CRW and CML (No 1)
[2003] FMCAfam 235
•1 September 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CRW & CML (No. 1) | [2003] FMCAfam 235 |
| CHILD SUPPORT – Variation of periodic payment provisions of Child Support Agreement – husband asserts that he is unable to pay periodic payment amounts – need to show change giving rise to a ground of departure under s.117 of the Child Support (Assessment) Act 1998 – reference to provisions in Gebert (1990) FLC 92-137 by analogy – husband entered into Child Support Agreement of his own volition – parties’ desire to keep children at private schools shifts burden of meeting children’s day to day needs onto taxpayer – no relevant change demonstrated – no special circumstances – discussion of meaning and effect of Full Court decisions in Bryant (1996) FLC 92-690 and Wild v Ballard (1997) FLC 92-771. |
Child Support (Assessment) Act 1988
Child Support (Registration and Collection) Act1988
Luton v Lessels (2001) FLC 98-015
Gyselman (1992) FLC 92-279
Hides v Hatton (1997) FLC 92-759
Ross & McDermott (1998) 23 FamLR 613
Hallinan v Witynksi (1999) FLC 98-009
Liesert v Nutsch (1996) FLC 92-665
Bryant (1996) FLC 92-690
Wild v Ballard (1997) FLC 92-771
Gebert (1990) FLC 92-137
Gilmour (1995) FLC 92-591
| Applicant: | CRW |
| Respondent: | CML |
| File No: | MLM 9493 of 2002 |
| Delivered on: | 1 September 2003 |
| Delivered at: | Melbourne |
| Hearing Date: | 25 June 2003 |
| Judgment of: | Walters FM |
REPRESENTATION
| Counsel for the Applicant: | Ms Wheeler |
| Solicitors for the Applicant: | Eales & Mackenzie |
| Counsel for the Respondent: | Mr Cronin |
| Solicitors for the Respondent: | Marshalls & Dent |
ORDERS
The husband’s application filed 13 November 2002 be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 9493 of 2002
| CRW |
Applicant
And
| CML |
Respondent
REASONS FOR JUDGMENT
Introduction/Background
This is an application to vary a child support agreement.
The parties are the parents of N (born 10 September 1985) and T (born 15 December 1988). N and T are boys.
The husband was born in August 1953. The wife was born in August 1960. They married in May 1984 and separated in January 1999. They were divorced in June 2001.
In September 1999 the parties entered into a Child Support Agreement (“the Agreement”).
The Agreement records that N and T then resided with the wife. They still reside with her.
The relevant clauses of the Agreement are as follows:
1.The husband will pay by way of child support:-
(a) To the wife, $916.66 per month for each child (a total of $1,833.34 per month), such amount to be paid in advance on the 1st day of each month and to be adjusted on 1 July 2000 and each year thereafter in accordance with the inflation factor prescribed by the Child Support (Assessment) Regulations.
(b) One quarter of the cost of family health insurance at the existing level of cover.
(c) One half of the children’s pocket money.
(d) All education expenses, including (but not limited to) private school fees, uniforms, books, computers, public transport concession tickets (for travel to and from school), tutoring for T and extra-curricular activities (including camps, excursions, music lessons and sports).
(e) All psychiatrist’s fees incurred in respect of T for so long as it is reasonably necessary for him to continue seeing a psychiatrist.
2.In the event that the payments of the wife currently receives from Centrelink (by way of family allowance and parenting payment) are reduced upon one or both of the children attaining the age of 16 years, the husband will consider increasing the amount payable to the wife pursuant to paragraph 1(a) hereof.
3.The husband’s liability to pay child support pursuant to this Agreement for each of the children shall continue after the children attain the age of 18 years until they respectively complete their secondary education.
4.That the parties agree that the provisions of this agreement shall operate in place of any administrative assessment to which the husband may otherwise have been liable pursuant to the provisions of the Child Support (Assessment) Act 1989.
5.The payments made by the husband pursuant to this Agreement are to be credited against his liability under any relevant administrative assessment of child support as 100% of the annual rate of child support payable pursuant to such assessment.
6.It is agreed that the total of the non-periodic child support payable by the husband pursuant to paragraph 2 hereof has an estimated present annual value of $15,000.00.
7.This Agreement will cease to have any effect upon either child attaining the age of 18 years and discontinuing full-time secondary education.
It is common ground that the Agreement was appropriately registered with the Child Support Agency. On 6 January 2003 (and pursuant to the Order of the Chief Federal Magistrate made on that day) it was deemed to be filed in this Court.
On 13 November 2002 the husband filed an application to, inter alia, discharge the Agreement.
The wife filed a notice of intention to defend on 16 December 2002. On 4 March 2003 the husband filed an amended application. He was unrepresented at that time. The orders that he sought were as follows:
1.That the Child Support Agreement between the husband and the wife dated 16 September 1999 be discharged.
2.Discharge CRW from arrears calculated under the Child Support Agreement dated 16 September 1999, as they are unreasonable in relation to the husband’s income.
3.Order that further child support be assessed under the Child Support Agency Formula.
The matter came on for trial in June 2003. By that stage, the husband had obtained legal representation. The wife was also legally represented.
At the commencement of the hearing, counsel for the husband (Ms Wheeler) made it clear that the husband no longer seeks the orders set out in the amended application filed in March 2003. Relevantly, he no longer seeks that the Agreement be set aside or discharged. The husband’s case at trial was that the Agreement should be varied by “…setting the periodic payments as and from 26 February 2001 at an amount calculated by applying the Child Support Formula to the husband’s taxable income to result in a more just and equitable determination reflective of the husband’s income earning capacity, property and financial resources”[1].
