EGH and SH
[2005] FMCAfam 27
•3 February 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EGH & SH | [2005] FMCAfam 27 |
| CHILD SUPPORT – Administrative assessment – departure application –application for McKenzie friend. |
Family Law Act 1975
Child Support (Assessment) Act 1989
In the Marriage of JM and PJ Bryant 20 FamLR 575
In the Marriage of Gyselman (1992) FLC 92-279
In the Marriage of Hides and Hatton (1997) 21 Fam LR 855; FLC 92-759
McKenzie v McKenzie [1970] 3 All E.R 1034
Watson v Watson [2001] FamCA 1470
| Applicant: | EGH |
| Respondent: | SH |
| File No: | PAM 450 of 2002 |
| Delivered on: | 3 February 2005 |
| Delivered at: | Parramatta |
| Hearing date: | 28 January 2005 |
| Judgment of: | Sexton FM |
REPRESENTATION
| Solicitors for the Applicant: | Watts McCray |
| Respondent: | Self represented |
ORDERS
That pursuant to section 117 of the Child Support (Assessment) Act 1989, there be a departure from the administrative assessment of child support payable by SH for the child JSG born 2 January 2001 as follows:
(a)For the period from 15 September 2004 to 31 December 2008 child support be payable at a monthly rate of $350.00.
(b)That the amount of periodic child support be increased in accordance with the consumer price index for Sydney on
1 January 2006 and on 1 January each year thereafter.That the father’s application for his child support arrears to be discharged be dismissed.
All outstanding applications are otherwise dismissed.
All exhibits tendered in these proceedings be returned at the expiration of one calendar month unless an appeal is lodged.
The solicitor who issued any subpoena collect that subpoenaed material and return it to the owner within seven (7) days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM 450 of 2002
| EGH |
Applicant
And
| SH |
Respondent
REASONS FOR JUDGMENT
Proceedings
These proceedings concern child support for JSG born 3 January 2001. The mother filed an application on 15 September 2004 to depart from an administrative assessment of child support. The parties to the proceedings are EGH and SH who are referred to in these reasons as the “mother” and the “father” respectively. The mother was represented by Ms Vincent of Watts McCray. The father was unrepresented.
The mother seeks the following orders:
a)That the child support liability of SH for the support of JSG born 3 January 2001 be varied as and from 1 October 2003 such that the respondent father shall pay to the applicant mother by way of periodic child support the sum of $500.00 per month.
b)
That the amount of periodic child support be adjusted in accordance with the consumer price index for Sydney on
1 January 2006 and on 1 January each year thereafter.
The respondent father opposes the mother’s application.
Orders were made in relation to parenting issues on an undefended basis on 9 May 2002. Those orders provided for the child to live with the mother and for the mother to have sole parenting responsibility for his care including the authority to change the child’s name without the father’s consent. The Court noted on the order that the father left the courtroom prior to the orders being made.
At the commencement of this hearing, the father applied to the court for leave to allow his wife to assist him in the proceedings as a McKenzie friend. He wanted his wife to take notes and find documents for him during the hearing. He said his wife knew more about the matter than he did. He said her assistance would expedite the hearing.
I explained to the father the limits on the role of a McKenzie friend. Ms Vincent for the mother opposed the application. She submitted the matter concerned only matters which should be well within the father’s knowledge. She submitted the father should not require any assistance.
The Full Court in Watson v Watson [2001] FamCA 1470 set out the effect of the English Court of Appeal decision which led to the term ‘McKenzie friend’. The Full Court summarised the effect of the decision of McKenzie v McKenzie [1970] 3 All E.R 1034:
That decision was to the effect that a litigant who appears before a Court in person is ordinarily entitled… to have the assistance… of a friend or assistant who may sit beside the litigant at the bar table for the purpose of taking notes, handling or cataloguing documents or exhibits, making quiet suggestions to the litigant as to how best to conduct the case, and generally being of assistance to the litigant…provided that person does not disrupt the proper conduct of the proceedings. An important limitation upon the role and functions of a McKenzie friend is that he or she may not … act as an advocate for the litigant in the proceedings.
Ms Vincent then submitted she would have no objection to the father’s wife assisting him during cross examination of her client. Given the mother was represented I decided there was no prejudice to the mother if the father’s wife assisted him. I gave leave to the father to appoint his wife as a McKenzie friend for the duration of the hearing.
