FIRTH & HALE-FORBES
[2014] FamCAFC 187
•1 October 2014
FAMILY COURT OF AUSTRALIA
| FIRTH & HALE-FORBES | [2014] FamCAFC 187 |
| FAMILY LAW – APPEAL – CHILD SUPPORT – Leave to appeal – Where the mother successfully applied to vary an existing child support departure order to increase the periodic amount to be paid and to have the increased amount backdated – Where the father’s application to vary to nil the existing periodic amount set by departure was dismissed – Where the father failed to establish a ground for departure as required by s 117 of the Child Support Assessment Act 1989 (Cth) – Where father established changes in circumstance but not “special circumstances” – Where the primary judge did not analyse the evidence about the financial impact of those changes on the father’s circumstances – Whether the child support departure orders made on the mother’s application were just and equitable – Whether the primary judge failed to consider whether the effect of the orders would visit hardship on the father and his children from another relationship – Where the payment of income tax cannot be treated as discretionary expenditure - Leave to appeal granted - Appeal allowed – Matter remitted for rehearing. |
| Child Support Assessment Act (1989) (Cth): ss 4, 111, 117, 118 |
Bassingthwaite v Leane (1993) FLC 92-410
Bryant & Bryant (1996) FLC 92-690
C & S [2003] FMCAfam 464
Coulton v Holcombe
(1986) 162 CLR 1
Gyselman & Gyselman (1992) FLC 92-279
(1993) FLC 92-430
(1999) FLC 98-004
(1996) FLC 92-665
(1985) 60 ALR 68
Humphries & Humphries
Johnson & Johnson
Liesert v Nutsch
Metwally v University of Wollongong
Water Board v Moustakas
(1988) 180 CLR 491
(1997) FLC 92-771
Wild v Ballard
| APPELLANT: | Mr Firth |
| RESPONDENT: | Ms Hale-Forbes |
| FILE NUMBER: | SYC | 3026 | of | 2011 |
| APPEAL NUMBER: | EA | 69 | of | 2013 |
APPEAL NUMBER: | EA | 164 | of | 2013 |
| DATE DELIVERED: | 1 October 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan, Murphy & Aldridge JJ |
| HEARING DATE: | 16 May 2014 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATES: | 10 May 2013 & 18 October 2013 |
| LOWER COURT MNCS: | [2013] FamCA 334 [2013] FamCA 814 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Wilson SC |
| SOLICITOR FOR THE APPELLANT: | Cameron Gillingham Boyd |
| COUNSEL FOR THE RESPONDENT: | Mr Cummings SC |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
Orders
The appellant father’s application for leave to appeal Orders 11 and 12 of the orders made by Rees J on 10 May 2013 be granted.
Appeal EA 69 of 2013 be allowed.
Orders 11 and 12 of the orders made by Rees J on 10 May 2013 be set aside.
Appeal EA 164 of 2013 be allowed.
Order 4 of the orders made by Rees J on 18 October 2013 be set aside.
The proceedings be remitted for rehearing before a judge other than Rees J.
That there be no order as to costs.
That the Court grants to the appellant father a costs certificate pursuant to the provisions 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 him in relation to the appeal.
That the Court grants to the respondent mother a costs certificate pursuant to the provisions of s 6 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 respondent in respect of the costs incurred by her in relation to the appeal.
That the Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 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 each of the parties in respect of the costs incurred by the appellant and respondent in relation to the rehearing of the application.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Firth & Hale-Forbes has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Numbers: EA 69 of 2013; EA 164 of 2013
File Number: SYC 3026 of 2011
| Mr Firth |
Appellant
And
| Ms Hale-Forbes |
Respondent
REASONS FOR JUDGMENT
Before the court is an application for leave to appeal and, if leave is given, the appeal by Mr Firth (“the father”) in relation to child support departure orders made pursuant to the Child Support Assessment Act (1989) (Cth) (“the Act”) by Rees J on 10 May 2013 (EA 69 of 2013) (“the child support appeal”). Leave to appeal is required for the child support appeal. He also appeals an order made on 18 October 2013 that he pay half the mother’s costs of the substantive proceedings (EA 164 of 2013) (“the costs appeal”).
