Daley & Daley
[2009] FMCAfam 398
•1 May 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DALEY & DALEY | [2009] FMCAfam 398 |
| CHILD SUPPORT – Application to set aside child support agreement made in February 2005 – agreement has “transitioned” to new child support regime and is regarded as a binding child support agreement – whether “exceptional circumstances” exist – absence of independent legal advice – hardship in context of comparison between amount of child support being paid pursuant to agreement and amount which would be paid pursuant to administrative assessment – justice and equity – costs. |
| Family Law Act 1975, ss.90G, 117 Child Support (Assessment) Act 1989, ss.3, 4(2), 80C, 80E, 80D, 80G, 92(3), 100, 116, 117, 136, 146B |
| Simpson & Hamlin (1984) FLC 91-576 Whitford & Whitford (1979) FLC 90-612 |
| Applicant: | MS DALEY |
| Respondent: | MR DALEY |
| File Number: | ADC 2810 of 2008 |
| Judgment of: | Brown FM |
| Hearing dates: | 27 October 2008 & 22 April 2009 |
| Date of Last Submission: | 22 April 2009 |
| Delivered at: | Adelaide |
| Delivered on: | 1 May 2009 |
REPRESENTATION
| Counsel for the Applicant: | Ms Dickson then Mr Eid |
| Solicitors for the Applicant: | Legal Services Commission of SA |
| Counsel for the Respondent: | Ms Lewis then Mr Daley in person |
| Solicitors for the Respondent: | Michael W Speck & Co until 5 December 2008 |
ORDERS
The child support agreement between the parties dated 18 February 2005 which provides the basis for the payment of child support for the parties children [X] born in 1993 and [Y] born in 1995 is set aside as from 27 October 2008 onwards.
As a consequence of order 1 hereof the parties’ liability for child support in respect of the aforesaid children is to be calculated pursuant to the provisions of the Child Support (Assessment) Act 1989 from 27 October 2008 onwards.
The respondent pay the applicant’s costs of these proceedings to be agreed between the parties and failing agreement to be taxed pursuant to the Federal Magistrates’ Court Rules.
All applications be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Daley & Daley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 2810 of 2008
| MS DALEY |
Applicant
And
| MR DALEY |
Respondent
REASONS FOR JUDGMENT
Introduction
This case concerns a child support agreement and particularly whether sufficiently exceptional circumstances exist to justify it being set aside pursuant to the provisions of section 136 of the Child Support (Assessment) Act 1989.
The parties to the proceedings are Ms Daley “the wife” and Mr Daley “the husband”. They are the parents of [X] born in 1993 and [Y] born in 1995.
In the early part of 2005, the parties entered into a child support agreement, which dealt with issues to do with the provision of financial support for [X] and [Y].
The parties agreed that the husband would pay the wife the sum of $150.00 per month by way of periodic child support for each of [X] and [Y]. A total payment of $300.00 per month.
The agreement was to start on 18 February 2005 and conclude on [date omitted] 2013, the day prior to [Y]’s eighteenth birthday. The periodic payment was to be adjusted every fifteen months for inflation as referenced by the weighted national average consumer price index.
The agreement did not provide for the periodic amount to be varied when the husband was unemployed. Nor did it, on its face, provide for the Child Support Agency to collect the resulting child support payments.
The agreement was based on the fact that [X] and [Y] would be spending between 110 and 145 nights per year with their father. This reflected an earlier order made by the Family Court at Adelaide, which provided for [X] and [Y] to spend ten nights out of every twenty-eight in the care of their father but otherwise live predominantly with their mother.
This order in turn reflected the fact that Mr Daley, although a resident of Adelaide, worked at [M] in the remote north of South Australia. As a result, he worked two weeks on/two weeks off, returning to his home in Adelaide in his time off work.
As a result of inflationary factors, since February of 2005, the amount of child support per month the husband is currently paying the wife, for the children, has increased to $315.34 per month.
The order of the Family Court has not been discharged and [X] and [Y] continue to live predominantly with their mother. They also continue to see their father regularly, although from time to time [X] has been spending less time with her father than the orders originally envisaged.
When the parties entered into the child support agreement of February 2005, the husband was working at [M]. He is now employed as a [omitted]. As a consequence, he is a PAYG tax payer. His annual salary is $86,700.00 per annum prior to the assessment of tax.[1]
[1] See exhibit 1
The wife is also a PAYG tax payer. She is employed as a full-time [omitted]. Her annual salary is in the vicinity of $39,000.00 prior to tax.