Background
The parties married at Coffs Harbour on 8 January 2000 and separated on 10 September 2000.
The only child of the marriage, JSG was born on
3 January 2001.
The parties divorced on 9 May 2002.
The father re-married on 6 October 2002. His wife has a child AY, now aged 13 years from a previous relationship. AY’s biological father is deceased.
The father and his current wife have a child JH, born 9 July 2004 aged 6 months.
The father has a child GH from a previous marriage, born 7 September 1995, aged 9 years.
The mother lives with the parties’ child and her mother, aged 77 years.
The mother is not in paid employment.
The father is qualified to operate a variety of earth- moving machinery and is also a landscape gardener.
The relevant law in proceedings for child support
Jurisdiction is conferred on this court by Section 99(1) of the Child Support (Assessment) Act1989. Division 4 of Part 7 of that Act governs departure proceedings. Section 3 contains the obligation that parents maintain their children. Section 4 sets out the objects of the Act. Each of the objects needs to be borne in mind when deciding an application under the Act. Section 4(3) of the Act recognises the desirability of parents reaching agreement for the financial support of their children. Sections 114 and 121 identify that the further objects of Divisions 4 and 5 of Part VII include:
a)that the children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents and
b)that parents share equitably in the support of their children.
The Full Court of the Family Court in In the Marriage ofGyselman (1992) FLC 92-279 set out a three step process that courts must follow in determining an application for a departure order under s.117. The first step is whether one or more of the threshold grounds in s.117(2) is established. If a ground is established, the next step is whether it is just and equitable within the meaning of s.117(4) to make a particular order. The final consideration is whether it is otherwise proper within the meaning of s.117(5) to make a particular order.
In In the Marriage of Hides and Hatton (1997) 21 Fam LR 855; FLC 92-759 the Full Court held that it is necessary for the Court to undertake the three stage process described in Gyselman for each child support year in respect of which departure is sought. Further the Full Court also said that regard may be had to the current circumstances of the parties:
By this we mean that not only must the judge apply the three stage process under Section 117(2), (4) and (5) in relation to the circumstances of the parties as they existed in the child support year in question, but also in relation to the present circumstances of the parties (if at all relevant). For example, it may well be necessary in a particular case in addition to considering the circumstances of the parties in the past child support year in question, also to consider the present capacity of the payer to meet a new assessment, and/or the impact on a payee of any credit in the payer’s favour which might be created by a departure from an assessment for an earlier child support year.
Section 115 provides for applications for departure from administrative assessments in relation to periods beginning on or after 1 July 1992 to be made after an application is made to the Child Support Registrar under Part 6A of the Act. An application under Part 6A is an application to the Registrar for a departure from the assessment. Section 116 creates a further requirement in relation to any decision made under Part 6A on or after 15 December 1998 in relation to child support payable on or after 1 July 1999 whereby no application may be made to a Court for departure unless an objection under Part 6B to that decision, has been lodged by the applicant and determined. An objection must be lodged within 28 days of service of notice of the decision under part 6A. If out of time a person may lodge an objection together with an application to the Registrar for an extension of time.
In this matter, an application was lodged by the mother on 21 July 2003 to the Child Support Agency to increase child support payments from 1 October 2003. The father opposed the mother’s application and sought a reduction in child support. The decision of the Agency of 30 September 2003 was to increase the annual rate of child support payable by the father. On 28 October 2003 the father objected to the decision and this objection was disallowed by decision of 11 November 2003. Subsequently in or about May 2004 the Agency decided it was in error and reversed its decision to disallow the father’s objection. I am satisfied the pre-requisite procedural steps have been taken and the Court has jurisdiction to hear the mother’s application.
Evidence and findings
The mother relied on:
·Her Application filed 15 September 2004.
·
Her Financial Statement sworn 14 September 2004 and filed
15 December 2004.
·Her affidavit sworn 14 September 2004 and filed 15 September 2004.
The father relied on:
·
His Financial Statement sworn 11 November 2004 and filed
11 November 2004.
·His affidavit filed 22 October 2004.
The parties were the only witnesses and both were cross-examined. Both parties tendered documents which became exhibits in the proceedings.
Special circumstances – has the applicant shown a ground for departure?
It is the applicant wife’s case that she can make out the grounds in Section 117(2)(a)(iii)A and Section 117(2)(c)(i).