At the commencement of the appeal, senior counsel for the father informed us that the father withdrew his appeals against her Honour’s refusal to stay the child support orders and, with the exception of order 4 dated 18 October 2013, the other orders for costs identified in the costs appeal.
Ms Hale-Forbes (“the mother”) is the respondent and seeks to uphold the orders made by the primary judge. On 1 May 2014, she filed an application for leave to adduce further evidence in the appeal in accordance with her affidavit filed the same day. In that affidavit, the mother deposed to her attempts to secure ongoing financial disclosure from the father, financial information she volunteered to him and inadmissible material concerning employer profit distributions in 2013 by the place in which the father is employed. This evidence went to two points, namely whether the father should be given leave, and if the child support appeal is allowed, to demonstrate that the matter should be remitted for rehearing. Senior counsel for the father conceded the latter point and for reasons we will set out later on the leave point, we granted the application to adduce further evidence in the application for leave.
The parties have three children who since separation have primarily lived with the mother and spent substantial time with the father. Her Honour discharged all parenting orders in relation to the elder child and reduced the two younger children’s time with the father during term to five nights each fortnight. There is no appeal in relation to the parenting orders.
There were two competing child support applications before the primary judge. The first was the father’s application to vary to nil an existing child support departure order which required him to pay $29,536 per annum ($189.33 per week per child). If granted, the effect of his application was that he would continue to pay the children’s private school fees (then $88,868 annually and associated expenses) and medical expenses not otherwise covered by private health insurance but would not otherwise contribute to the children’s costs in the mother’s care.
In response, the mother applied to increase the periodic amount to $59,112 annually (or $378 per week per child). According to her, the operative periodic amount payable by the father was underpinned by his misrepresentation of his income and thus she also sought to retrospectively increase the periodic amount from 1 January 2009.
The father’s application was dismissed. The mother secured a significant increase in the periodic amount which was backdated to 1 July 2011. The effect of the orders is that after provision is made for the children’s proper needs and as a consequence of the periodic amount the father must pay, the mother’s available income materially exceeds his. Central to the child support appeal is whether the primary judge was wrong to conclude that the orders are just and equitable.
The primary judge ordered the father to pay the mother’s costs of her application to amend the parenting orders pursuant to the slip rule, her application for an interlocutory order filed on 29 June 2012 and the child support proceedings. Absent agreement, all orders for costs are to be calculated on a party/party basis. In relation to the order for costs in the child support proceedings, the amount payable is half the mother’s costs of the combined parenting and child support proceedings.
Background Facts
So as to provide context to the appeal a brief historical overview is required.
The father, who is a legal professional and the mother, who is also a legal professional, have three children. They are H, E and B.
Although they were separated, the parties continued to live in the same home until parenting, property settlement and child support departure orders were made on 10 November 2005 (“2005 orders”). By those orders O’Ryan J ordered that during term the children live with the father four nights in each 14 and otherwise with the mother. He was ordered to pay periodic child support in the amount of $313 per week for each child, as well as their private school fees and associated expenses, and any medical expenses not otherwise covered by private health insurance.
The 2005 child support orders are set out below:
…
5.By way of departure from the Child Support Assessment issued by the Child Support Registrar in Case No. xxx92 or any other assessment issued by the Child Support Registrar in respect of the children or either of them, the husband pay or cause to be paid:
5.1To the wife or as she may from time to time direct in writing, child support for each of the children at the rate of $313 per week per child, the first payment to be made within seven days of the date of this order and thereafter by monthly instalments in advance and the final payment to be made on the happening of a child support terminating event in relation to each of the children respectively as defined in s 12 of the Child Support (Assessment) Act 1989.