[1] See part G of the husband’s Outline of Case Document
The husband’s case was presented on the basis that the only provision of the Agreement that the husband seeks to vary is clause 1(a). It was explained to me that although the husband seeks to reduce the periodic payments of child support referred to in clause 1(a) of the Agreement from the present level of something in excess of $1,833.34 per month to whatever would be generated by the application of the Child Support Formula to the husband’s overall financial position, in reality the husband seeks that the periodic payment be fixed in the sum of $1,003.00 per month – with effect from 26 February 2001. The husband also seeks that all arrears be effectively discharged, but he does not seek to recover from the wife any amounts that he may ultimately be found to have overpaid her.
Both boys attend independent schools, and Ms Wheeler confirmed that it has been agreed between the parties that the boys will complete their education at the schools that they now attend, and that the husband will continue to meet their education expenses as provided for in clause 1(d) of the Agreement.
In broad terms, the thrust of the husband’s case is that he cannot afford to meet the various payments that the Agreement obligates him to meet. He is willing to continue to pay all education expenses for the boys, but seeks that the quantum of periodic child support for which he is liable pursuant to clause 1(a) of the Agreement be reduced to $1,003.00 per month (from something in excess of $1,833.34 per month). The husband is prepared to meet all the other expenses referred to in the Agreement. To the extent that arrears have accumulated since 26 February 2001 – which is the date upon which the husband unilaterally reduced his payments of periodic child support from the amount referred to in clause 1(a) of the Agreement to $1,003.00 per month – then those arrears should be discharged.
The wife argued that the husband’s application should be dismissed.
Documents Relied Upon
The husband relied upon the following documents:
a)his amended application filed 4 June 2003;
b)his affidavits sworn 17 April 2002, 4 March 2003 (two affidavits were sworn by the husband on this day) and 6 June 2003; and
c)his financial statement sworn 24 June 2003.
The wife relied upon her affidavit sworn 6 January 2003 and her financial statement sworn 2 June 2003.
The husband provided an Outline of Case Document (dated 24 June 2003).
The Husband’s Evidence
The husband is an interior designer. He is the sole director and shareholder of CRW Design Pty Ltd (“the Company”). The husband’s interior design consultancy is conducted by the Company, which the husband conceded is his alter ego.
The Company employs the husband – and others.
The Company’s financial statements for the years ended 30 June 1999, 2000, 2001 and 2002 were attached to the husband’s financial statement. The 1999 accounts record the 1998 figures by way of comparison.
The various profit and loss statements reveal that the Company’s gross income from professional fees for each of the years from 1998 to 2002 was as follows:
Year Income 1998 $258,830.00 1999 $166,581.00 2000 $250,100.00 2001 $167,932.00 2002 $253,417.00
I note that the Company’s financial statements for the year 2000 record gross professional fees of $184,015.00 for that year. The amount of $250,100.00 referred to in the above table appears in the comparative figures for the year 2000 in the 2001 profit and loss statement for the Company.
The same financial statements reveal that, after taking into account all expenses, the Company made a profit (or loss) for each of the above years as follows:
Year Profit / Loss 1998 $62,241.00 1999 ($39,320.00) 2000 $84,538.00 2001 ($66,118.00) 2002 $15,736.00
Again, I note that the company’s financial statements for the year 2000 record the net profit for that year as $18,454.00. I also note that the company’s income tax return for the year 2000 records that its net profit was $18,453.00. The amount of $84,538.00 referred to in the table in paragraph 24 above is sourced in the comparative figures for the year 2000 in the 2001 profit and loss statement for the company.
The husband’s personal income tax returns reveal that his taxable income for the years 1999 to 2002 was as follows:
Year Income 1999 $49,810.00 2000 $45,173.00 2001 $52,571.00 2002 $52,306.00
The husband’s “salary” for the financial years 1999 and 2000 was $50,000 per annum. It increased to $57,500.00 in 2001 and $60,000.00 in 2002. The table in paragraph 26 above records that the husband’s taxable income was lower or significantly lower than his income in each of the relevant years.
During the course of her opening, Ms Wheeler reviewed certain of the above figures and submitted that if items such as depreciation and motor vehicle expenses were to be removed from the company’s expenses for the financial years 2000, 2001 and 2002, and if the Company’s net profit (or loss) was to be treated as income available to the husband (or, alternatively, the husband’s liability), then it could be seen that the husband had available to him the following amounts (before tax) in each of the relevant financial years:
Year Income 2000 $82,486.00 2001 $70,120.00 2002 $93,626.00
Ms Wheeler also argued that the application of the child support formula to the above figures would lead to the conclusion that the amount of child support for which the husband is liable pursuant to the Agreement is far in excess of the amount that he would have to pay if the formula were to be applied to those figures.
I did not understand Mr Cronin (for the wife) to suggest that Ms Wheeler’s mathematics were incorrect. Nor did he submit that Ms Wheeler’s analysis of the husband’s comparative obligations under the Agreement (on the one hand) and pursuant to a notional application of the child support formula (on the other) was incorrect. He argued, however, that the husband had committed himself to the financial obligations inherent within the Agreement, and that no grounds exist to relieve him from those obligations.
The husband confirmed that the boys live primarily with the wife. It was not in dispute that he has “substantial contact” with both boys – totalling not less than 110 days per year.
It is apparent[2] that the husband has paid a total of approximately $133,500.00 towards child support, education and other expenses for the boys over the period of approximately four years leading up to
31 December 2002. The husband pointed out that his payments for the boys average approximately $33,375.00 per year. It is likely that the total amount that he will pay in the 2003 financial year will be approximately $27,500.00.
[2] The amounts that the husband has paid are summarised in an annexure to his affidavit sworn 4 March 2003. The figures are not in dispute.
