source from which an obligation of the father to pay child support can be met … It is obvious, on the evidence, that the father has both sufficient real property, and a financial resource in the form of a capacity to borrow against the value of that real property, to meet any reasonable order for child support. It is up to him to organise his own affairs in order to devise the means to meet his proper level of child support obligations.”

In Abela and Abela (1995) FLC 92-568; 18 Fam LR 569, the wife sought a departure from an administrative assessment which required her to pay $150 per week for three children in the husband’s care, on the basis that her income was largely derived from property holdings, and that she should not be required to deplete her capital to meet her child support obligations. In dismissing the wife’s application, Nicholson CJ said (at FLC 81,649; Fam LR 576):

“[The wife’s] asset position is such that I can see no reason why she should not assist and participate in the obligation of maintaining the children having regard to the way in which the Act is framed.
It was put on her behalf that she should not be forced into depleting her capital. I can see no basis in law for drawing this distinction. Indeed, I can see great difficulties in accepting such a proposition. There are many in our community who are rich in assets but adept at producing a result whereby they disclose little or no income and it would be highly undesirable if they were able to take advantage of such machinations to deprive their children of support. I do not suggest that the wife in this case falls into that category but the principle that she contends for might produce such a result in cases of that nature”

Whilst it might well be appropriate to ignore an unliquidated equity in modest accommodation in circumstances where the liable parent has little if any borrowing power, the circumstances that pertained to the mother in the child support period in question in this case were somewhat unusual. She in fact sold her home and converted her assets into cash. She had a surplus immediately available to her of some $25,000-45,000 over and above the monies required by her to acquire a replacement property. She chose to spend that money (Transcript p 60 et seq) in reduction of a car loan and:

"various purchases towards the house that we’re building and some outstanding debts. They're - they're just odd thousand here and thousand there."

In the circumstances that prevailed at a time when the mother had liquid assets and where two of her children were being fully supported by their father whilst one was being fully supported by her, we are of the view that it was appropriate to take into account the disparity of capital available to the parties at least for the purpose of provision of some child support during the period the subject matter of this appeal.

The father has urged us to approach the matter on a rather simple basis. He says that it is appropriate to assume in accordance with the Lee and Lovering tables and the material that can be gleaned from the parties' Forms 17 that it costs each of the parties $200 per week to keep each of the children in addition to some housing costs. These sums are consistent with Coleman J’s findings that the father was expending all of his income after meeting his fixed expenditure on maintaining his two children. His Honour made reference to the father's claim for $392 per week as a necessary expenditure for the children and did not reject it. Similarly he accepted the mother's evidence that she was spending $205 per week on T.

The father’s minimal position before us was that the parties should be seen required to share equally in that position. Given that the father had two children to care for over most of the period and the mother had one child in her care for most of the period, at least for the period from 1 July 2003 to 2 June 2004 the mother should have paid the father one half of the cost of keeping the additional child that he had to care for. On the estimates discussed including an amount for a proper housing allowance he would say that the sum payable to him should have been at least $137.50 per week.

He then urged a further adjustment to be made for the remaining four months of the period to 30 September 2004 given that T was now being shared between the parties on a week and week about basis. For the 48 weeks that T remained with his mother that would come to $6,600. If, for example, the amount payable by the mother was increased to $200 per week for the remaining 16 weeks the total sum payable by her would be increased by $3,200 to $9,800.

Counsel for the mother acknowledged that some sum would be payable if the Court took into account the disparity of capital available between the parties but urged that the sum be kept as modest as possible given the very humble circumstances he said his client found herself in and the commitments she had made towards the acquisition of a new home.

Doing the best we can with the very limited material we have available to us, and bearing in mind the liabilities the parties have already assumed for the provision of private school fees for these children, we think it is appropriate that a further allowance of $5,000 be made for child support payable for the entire period. The basis for making that adjustment rests firmly on the disparity of capital that was available to the parties in liquid form during the period in question. Any child support case officer or judicial officer who has to deal with further departure applications in this case need not assume that we are suggesting that future adjustments to any administrative assessment for this family would necessarily be appropriate having regard to the capital disparity given that the mother has now committed the balance of her funds to the provision of somewhat modest housing for herself and her present husband.

Mother's earning capacity

As to the mother's earning capacity his Honour found:

“40. …the evidence establishes that the wife is exercising her capacity for appropriate gainful employment by way of personal exertion to the extent that she reasonably should. The Court does not accept that the wife should be obliged to obtain full time employment having regard to the fact that she has the care of a young child of the parties.
41.Even if the wife should be employed to a greater extent than she is, the wife’s evidence, which the Court accepts, is that she has in recent times made extensive and appropriate inquiries and/or applications in that regard…”

The father's strong assertion before the trial Judge and the Full Court was that the mother had a greater earning capacity than that found by the trial Judge. He asserted that she should have been assessed at being able to work full time as a teacher earning between $57,000-60,000 per annum.