5.2Pay or cause to be paid to the school within 14 days of receipt of accounts or invoices or to the mother within 14 days or receipt, all school fees incurred by the wife in respect of the attendance of each child at a [named] private school, or such other school or schools as the parties may agree the children attend) and such private school fees shall mean and including all boarding fees, tuition fees, excursion fees, incidental sporting costs, the costs of all school books, school uniforms and reasonable extra curricular activities.
5.3Pay any orthodontic, hospital, optical, physiotherapy, podiatry or other medical or medical specialist fees or expenses incurred in respect of the children not able to be recovered from the private health insurance fund maintained by the wife for the benefit of the children.
…
The father married Ms T in March 2007. The mother has not repartnered.
The child D was born to the father and his wife in 2008.
In the shadow of the father’s application filed on 7 November 2008 to divide the children’s time equally, the parties negotiated changes to the 2005 orders. Their agreement is reflected in orders made by consent on 10 December 2008 (“2008 orders”). The effect of those orders is that the children’s time with the father increased to six nights each fortnight during term and the periodic amount was reduced by nearly 50 per cent, to $170.75 per child (indexed).
The 2008 child support order is set out below:
…
5.Order 5.1 of the child support departure orders be varied so that the amount payable by the father by way of periodic child support is varied to the sum of $170.75 per week per child effective 1 January 2009.
…
The child F was born to the father and his wife in 2010.
In May 2011, the father filed another application to divide the children’s time equally and to reduce the periodic amount to nil.
In response, the mother sought, inter alia, to prospectively and retrospectively increase the periodic amount payable by the father. By way of retrospective variation, she sought $342 per week per child commencing from
1 January 2009 and from 1 October 2012 she sought $378 per week per child.
The primary judge increased the periodic amount for the year commencing 1 July 2011 to $50,286.60 or $322.34 per week per child. Commencing
1 June 2012, the periodic amount was set at $343.33 per week per child.
The child support orders made on 10 May 2013
The child support orders made on 10 May 2013 are set out below:
(11)That the application of the father to reduce periodic payments of child support to nil be dismissed.
(12)That pursuant to section 118(1) of the Child Support (Assessment) Act 1989 (Cth), the rate of child support payable by the father be varied as follows:
(a)for the child support period commencing 1 July 2011 and finishing 30 June 2012, a lump sum of $50,286.60;
(b)for the child support period commencing 1 June 2012 and finishing on 30 June 2013 and each year thereafter, the annual rate be $343.33 per week per child.
Section 117 of the Act
Section 117 of the Act is the provision which underpins the parties’ applications and the child support appeal. It is useful if we set it out now:
s 117 (1) Court may make departure order where:
(a) application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b) the court is satisfied:
(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:
(A) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this Division;
the court may make the order.
Grounds for departure order
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i) the duty of the parent to maintain any other child or another person; or
(ii) special needs of any other child or another person that the parent has a duty to maintain; or
(iii) commitments of the parent necessary to enable the parent to support:
(A) himself or herself; or
(B) any other child or another person that the parent has a duty to maintain; or
(iv) high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain;
(aa) 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 the responsibility of the parent to maintain a resident child of the parent (see subsection (10));
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i) because of high costs involved in enabling a parent to spend time with, or communicate with, the child; or
(ia) because of special needs of the child; or
(ib) because of high child care costs in relation to the child; or
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
High costs involved in enabling parent to care for a child
… [(2B)-(3C) omitted]
Matters to consider for purposes of subparagraph (1)(b)(ii)
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
Proper needs of the child
(6) In having regard to the proper needs of the child, the court must have regard to:
(a) the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b) any special needs of the child.