Section 117(2)(a)(iii)A provides:
(a)that in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(iii) commitments of the parent necessary to enable the parent to support:
A. himself or herself
Section 117(2)(c)(i) provides:
(c)that in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i)because of the income, earning capacity, property and financial resources of either parent or the child.
On 14 September 2004 the mother deposed to an income of approximately $755.00 per week, made up of $360 per week in rental income from an investment property, $50 per week in child support and the balance in Centrelink payments. However, according to the most recent child support assessment from the Child Support Agency, the father is liable for payments of only $12.25 per month, or $3 per week [Ex A1] for the period 1 December 2004 to 31 January 2006. This reduces the mother’s current income to $708 per week including her Centrelink payments. Section 117(7)(b)(ii) of the Child Support (Assessment) Act provides that a court having regard to the income, earning capacity, property and financial resources of the child or a parent of the child, must disregard any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
The mother puts her weekly fixed expenses at $1,287.00 which included a figure of $900.00 for her day to day expenses listed in Part G of her financial statement. As the total figure in Part G is $913.00 per week [not $900 as itemised at No 30 of her statement], her total weekly expenses are put more precisely at $1300.00 per week. The mother includes in her weekly expenses a figure of $356.00 for her elderly mother who lives in her household. Her mother’s income is put at $235 per week. She therefore supports her mother to the extent of $121 per week. This support is voluntary. The mother has no legal obligation to support her mother. In the circumstances of this case, I have decided it is appropriate to disregard that figure in relation to the mother’s expenses. This means the mother puts her total income at $708 per week and her total expenses for herself and the child at $944.00 per week. On these figures the mother has a shortfall of $236.00 per week. Excluding her Centrelink payments which I am required to do pursuant to Section 117(7)(b)(ii) of the Child Support (Assessment) Act the mother puts her income at $363.00 per week. The shortfall between this income and her expenses of $944 per week is $581.00 per week. On the basis of these figures the mother does not have sufficient income to support herself each week without taking into account any of the child’s expenses.
The mother’s expenses of $944 per week include mortgage payments at $311.00, food at $180.00, clothing and shoes at $70.00, holidays at $40.00, hairdressing at $23.00, charitable donations at $7.00 and modelling agency fees for the child at $7.00.
The mother has the following assets:
(a)Real estate in Russell Lea $450,000.00
(b)Bank account $144.00
(c)Ford Fairmont motor vehicle $19,600.00
(d)Household effects $500.00
(e)Superannuation $5,387.00
$475,631.00
The mother has the following liabilities:
ii)Loan secured by mortgage $158,200.00
Thus the nett asset position of the mother is $317,431.00. It is the mother’s evidence at hearing that she has met approximately $7-8,000.00 in legal fees by increasing her mortgage. The mother is presently owed $1,099.65 in child support arrears by the father. [Ex A2].
The mother said in evidence that she had not been in the paid workforce since approximately October 2001. She had been a flight attendant with Ansett until the airline ceased its operations, earning between $35,000 and $40,000.00 per annum. The mother has a degree in Health Sciences and Nursing but is not currently registered as a nurse. She said she was committed to the care of the parties’ child, JSG and had not returned to the workforce as a registered nurse or in any other capacity because of her need to care for him. The father challenged the mother’s decision not to work. He asked why her mother could not care for JSG while she worked. The mother said her mother was in poor health with limited English. She did not in her view have the capacity to care for JSG, nor would the mother give an elderly woman so much responsibility. She said her mother babysits JSG from time to time for a few hours which is the most she could ask of her.
It is not disputed by the father that he has no contact with the child JSG and has never had any contact. The parties separated before the child was born. The father has made no application to a court in relation to establishing a contact arrangement. The father said he had tried to arrange contact by direct communication with the mother but the mother had been resistant. The father believed Court proceedings would be detrimental to the child’s welfare. It is however, clear from the Court record that the father chose not to participate in the proceedings which led to the parenting orders of May 2002. He left the courtroom during the course of the proceedings. It is plain the father blames the mother for the present situation and has taken no active steps himself to change it. The mother has the day to day responsibility for the child with no assistance of a practical kind from the father. She therefore bears the sole responsibility in the long and short term for the child’s care, welfare and development. In these circumstances and given the age of the child, I have decided the mother’s decision to remain out of the paid workforce at this time, is reasonable.