As matters currently stand, Mr Daley is liable to pay Ms Daley an annual amount of child support for [X] and [Y] of $3,784.08. This equates to 4.36% of his gross income. From the wife’s perspective, given her current financial position and the existing care arrangements for the children, this situation is grossly unfair.
On this basis, the wife has applied to the court to discharge the child support agreement dated 18 February 2005 to take affect from 30 June 2008 onwards.
In lieu thereof, she wishes the Child Support Agency to calculate the husband’s liability for child support pursuant to the applicable formula contained in the Child Support (Assessment) Act1989. She also wishes the husband to pay her costs of this application.[2]
[2] See wife’s amended initiating application filed 8 October 2008
The wife commenced these proceedings on 15 July 2008. The husband responded to the application on 7 October 2008. It is his position that the wife’s application should be discharged and that she should pay his legal costs.[3]
[3] See husband’s response filed 7 October 2008
Although the child support agreement in question specifies that the parties did not require the Agency to collect child support, it is the position that the parties’ case is an “agency collect” one. From 13 February 2005 until 10 June 2008, the husband has paid the wife the sum of $11,610.89, which has been collected by the Child Support Agency on her behalf.
The husband’s position is that the wife has not provided sufficiently convincing evidence of any “exceptional circumstances” sufficient to justify the court setting aside the child support agreement in question. It is his case that both parties freely entered the agreement and were well aware of its consequences.
In support of his position, the husband points to the fact that the wife herself prepared the agreement and was fully aware that it would remain in force until [Y] reached eighteen years of age – a considerable period of time – and notwithstanding this fact, she was not deterred from entering the agreement.
The child support agreement in question consists of a pro-forma document prepared by the Child Support Agency and no doubt printed on its behalf. The parties, particularly the wife, have completed the document in handwriting and have ticked a number of boxes, which appear on the form.
Part of the printed body of the document contains the following information:
“IMPORTANT
· ∙
A child support agreement is a binding contract between the 2 parents. It can only be changed by another Agreement or by going to court.
[WARNING: An agreement is binding on both parties. CSA recommends that you make your Agreement for a short fixed period.]”[4]
[4] See exhibit 4
It is common ground between the parties that neither of them had any formal legal advice prior to entering the child support agreement. At the time, there was no requirement that the parties to such an agreement required any legal advice prior to entering such an agreement and before it could become enforceable.
Background
The parties married in 1994. They finally separated on 12 April 2001. [X] is currently attending [S] School and [Y] is at [H] School.
It is the wife’s position that, since separation, she has experienced difficulty in obtaining a regular and reasonable amount of child support from Mr Daley, particularly in periods when he has been self-employed. It is also her case that she has always received a lesser income than Mr Daley, who has been in the better financial position of the two.
Between April 2001 and June 2002, the husband’s child support liability was calculated on the basis of a child support income of $9,749.00 resulting in an annual child support liability of $260.00. This amount was increased to $423.00 per year for the period from 1 July 2002 to 2 September 2002 on the basis that Mr Daley’s child support income was $13,808.00.
The wife was concerned that these assessments did not reflect the true income position of the husband. As a result she made application for a change of assessment, which resulted in the husband’s child support income being fixed at $38,000.00 per annum, which produced a child support liability of initially $7,009.00 per year, which was reduced to $5,777.00 in the latter part of 2002.
It is the wife’s case that she found the process of administrative assessment of child support unsatisfactory. She believed that, due to his self-employment, the husband had the capacity to manipulate his taxable income, which resulted in child support assessments which did not reflect the husband’s true financial position. As such, she was always at a disadvantage in any process of administrative assessment of child support with Mr Daley.
In this context, the parties entered into a series of child support agreements between 21 December 2002 and 17 February 2005. These resulted in Mr Daley paying an amount of child support of between $242.50 and $255.20 per month per child.
Prior to 17 February 2005, the husband was paying child support directly to the wife. It is the wife’s case that the husband was not always reliable in his provision of the agreed payments. Again, in this context, it is Ms Daley’s position that she considered she would be more financially secure if there was some form of agreement between the parties as to how much child support was to be paid and it was collected by an independent organisation which kept a proper record of what payments had been made.
The parties disagree about who initiated the child support agreement in question in the present case. It is the wife’s position that it was the husband’s idea, as he represented to her that his business was in decline at the time and he was struggling to make the payments involved. In these circumstances she was persuaded that some form of agreement about child support was likely to be her best option.