Income, earning capacity, property and financial resources
(7) In having regard to the income, earning capacity, property and financial resources of the child, the court must:
(a) have regard to the capacity of the child to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child that do not produce, but are capable of producing, income; and
(b) disregard:
(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
(7A) In having regard to the income, property and financial resources of a parent of the child, the court must:
(a) have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing, income; and
(b) disregard:
(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
(7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a) one or more of the following applies:
(i) the parent does not work despite ample opportunity to do so;
(ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or working pattern; and
(b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i) the parent’s caring responsibilities; or
(ii) the parent’s state of health; and
(c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
Direct and indirect costs in providing care
(8) In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care.
Subsections not to limit consideration of other matters
(9) Subsections (4) to (8) (inclusive) do not limit other matters to which the court may have regard.
… [(10) omitted]
Because it is accepted that the father’s two children with his wife are resident children for the purpose of s 117(4)(g)(iii) we have omitted the definition provisions and others that have no bearing on the case.
The primary judge’s reasons
As we said earlier, the proceedings before the primary judge concerned parenting and child support orders. By way of preamble to her reasons for judgment on both issues, her Honour observed that at the time of hearing the children spent six nights each fortnight with the father, which arrangement he sought to continue (albeit structured differently) and which the mother, in relation to the younger children, sought to reduce to five nights. The mother said no orders should be made about the elder child. Her point being, that at 17 it was no longer appropriate for his living arrangements to be defined by order. At [51], her Honour accepted that even if there were no parenting orders in relation to that child, he would want to continue to divide his time between his parents in accordance with the arrangements for his two younger siblings.
The parenting proceedings were considered first. All parenting orders were discharged and an order was made that the parties have equal shared parental responsibility for the three children. Otherwise no parenting orders were made in relation to the elder child. Orders were made that during school term the two younger children live with the father five nights each fortnight and the remaining eight with the mother. School holidays are shared equally. It was on this basis that her Honour determined the child support applications.
The father’s application was considered first. His evidence that he pays $88,868 per annum for the children’s school fees and expenses and $29,536 periodic child support for the three children annually was accepted.
Next, the primary judge considered whether, in accordance with s 117(1)(b)(i), he had established a ground for departure contained in s 117(2) of the Act. For authority concerning the operation of s 117(2), reference was made at [98] to Gyselman & Gyselman (1992) FLC 92-279 where, at 79,065, the Full Court said:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words, “in the special circumstances of the case”. Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasize that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases. In Savery’s case (p. 77,897), Kay J, adopting the view in Philippe and Philippe (1978) FLC 90-433 at p. 77,202 in a different context, said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
The change in circumstances which, on the father’s case amounted to “the special circumstances of the case”, were set out at [99] as follows:
1.The subsequent birth of a child to the husband and the stepmother.
2.The significant increase in the income of the respondent.
3.The increase in school fees payable now that all of the subject children are in high school.
4.The school fees now payable for the father’s child, born before the date of the order sought to be varied.
If not explicitly, then at least by necessary implication, at [100], the
primary judge proceeded on the basis that although the father established facts consistent with three of the four changes in circumstances, the changes were not “special or out of the ordinary”. Her Honour saying that the fact parents repartner and children are born of those new relationships merely accords with the usual course of events. In other words, F’s birth was treated as irrelevant. In this respect, her Honour differentiated between what might constitute special circumstances for an order set by departure compared with the manner in which the administrative scheme takes into account changes in a liable parent’s circumstances. She said “[i]ndeed the Child Support legislation itself recognises that adjustments have to be made having regard to the commitments of liable parents to support other children” [100].
Her Honour regarded the increase in the mother’s income as modest and not “…out of the ordinary expectation of parties in the position of these parties” [101].
Because of its importance in the appeal, the parties’ taxable incomes, as found at [102], are set out below:
Year
Father
Mother
2008
$1,473,065.00
$367,642.00
2009
$706,086.00
$386,523.00
2010
$867,789.00
$125,238.00
2011
$957,432.00
$408,306.00
2012
$602,173.00
$384,359.00
The primary judge took into account that the father’s wife earned $561,000 per annum which meant she was “…well able…” to contribute to their children’s expenses [103]. This finding reinforced her Honour’s view that not only was the birth of another child irrelevant, the changes in the father’s circumstances based on his increased expenses for his and his wife’s children were not special.