There was no challenge by the father to the mother’s income figures.
I am satisfied the mother’s income is $363.00 per week as set out in paragraph 28 of these reasons.
The father challenged the expenses of the child as deposed to by the mother at a total of $211.00 per week. In particular, the father contested the figures for clothing and shoes, holidays, hairdressing and toiletries, modelling agency and charitable donations. He compared clothing, holiday and hairdressing expenses with those of his current family and said the applicant’s figures were exaggerated. He said modelling agency fees and donations for a four year old child are not reasonable expenses. I found it impossible to compare the child’s expenses deposed to by the mother with the children’s expenses deposed to by the father in his financial statement. The father included some children’s expenses in his own column in Part G, for example orthodontic expenses for his wife’s daughter, child care expenses for his son, JH. These amounts ought to have been listed in the children’s column. He included expenses for his step-daughter for whom he is not legally responsible. He also included ‘NK’ for a number of items.
The Full Court of the Family Court in In the marriage of JM and PJ Bryant 20 Fam LR 575 said that microscopic examination is neither required nor desirable in most cases of this kind. I agree with the father that modelling and donation expenses should be omitted from the child’s expenses. I find the other expenses for the child reasonable when compared with the costs of children of his age on the Lee Expenditure tables. With respect to the father no real damage was done to the wife’s evidence of the needs of the child. I am satisfied the child’s reasonable expenses total $199.00 per week. This in my view is a low figure because the mother is not presently paying rent and there is therefore no expense included for the child’s accommodation.
The father cross-examined the mother at length about the contents of her departure application to the Child Support Agency dated 17 July 2003. This is Annexure F to the father’s affidavit. The mother conceded there were errors in that Application. She omitted her anticipated rental income from her investment property at No 17 of the application. She explained that the property was not tenanted for several months in the 2003 year and was not tenanted at the time she completed the application. She also said she lived in the property for a few months in 2003. According to Ms RA, Senior Case Officer, the mother was living in her property in September 2003 [Annexure E of the mother’s affidavit, at page 5]. The mother agreed she should have completed the question, advising the Agency of the existence of the property and her anticipated income from that property, once she moved out and it was tenanted. However, it is plain from the decision of Ms RA of 30 September 2003 that the mother had explained her intentions in relation to the property [Page 5 of Annexure E]. At No 23 the mother included details of the property as the property she was living in. I am persuaded the mother was living in the property at the time of the application and that fact would explain her answers to questions 17 and 23. I agree with the father that the mother should have explained the position in relation to her property at No 17. In addition, the mother agreed “registration fees” should not have been included in her description of “other expenses”, nor should vehicle expenses of $700 per month been included as a monthly figure at Question No 21. She conceded other figures were 3 monthly rather than monthly. The mother said in evidence she told the review officer that the vehicle figure was an annual rather than a monthly figure and this is confirmed in the decision of the review officer of 30 September 2003 at page 5. The father challenged the mother’s assertions in the same application of July 2003 concerning the company DP Pty Ltd [‘DP’]. The mother said in her application:
DP has no assets… and “little if any real overheads, or more so, little if any company expenses. SH [the father] did not obtain any loan for the establishment of DP. DP hasn’t any company assets or property such as machinery, plant or equipment; no maintenance/repair costs; no office and/or rent; no telephone business account; no public liability; no advertisement costs; no vehicle and/or fuel expenses and many other outgoings pertaining to a business. He still operates a plant belonging to an Earthworks company – making him an employee of that company. ..
SH controls every aspect of DP and the list of expenses is contrived by him.
The mother conceded under cross examination she had only minor involvement in the company DP when it was established in 1999. She conceded she had never worked for the company. She said her assertions in the application to the Agency were based on out of date information. The father asked the mother to acknowledge she had lent money to the company for its purchase of a car in 1999. She would not agree. She said she had lent the father money which had subsequently been repaid. The father tendered a cheque butt and bank statement from the company’s St George Account showing a loan repayment to the mother of $1200.00 from company funds [Ex R1] which related to the car loan. In other evidence the mother agreed she had been paid $9,000.00 by the father in 1999 for her motor vehicle, such sum being used for the parties’ wedding. She said she was not aware the monies had come from company funds.