The mother had entered into a retail business venture with her sister and it had proved to be unprofitable. The trial Judge rejected any losses that had been generated by the business, taking some sort of judicial notice of the notorious failure rates of small businesses and somehow implying that "the absence of evidence as to due diligence prior to the entry into that business relationship" ought somehow lead to the probable loss being incurred by the mother not being taken into account.

Whilst we have some disquiet with that approach it is not necessary for us to further explore that matter given our own acceptance of the finding that for the period now under consideration, namely July 2003 to September 2004 the finding that it was reasonable for the mother to remain in part time employment was clearly open to the trial Judge.

There was no evidence that full time employment in teaching was available to the mother. She had been involved in part time employment for many years and had no recent experience working full time. When his Honour made his determination in this case the mother still had the full time care of T.

We accept it was open for the trial Judge on the evidence to reasonably conclude, as he did in paragraph 62 that he was “not satisfied that either party had a capacity to derive income from personal exertion which is unreasonably being not exercised.” The mother had given evidence of her desire to remain involved in part time work until at least she could fulfil her obligations in relation to the lease she had entered into in relation to the business. She said (Transcript 56 AB 212):

"I'm obliged to either continue on with the lease or find someone to replace the lease so, at this moment, I'll fulfil my obligations in regard to the business."

She said the lease would expire in July 2006. She said it would not help her to now leave the business and find work during the same hours that she was working in the business as she would have to pay somebody to replace her in the business.

Given our rejection of the appeal ground that the finding relating to the mother's earning capacity was not reasonably open to the trial Judge it is unnecessary for us to further investigate what the appropriate level of the mother's child support income should have been and whether it was particularly appropriate for the trial Judge to notionally inflate it by application of an interest component on the excess capital that she had received to care for the children.

The father’s child support income amount

We are proposing to substitute a single figure for the child support payable for the period rather than by reference to the component parts of the formula. Although it becomes unnecessary for us to deal with the father's complaint concerning the notional adjustment to his income by the adding back in of motor vehicle expenses we make the following observations.

The father was employed on a salary package that provided part of his income by way of a tax free motor vehicle allowance in the sum of $6,000. Coleman J added the $6,000 back to the father's child support income amount saying:

"so far as parity between the parties is concerned, to simply deduct $6,000 for the husband's gross income and not make a corresponding adjustment in favour of the wife would be quite unfair. The evidence suggests that the husband works from home, no office or other place of business being referred to, whilst the wife has, albeit by her own choice considerable distances to travel."

The evidence of the father's salary package (AB 244) was:

"1.The remuneration package will be a total of $36,000 per annum.
2.You are required to cover the cost of motor vehicle use associated with your responsibilities and this is expected to be approximately $6,000 per annum."

Three matters arise from the manner in which the trial Judge dealt with the additional expenditure. First the father says that as the issue was never raised during the administrative review process it was not open to the trial Judge to make any notional adjustment to the father's child support income amount. Before any such step could be taken he submitted it would be necessary for the mother to raise the matter herself under the provisions of Part 6A of the Child Support (Assessment) Act with the Registrar or an officer delegated by the Registrar. If she was unsatisfied with any determination so made she would then need to file an appropriate objection and it was only on the dismissal of that objection that the issue could then be raised by the mother in the course of any proceedings before a judicial officer exercising the departure power under Division 4 of Part 7 of the Act.

There were a number of fallacies in that approach. Section 116 of the Family Law Act prohibits a person from making an application for a departure order unless there has first been an objection to the making or refusal of making of a departure determination by the Registrar. That prohibition does not apply if the person is a party to an application already pending in a court having jurisdiction under the Family Law Act and the court is satisfied that it would be in the interests of the parties to hear that application at the same time as any other pending application. It should be pointed out that the mother was making no application. Accordingly the prohibition did not exist.

If, on the father's application, the Court determined there was a proper basis for departure for administrative assessment then the Court was obliged by the provisions of s 117(4) to give attention to the matters therein contained which included the income, earning capacity, property and financial resources of each parent and the commitments necessary for those parents to support themselves and any other person they had an obligation to support.

The vagaries and machinations of the Income Tax Assessment Act and the deductibility of expenditure available to the parties would be of only coincidental concern in such an exercise. Taxation benefits available to one of the parties by reason of salary packaging would be an issue that the Court could properly give weight to and restructure a child support income amount that was appropriate in the circumstances. The notional adding back of income or the notional allowance of deductions to reach a satisfactory figure for the purposes of assessing child support would be only one method by which the Court could ultimately come to its conclusion.