Notwithstanding the terms of the Agreement, the husband has been paying $1,003.00 per month by way of periodic child support for the boys since February 2001. This payment is some $10,000.00 per annum less than he is obliged to pay pursuant to the Agreement. The husband has continued to meet the educational and other expenses set out in the Agreement.
According to the husband, the unilateral reduction in the payment of periodic child support was made:
“… because my level of income together with my financial commitments could no longer sustain the amount payable pursuant to the agreement”.
The husband asserted that his financial circumstances were “becoming dire” in February 2001:
“I was going further into debt with the Australian Taxation Office. I was meeting my child support payments from money I needed to pay tax and other commitments like superannuation and Workcover insurance.” [3]
[3] See paragraph 16 of the husband’s affidavit sworn 6 June 2003.
In his final affidavit, the husband said that he has:
“… necessary financial commitments that limit (his) capacity to pay the full amount of child support provided for in the Agreement”.
Particulars of that assertion are contained in paragraph 19 of the affidavit. Relevantly, the husband deposes that, since the Agreement was entered into, debts (including debts to the Australian Taxation Office) have increased from approximately $30,000.00 to approximately $112,000.00.
In paragraph 22 of the husband’s final affidavit, he asserts that the Agreement:
“...has resulted in an unjust and inequitable determination of the level of financial support...”
provided by him for the children because of his income earning capacity, property and financial resources. The husband provides particulars of this assertion in sub-paragraphs (a) to (f) of paragraph 22. Amongst other things, the husband asserts that he “can now see” that at the time that he entered into the agreement he was “pressured” into agreeing to the level of contribution that he was to make for the support of the children. The husband says that he did not have legal advice during the negotiation process (as he wanted to save on legal costs so that he could better provide for the children). Further, he was emotionally distraught and feeling very guilty for the breakdown of the marriage.
During the course of his evidence, the husband referred to two documents – which became exhibits “H1” and “H2”. The first is a statement from the Australian Taxation Office (“the ATO”) addressed to the Company. It reveals that the Company owes the ATO $112,980.82 – for, amongst other things, outstanding goods and services tax and PAYG instalments. The second document is an Adjustment Demand Notice from CGU Workers Insurance. Again, the notice is addressed to the Company. It records that the Company owes $7,844.10 to its workers compensation insurer.
The husband said that he seeks the opportunity to “trade out” of the Company’s present financial predicament. His intention is to obtain a loan from a financial institution in order to pay part of the Company’s liability to the ATO, and thereby reduce the interest that is accruing. The present arrangements between the Company and the ATO require the Company to pay its total tax liability at the rate of $6,000.00 per month. By restructuring the Company’s liabilities, the husband hopes to obtain more “value” (as it were) for a similar overall payment.
The husband is hopeful that he will increase the revenue flow of the Company by engaging in more profitable contracts. On the other hand, the husband said that he does not know whether he can increase the Company’s income substantially. That is so because, according to the husband, the Company’s income earning capacity is currently “…at about saturation point”.
The husband said that the restructuring of the Company’s liability to the ATO “won’t make a huge difference”, and that the only way to improve the Company’s overall financial position is for the husband to reduce his personal drawings.
The husband asserted that he had not paid the Company’s tax debts as and when they fell due “…because of lack of cash flow”.
The husband’s assets and liabilities are listed in his financial statement. The most significant assets are a property in Dunolly (in country Victoria) and his interest in the Company. The husband also has household effects worth approximately $20,000.00.
The husband lists a number of significant liabilities in Part E of his financial statement. Some of the liabilities attached to the Company are included by the husband in his financial statement because the husband is ultimately liable for them. The debt to the ATO appears in the financial statement, as does the CGU Workers Insurance debt. The husband also refers to a debt of $6,167.00 to Esanda Car Finance and a personal loan to the Commonwealth Bank in respect of which $3,920.00 is owing.
The husband resides in rented premises. He pays $250.00 per week rent.
The Wife’s Evidence
The wife affirmed the matters deposed to in her affidavit and financial statement. She was not cross-examined at any length, and I have no reason not to accept her as a witness of truth.
The wife accepted the accuracy of a summary prepared by the husband of the amount that he has paid for the boys. Further, she confirmed that she did not dispute the accuracy of the fees and expenses of the Company as recorded in its financial statements.
As far as the wife is concerned, the boys’ schooling “comes first”. She appeared willing to accept any order that would have the effect of ensuring that the husband continues to pay for the boys’ educational expenses as required by the Agreement.
In her affidavit, the wife confirmed that the parties had intended – at all relevant times – that their children be educated at private schools. N has attended a private school since 1995. T has attended a private school since 2000.
N presently attends De La Salle College. He is in year 12.
N moved from Xavier College to De La Salle at the end of 2000.
The reasons behind N’s change of school from Xavier to De La Salle are set out in paragraphs 11 to 16 of the wife’s affidavit. Those reasons are not in dispute, but are not directly relevant to the matters in issue in the proceedings now before me. Suffice it to say that the parties agree that N should complete his secondary education at De La Salle.
T is in year 8 at St Kevin’s College. He has been at St Kevin’s since year 5.
T suffers from “diagnosed separation anxiety, primarily from (the wife)”.
The reasons why T should continue at St Kevin’s are explained by the wife in paragraphs 17 to 29 of her affidavit. Once again, they are not in dispute. The parties agree that T should complete his secondary education at St Kevin’s.
The wife is a sales person in a clothing boutique. She works “… full-time five days per week from 8:30 a.m. to 5:30 p.m. on a roster system”. The wife stated in her affidavit that she does not have the ability to earn more income than she currently earns, or to work more hours and still have time to be available for the boys. She was not cross-examined on this statement, and I have no reason not to accept its accuracy. I find, therefore, that the wife is presently exercising her earning capacity in an appropriate manner.