Because the father failed to establish a ground for departure his application was dismissed.
The mother’s departure application was then considered. Because the mother applied for a retrospective variation to orders more than 18 months old, as a consequence of s 111 of the Act, she required leave to pursue that aspect of her application.
Her Honour explained that the effect of the 2008 orders was to reduce the periodic amount by almost 50 per cent. In relation to the negotiations which resulted in the 2008 orders, at [114], she found:
It is common ground that in the negotiations leading up to consent orders relating to child support there was no formal financial disclosure. On 20 May 2008 the father sent an email to the mother in relation to child support. The email read in part “however, if you use the child support calculator and assume your income is 300,000 (which is a guess) and mine is 750,000 (which it is not), the amount due would be zero.” The only reasonable inference to be drawn from the father’s email is that he asserts his income is less than $750,000.
The fact that through misrepresentation of his income the father secured a significant reduction in the periodic amount, when considered in the context of the Objects of the Act (s 4), resulted in the mother being granted leave.
The primary judge then turned her attention to the application of s 117 to the mother’s application. On the basis of the father’s income earning capacity contained in the table we set out earlier, the primary judge was satisfied the mother established grounds for departure. There is no ground of appeal addressed to the primary judge’s determination that the mother established grounds for departure.
Whether it would be just and equitable to make the orders sought by the mother was considered next (s 117(4)). Because the mother failed to give evidence of the amount she actually spent on the children between 1 January 2009 and 30 June 2011, she failed to establish their proper needs as a consequence of which the primary judge said she was not entitled to a variation of the 2008 order before 1 July 2011 [129]. As to the remaining periods, the mother’s unchallenged evidence set out in her financial statement (excluding credit card payments) as to the children’s personal expenses was accepted. In order to determine the children’s proper needs, the primary judge added an additional 66 per cent of the mother’s expenditure for mortgage, rates, insurance and car expenses.
It is on this basis that for the years ended 30 June 2012 and 30 June 2013 the children’s proper needs while with the mother were found to be $143,676 and $166,751 respectively.
The father’s evidence concerning the children’s proper needs when with him was then considered. Her Honour accepted the father’s evidence in his financial statement sworn 24 August 2012, that he spent $2,049 per week (excluding school fees) on the children, which fell to $1,724 per week in
April 2013. The father adopted the same approach as the mother and did not allocate a portion of his housing costs to the children. However, in order to determine their proper needs her Honour said 66 per cent of those costs would be taken into account.
The effect of this is that for the year ended 30 June 2012 the father’s proper needs for the children (excluding school fees) were $2,049 per week ($106,548 per annum) plus $1,761 per week housing costs ($91,600 per annum). For the year ended 2013, the father’s housing costs for the children reduced to $939 per week ($48,872 per annum).
The parties’ 2013 incomes were then considered. For that year the mother’s taxable income was $413,452 which after the payment of the children’s proper needs would leave her with $246,701. The father’s taxable income was $602,160 which after the payment of the children’s proper needs (including a share of mortgage costs) and school fees would leave $374,772.
As to the balance, at [135], the primary judge said:
... Each is entitled to spend his or her considerable incomes as he or she chooses.
The theme of discretionary expenditure continued at [136] where reference was made to the balance of the mother’s income being her “available income”. As to what outcome would be just and equitable, the primary judge said:
139.In the circumstances, particularly that the father’s salary is significantly higher than the mother’s, both before and after child expenses are taken into consideration, and that the children spend the majority of time with the mother, it is reasonable that the father contribute to the mother’s costs in caring for the children. In the circumstances of the case I find it appropriate that the father pay 35% of the mother’s costs of care, which equates to $50,286.60 for the financial year ended 30 June 2012 and $58,362.85 for the financial year ended 30 June 2013.
