Farmer & Farmer

[2007] FamCA 158

FAMILY COURT OF AUSTRALIA

FARMER & FARMER [2007] FamCA 158

APPEAL – From decision of Federal Magistrate – Property  – Parties agreed that contributions should be assessed as to 70% in the wife’s favour – On appeal husband challenged the adjustment for s75(2) factors, claiming they should have favoured him rather than the wife – Wife had a higher income earning capacity than the husband and would retain a greater proportion of the assets – Equal shared parenting – Federal Magistrate had concluded that since the husband had consented to the children attending private schools but the wife alone bore the cost and was paying child support, a 5% adjustment in her favour was warranted – Held: it could not be said that the children’s attending private schools was a necessary expense nor had the parties jointly agreed upon it – The wife’s obligation to pay child support could not reduce the husband’s property entitlements as this would amount to an effective reduction his child support entitlement – The s75(2) factors favoured the husband and the proper outcome was 66.67/33.33 in the wife’s favour.

Family Law Act 1975 (Cth)
Federal Proceedings (Costs) Act 1981 (Cth)

Allesch v Maunz (2000) 203 CLR 172
Burke v Burke (1993) FLC 92‑356
Gronow v Gronow (1979) 144 CLR 513
House v. The King (1936) 55 CLR 499
Mee v Ferguson (1986) FLC 91‑716

APPELLANT: MR FARMER

RESPONDENT: MS FARMER

FILE NUMBER: LNM 1279 of 2005

APPEAL NUMBER: SA 72 of 2006

DATE DELIVERED: 21 February 2007

PLACE DELIVERED: Melbourne

JUDGMENT OF: KAY J

HEARING DATE: 21 February 2007

LOWER COURT JURISDICTION: Federal Magistrates Court

LOWER COURT JUDGMENT DATE: 10 October 2006

LOWER COURT MNC: [2006] FMCAfam 524

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Tresize

SOLICITOR FOR THE APPELLANT: Dobson Mitchell & Allport

COUNSEL FOR THE RESPONDENT: Mr McGuire

SOLICITOR FOR THE RESPONDENT: Temple-Smith Partners

Orders

1. That the appeal be allowed.

2. That order 1(a) of the orders made by Roberts FM on 10 October 2006 be varied by substituting the sum of "$105,235" for the sum "$152,000" therein appearing.

3. That the Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.

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

The court notes that, should the wife refund the difference in the amounts within a reasonable time, the appellant will not seek any interest in respect of the overpayment.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SA 72  of 2006
File Number: LNM 1279 of 2005

MR FARMER

Appellant

And

MS FARMER

Respondent

REASONS FOR JUDGMENT

1. This is an appeal against orders for property settlement that were made by Roberts FM on 10 October 2006. 

2. I heard this appeal sitting as a single judge of the Family Court pursuant to arrangements made under s 94AAA(3) of the Family LawAct 1975 (Cth) (“the Act”).

3. The matters in issue are fairly narrow.  There was a pool of assets with an agreed value of some $563,000.  I will detail breakdown of that pool shortly.  It was agreed that an appropriate division of the pool, based on s 79(4)(a), (b) and (c) considerations (colloquially known as "the contribution factors") should be 70 per cent in favour of the wife and 30 per cent in favour of the husband. 

4. The Federal Magistrate went on to make a further adjustment in what is colloquially known as “the s 75(2) factors”, and determined that a further 5 per cent allowance should be made in favour of the wife, relying particularly on two factors, it appears to me: 

   ·    that the children of the marriage who were being shared between the parties on an equal basis, in terms of the time spent with each parent, were enrolled in private schools and the wife was wholly responsible for their education expenses; and

   ·    that the wife was paying, in addition to the private school fees, some child support to the husband because she was a greater earner than he was.

5. The husband challenges the s 75(2) adjustment, saying that the factors ought to have led to an adjustment in his favour of 10 per cent so that the pool should be divided 60‑40 in favour of the wife rather 75-25 in the wife's favour.  He relies upon two matters that would make that appropriate, namely the wife's superior earning capacity and the wife's superior capital base as a result of the contribution division.