I am satisfied the company owns a motor vehicle and therefore has an asset, contrary to what the mother told the Agency in her application of July 2003. I am persuaded the mother was careless in her completion of her expenses on the application, and careless in relation to her assertions in that application about the company. She was not convincing in her responses in relation to monies received from the company for her car, or in relation to the company’s repayment of the car loan. On the other hand, I found her to be credible in relation to particular examples of purportedly excessive claimed expenditure which were put to her in cross examination. She explained the source of purchase funds for her Ford Fairmont as the $14,000 she received in entitlements when she left Ansett and some assistance from her family. She explained the way she managed the shortfall between her income and expenses by withdrawing $8,500.00 in superannuation funds on the basis of hardship. While it is not possible to exclude the risk that the mother included in her estimated expenditure some inflated figures, I do not consider that she attempted to mislead the Court and on balance I accept her as a witness of truth.
On 11 November 2004 in his financial statement the father deposed to an income of approximately $481.00 per week, made up solely of his wages of $481.00 from DP.
The father puts his weekly fixed expenses at $887.00 [the total was incorrect in his financial statement at No 33] which includes a figure of $385.00 for his day to day expenses listed in detail in Part G of his financial statement and a figure of $133.00 per week in child support. On these figures the father has a shortfall of $406.00 per week. However that the father deposed to a child support liability of $533.84 per month which is $123.00 per week, not $133.00 per week as deposed to. The child support transaction statement tendered by the father shows a present liability for the subject child and his child GH as $12.25 per month [Ex R2]. Therefore the stated expense of $133 per week for child support has been all but eliminated.
The father’s expenses for himself include mortgage payments at $284.00, food at $123.00, clothing and shoes at $32.00, childcare for his child Jordan and orthodontic expenses for his step daughter at $118.00 per week, pocket money of $5.00 per week, hairdressing at $4.00. As I have said earlier, some of these expenses should have been allocated to the children, not to him.
The father has the following assets:
(a)Real estate [50% share] $180,000.00
(b)Bank account $5.00
(c)Household effects no value provided
(d)Superannuation $6,443.00
$186,448.00
The father has the following liabilities:
(a)Loan secured by mortgage [50%] $173,463.00
(b)St George Mastercard $500.00
(c)Director’s loan $16,069.00.
Thus the nett asset position of the father is $(3,584.00).
The father deposed to his need to support AY, his current wife’s daughter from a previous marriage, now aged 13. He deposed to her biological father being deceased. Whilst I accept the father may have a moral obligation to assist with AY’s support, the father has no legal obligation to do so. The father has not adopted AY, nor is there any order in existence to create such a legal obligation. His legal obligations are to his biological children. In the exercise of my discretion on this issue, I have decided to exclude AY’s expenses from the father’s expenses.
The father was uncertain in relation to much of his evidence under cross-examination. He had difficulty in accepting a series of uncontroversial propositions put to him in relation to his attempts to reduce child support in the past. He had difficulty in accepting he had a shared responsibility with the mother for the support of the parties’ child. He would not readily accept that when his child support obligations to the mother reduced by nearly half in May 2004, the child’s expenses would not have halved. He would not accept that any of the reasons his company DP was established related to minimising taxation, nor would he concede that he had ever discussed the benefits of a company structure as a vehicle for self employment with his accountant. He said the only reason for the establishment of the company was the benefits to potential employers and the likelihood of increased work. He was hesitant before accepting that reduced income would mean reduced taxation obligations and reduced child support obligations.
The father established DP Pty Ltd in May 1999. He was its sole director, officeholder and shareholder. In August 2003 he resigned as Director and officeholder and his wife became the sole Director and Secretary. On 29 December 2004 he transferred his only share in DP to his present wife. He said, and I accept, he had instructed his accountant to make all the changes in August 2003 but the accountant failed to act on those instructions. The father said he now had no interest in Diesel. He works for the company on a casual basis. His present wife has earned income from DP since approximately July 2003. The father said his wife had been assisting him with the administration of DP since September 2000 but had not been paid for her services until July 2003. The father denied this decision to pay income to his wife was taken to reduce the family’s tax obligations. When it was put to him that his wife’s income should therefore be added to his income for the purposes of child support calculations, the father disagreed. The father vehemently denied that at any time he had been motivated in his actions by a wish to reduce his taxation or his child support obligations. I found much of the father’s evidence on these taxation issues unsatisfactory. The father has had an accountant for many years. I do not accept the father’s evidence that he has never discussed with his accountant the taxation implications of splitting income, or establishing a company for employment purposes.