140.However, the mother seeks an order that in the financial year ended 30 June 2013 and following the father pay $343.33 per child or $53,559 and I propose to limit his liability to that sum for the year ended 30 June 2013 and the following years.
The primary judge was satisfied that it was proper (s 117(5)) that the children enjoy a high standard of living in their parent’s homes commensurate with their parent’s income earning capacities. Although the father’s wife’s income had not influenced her Honour’s decision about the periodic amount, that her income exceeded the mother’s and the father’s combined household annual income was in excess of $1.16 million meant the orders were otherwise proper.
Orders sought in the child support appeal
The orders sought in the child support appeal are:
1.
To the extent necessary, leave be granted to appeal against orders 11 and 12 of the order made by the Honourable Justice Rees on
10 May 2013.
2.That orders 11 and 12 of the orders of 10 May 2013 be discharged as and from 10 May 2013.
3.That all existing orders for the payment of periodic child support pursuant to the provisions of the Child Support Assessment Act (1989) as and from 1 July 2013 be discharged.
As we mentioned earlier, senior counsel for the father appropriately conceded that given the nature of the hearing and the need for up to date financial evidence, if the child support appeal is successful the matter would need to be remitted for rehearing. We agree and thus the issues for determination are whether leave should be given and whether orders 11 and 12 dated
10 May 2013 should be set aside. The fate of the other orders would thus be considered on any rehearing.
Grounds of appeal concerning child support
The grounds of appeal contained in the father’s Notice of Appeal filed on 6 June 2013 are set out below:
1.The trial Judge erred in principle by concluding that the provisions of s 117(2) of the Child Support (Assessment) Act (“the Act”) could not be enlivened in reliance upon any of the grounds articulated by the Appellant in support of his application for relief pursuant to that section of the Act.
2.The trial Judge erred in principle by rejecting the Appellant’s application for relief pursuant to s 117(2) of the Act without consideration of the merits of such application in circumstances where the Respondent conceded that “there can be no doubt that it is common ground that there are grounds for departure”.
3.The trial Judge erred in principle in that Her Honour failed to reveal, or adequately reveal, the process of reasoning by which the Court’s conclusion was reached.
(a)with respect to the establishment of a ground, or grounds pursuant to s 117(2) of the Act;
(b)with respect to the quantum of the order proposed to be made in reliance upon such ground;
(c)with respect to the justice and equity of such proposed order.
4.Whatever the basis of the trial Judge’s decision with respect to the competing applications of the parties for relief pursuant to s 117(2) of the Act, Her Honour erred by making an order which was:
(a)not reasonably open on the findings of fact made with respect to the reasonable needs of the children, the subject of such orders, the means of the parties and the history of the parties’ financial support for those children;
(b)not able on the findings of fact made by the Court to be found to be just and equitable within the meaning of s 117(2) of the Act.
5.The trial Judge’s conclusion with respect to s 117(2) of the Act was vitiated by material errors of fact:
(a)in relation to the reasonable weekly needs of the children, the subject of the competing applications asserted by the Respondent whilst the children were in her care by assessing such needs as approximating $143,676 in 2012 and $166,751 in 2013 despite the concession by the wife that such needs approximated $2,157 per week, or $112,164 per annum.
(b)by failing to have regard to the concession of the Respondent that child support was not sought for the eldest of the parties’ children.
6.The trial Judge erroneously failed to have regard to the evidence of the incidence of income tax on the taxable earnings of the parties, and its impact on the means of the parties, resulting in
(a)the extent to which the Appellant’s available income exceeded that of the Respondent being regarded as materially greater than it actually was, and the trial Judge’s calculations assumed, and
(b)the payment of child support by the Appellant to the Respondent out of after tax income being ignored, and
(c)the trial Judge’s calculations being fatally flawed.
Ground 5(b) was withdrawn.