Background

1. The parties met and married in Western Australia in 1993.  The wife was an American citizen and they were working in WA.  After the marriage the wife returned to Utah, where she had gainful employment. Eventually the husband, after sorting out some visa difficulties, moved to the United States to be with his wife. 

2. It is clear that throughout their stay in the United States that lasted for the next three or four years the wife was continuously in employment, firstly in Utah as a social worker and then in Alaska for a year before coming to Australia.

3. During the period that the parties were in the United States it is abundantly clear that the wife was significantly the major breadwinner.  In her affidavit she set out a chart of the differential in their income and demonstrated that whilst they were in the United States of America her earnings exceeded US$200,000 whilst the husband's were slightly less than US$30,000. 

4. The parties had two children who are the subject matter of some consent orders relating to the time they would spend with each parent.  The children were T, who was born in July 1997; and J, who was born in February 1999. 

5. The parties returned to Australia after T's birth to acquire an interest in the WA business where they had met.  Their investment proved to be less than satisfactory.  They then stayed in Western Australia, the wife taking up work for a counselling agency and the husband working as a gardener and handyman. 

6. After the birth of J the wife obtained employment in Tasmania as a social worker.  The parties moved to Tasmania and they purchased a home in B.  Then the wife obtained some employment in D as a social worker and the children initially went with her - the husband having, during the course of the time in Tasmania at least, been effectively, by agreement, fully‑occupied in home duties and becoming the principal carer for the children whilst the wife was the principal breadwinner. 

7. After the wife moved to D, the husband stayed behind to complete some repairs on the home and enable it to be made more presentable.  The home was used to assist in the wife acquiring a property in D by borrowing against the B property.  The husband then moved to the north‑west coast of Tasmania and they commenced sharing the children equally. 

8. The wife then brought an application to move to Hobart, and that was compromised ultimately by orders that were made in February 2006.  They were to have joint responsibility for the long‑term care, welfare and development of the children and would share the children on a week about basis. 

9. There was an order made that by consent the wife have leave to enrol the children, Tand J each at a private school.  The property proceedings were then adjourned for subsequent hearing. 

10. Both parents then found themselves living in Hobart and the arrangement for equal shared care of the children was put into effect.  There is nothing in the judgment of the Federal Magistrate under appeal that would indicate that that has not remained the position. 

11. The evidence before the Federal Magistrate is that the wife was in employment, that she was earning something less than $90,000 per annum in her present circumstances.  The husband was not in employment but was undertaking a retraining program at a TAFE college to update his qualifications and he was hopeful of completing the course at the end of 2007. 

12. In the midst of their property proceedings the husband obtained a child support assessment.  The wife was dissatisfied with the amount that was assessed that she should pay child support to the husband.  The matter was the subject of a review by a senior case officer, who reduced the child support payable by the wife from approximately $9000 per annum down to $6000 per annum, based upon the opinion of the officer that the husband was not exercising his earning capacity to its full potential.

13. The case review officer rejected the wife's argument that she should receive a further reduction because of the manner in which the children were being educated and the costs that were attributable to that matter.  The senior case officer had concluded that the consent contained in Order 4, that the wife have leave to enrol the children, T and J at the two private schools, was no more than an order that empowered the wife to enrol the children at the schools nominated and did not carry with it any implication of a mutual intention to provide the children with fee‑paying schooling. 

14. Although it is only of marginal interest, for my purposes, the relevant legislation the child support review officer has allows for the possibility of an adjustment to the amount of child support because:

    “the costs of maintaining a child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents”.

15. The senior case officer took the view that you could not imply from the orders made in February 2006 that it was expected  by both parents that the children would be educated or trained in the private school system but merely that the order simply gave the wife permission to enable that to occur if that was her wont. 

16. That seems to me, I should say, to be an interpretation of the order that is not an unreasonable one in the circumstances and is consistent with the underlying philosophy, spoken of by the Full Court in Mee v Ferguson (1986) FLC 91‑716 at 75,201, in relation to the obligation of a non‑custodian to pay school fees.  Where the non‑custodian has agreed to the child attending a fee paying school

    that person is liable to contribute to the fees involved so long as and to the extent that he or she has a reasonable financial capacity to continue to do so.