The husband contends that it was the wife’s idea. In support of his position, he points to the fact that it is the wife’s handwriting which predominantly fills the pro forma document, on which the parties’ agreement is based. This is so. However, I think it unlikely that the wife would have agreed to a marked reduction in her child support entitlements of her own volition. Certainly I think she would have needed to have thought there was something in such an arrangement for her.
The only thing it can have been is that she was persuaded that it would give her greater financial certainty. In essence, she was persuaded to trade off the potential to receive a greater amount of child support, if she could establish the husband’s true financial circumstances, for the certainty of locking the husband into a fixed but more modest sum each month.
The benefit cut both ways. There were also advantages for the husband in paying a lesser amount if his financial circumstances changed. But, from the wife’s point of view, the benefit for her rested primarily on the fact of the husband remaining in self-employment and, as she saw it, being able to manage his income and expenses in such a way as to minimise his child support liabilities. Something which had occurred in the past.
In her affidavit material, the wife puts it as follows:
“He [Mr Daley] guaranteed that he would pay the assessed amount without further argument if I signed the agreement. Whilst this was considerably less child support than the agreement we had in place at the time, I was forced to accept his terms as I wanted security for our children’s financial support in the future. I needed to be sure that I would receive a set amount of child support each month on time. Further, by agreeing to his terms I also avoided further conflict as our relationship at that time was still volatile. Upon entering this new agreement I also sought the Agency’s assistance in collection of the respondent’s ongoing liability.”[5]
[5] See wife’s affidavit filed 15 July 2008 at paragraph 9
I have little doubt that there continues to be considerable ill will between the parties. The husband points to the fact that the financial settlement of the parties’ property proceedings greatly favoured the wife to his detriment. The wife disputes this state of affairs. I do not think that these issues are relevant to the current proceedings other than that both parties have felt aggrieved, in the past, at their financial interaction with one another.
The evidence
The wife is the applicant in these proceedings. She relies on the following documents:
i)Her amended application filed 8 October 2008;
ii)Two affidavits of herself filed on 15 July 2008 and 15 October 2008 respectively.
The husband relies on the following documents:
i)His response filed 7 October 2008;
ii)An affidavit of himself filed 7 October 2008;
iii)A statement of his financial circumstances filed 7 October 2008.
The parties themselves were the only witnesses who gave evidence in these proceedings.
In addition, a number of documents were tendered into evidence. These included a copy of one of the husband’s payslips; a copy of the child support agreement in question; and a letter which confirmed that the agreement had “transitioned” to the new child support regime. The significance of this “transition” will become clear when I turn to the legislative considerations applicable.
In addition and importantly, the parties agreed on the tender of a projected estimate of what would be the applicable child support assessment attaching to the situation of the parties now if the agreement of 2005 was set aside and the formula was applied to those circumstances. This estimate indicated that Mr Daley would be liable to pay a total amount of child support of $1,049.00 per month or $12,586.00 per annum in respect of [X] and [Y].[6]
[6] See exhibit 2
In my estimation both parties concerned gave their evidence honestly and openly. In particular Mr Daley was frank about his current financial circumstances. He was also refreshingly candid when he conceded that the current arrangements were not particularly “fair” to Ms Daley.
I accept Mr Daley’s evidence that he spends significant periods of time with the children each month, although more with [Y] than [X] currently. I also accept that he makes some provision for the children’s financial support, when they are with him, by paying for some of their excursions and other expenses, particularly day to day needs. However, I think it clear that Ms Daley pays more of these expenses than the husband does.
Some time, during the hearing, was spent on examining how the children’s school fees were paid. I accept that Mr Daley has made some of these educational expenses. However, the level of expenditure is not so great as to distort the parties’ current financial circumstances. The payments in question are relatively modest and it seems clear that
Ms Daley has paid more of them than has Mr Daley.
a) The wife’s financial circumstances
Ms Daley receives a gross weekly salary of around $745.00 from her employment as a child care worker. In addition, she receives government benefits and child support payments equal to a further $187.00 per week. Accordingly, in my view, she must be described as a low income earner.
Ms Daley estimates her living expenses, for herself and the children, as being in the sum of around $954.00 per week. Her major expenses each week are food ($210.00); mortgage repayments ($156.00); income tax ($134.00); and car running expenses ($90.00).