The wife earns approximately $615.00 per week from her employment. Her Form 17 reveals that she also receives a “family assistance and parenting payment” and “youth allowance”. Her employer contributes $55.00 per week in respect of her superannuation entitlements.
N has a part-time job and earns approximately $90.00 per week.
The wife has very few assets. Like the husband, she lives in rented premises ¾ in respect of which she pays something in the order $340.00 to $360.00 per week. She has a motor vehicle (worth approximately $1,200.00) and furniture, chattels and effects worth approximately $11,500.00. She owes more than $26,000.00 to “family and friends”. Her superannuation entitlements are modest (amounting to approximately $8,300.00).
In Part G of her Form 17, the wife sets outs her average weekly expenses as they relate to herself and the boys. Ignoring her rent and income tax, the wife asserts that her total average weekly expenses for herself and the boys amount to $723.00. Of that sum, $430.00 is attributable to the boys. Once again, the wife was not cross-examined on these figures and I find that the wife’s average weekly expenses for the boys (excluding their share of the rent) is $430.00.
It is apparent from the wife’s Form 17 that there is a significant shortfall between the wife’s income and her expenditure. Ignoring the contributions made by the wife’s employer to her superannuation fund and the child support presently paid by the husband, but including the amounts referred to by the wife as being by way of “family assistance and parenting payment” and “youth allowance”, it is apparent that the wife’s gross weekly income is $759.00. Her expenses (for herself and the boys) – including rent and income tax – amount to approximately $1,200.00 per week. It follows that the shortfall between the wife’s income and expenditure is something in the order of $441.00 per week. Indeed, the wife anticipated that her rent would increase from late June 2003 – and hence the shortfall is likely to be at least $450.00 per week.
It is immediately apparent from the above figures that the wife is living well beyond her means. In order to “break even”, she must receive from the husband close to or more than the amount that he is currently required to pay pursuant to clause 1(a) of the Agreement.[4]
[4] Particularly when regard is had to the fact that the wife's income includes "pensions, allowances or benefits" from the Government.
Of significance, of course, is the fact that the wife’s expenses for the boys exclude the education expenses for which the husband is liable under agreement.
The Dunolly Property
The Dunolly property is worth approximately $135,000.00. It is encumbered by a mortgage in respect of which approximately $108,000.00 is owing.
The husband pays $155.00 per week in respect of the mortgage encumbering the Dunolly property.
The husband said that the Dunolly property was purchased “approximately two years ago”. It was purchased at a time when the husband had a tax debt. According to the husband, the tax debt was “not as substantial then as it is now” and was “under control”. In order to purchase the property, the husband “put in $30,000.00 from the operations of the Company”.
It would appear that the husband purchased the Dunolly property on the basis that it could be leased. It is not now tenanted. The husband goes to the house on a regular basis — and sometimes with the boys. As I understand the husband’s evidence, the Dunolly property is comfortably (although not lavishly) furnished and is used by him as a “retreat” from his city unit.
The husband was cross-examined upon various other aspects of his financial position. For example, the husband was asked why his motor vehicle expenses (being “fuel, oil and maintenance” as recorded in the Company’s 2002 profit and loss statement had more than doubled in a period of 12 months. The husband replied that he had had his vehicle serviced twice, and had paid for two broken windscreens. As well, he had used the vehicle to travel backwards and forwards to the Dunolly property. Although the husband later said that he has a client or clients in the area, I find that his trips to and from the Dunolly property were, almost invariably, for his own private purposes.
The Law
The Commonwealth’s legislative scheme for assessment and enforcement of child support liabilities is contained in the Child Support (Assessment) Act 1988 (which I shall call the “Assessment Act”) and the Child Support (Registration and Collection) Act1988. Certain aspects of this scheme were considered by the High Court in Luton v Lessels (2001) FLC 98-015. In that case, Gaudron and Hayne JJ said (at page 95,659):
“The Assessment Act records that the ‘parents of a child have the primary duty to maintain the child’. This duty is said, by the Assessment Act, (a) to be not of lower priority than the duty of the parent to maintain any other child or another person: (b) to have priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself and any other child or another person the parent has a duty to maintain: (c) to be not affected by the duty of any other person to maintain the child or any entitlement the child or another person may have to an income tested pension, allowance or benefit. …The principal object of the Assessment Act is said to be ‘to ensure that children receive a proper level of financial support from their parents’.
Part 5 of the Assessment Act (ss 35-79) provides for the administrative assessment of child support. “Child support” is defined as “financial support under [the Assessment] Act, including financial support under [the] Act by way of lump sum payment or by way of transfer or settlement of property”. An administrative assessment of child support requires the application of one or more of several statutory formulae that is, or are, apposite in the particular circumstances. Section 79 of the Assessment Act provides that ‘an amount of child support due and payable by a liable parent to a carer entitled to child support is a debt due and payable by the liable parent to the carer’…
Where there has been an administrative assessment, both the liable parent and the carer may lodge with the Registrar an objection against the assessment. A person aggrieved by a decision on the objection may, pursuant to section 110 of the Assessment Act, appeal to a court having jurisdiction under that Act.”
In the same case, Gleeson CJ said (at page 95,653):
“The objects of the Assessment Act are set out in section 4. The principal object is to ensure that children receive a proper level of financial support from their parents. To that end, the Act provides for a level of support to be determined in accordance with legislatively fixed standards, and permits carers of children to have the level readily determined without the need to resort to court proceedings.
…It may be observed that, although the legislation is enacted in furtherance of a clearly defined public policy, it creates a distinctly personal liability. The natural and moral obligation of the parent to support a child becomes, by force of the legislation, a legal obligation reflected in a debt, calculated in accordance with the Assessment Act, owing by a parent to a carer of the child.”