By ground 2, it is asserted that concessions were made by the mother and which were overlooked by the primary judge. Senior counsel for the mother argues that the purported concessions were not made. In addition, senior counsel for the mother argues that various grounds of appeal (3, 4(b) and 6) conflict with the father’s position at trial or seek to raise an argument not previously advanced. In particular in relation to hardship and his capacity to pay.
Underpinning adjudication of these issues is the proposition that a party is generally bound by the conduct of his or her case. The significance of this on appeal is that it is in only the most exceptional circumstances that a party will be permitted to raise a new argument (particularly in relation to factual matters which are contentious) which was not advanced in the court below (Metwally v University of Wollongong (1985) 60 ALR 68 at 71; Coulton v Holcombe (1986) 162 CLR 1; Water Board v Moustakas (1988) 180 CLR 491.)
Senior counsel for the father does not agree that the father did not raise issues concerning his capacity and hardship before the primary judge. It is thus necessary that before we discuss the grounds of appeal in any detail, we examine the manner in which the parties conducted the case before the
primary judge. We observe that where important concessions are made such that a judge considers it is appropriate not to address otherwise applicable legislative provisions, these matters should be identified in the reasons. The failure to do so unnecessarily complicates the appeal process. It also increases the risk that concessions might be overlooked or misunderstood. It would have been appropriate for her Honour to have done so in this case.
The hearing before the primary judge
As we mentioned earlier, the father presented his case on the basis there existed four circumstances which, whether considered individually or collectively, were special and established grounds for departure. On the basis that he established a ground for departure, the father argued “proportionality would provide that the [father] should contribute to the costs of the children as they might reasonably require in proportion to his income as seen in the context of the total care of the children and the total financial circumstances of the parties”.
(Father’s Case Outline document, filed 5 April 2013, p 10)
The appropriate proportion which each party should contribute to the costs of the children was then calculated in the case outline document. The calculation started with the parties’ 2012 taxable incomes. Rounded out, the father said he earned about 60 per cent of their combined taxable income. However, the proportion payable by each party needed to take into account that he had two relevant dependent children with his wife. By analogy to the formula for the administrative assessment of periodic child support, because of his two children the formula would reduce his child support income (in his case taxable income) by 19 per cent which was rounded up to 20 per cent. With that adjustment made, the father argued that as he had 55 per cent of the combined taxable income, he should only pay 55 per cent of the costs of the children.
On the basis that the 2008 orders required that he pay more than 55 per cent of the costs of the children, the periodic amount should be reduced to nil.
Counsel for the mother argued that the father failed to establish a basis on which the 2008 orders would be varied. Relevant to the Metwally point, it was submitted that:
6.2 His income is, and in all probability will continue to be, considerably greater than that of the wife.
6.3On the face of the documents he relies:
6.3.1He has the support of his wife who earns $560,976/annum (a combined household income of $1.16 million.
6.3.2He has no deficit of income over expenditure currently (that is on the basis of payments of the existing level of Child support).
6.4The father’s suggestions that his future income earning capacity is under some cloud is disingenuous to say the least.
6.5It is entirely unclear on the evidence as to what basis there could be for such a dramatic change in the existing arrangements.
(Mother’s Case Outline document, filed 5 April 2013, p 12)As to the mother’s case for a variation of the 2008 orders it was submitted that the approach adopted by O’Ryan J provided “…a helpful blueprint”. Namely, that the primary judge would first quantify the children’s proper needs which would be met equitably and in proportion to the parties’ income.
Counsel for the mother then urged the primary judge to make particular findings in relation to the parties’ 2008-2012 taxable incomes, in relation to which it was said that of their combined taxable income, the father received 77 per cent compared to the mother’s 23 per cent (Mother’s Case Outline document, p 8).
The argument in favour of leave was then made and because it is not the subject of a ground of appeal, need not be referred to again. On the assumption that leave would be granted and the mother established grounds for departure, counsel for the mother addressed s 117(4) of the Act, including specific reference to s 117(4)(g), namely, hardship. The submission being, hardship would be caused to the mother if the departure order she sought was refused.