17. It could not be said, on any view of the material before the Child Support Registrar, that Mr Farmer had the reasonable capacity to provide anything towards the payment of private school fees.

The judgment

1. With that background in mind, the Federal Magistrate, having set out what the assets of the parties were as follows

Distributed funds	$80,000
Funds held in trust	$238,326
Husband’s car	$7,000
Wife’s car	$7,000
Wife’s equity [D] home	$60,000
Camper trailer	$2,500
Husband’s RBF superannuation	$1,310
Husband’s West State Superannuation	$3,729
Wife’s RBF Superannuation	$39,582
Wife’s USA superannuation	$123,500
TOTAL	$562,947

noted that a significant portion of that table consisted of superannuation entitlements.

1. His Honour acknowledged that the parties had reached some agreement that an appropriate division, based on the contribution factors, was 70‑30 in favour of the wife.  That created an imbalance in favour of the wife of $225,000. 

2. The Federal Magistrate then turned to what he described as the s 75(2) factors, identifying as follows, and I paraphrase,

   -The husband is aged 53, the wife is aged 46. 

   -The wife's earning capacity is greater than the husband's. 

   -She is younger and has generally earned more than he has.  She has qualifications a social worker earning $68,000 per annum in a senior government position. 

   -The husband is undertaking a TAFE course and in unlikely to complete the course before the end of 2007.  

   -The senior case officer had adopted artificially an earning capacity of $34,000 for the husband, based on what he could earn as a truck driver in Tasmania and the wife's income is double that.

3. The Federal Magistrate then noted that the wife was paying child support because she had a superior earning capacity.  He then made some comments relating to the senior case officer's interpretation of the obligation to provide for private school fees, saying that because the husband consented to allowing the wife to enrol the children in private school there must have been a mutual intention for the children to attend private school. 

4. The Federal Magistrate concluded that because the children were attending private school at the cost of $15,000 per annum and the wife was paying $6000 in child support towards the husband, that $21,000 per annum from her after‑tax income was a substantial drain and in those circumstances the matter cried out for an adjustment in favour of the wife rather than in favour of the husband.

The appeal

1. This was a discretionary judgment.  In order for the appeal to succeed it must be shown that there is either an error of fact or of law or that the result that has been obtained is one that falls outside acceptable parameters.  See House v. The King (1936) 55 CLR 499, at 504-505; Gronow v Gronow (1979) 144 CLR 513 at 519 per Stephen J.

2. It seems to me the trial judge has erred in the manner in which he has dealt with the s 75(2) factors. 

3. The significant and relevant factors are identified under s 75(2)  itself.  The section talks of the requirement for the court to give consideration to only the factors set out in s 75(2), but of course those factors contain a general factor of:

   (o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.

4. But amongst the myriad of factors that the court must take into account is the commitment of the parties necessary to enable the party to support a child or other person the party has a duty to maintain.  The limiting word in s 75(2) is that the expense has to be "necessary".  This is a different consideration to matters that might be taken into consideration in determining whether or not to make a departure order in a child support application.  It is a different consideration to that which might become relevant if there was a child maintenance issue and the issue of the payment of private school fees came into account. 

5. That private school fees issue is dealt with in the child maintenance area by the requirement to take into account the proper needs of a child, which take regard of the manner in which the parents expected the children to be educated or trained.  One could not say in this case that the parents collectively expected the children to be educated in private schools rather than that was the wife's desire which the husband had not vetoed.  I do not think you can read the consent order any higher than that. 

6. In any view, it cannot be said that the payment of private school fees was a necessary expense, and in those circumstances and consistent with Mee v Ferguson (supra) that one can only visit private school fees upon a parent where there is the capacity to meet them, in my view, it would be equally inappropriate to make a capital adjustment away from the share of a parent in favour of the other parent in the circumstances that would have the effect of the very modest amount of capital being provided being further eroded so as to assist the parent who wanted the children in private schools to meet that desire.