In my view, none of Ms Daley’s expenses can be described as either extraordinary or unreasonable. In support of her position that her current financial position is parlous, she points to the fact that the Lee expenditure survey gives a sum to support children aged over 13 of $365.53 per week.[7]
[7] See wife’s affidavit filed 15 July 2008 at paragraph 13
The wife’s most significant asset is her home valued at $265,000.00, which is subject to a mortgage of around $85,000.00. Apart from her motor vehicle, superannuation and personal effects, the wife has no other significant assets and no savings to speak of.
b) The husband’s financial circumstances
The husband’s financial circumstances have recently changed. He is no longer living with his former defacto partner. Rather, he is temporarily living with his parents, to whom he is paying no rent. However, I accept that this state of affairs is likely to be a temporary one.
In the past, Mr Daley felt a moral obligation to support his former partner’s dependant children, particularly as their father paid little or no child support. The husband had no legal obligation to support these children.
However, I accept that, in a practical sense, as the children were living in his household, Mr Daley was not in a position to utilise his income in such a way that it would not flow, in one form or other, to benefit these children, particularly as their own father seems to have abrogated his financial responsibility for them. However, given his recent separation, these issues are no longer germane.
Mr Daley receives a gross weekly salary of around $1,667.30 from his employment as a health and safety officer. On this sum, he pays around $426.00 tax per week. Apart from his liability to support himself and [X] and [Y], he is under no legal obligation to support any other person.
In his statement of financial circumstances, which pre-dated his recent separation, the husband calculated that his weekly expenditure was exactly the same as his weekly income. This may be so, from time to time, but in my estimation Mr Daley has no extraordinary expenses. Rather, he has the level of financial responsibilities which confront most full-time salary earners.
In particular, Mr Daley runs a motor vehicle; pays ordinary levels of insurance (including income protection insurance); and is paying off a number of personal loans. He also has to feed, clothe and accommodate himself.
Mr Daley has modest amounts of superannuation and, apart from his motor vehicle and household contents, has no assets of significant value. Certainly, he has no savings to speak of. In this sense, I accept that he is not in a strong financial position, but there can be no doubt that his income is significantly greater than Ms Daley’s is.
For reasons already provided, I do not accept that Mr Daley is currently paying a significant informal level of child support, for either [X] or [Y], by reason of moneys he advances to them when they are in his care.
In summary, Mr Daley can be regarded as an average PAYG tax payer, who earns a comfortable income. He is likely to have the level of expenditure, in providing for his food, accommodation and other necessary living expenses, which would confront an average citizen. His current financial circumstances can be regarded as unexceptional.
In these circumstances it seems likely that he has tailored his expenses to fit his income. As such, in future, it does not seem unreasonable that he should recalibrate his expenses to accommodate any future child support commitment as do many other PAYG taxpayers who receive a similar income to him.
The legal principles applicable
The law relating to the variation or discharge of the provisions of child support agreements, by court order, has been significantly changed as a result of the new child support regime, which commenced on 1 July 2008 by reason of the passage of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006.
This legislation created two new specific forms of child support agreements, which were previously unknown – binding child support agreements and limited child support agreements. The legislation in question came into force from 1 July 2008 onwards.
As a result of these legislative changes, the legislature and indeed the Child Support Agency recognised that there would undoubtedly be a level of uncertainty as to whether child support agreements in force prior to 1 July 2008 would continue to have effect after this date.
Accordingly, the Agency was directed by the legislature to undertake a review of all child support agreements in force prior to 1 July 2008 so it could be determined whether those agreements contained provisions that would enable them to continue after the commencement date of the new legislation.[8]
[8] See Schedule 5 of Part 2 of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 at item 73(1)
As a result of the legislative direction placed on him, the Registrar of the Child Support Agency has reviewed the child support agreement dated 18 February 2005 between Mr Daley and Ms Daley and determined that it will remain in force after 1 July 2008.
As a result of this exercise, it is taken to be a binding child support agreement, as it has no specific provisions which provide for its termination prior to the younger child attaining the age of eighteen years.
As a consequence, it can only be set aside by reason of the provisions of section 136(2) of the Child Support (Assessment) Act 1989 which reads as follows:
“136(2) If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:
(a) that the party’s agreement was obtained by fraud or a failure to disclose material information; or
(b) that another party to the agreement, or someone acting for another party:
(i) exerted undue influence or duress in obtaining that agreement; or
(ii) engaged in unconscionable or other conduct;
to such an extent that it would be unjust not to set aside the agreement; or
(c) in the case of a limited child support agreement:
(i) that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
(ii) that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement); or
(d) in the case of a binding child support agreement—that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.”