Gaudron and Hayne JJ continued (at page 95,663):
“Part 7 of the Assessment Act (ss 99–146) deals with the jurisdiction of courts under the Act. In particular, provision is made for applications to a court for a declaration about the applicability of the administrative assessment provisions. Provision is made for what are called “appeals” against incorrect administrative assessments and for orders for departure from administrative assessment. (The reference to “appeal”, although similarly used in other contexts, may mislead. The proceeding which is so described is the first application of judicial power; it is an exercise of original, not appellate jurisdiction.) An order by a court for departure from an administrative assessment may be made on the grounds on which the registrar may make a departure determination…”
The process involved in the consideration of an application for departure from the administrative assessment of child support was explained by the Full Court in Gyselman (1992) FLC 92-279 at 79,064-5, under the heading “Division 4 – Orders for Departure from Administrative Assessment in Special Circumstances”. The Full Court said (inter alia):
“Section 117 is the critical provision.
The structure of that section is that s.117(1)(b) identifies concisely the matters about which the Court must be satisfied and those components are then expanded in subsections (2) to (9). Section 117(1)(b) identifies a clear three-step process:
1. Whether one or more grounds of departure in s.117(2) is established.
2. Whether it is ‘just and equitable’ within the meaning of s.117(4) to make a particular order.
3. Whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order.
It is clear from the careful way in which s.117 has been structured that the Court must address each of those three separate issues...
…Each of those grounds (in s.117(2)) is prefaced by the words, "in the special circumstances of the case". Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases. (It has been held) that "special circumstances" were "facts peculiar to the particular case which set it apart from other cases". The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.”
In Hides v. Hatton (1997) FLC 92-759, the Full Court said (at 84,352):
“It was also made clear in Gyselman that when the Court is considering whether it is just and equitable within the meaning of s.117(4) to make a particular order, the Court is required to undertake the task of considering the matters set out in paragraphs (a) to (g) of that sub-section, and in this regard the Full Court said as follows (at 79,078):
‘However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).’
The Full Court also made it clear in its decision in Gyselman that similar considerations apply to the Court’s determination as to whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order (see at 79,080), and furthermore and very relevantly for present purposes the Full Court emphasised the importance of trial Judges providing adequate reasons for judgment in order to ensure a proper exercise of the discretion under s.117 (see at 79,080).”
In the same vein, a differently constituted Full Court…in Ross & McDermott (1998) 23 FamLR 613 at 623-4 (paragraph 39) said this:
“n our view a practical and flexible approach should be adopted to the task of considering these s 117(4) and (5) matters, that is an approach similar to that which this court has long adopted to the ‘s 68F(2) matters’… in child-related proceedings under the Family Law Act 1975 (Cth), and to the ‘s 79(4) matters’ and ‘s 75(2) matters’ in property settlement proceedings under that Act. Accordingly, we consider it is unnecessary to make any reference to those s 117(4) and (5) matters which have no real relevance in the circumstances of the particular case. We also consider that it would be permissible to group together and consider as a whole, those relevant matters which by their nature lend themselves to such an approach in the circumstances of the particular case, and in the case of those matters which are required to be considered under more than one subsection of s 117, to examine such matters only once, although they may need to be taken into account under more than one subsection.”
In Hallinan v. Witynski (1999) FLC 98-009, the Full Court said:
“As the judgment of the Full Court…in Hampson v. Lightfoot (1997) FLC 92,775 at 84,560-1 demonstrates, the reasons for answering the two questions posed by s.117(1)(b)(ii) need not be elaborate, but the task of considering, at least broadly, the matters referred to in s.117(4) and 117(5), respectively, and then making a finding as to satisfaction or otherwise in relation to the relevant matter, must be undertaken as a necessary part of the exercise of discretion imposed on the Court by s.117(1).”
It is important to note that the husband is not seeking to vary or discharge his obligation to pay school fees. He seeks only to vary the periodic payments referred to in clause 1(a) of the Agreement.
Section 95 (2) of the Assessment Act provides that periodic payments due under a child support agreement are to be treated as if they are due pursuant to an order made by consent under Division 4 of Part 7 of the Assessment Act.
Section 95(3) of the Assessment Act states that provisions in a child support agreement under which child support is to be provided in a manner otherwise than in the form of periodic amounts to be paid to the carer entitled to child support are to have effect as if they were an order made by consent under s.124 of the Act.
Because the husband only seeks to vary the periodic payments referred to in clause 1(a) of the Agreement, s.95(2) has relevance to the present application, whereas s.95(3) does not.
Section 98 of the Assessment Act states that the provisions of a child support agreement may be “discharged, suspended, revived or varied by the court in the same manner and in like circumstances as the Court could discharge, suspend, revive, or vary an order of that kind made by it”.