The father said he did not have the capacity or opportunity for increased work. He said he worked casually, which meant his hours varied. He did not work every day, as there was not work available every day. He agreed almost all work done by DP in recent years had been contracted by the one company. He agreed DP did not have to chase jobs.
According to the profit and loss statements for DP[Annexure J to the father’s affidavit] in the year ending June 2004 DP earned gross fees of $99,310.00. DP claimed expenses in that year of $99,089.00. In the year ending June 2003 DP earned gross fees of $76,249.00 and claimed expenses of $79,770.00. In the year ending June 2002 DP earned fees of $87,323 and claimed expenses of $81,704.00. There was no evidence before me to suggest DP would not continue to operate successfully into the future.
The father submits that he has not held an interest in DP since August 2003. I have already accepted the father’s evidence that it was an oversight on the part of the company’s accountant that he retained his shareholding until December 2004. He said he initiated his exit from DP because he wanted to pursue a career as a paramedic. The father submits he therefore has no control over the manner in which DP distributes income or claims expenses. I do not accept that submission. The father established the company in May 1999 and was its sole Director, office holder and shareholder until August 2003. At that time, he had challenged decisions of the Senior Case Officer of the Child Support Agency on a number of occasions and failed on each occasion. In August 2003 he instructed his accountant to transfer his interest in the company to his wife. He resigned as a Director and officeholder. His wife was appointed in his place. He claims in his financial statement to owe the company $16,069.00. At all times, his labours alone have generated the fees payable to the company. The father provided no evidence of any change in circumstances which would explain the need to change the ownership and office holding of the company at that particular time. There is no evidence of the father having taken steps in relation to a new career as a paramedic. All the evidence points to the company operating as the alter ego of the father.
The father was entitled to resign as a Director and to transfer his shareholding in the company to his wife. However, he is not entitled to arrange his affairs so that he can avoid his responsibilities as a parent in relation to child support. Until August 2003 the father received the whole of the income from the company. He then included his wife as a salary earner. His decision in August 2003 in relation to his exit from DP cannot be at the expense of his duty to pay child support for the child of the parties. The father’s wife earns a good income for her full time work for an independent employer. There may be sound reasons from a taxation perspective to split the income from DP between the father and his wife. However, from a child support perspective, I have decided to include the whole of the salaries listed in DP’s expenses for the 2004 financial year in the father’s income.
The father was cross-examined on the expenses claimed by DP in the 2004 financial year as set out in the profit and loss statement of the company annexed to the father’s affidavit. I was not provided with any documents to corroborate the business expenses claimed. The father was adamant that the company claimed almost nothing as a business expense which benefited him or his family privately. The father said the telephone expense of $4,551 for the 2004 financial year was the expense of two mobile phones. He said almost all calls related to the business. He said he and his wife did not claim their landline at home, although the home phone and facsimile machine were both used for business purposes from time to time. It was put to the father that given DP obtained the majority of its contracts from one company, it is difficult to imagine why two mobile phone accounts would be so high if confined to business use only. I note a significant increase in this expense from the last financial year. I am not satisfied the telephone expenses relate solely to the business. The father said there were 3 computers at his home for which he claimed expenses. He conceded he made some use of the internet for private purposes. He said his wife alone handles the administration of DP. I am not persuaded more than one computer is necessary for a business of this kind given the father has no role in its administration. In relation to motor vehicle expenses of $17,302.00 the father said this related solely to the use of his work vehicle. Apart from collecting milk and bread on the way home from work, he said he used his wife’s car exclusively for private use. The sum of $17,302.00 is a very substantial claim for an ordinary work vehicle in one year. I have concluded there is some cross-over in usage between business and private. The father said he did not understand the depreciation expense claimed of $7,781.00. He left this with his accountant. It is plain this is an expense on paper only. The father conceded the amount claimed for staff amenities was a personal benefit to him.
As I have already stated, I am satisfied the father’s income from DP should include the whole of the salaries listed in the DP expenses for the 2004 financial year. There are other expenses claimed as deductions for taxation purposes which in my view should be added back when determining the father’s income for child support purposes. Those include some of the computer expenses, the whole of depreciation expenses, a proportion of motor vehicle expenses, staff amenities and some telephone expenses. There may be other expenses claimed which I have allowed but which may be excessive. There was no specific challenge to these other expenses. It is not possible to be precise in this exercise. The effect of these findings is that I have decided the father has in reality an income in excess of $50,000.00 per annum for child support purposes.