Section 80C(2) of the Act sets out the requirements for a binding child support agreement. Such agreements must:
·Be in writing and signed by each of the parties;
·Contain a statement and certification that each party has received independent legal advice, in respect of the agreement, particularly regarding:
Ø The affects of the agreement on the rights of that party;
Ø The advantages and disadvantages, at the time of the making of the agreement, of entering the agreement in question.
These provisions mirror those concerning financial agreements in the Family Law Act 1975.[9] In the case of each legislation, an agreement is binding if and only the provisions of either section 80C (binding child support agreements) or section 90G (financial agreements) have been complied with. The central pillar of each provision is that the parties to both type of legislatively sanctioned agreement receive independent legal advice.
[9] See Family Law Act 1975 at section 90G
Section 4(3) of the Child Support (Assessment) Act recognises the desirability of parents reaching agreement for the financial support of their children. When interpreting the Act, the section requires that “the Act should be construed, to the greatest extent consistent with the attainments of its objects:
a)to permit parents to make private arrangements for the future financial support of their children; and
b) to limit interferences with the privacy of persons.”
In recent major changes to both the Family Law Act and the child support regime, the legislature has recognised that conflict between separated parents is potentially extremely detrimental to the emotional and psychological wellbeing of children.
In particular, disputes over child support have been and continue to be a major source of ongoing and significant conflict between separated parents and, as such, pose a potential threat to children. In this context, the legislature is supportive of parents making private and binding agreements in respect of the provision of long term financial support for their children.
The provisions contained in section 80C seem to embody the government’s preferred ethos that parents should be free to negotiate about how and in what form child support will be paid, provided that they do so on a level playing field. The level playing field being provided by the fact that each will have a lawyer and will presumably be given a “warts and all” picture of what is and what is not in any particular agreement for each of them.
Clearly, when Mr Daley and Ms Daley entered into the child support agreement, which is currently before the court, neither was provided with an independent statement of such legal advice, particularly the pros and cons of the agreement and its binding nature from any independent and qualified source. The only admonitions to either party occurred in the form of the printed document itself, to which I have earlier made reference.
Child support agreements potentially have serious and long term financial implications – for the children and parents concerned and also the Commonwealth Government, which provides financial support to the vast majority of care providing parents, through the family tax benefit scheme. As such, child support agreements need to be fairly and freely made between parties, who can negotiate on an equal footing. In addition, the tax payer needs to be protected.
It is in this context that I turn to limited child support agreements which are defined in section 80E of the Act. There is one fundamental difference between a binding and a limited child support agreement. For the latter, it is necessary for there to be an active administrative assessment of child support to be in place.[10] For the former, there need not be such a nexus between the agreement and the mainstream child support regime.
[10] See Child Support (Assessment) Act at section 92(3)
By necessary implication, one of the major purposes of the provision of independent legal advice to a party considering entering a binding child support agreement is the consequences of opting out of the formulaically based child support scheme. Given the pre-existence of an administrative formulation, such a requirement is not so compelling in the circumstances of a limited child support agreement.
Limited agreements:
·As previously indicated, do not require the provision of legal advice;
·Must be for an amount which is either equal to or greater than the amount of child support administratively assessed;
·Like binding agreements, must be in writing and signed by each party to it.
The circumstances, which will permit the termination of a limited child support agreement, as opposed to a binding child support agreement, are also different. Binding agreements can only be terminated:
·By a subsequent binding child support agreement [Child Support (Assessment) Act section 80D(1)(a)];
·By a termination agreement;
·By a court order made pursuant to section 136.
Limited agreements can be terminated:
·By agreement between the parties formalised in either a further binding or limited child support agreement;
·By an order under section 136;
·By a termination agreement;
·If the agreement is more than three years old, by the written notice of either party [80G(1)(e)];
·If the amount which would have been paid pursuant to the applicable administrative assessment of child support changes by more than 15% in circumstances not contemplated by the agreement [the administrative assessment is referred to as the notional assessment – see section 80G(1)(d) and section 146B];
·If there is such a 15% variation from the notional assessment either party to the agreement may give 60 days written notice to terminate the agreement.
Accordingly, limited agreements have the scope for automatic termination. They can be terminated after a specific period of time – a period greater than three years; or they can be terminated if there is a disparity of more than fifteen percent, when the agreement is compared to the applicable administratively assessed amount of child support.
Accordingly, in the case of limited child support agreements, there remains a nexus between the statutorily based formula and the agreement, particularly in the sense that there must be some form of administrative assessment in place. The notional assessment process also has relevance for family tax benefits.