In order to vary a consent order made under the provisions of Division 4 of Part 7 of the Assessment Act, a Court must be satisfied that a ground for departure mentioned in s.117(2) of the Act exists, and that it would be “just and equitable” and “otherwise proper” within the meaning of s.117(4) and (5), to make an order changing an existing order.[5]
[5] See Gilmour (1995) FLC 92-591
The law in relation to the variation of the periodic payment provisions of a child support agreement is set out in Liesert v Nutsch (1996) FLC 92-665, Bryant (1996) FLC 92-690 and Wild v Ballard (1997) FLC 92-771. After referring (somewhat cynically, it seems) to fans, fogs, dust and horizons[6], the Full Court in Bryant observed that it is now:
“…beyond doubt that it is necessary for the Court in determining an application to vary the periodic payment provisions of a child support agreement, to proceed according to the provisions of s. 117(2) of the Assessment Act, and that no regard is to be had to other statutory provisions…which require a change of circumstances to be established before an order for child or spousal maintenance, or child support in a form other than periodic cash, can be varied.”[7]
[6] See the passage from Liesert v Nutsch at p. 83,163 of Bryant
[7] See Bryant (1996) FLC 92-690 at 83,164
But the Full Court in Bryant continued as follows[8]:
"It must however be recognised that once an order has been made departing from an administrative assessment, before there can be a variation of (or “departure” from) that existing order, it must be established to the Court’s satisfaction, that since the making of the existing order circumstances have arisen as a result of which the financial capacity of either party is now significantly reduced (s. 117(2)(a)), or the costs of maintaining the child have been affected (s 117(2)(b)) or the existing order now results in an unjust and inequitable determination of child support (s. 117(2)(c)). There is nothing in Gilmour to suggest to the contrary.
In the case of a child support agreement which has been accepted by the Registrar, and which provides for the payment of periodic child support, such an agreement takes effect as a departure order made by consent (s. 95(2)), and before the agreement can be varied by the Court, the Court must, again in our view, be satisfied that there has been some change which would give rise to one of the grounds for departure in paragraphs 117(2)(a),(b) and (c). Again, there is nothing in Liesert v Nutsch to the contrary.
If the situation was not as we have just proposed in the last two paragraphs, there would be nothing to stop a party who did not accept the terms of a departure order from immediately approaching the Court to have the matter re-heard, or to stop a party who thought better of the agreement which he or she had made, immediately seeking to vary the agreement.” (Emphasis added)
[8] See page 83,169-70
Thus, when dealing with the husband’s application for a reduction in his obligation to pay periodic child support as required by the terms of the Agreement, the Court must determine at the outset whether, by reason of a change of circumstance, a ground for departure exists. The Court must then determine whether it would be just and equitable, and otherwise proper, to make an order varying the arrangement described in the Agreement.[9]
[9] See Wild v Ballard at pp 84,492-3
To the extent that s.117 speaks of concepts such as “grounds for departure” and “administrative assessment of child support”, the Full Court in Bryant[10] confirmed that s.117 must “…be interpreted and applied uniformly and consistently in all cases…”. It does not matter whether the application before the court is for an initial variation from administrative assessment, or for a variation from an existing departure order, or for a variation of the periodic payment provisions of a child support agreement. Relevantly, the reference to “administrative assessment” in s.117(2)(c) does not preclude that sub-section from operating where an application is made to vary periodic payment provisions of a Child Support Agreement.[11]
[10] At page 83,169
[11] See Bryant at page 83,168
Discussion
The thrust of the husband’s case (leaving aside, for the moment, the question of whether or not he was pressured in some way to enter into the Agreement) is that he does not now have - and probably has never had - the capacity to pay the quantum of periodic child support required of him by the terms of the Agreement.
The husband’s capacity to pay is not the sole criterion by which the level of child support is to be determined. This Court must consider:
“…whether the level (of child support) that the parties had agreed upon was unjust or inequitable within the meaning of the legislation having regard (inter alia) to any change in the parties’ circumstances since the level was agreed upon, and the general financial circumstances of the parties, including the needs of the husband to maintain himself.”[12]
[12] See Wild v Ballard (1997) FLC 92-771 at 84,494
Mr Cronin (for the wife) quite properly drew the court's attention to the objects of the Assessment Act as they appear in s.4. Relevantly, he referred to s.4(3) subtitled “Private Arrangements for Financial Support”. The subsection reads as follows:
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.
This is an important provision, which suggests that a court should not lightly interfere with an agreement voluntarily entered into between the parties. Clearly, the Court must proceed to consider the husband’s application in accordance with established principles of law. Those principles include a requirement that the Court determine:
a)Whether, by reason of a change of circumstance, a ground for departure exists; and
b)thereafter, whether it would be just and equitable, and otherwise proper, to make an order departing from the periodic payment provisions of the Agreement.[13]
[13] See Wild v Ballard at pp 84,492-3
I am acutely aware of the differences between an application under s.79A of the Family Law Act and the application in the present proceedings. Amongst other things, the criteria which must be established in order to vary or set aside a property settlement order are very different from those which must be applied in a case such as the present one. As well, property settlement orders have a finality that orders relating to children (and child support) do not share. For all that, it seems to me that a limited analogy can be drawn between an application to vary or set aside a property settlement order made by consent and the present application. Although this is not an analogy that I wish to either distort or over emphasise, it does seem to me that certain passages from the Full Court's decision in Gebert (1990) FLC 92-137 are pertinent to the current proceedings.
In Gebert, the husband signed a Minute of Consent Orders relating to property settlement which had been prepared by the wife's solicitors. The husband understood the effect of the orders, and deliberately chose not to seek legal advice. The consent orders provided for the husband to receive something less than 10 percent of the matrimonial property, when his actual or probable entitlement (had the matter proceeded to trial) was something in the order of 40 percent. The husband's decision to accept less than that to which he was reasonably entitled appeared to be motivated by a desire to show the wife that their marriage was at an end.
The husband later repented of his decision and sought to have the consent orders set aside under s.79A(1)(a), on the ground that there had been a miscarriage of justice arising from the circumstances surrounding the making of the orders.
During the course of its Reasons, the Full Court made a series of observations:
·Although the acceptance by the husband of something in the order of 25 percent of his probable entitlement might lead the Court to infer that he had acted under duress, in ignorance or as a result of incompetent advice[14], no such inference could be drawn in the present case as the husband had provided a full explanation as to how the particular transaction had come about.
·The husband took conscious decisions knowing their effect, which decisions brought about the making of an order detrimental to his interests.