Perhaps of more substance is the father's complaint that this exercise took place without fair notice to him. It does not seem to be a matter that was raised in final address before the trial Judge. The matter was first identified in cross examination of the father when he said:

"…I have an allowance, sir, of 6000 to cover me for motor vehicle use. And that allowance is typically used most years.
…
…there's a gross sum with a recognition that I will spend of the thirty six thousand in motor vehicle expenses for the year. It's not a separate sum added to the income declared."

There was no discussion about whether any of the motor vehicle expenditure paid by way of tax free allowance was actually utilised for private or business purposes. Clearly if it was being properly exercised for business purposes than it could not as readily be added notionally back into the father's income as it might otherwise be if it was simply a method utilised in an attempt to minimise taxable income without any real business expenditure involved. There just was not the evidence before the trial Judge about it and nor was it a matter ever suggested to the father that it would be an appropriate approach for the trial Judge to take so that he could address the issue on whether that outcome was open on the evidence.

Because we have accepted the income of the parties is comparatively similar we think that ultimately nothing turns upon this issue. The matter has been further complicated by the father's own admission that at least since June 2004 he has been without a motor vehicle and that any new remuneration package will have to reflect that situation.

Education Costs

The final ground sought to be agitated before us was the issue of precisely what orders for school fees ought to have been made by the trial Judge. The father correctly points out that his claim as identified by the trial Judge was for the payment of:

"school, college or apprenticeship fees, uniform costs, school camps and other documented school and educated (sic) costs from 1 July 2003 to the end of the child support period."

The order of the trial Judge was simply for the payment of one half of school fees (including arrears) at … School.

The father advanced no evidence before the trial Judge or before us as to what the difference was between the making of the two orders in dollar terms nor could he indicate to us how those expenses would have been any different had the children not been at a private school but had been within the public education system in which case it was conceded that the costs would normally be absorbed in the formula elements and the matters generally taken into account when assessing the children's proper needs.

In the circumstances we do not conclude that it is a matter upon which we would properly give leave nor can we indicate that his Honour made any particular error in the matter other than perhaps not having made specific reference to the difference between his order and the application that was before him.

Leave to appeal

An appeal from a single judge of the Family Court exercising jurisdiction under the Child Support (Assessment) Act 1989 lies only with the leave of the Full Court (s 102). The general principles that may be distilled from the decisions discussed at some length in Hendy v Deputy Child SupportRegistrar (2001) 164 FLR 236; 27 Fam LR 641 are that the order appealed from is not an order of practice and procedure but a substantive order. The principles applicable to appeals from interlocutory orders may be too restrictive for appeals against substantive orders made under the child support legislation. A less restrictive approach may be necessary where the order sought to be appealed involves substantive rights or liabilities in relation to child support. If a party’s substantive rights have been significantly affected by an error at first instance, then it would be appropriate to grant leave to appeal under the section.

In this case matters raised by the father concerning the adjustment of his car allowance make no such significant difference to the outcome so as to justify a grant of leave. In any event those matters are subsumed by the approach we have already indicated is appropriate.

As the trial Judge appears to have fallen into error in failing to properly evaluate the matters required of him under s 117(4) and give due recognition to the disparity in available capital during the relevant period, we propose to grant leave and allow the appeal.

Doing the best we can on the very limited material we have available to us, and having regard to the modest circumstances of the parties and the fact that on their income position only minimal if any child support would be paid, we conclude that an appropriate order is that the mother pay to the father for the period in question namely 1 July 2003 to 30 September 2004 the sum of $5000 towards the support of the children together with the school fees as ordered by the trial Judge.

The application for leave and the appeal will otherwise be dismissed.

Orders

1. The applicant have leave to appeal against order 3 of the orders made by the Honourable Justice Coleman on 14 May 2004.

2. The appeal be allowed.

3. Order 3 made 14 May 2004 be set aside and in lieu thereof it is ordered that the respondent mother pay to the applicant father for the period 1 July 2003 to 30 September 2004 the sum of $5000 towards the support of the children.

4. The Court grants to the applicant a costs certificate pursuant to the provisions of s.9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the applicant in respect of the costs incurred by the applicant in relation to the appeal.

5. The Court grants to the respondent a costs certificate pursuant to the provisions of s.6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.

FINN J

This is an application by the husband for leave to appeal orders concerning child support made by Coleman J on 14 May 2004.

The factual background to this matter is set out in considerable detail in the joint judgment of Bryant CJ and Kay J. For my purposes, it is sufficient to say that in proceedings in late 2001 concerning residence of the five children of the husband and the wife and property settlement Moore J ordered that the children should reside with the wife and that out of the net value of the parties’ property of approximately $300,000 the wife should receive an additional 20%, or approximately $60,000, on account of her responsibility for the children and the disparity in her earning capacity relative to that of the husband.