No such requirements are necessary for binding child support agreements. Hence, by necessary implication, the prerequisites for their enforceability are greater. Essentially, each party is required to receive exhaustive and independent legal advice about the implication of such an agreement, presumably also including what are the implications of departing from the safety net of the formula based system.
In my view, any application to discharge a child support agreement, pursuant to section 136, must be considered within the overall legislative structure created by the Child Support (Assessment) Act1989.
Pursuant to section 3 of the Act, the parents of children have the primary duty to maintain their children. This duty has priority over all other commitments a parent may have, other than the necessary commitments which enable that parent to support him or herself, or any other child that the parent may have a duty to maintain.
The objects of the Act are described in section 4(2) as being intended to ensure:
“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;”
Section 136(2)(d) of the Act speaks of “exceptional circumstances”. In Simpson & Hamlin[11] the Full Court indicated that whether circumstances were exceptional in any particular case was “very much a question of fact and degree”.
[11] Simpson & Hamlin (1984) FLC 91-576 at 76,658
In the different context of an application to set aside property orders, Gee J indicated the question of whether a change of circumstances was exceptional or otherwise may turn on whether the change which had occurred was one not “within the reasonable contemplation or expectation of the parties” concerned.[12] In these circumstances, it was said that the ordinary circumstances and normal vicissitudes of life ought not be allowed to justify the return of a party to court to seek further property orders.
[12] See Sandrk & Sandrk (1991) FLC 92-260 at 78,750
Exceptional is defined by the New Shorter Oxford English Dictionary as follows:
“Of the nature of or forming an exception; unusual, out of the ordinary; special; (of a person) unusually good, able, etc.”
Accordingly, for circumstances to be exceptional, they must be unusual, out of the ordinary or special. In the child support context, in respect of an application for departure, Kay J held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.[13]
[13] See Savery & Savery (1990) FLC 92-131
In the Marriage of Gyselman[14], the Full Court of the Family Court said as follows of the phrase “special circumstances”:
“Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.”[15]
[14] See In the Marriage of Gyselman (1992) FLC 92-279 at 79,065
[15] (supra) at page 225
I am not persuaded that there is any significant qualitative difference between “special” circumstances and “exceptional” circumstances. In my view, what is required, in the case concerned, is for it to be out of the ordinary run of cases and to be marked by some characteristic which render it unusual or something other than commonplace.
If the court set aside either a binding child support agreement or a limited child support agreement pursuant to the provisions of section 136(2) the court has a discretion to depart from what would otherwise be the applicable administrative assessment provided special circumstances exist and it would be both just and equitable and otherwise proper to do so [section 136(4)].
Accordingly the departure provisions of Part 7 of Division 4 are enlivened by an application to set aside a child support agreement regardless of whether either of the parties concerned has made such an application. In addition the court is empowered to make any necessary consequential orders if an agreement is set aside [section 137]. Any such orders are to be informed by considerations of justice and equity.
Conclusions
The child support agreement, in this case, was entered into between the parties in February of 2005, a period well in excess of three years prior to the wife commencing these proceedings. It is deemed to be a binding agreement, not because each of the parties to it was provided with comprehensive legal advice regarding its implications, but rather because it is expressed to conclude when [Y] is eighteen years of age and makes no provision for any other terminating event.
From the wife’s perspective, its raison d’etre was the fact that the husband was in self employment at the time and she deemed it expedient to settle for a specific and regular amount of child support to be paid to her each month. The husband is no longer self employed. Rather, he is a PAYG tax payer, whose annual salary is significantly more than her is.
Although the chance that Mr Daley might return to the salaried workforce could not be excluded as a future possibility in February of 2005, it does not seem to be an outcome which was in the expectation of the parties at the time. From both their points of view, whilst the husband was self employed, it was attractive for them to settle on a fixed monthly amount of child support, which was memorialised in agreement and which was amenable to collection by the Child Support Agency.
The amount of child support Ms Daley currently receives is about thirty percent of what she would receive, by way of child support, if the current child support formula was applied to her and Mr Daley’s circumstances. If the agreement was a limited child support agreement the wife would have clearly satisfied a number of the applicable criteria to have it set aside – namely more than a 15% deviation from what would have been the notional assessment of child support and the expiration of three years since the inauguration of the agreement.
True it is that the agreement in question contains printed warnings as to its binding nature and advises that such agreements be limited to a short and fixed period. However, in this case, it is undisputed that neither Mr Daley nor Ms Daley received any independent legal advice about what this specifically meant.