·The husband's motivation was that he wished to make it clear to the wife that the marriage was at an end, and at the time that he entered into the agreement, he was prepared to pay the financial price of doing so.
·The husband was given an opportunity to seek legal advice which he deliberately chose not to do — and it can be inferred that he chose not to do so because he was well aware that he was agreeing to accept an amount well below his entitlement at law.
·The husband was subjected to no pressure of any kind from the wife — who not only acted entirely properly, but went out of her way (as did her solicitors) to suggest to the husband that he should get legal advice.
·There was clearly no inequality between the parties (such as may have permitted the wife to make unconscientious use of a superior position or bargaining power).
·At best, the husband could argue that he was under some emotional stress and that the agreement was entered into at a time shortly after the break-up of the marriage, which would have exacerbated this emotional stress.
[14] See Holland & Holland (1982) FLC 91-243
The Full Court's conclusion in Gebert was as follows:[15]
“The very expression ‘miscarriage of justice’ used in s. 79A(1)(a) does not fit happily with the concept of a party of full age and with full knowledge of the circumstances entering into an agreement of this nature in circumstances where he had deliberately decided not to seek legal advice, although urged to do so. No doubt had the situation brought about by the order been imposed upon him, it may have amounted to a miscarriage of justice but the law fortunately still allows persons to form their own views as to the arrangement of their affairs. In the present case, there appears to be no doubt that this is precisely what the husband did. The fact that he later repented of that decision in no sense elevates his original decision to consent to such an order to a miscarriage of justice, nor should such order in our view be interfered with. On the contrary, we would regard it as a considerable miscarriage of justice from the wife's point of view if the husband's then conscious decision entered into free of duress was now to be interfered with on a paternalistic view as to what might or might not have been in his best interests.”
[15] See page 77,937
As part of his assertion that the Agreement has resulted in an unjust and inequitable determination of the level of financial support provided by him for the children because of his income earning capacity, property and financial resources (see s.117(2)(c)), the husband in the present case deposed to the following:[16]
(b)Within a week of the separation, I was approached by the Respondent Wife's stepfather, Mr H. He is an accountant and had assisted the Respondent Wife and me in the financial management of my interior design business. Mr H presented me with a schedule of maintenance costs for the Respondent Wife and children. It covered her expenses as well as those of the children. ..
(c)Over the next 6 to 8 months, I met regularly with the male members of the Respondent Wife's family, including her father, stepfather and brother-in-law in relation to settling financial matters between the Respondent Wife and me. I can now see that at the time I was pressured into agreeing to the level of contribution I was to make for the support of the children and the Respondent Wife. I did not have legal advice during the negotiation process as I wanted to save on legal costs so that I could better provide for the children. I was emotionally distraught and feeling very guilty about the breakdown of the marriage.
(d)I did have legal advice immediately before signing the Agreement produced by the Respondent Wife's solicitor. I was advised that the level of periodic support was reasonable based on my estimated annual gross income at the time of $80,000.00 to $90,000.00 but the education expenses and medical insurance on top of that was onerous. I signed the Agreement against the legal advice I had as I thought erroneously that I could manage and I wanted to pay for the children's schooling and have them know in the future that I had paid for it. I was reassured by the advice I received from the solicitor I consulted that the Agreement could easily be varied if it proved to be too onerous.
[16] See paragraph 22(b), (c) and (d) of the husband's affidavit sown 6 June 2003.
As in Gebert, the husband has provided a full explanation of how it came about that he entered into the Agreement. He made conscious decisions, knowing their effect. He was well aware that he could have obtained legal advice at any time, but elected not to do so until shortly before the signing of the Agreement. He was advised that the level of periodic support was reasonable (based on his own estimate of his annual gross income at the time), but that the requirement that he pay education expenses and medical insurance over and above that amount was onerous. He signed the agreement against the legal advice that he had obtained, and he did so because:
a)he thought he could "manage"; and
b)he wanted to pay for the children's schooling "…and have them know in the future that (he) had paid for it".
The advice that the husband received from his solicitor to the effect that the Agreement "could easily be varied if it proved to be too onerous" did not cause the husband to sign the Agreement. It merely "reassured" him.
I do not accept that the husband was subjected to any inappropriate pressure by the wife, or by anyone else on her behalf. The husband provided no particulars of the manner in which he asserts that he was pressured.
There was clearly no inequality between the parties (such as to permit the wife to make unconscientious use of a superior position or bargaining power).
As in Gebert, the most the husband can argue is that he was under some emotional stress at the time the negotiations took place. There appears to be no suggestion, however, that he was under the same degree of stress at the time that he actually signed the Agreement.
Of most significance, however, is the husband's to the effect that he was advised that the level of periodic support was reasonable based on his estimated annual gross income at the time of $80,000.00 to $90,000.00, but that the education and other expenses on top of that were "onerous". The figures provided to the Court by Ms Wheeler during the course of her opening (and referred to in paragraph 28 above) reveal that the husband's estimate of his likely annual gross income (in a broad, notional sense) was a fair one. It follows that an assessment of periodic child support based on such an income could not (on the husband's own case) be considered unreasonable. Instead of the husband seeking to avoid responsibility for the educational and other expenses to be paid by him “on top” of that amount, however, he seeks to reduce the periodic payment component of his obligation. In so doing, it is apparent that the husband still wants to pay for the children's schooling and, no doubt, to have the children know in the future that he has paid for it.
Although the wife seeks that the husband's application be dismissed, her preference remains that if some reduction is to occur, then it should occur in the quantum of the husband's periodic payments – and not in the area of educational expenses.