I have considered the father’s evidence of private expenditure. Unfortunately, the father’s position is poorly set out in his financial statement and he has made mathematical errors in his calculations. He has included children’s expenses in his own expenses, and has included expenses for his step-daughter which in the exercise of my discretion I have disregarded. The father did not make any submissions in relation to particular items of his private expenditure. He made a general submission that he was unable to afford anything but the most basic expenses for himself and his family, details of which are set out in his financial statement. That statement puts expenses for himself at $385 per week in addition to $71 for tax, $284 for his share of the home loan, $9 for home and contents, and $133 for child support payments. As I have previously stated, the expenses for his step-daughter will not be taken into account in my assessment of the father’s financial position. The $133 in child support is no longer being paid, and in any event must be omitted in this exercise of deciding what ‘excess’ income is available to the father to meet his obligations to all three of his biological children. The father agreed under cross-examination that he had more than doubled his expenses for accommodation since purchasing his present home with his wife in September 2004. His share of rent had been $110 and his share of the weekly mortgage payment is now $284.00. He defended his decision with an assertion that it was every Australian’s dream to own their own home. He said he and his wife had gone without any extras to save the 3% deposit and had lived with his wife’s father for 15 months to enable them to purchase the home. In my view, the decision by the father to purchase a home with his wife was a reasonable one and I have taken his share of the loan repayment into account in assessing his expenses and his subsequent capacity to pay child support.
There were no submissions made by either party as to the parties’ respective asset positions. The father in his affidavit deposes to the mother receiving more than him at the time of the parties’ separation but as the assets do not appear to be significant and the mother was pregnant with the parties’ child at the time, I do not regard this issue as material to the decision I must make.
At no time has the child had any income, assets or financial resources.
Although it is not necessary to consider whether more than one ground for departure may apply, I have decided both grounds relied on by the mother for departure are made out. In relation to the first ground, I am satisfied the mother has a reduced capacity for support for the child because of her commitment to support herself. As set out in paragraph 28 of these reasons, the mother’s income is less than she needs to meet her own expenses, without her making any contribution to the expenses of the child. In relation to the second ground, I am satisfied in the special circumstances of the case, an administrative assessment of child support would result in an unjust and inequitable determination of the level of support to be provided by the father because of his actual income. I have decided the father earns in excess of $50,000.00. Child support is presently assessed on an income of $25,021.00. Thus the income on which the current assessment is based, and was based after May 2004 bears no relationship to the past or future income of the father.
Is it just and equitable or otherwise proper to make a departure order?
In determining whether it would be just and equitable to make an order departing from an existing assessment or agreement, the court is required under Section 117(4) to have regard to the following matters:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d)the income, earning capacity, property and financial resources of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)himself or herself; or
(ii)any other child or another person that the person has a duty to maintain; and
(f)direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support:
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.
The thrust of the child support scheme is to base the assessment of a child support liability on the income, earning capacity and financial resources of the parties, to have the parties meet that liability equitably as between themselves and to have eligible children share in the financial fate of their parents. I have set out in these reasons the substance of the parties’ financial circumstances. The essence of this criteria is to strike a fair balance between the parents of the financial burden of the children’s support.
I accept the mother needs every dollar she can have from the father towards child support. Child support is primarily an income-based formula. The mother has already increased her mortgage and withdrawn part of her superannuation entitlement to meet the shortfall between her income and expenses. It is not appropriate in my view in the circumstances of this case to expect the mother to draw on assets intended to provide for her future.
The proper needs of the child are to be seen in the context of the background facts. The father has never lived with the child. Since the mother has stopped working, she has depended on child support for a significant proportion of her income. The parties have had only a moderate income. The concept of proper needs moves from reference to the bare cost of living and minimal day to day requirements to high costs of living and high expectations for children. I noticed the father’s reaction to some of the mother’s quite modest expenses for the child as too high. The father sought to compare the mother’s expenses for the child against his expenses for his children. He saw some of her expenses as too high compared with his expenses. Yet the father for example deposed to several times the expense for medical and dental than the mother. In the final analysis, I am satisfied the wife’s estimate of the child’s expenses are close to reflecting the proper needs of the child in the context of this case. I have already decided the child’s proper expenses to be $199 per week.