By the time of the hearing of the child support proceedings in which the orders which are the subject of the present application were made, two of the children had reached 18 years of age, another two of the children had moved to live with the husband and only one remained with the wife. At the time of that hearing there was also pending an application by the husband under s 79A of the Family Law Act 1975 (“the Act”) for a variation of the property settlement orders apparently based on the change in residence of some of the children.

As the Bryant CJ and Kay J explain in their joint judgment, one of the effects of Coleman J’s orders was to vary the child support income amounts of both the husband and the wife for the period 1 July 2003 to 7 November 2004 with the result that the wife was liable to pay child support for the two children who were residing with the husband for the period in question at an annual rate of $14.76. As their Honours also explain, in the event that the husband is granted leave to appeal and his appeal is successful, he seeks an increase in the amount of child support payable to him by the wife.

In their joint judgment (at paragraph 20) Bryant CJ and Kay J identify the four issues of substance which would arise on the husband’s proposed grounds of appeal if he was granted leave to appeal Coleman J’s orders. Those four issues are summarised by their Honours as follows: capital imbalance; education costs; the wife’s earning capacity; and the husband’s child support income.

As I understand their Honours’ position, they would only grant the husband leave to appeal on the basis of what they have termed the capital imbalance issue. I agree with their Honours that leave to appeal should not be granted on the basis of the other three issues. But, for my part, I would not grant leave to appeal even on the basis of the capital imbalance issue.

Coleman J dealt with the capital imbalance issue in the following terms:

63.The husband’s constant assertion that he “has nothing”, and, inferentially, “got nothing” from the orders made by Moore J in December 2001 does not advance his case. The husband, for good and sufficient reason, as Moore J explained in detail, was awarded approximately $90,000. His income at that time exceeded that of the wife several times over. No adjustment in the wife’s favour appears to have resulted from that. What the husband has done with the money since that time has been entirely of his choosing. The evidence before this Court does not establish that the wife has been unjustly enriched since the orders made by Moore J or that the husband has been “hard done by” in the period, either by anything done or not done by the wife or otherwise. Accordingly, the wife’s circumstances being no more than reasonable and modest, to have recourse to her capital to pay child support would be unjust.
64.As has been acknowledged earlier, nothing done in these proceedings derogates from the husband’s entitlement to pursue his s 79A application. Whilst s 117(2)(c) does not have the effect for which the husband contends, it does enable this Court to have regard to the reality that a proportion of the wife’s property settlement award was in respect of an obligation she does not now have. Of the $60,200 awarded to the wife by Moore J in December 2001, approximately $20,000 could be thus viewed. The evidence is sufficient to enliven the provisions of s 117(2)(c)(ii). To notionally adjust the wife’s income for child support purposes by a notional interest component would in the circumstances be appropriate. The difficulty is in determining an interest rate. A rate of approximately 3 per cent is paid by the Commonwealth Bank on a Cash Management Call Account, for between $20,000 - $49,999. Notional interest of $600 per annum could thus be added to the wife’s income for child support purposes. The wife would not pay tax on such interest given her business losses.

65.It follows that the wife’s income for calculation of child support should thus be regarded as $27,948 and that of the husband $36,000. The Child Support Agency will be directed to recalculate the entitlements of the parties for the disputed years on that basis.

It may well be that Coleman J was in error in his interpretation and application of s 117(2)(c)(ii) of the Child Support (Assessment) Act 1989 as discussed by the Chief Justice and Kay J in paragraphs 36 to 39 of their joint judgment and that the correct place or context for the Court to take into account “any imbalance in the capital structure of the parties” is contained in s 117(2)(c)(i) rather than s 117(2)(c)(ii).

However, even if this correct approach was employed with each party’s capital position being considered in the context of s 117(2)(c)(i), I am not persuaded that in the circumstances of this case, as described by Coleman J in paragraphs 63 and 64 of his judgment, it would be just to require the wife whose circumstances his Honour described as “being no more than reasonable and modest”, to have recourse to her capital (which in fact represents her home) to pay child support. Accordingly, in my view, no useful purpose would be served in granting the husband leave to appeal.

I certify that the 108 preceding
paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Full Court.

Associate

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Citations

Christian & Donald [2004] FamCA 1171

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DSK22 v DSL22 [2023] FedCFamC2G 870

Cases Citing This Decision

4

Bass & Bass and Anor [2014] FamCA 1000

Aspen & Selby [2007] FamCA 872

Berge and Berge [2013] FMCAfam 38

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Hendy v Deputy Child Support Registrar [2001] FamCA 632

[2004] FamCA 1171

21 December 2004

Key Legal Topics

Areas of Law

Civil Procedure

Administrative Law

Legal Concepts

Appeal

Judicial Review

Jurisdiction

Procedural Fairness

Standing