The provision of such advice would now be an essential and indispensable pre-requisite for the enforcement of any such binding child support agreement made after 1 July 2008. To a certain extent, it is an administrative fiction that the agreement between the parties in this case is regarded by the Agency as being a binding child support agreement.
The printed document advises that child support agreements can only be changed by another agreement or by “going to court”. It does not indicate what this entails specifically. Prior to 1 July 2008, it would have been open to Ms Daley to make an application to discharge the child support agreement pursuant to the provisions of the former section 98, which provided a procedure analogous to a departure application. It would not have been necessary for her to establish exceptional circumstances causing her hardship or to demonstrate to the court some species of unconscionability or duress. That avenue is no longer open to her.
In the explanatory memorandum to the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Bill 2006 the legislature provides the following explanation in regards to its intention relating to child support agreements and court orders from 1 July 2008 onwards:
“[The legislation] will provide more flexible arrangements, with better legal protection, for parents who want to make agreements between themselves about the payment of child support, will detail how lump sum payments are treated, and will provide for the effect of agreements on family tax benefit payments. It will also provide a simplified process to allow parents to suspend child support payments for a period of six months if they reconcile, and then resume the payments should they separate again, without having to apply anew.”[16]
[16] Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) – Bill 2006 – Explanatory Memorandum at page 150.
In addition, the other legislative changes made concurrently with those relating to agreements significantly altered the formulaic basis for the calculation of child support, particularly the method by which the cost of raising children is to be calculated and how both parents’ incomes are to be taken into account in this process.
In addition, the new formula also makes greater provision for the level of contribution parents make to the financial costs of their children through the amount of time they spend with any children concerned. The new arrangements regarding the formula are said to be fairer and based on independent research regarding the proper cost of supporting children, of various ages, in the Australian context.[17]
[17] See Taggart & Pelly[2008] FMCAfam 1321 at paragraph 24
Accordingly, in my view, the current child support formula is likely to provide a more reliable and objective yardstick to gauge [X] and [Y]’s financial needs than the agreement reached between the parties, which I accept, from Ms Daley’s point of view, was based on expediency.
I do not think that it can be conceivably possible that the parties, when they entered into the child support agreement in February of 2005, foresaw the possibility that the legislature would so radically modify the method of calculation and collection of child support in Australia or the extent of the changes made to the legislative provisions in respect of child support agreements.
To the contrary, it is my impression and finding that both parties entered into the agreement on an essentially ad hoc basis as a result of considerations of expediency at the time. Certainly, from Ms Daley’s perspective, she was not provided with the better level of legal protection, which the legislature intended to provide to those who were contemplating binding child support agreements, particularly those departing form the “safety net” of the provisional assessment process.
In addition, whilst the legislation in question continues to recognise that parents are to be encouraged to make their own arrangements, so far as the provision of financial support to their children is concerned and as a result the court is directed to recognise the primacy of such agreements, the agreement which the parties entered into, in this particular case, seems to me to fail a number of seminal objects of the overall child support legislation.
Firstly, the level of child support being provided by Mr Daley and
Ms Daley for [X] and [Y] is out of kilter with their individual capacity to provide financial support for the children. Certainly, it cannot be said that the parties are utilising their capacity to provide financial support for [X] and [Y] in a like manner.
In addition, in my view, there is a clear disconnect in respect of the amount of financial support currently being provided by Mr Daley for [X] and [Y] and the legislatively fixed standards provided by the child support regime. Finally, it cannot be said that the children are beneficially sharing in any changes, which have flowed through to
Mr Daley as a result of him having changed his mode of employment from self employment to being part of the salaried workforce.
In my view, the combination of these factors takes this case out of the ordinary run of cases and make it an exception. The child support agreement, which the parties entered in early 2005 cannot be regarded as being strictly analogous to a binding child support agreement entered into after 1 July 2008, particularly in the absence of independent legal advice. Exceptional circumstances have arisen which justify it being set aside.
In this sense, with no intention to be disrespectful to the Registrar of the Child Support Agency and its officers, it seems to me there is some level of artificiality in the manner in which the parties’ child support agreement has been taken to a transition to the new child support regime. However, having said this, I accept that the Registrar was, in reality, presented with no proper alternative to such a transition.
Clearly both Ms Daley and the children will suffer hardship if the child support agreement in question is not set aside. As matters currently stand, the children are receiving less than 4.4% of their father’s annual income by way of child support, when the applicable formula would provide a far greater sum. Necessarily, their mother, who must be regarded as a modest income earner, is taking up the short fall.