I am not satisfied the father can meet the whole of this amount, even though I have decided the mother cannot presently meet any of this amount. Nor has the mother sought an order for the whole of this amount. There is the issue of what after tax income of the father would be available to meet the needs of this child. Ms Vincent for the mother submitted the father could meet a liability of $500 per month. She submitted his actual income was close to $60,000.00 and if that income was adjusted in accordance with the child support formula (i.e. his exempt income amount of $23,929.00 deducted) the father had capacity to meet a liability of a greater amount than the mother was seeking. Ms Vincent submitted there was no need for me to make a finding in relation to the father’s reasonable expenses. I do not agree. The order sought by the mother is for a fixed monthly amount of child support not for the insertion of a new income figure. I have considered, as far as I have been able on the evidence before me, the father’s reasonable expenses. I have included a tax figure for an income of $50,000.00, his home loan repayment and an estimate of his own expenses. As explained already in these reasons, I have not included all expenses included in the father’s column in Part G of his financial statement.
The mother is unlikely in the foreseeable future to have an income earning capacity similar or approaching that of the father. The mother may return to work when the child attends school, but it is likely to be part-time work only given her lack of support for the child by the father. The mother has raised the child alone and is likely to be required to do so for the foreseeable future. The mother is providing some support for herself through her management of her investment property.
If a departure order is not granted, the likely hardship to the mother is that she will continue to erode capital that will be very hard for her to replace. Even on the order the mother seeks, the mother will be eroding capital to some extent until she is in a position to supplement her income from some kind of work. For the child, he will not have the lifestyle the mother would wish for him. For the father, there will also be some hardship but as the legislation provides, there must be an equitable sharing.
In determining whether it would be otherwise proper to make an order departing from an existing assessment or agreement, the court is required under Section 117(5) to have regard to the following matters:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(c)the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
The effect of any order on the mother’s centrelink benefits did not feature in the submissions of either party.
The orders which I propose would increase the mother’s income for the purposes of any means test which may apply to the benefits she currently receives. By definition that could only result in a reduction in those benefits and therefore a reduction in the extent to which the responsibility for the support of the subject child is borne by the taxpayer.
I am satisfied that a departure order would be otherwise proper.
I propose to make an order but not in the same terms sought by the mother. I have decided the father can meet the order I propose to make. I have determine the father’s capacity by dividing his available income after reasonable expenses between the three children he is legally obliged to support. I have also checked this result by application of the Child Support Agency formula to his income as I have found it to be.
I propose to make an order that the father pay child support in the sum of $350.00 per month, to increase with the Consumer Price Index each year.
The mother sought an order until the child reaches 18 years. It is unusual to make a departure order that would extend until the child ceases to be eligible. I am not critical of the mother’s application given the number of applications, responses and objections she has dealt with in the past. In the absence of a registered agreement, an administrative assessment will revert to the rate assessed on the father’s taxable income as evidenced by his tax return. The formula will not therefore accommodate what I have found to be the true financial circumstances of the father. The child support scheme is based on the regular review of liability to ensure the objects of the scheme are met by reference to the changing circumstances of the payer, the payee and the subject child. The parties’ financial circumstances may significantly change in the years to come and may the needs of the child. It is likely the needs of the child will increase. Those changes should be accommodated by the Registrar in a few years time. I have decided the orders will extend until 31 December 2008.
The father has asked in his affidavit that he be relieved of his present arrears of $1,099.65. I have treated this as an application by the father to discharge the present arrears. The father says he was caused hardship as a result of the Agency’s decision of 30 September 2003 to increase his annual rate of child support. The mother was caused hardship by the reversal of the Agency’s decision in May 2004. In all the circumstances, I have decided not to make an order for the father’s arrears to be discharged.
The mother has asked that any order I make be backdated to 1 October 2003. As there were conflicting and confusing decisions by the agency as to the quantum of child support to be paid from that date, and as the father purchased his home in July 2004, I have decided it would be too onerous on the father to backdate the order to October 2003. However, from the date the mother filed her application on 15 September 2004, the father must have contemplated the possibility of the mother succeeding in her application or at least succeeding in part. I have decided to backdate the orders to 15 September 2004.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of Sexton FM
Associate: Collette McFawn
Date: 3 February 2005
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