7. In the circumstances, I am of the view that the Federal Magistrate erred in his assessment of s 75(2) factors to give weight to the fact that the wife was paying the private school fees, and, insofar as his judgment is capable of being interpreted as also giving weight to the wife having to pay the husband child support.  That of itself amounts to a further error. 

8. Section 79(4)(g) requires the court to pay attention to any child support under the Act that a party has provided or is to provide. That section is aimed not at entitling the parent paying child support to a greater share of the capital assets but rather to enable the parent paying child support to resist an application by the other parent for a greater share of the assets on the basis they have an obligation to care for the children, otherwise the effect of the order would be that the child support recipient would be paying their own child support by a reduction in the capital assets available to them. That is not the intention of the child support legislation nor do I read it as the intention of s 79(4)(g). I add that counsel for the wife in these proceedings acceded to that proposition in the course of argument.

9. What then remains, once I conclude that the Federal Magistrate was in error in making an adjustment in favour of the wife, is to consider the application that the Federal Magistrate should have made an adjustment in favour of the husband.  It was submitted that adjustment should be as high as 10 per cent of the pool of assets.  That would have the effect of decreasing the differential between the parties by $125,000 to take into account the factors that the husband identifies as favouring his position. 

10. The factors that favour an adjustment in favour of the husband can be identified as the capital and income disparity.  The wife has $225,000 more of this pool of assets than he has, based on contribution.  She has a higher income.  At its highest the disparity is that he has to rely on social security until the end of 2007, a period of some 15 months from the time of judgment; or, at its lowest, he can be expected to earn the type of moneys that the child support case review officer was speaking about, namely $34,000 or $35,000 a year for the time being, and the wife has the capacity to earn twice that much.

11. The disparity between the two households is considerably narrowed when one takes into account the child support adjustment and one takes into account the social security available to the husband.  However, there remains a disparity.  That disparity is brought about partly by reason of the manner in which the parties conducted themselves during the course of the marriage and the agreement that the husband would stay home and care for the children for much of the time, and that he otherwise continues to be an equal caregiver for the children.  I think there is much substance in the submission being made that one should have regard to the observations of Fogarty J in Burke v Burke (1993) FLC 92‑356 at 79‑765. In that case the wife's financial circumstances were significantly better than the husband's, and his Honour commented:

    It is important to bear in mind that section 75(2) factors are gender‑neutral - that is, they apply equally to men and women, although this court is more accustomed to dealing with cases where it is the husband who has the future income‑earning capacity and the future superannuation entitlement and it is the wife who is not employed and has been out of the workforce for some time. 

12. If one was to apply a gender‑reversal argument to this case and approach it on the basis of a husband who was in secure employment earning at least twice as much as the wife, the parties were sharing the children and the husband had a greater capital entitlement, even though the husband was meeting private school fees that he determined was the appropriate way of educating the children, one would anticipate an adjustment in favour of the wife.  Applying a gender‑neutral interpretation to legislation.  I find it difficult to resist a similar outcome in this case. 

1. I should say that each of the parties invited me to re‑exercise discretion without consideration to any further material, in accordance with Allesch v Maunz (2000) 203 CLR 172..  I think when I give consideration to an order that is ultimately just and equitable - that which is described as the “fourth step” in these proceedings, working out the mathematics and standing back - that there is room for an appropriate adjustment in favour of the husband but far smaller than the one that he anticipates. 

2. It seems to me that an appropriate adjustment to recognise the disparity in earning capacity brought about to some degree by the roles adopted by the parties in agreement in the course of their marriage and the capital disparity of the parties enables an adjustment so that the pool of assets identified by the trial judge should be adjusted as to two‑thirds in favour of the wife and one‑third in favour of the husband.  That is effectively a 3.3 per cent adjustment from a contribution based assessment. It narrows the discrepancy in outcome by 6.6 percent .

3. On a pool of $562,947, two‑thirds gives the wife an entitlement to receive assets to the value of $375,317.  According to the Federal Magistrate she already has $270,082, which gives her an entitlement to receive $105,235.

4. It is appropriate that each party have costs certificates in the matter..

I certify that the preceding forty three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kay

Associate: 

Date:  8 March 2007