In another legislative context, the Full Court of the Family Court has considered that hardship is a question of “any appreciable detriment financial, personal or otherwise.”[18] Clearly, if the current child support agreement is allowed to stand, it will create considerably detrimental financial consequences for both Ms Daley and the children.
[18] See Whitford & Whitford (1979) FLC 90-612 at 78,145
I understand that the setting aside of the agreement will also cause some detrimental consequences for Mr Daley. However, given the structure of section 136(2)(d), the court is not directed to balance the hardship entailed from the perspective of each of the parties.
Rather, as previously indicated, the court’s inquiry is directed to any applicant concerned and any child affected. In any event, in terms of the hardship to be occasioned to him, Mr Daley considerably undercuts any concerns about potential inequity being occasioned to him by his concession that he regards the current agreement as being essentially unfair to Ms Daley.
In all these circumstances, I have come to the conclusion that the child support agreement between the parties dated 18 February 2005 should be set aside. The next issue which arises is the effective date from which the agreement should be set aside and whether there should be any departure from the administrative assessment which will arise in lieu thereof.
The hearing of Ms Daley’s application commenced on 27 October 2008. At this stage the parties spent considerable time examining the possibility of compromising the matter on the basis of entering into another child support agreement. These discussions were unfruitful and the hearing process resumed on 22 April 2009.
Neither party has made application for a departure pursuant to the provisions of section 116. In this context, I am not persuaded that sufficiently special circumstances exist to justify any departure pursuant to any of the grounds listed in section 117(2) from the consequential administrative assessment.
I appreciate that this outcome will potentially create a level of arrears for the husband, who has stoutly resisted the wife’s application to set aside this agreement, notwithstanding his concession that he regards the current arrangements as being unfair to her. In these circumstances, I do not think that considerations of justice and equity militate against the creation of some level of arrears for Mr Daley.
I have reached the conclusion, after balancing the hardship to each of the parties concerned and considering the date on which Ms Daley commenced these proceedings (15 July 2008) that the appropriate date from which to set aside the agreement is 27 October 2008. It must follow that the applicable child support formula will apply to the parties from this date onwards.
Costs
The wife has also sought an order that the husband pay for costs she has incurred in these proceedings. I have not been provided with any estimate, on her behalf, of the likely level of these costs. The husband resists such an application.
Pursuant to section 100 of the Child Support (Assessment) Act, the question of costs in child support proceedings is governed by the provisions of the Family Law Act 1975. Section 117 of the Family Law Act provides as follows:
“Costs
(1)Subject to sub-section (2) and sections 117AA and 118, each party to proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A)In considering what order (if any) should be made under sub-section (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has, in accordance with section 117C or otherwise, made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.”
Section 117(1) abolishes, for the purposes of Family Law Act proceedings, the general rule that in civil proceedings costs follow the event. Section 117(2) then provides the court with a general discretion to make costs orders if it is of the opinion that there are circumstances that justify it in so doing. Section 117(2A) sets out the matters that the court shall have regard to.[19]
[19] See Browne v Green 29 Fam LR 428 at 432
Neither party can be regarded as being in a strong financial position. However, on any view, Mr Daley is markedly better off than Ms Daley, who can only be regarded as a below average income earner.
The wife is in receipt of a grant of legal aid for these proceedings. I do not know the terms of the applicable grant of legal aid. Mr Daley has instructed solicitors to appear on his behalf in the past but more recently has been self-represented. No doubt, this is an indication of his inability to easily afford legal representation.
The hearing before me has taken some time to complete. In October of 2008, the proceedings had to be adjourned part-heard. At this juncture, much time was taken up as the parties attempted to negotiate a settlement with one another, particularly whether the child support agreement in question could be replaced with another one. Those negotiations were not fruitful.
In these circumstances, given the disconnect between the formulaic assessment of child support and the amount being paid to her by the husband, Ms Daley was left with no real alternative but to continue with the proceedings. Although the husband has subsequently conceded that the child support agreement of February 2005 is fundamentally unfair to the wife, he persisted with his application to resist its discharge. Accordingly, his conduct has added to the wife’s potential cost burden in this case.
The husband has been wholly unsuccessful in his opposition to the wife’s application. In my view, the combination of these various factors justify that there be a cost order in the wife’s favour.
Accordingly, I propose to make an order that the husband pay the wife’s costs to be agreed between the parties and in the absence of agreement to be taxed.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and twenty-seven (127) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: P Smith
Date: 1 May 2009
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