In my opinion, the attitude of both parties is extraordinary. They have modest assets (indeed, the wife has very few assets), and both live in rented accommodation. The wife's income is modest, and the husband has very significant liabilities – which he is struggling to meet. Notwithstanding their respective financial positions, the parties would – metaphorically speaking – prefer to give their children a private school education than to ensure there is sufficient food on the table for them. If the structure of the orders sought by the husband is to be adopted, then it is likely that the taxpayer will have to bear a substantial proportion of the burden of meeting the boys' day to day living expenses – whilst they continue to attend private schools.
Change / “Special Circumstances”
When regard is had to the whole of the evidence presented by the parties, and relevantly to:
a)the circumstances surrounding the husband's decision to enter into the Agreement (as referred to in paragraphs 95 to 101 above);
b)the fact that there has been no identifiable “change” which would give rise to one of the grounds for departure in s.117(2) of the Assessment Act;
c)the fact that I am unable to identify any “special circumstances” associated with the case, beyond the fact that the husband is encountering considerable difficulty in meeting his obligations pursuant to the provisions of the Agreement; and
d)the fact that the husband saw fit to purchase the Dunolly property in the circumstances described in paragraphs 64 to 67 above, and that he continues to make payments in respect of it,
I am not satisfied that the provisions of the Agreement should be interfered with in any way whatsoever.
I find that there has not been any “change” which would give rise to one of the grounds for departure referred to in s.117(2) of the Assessment Act. Quite apart from the matters referred to in the previous paragraph of these Reasons, it appears that there has been no relevant “change” from the situation as it adhered at the time that the Agreement was entered into. The husband was advised at that time that although the periodic payment provisions of the Agreement were reasonable or acceptable, the obligation to pay educational and other expenses “on top” was not. The fact of the matter is that, on the husband's own case, it could still be considered reasonable for the husband to make the periodic payments as referred to in the Agreement if he did not have to pay the educational and other expenses as well. The husband's response to the dilemma is not to seek to be relieved from the obligation of having to pay the educational and other expenses, but to seek to reduce the periodic payment itself. The husband was not prepared to take that step when he entered into the Agreement, and he is still not prepared to take it.
In my opinion, there is no reason why the husband cannot sell the Dunolly property, and use the proceeds from the sale to meet the educational expenses for the boys during their remaining years of secondary school. After all, N will soon be 18, and will complete his secondary education at the end of 2003.
I have not ignored the general financial circumstances of the parties, or the needs of the husband to maintain himself. I have already discussed the former in these Reasons, and the latter is unlikely to be affected by the order that I have foreshadowed. The husband could have walked away from the purchase of the Dunolly property, but he did not. He could have sold the Dunolly property well before now, but he did not. And he could have sought to vary the Agreement well before now, when N has almost completed his secondary education. But he did not do that.
“Just and Equitable”
Even if I am wrong in concluding that there has been no “change” giving rise to one of the grounds of departure in s.117(2), and even if "special circumstances" could be identified, I am firmly of the view that it would not be just and equitable as regards the child, the carer entitled to child support and the liable parent to make the orders sought by the husband. In that regard, s.117(9) makes it clear that the Court may have regard to matters other than those referred to in s.117(4) in determining whether it is just and equitable to make an order that has been sought. Even if I were to conclude that the application of the factors referred to in s.117(4)(a) to (g) leads inexorably to the conclusion that the husband cannot afford to make the various payments that the Agreement obligates him to meet, I could not help but conclude that an injustice and inequity would arise – from the wife's point of view – if the husband's then conscious decision to enter into the Agreement (made free of duress) was now to be interfered with on what may be considered to be a paternalistic view as to what the husband should have done at that time.
As I have already explained, the husband’s circumstances have not changed in any relevant sense, and, to the extent that s.117(4)(g) may loom larger than any of the other provisions of s.117(4), it seems to me that the husband's ability to deal with the Dunolly property in the manner which I have described demonstrates that no inappropriate or unacceptable hardship would be caused to him by the refusal of the Court to make the orders that he seeks. If the husband has repented of his decision to enter into the Agreement, then why should he not repent of his decision to purchase the Dunolly property?
“Otherwise Proper”
Finally, and even if I am wrong in relation to the application of the provisions of s.117(2) and (4) of the Assessment Act, I am not be satisfied that it would be “otherwise proper” – within the meaning and contemplation of s.117(5) – to make the orders sought by the husband.
Section 117(5) requires the Court to have regard, inter alia, to the fact that it is the parents of a child themselves who have the primary duty to maintain the child. The Court must also have regard to the effect that the making of the order sought by the husband would have on the wife's entitlement to an income tested pension, allowance or benefit. Although the dynamics (as it were) of the application of s.117(5) to the circumstances of the present case may be considered unusual, it seems to me to be necessary to bear firmly in mind the fact that the parties’ determination to keep their children at independent schools has clearly shifted part of the burden of supporting the children from the parties themselves to the taxpayer. If the parties are determined to keep their children at private schools when they arguably cannot afford to do so, then that is a matter for them.
For these reasons, I am of the view that it would not be proper to make the orders sought by the husband. Further, even if it could be considered proper to make the orders sought by the husband (notwithstanding their impact on the public purse), I consider that it would not be proper to make them when regard is has to the matters referred to in paragraphs 95 to 101 of these Reasons (dealing with the husband's conscious decision to enter into the Agreement notwithstanding the legal advice that he had obtained). In my view, s.117(9) allows such a consideration to be taken into account in determining under s.117(5) whether it is “otherwise proper” to make the orders sought by the husband.
Conclusion
For all the above reasons the husband's application will be dismissed.
I certify that the preceding one hundred and thirteen (113) paragraphs are a true copy of the reasons for judgment of Walters FM
Deputy Associate: Rebecca Young
Date: 1 September 2003
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