Closing addresses were also made in writing with the submissions made on behalf of the mother being filed first.
Counsel for the mother analysed the parties’ combined taxable incomes for 2008 – 2013 and, in relation to the financial year ended 2013 contended that of their combined incomes the mother earned 26 per cent compared with the father’s 74 per cent. For the current (2013 – 2014 year) this changed to 37 per cent to the mother and 63 per cent to the father. When the six years to 2013 were averaged, the father’s average annual taxable income was $875,180. The same exercise, based on the mother’s evidence, gave her an average annual taxable income of $304,348.
At [28], counsel for the mother said:
The father’s financial position is secure and promising. He is confident enough to have spent around $70,000 in the last few months on overseas holidays and was able to reduce his mortgage debt considerably ($100,000 in the last 12 months). The dependency of [the father’s children] upon him, in all of the circumstances including their mother’s actual income and income earning capacity, is an irrelevant consideration.
(Mother’s Closing Submissions, filed 12 April 2013)Of particular relevance to the Metwally argument are the submissions made by counsel for the mother under the heading “Father’s Capacity to Pay”. Because these submissions are important to this argument, they are set out in full:
41.The father, using his 2012 income, the lowest it has been in six years, says in his financial statement … that he has no disposable income. However it emerged in the evidence that;
41.1It is not appropriate to deduct $481/week for superannuation contributions because he has used his taxable income (ie after deductible super contribution that he thought had been either $25,000 ($481/week) or $50,000;
41.2The proper figure for his income should be $644,000 being his evidence in 15.11.12 affidavit paragraph 94 and no clear evidence to the contrary – this is an increase of $42,000 per annum or $807/week;
41.3He is reducing the capital on his mortgage (to the tune of $100,000 in 2012) – despite acknowledging that the capital reduction component of the payments were not a necessary commitment. Note 3 in Part O of his financial statement .. acknowledges that any payment over and above $624/week is discretionary. The amount claimed as an expense is $1424 - meaning that $800/week is available income.
42.The consequence of these matters is that $2088 per week is available on the father’s unchallenged figures. (original emphasis)
We mention now that the primary judge did not average the father’s income in the manner suggested or make findings in accordance with [41] – [42] of counsel’s submissions.
The submissions then analysed the evidence in relation to the children’s proper needs, referred to as the “costs of the children”. The father’s evidence concerning the reasonable weekly costs of the children in his care at $1,724 was accepted. Adjustments were then made so as to exclude mortgage payments and educational expenses. Analysed in this manner, it was submitted that the father paid 44 per cent of the children’s total costs compared with the mother’s 56 per cent. It was pointed out that this substantially coincided with the amount of time the children spent with each party (Mother’s Closing Submissions, filed 12 April 2013, [52]).
The significance of this analysis was said to be that it demonstrated that once the question of housing costs, mortgage and education expenses were taken out of consideration, the parties had comparable rates of weekly expenditure for the children. With education expenses, but not housing costs or mortgage repayments factored in, it was submitted that as at the date of hearing the father met approximately 72 per cent of the children’s total costs compared with the mother’s 28 per cent.
On this basis, it was submitted:
It is completely clear on the evidence that the lifestyle that has been maintained for these children by the parties has not varied to any material extent since the making of the original orders in 2005 nor indeed since separation. The expenses have increased over the years for the obvious and usual reasons mainly attributable to the increase in the overall cost of school fees.
The father conceded that there had been no change in the children’s circumstances which would have any material effect on the expenditure for them save for the fact that overall the expenses had increased.
(Mother’s Closing Submissions, filed 12 April 2013, [60]-[61])
Various tables were then presented with the aim of demonstrating:
A percentage … to reflect a just and equitable approach to the sharing of child support based on the income differential between the parties, the financial resources available to the father and the fact that the children spend more time with their mother.
(Mother’s Closing Submissions, filed 12 April 2013, [90])
The issue of leave to vary retrospectively follows, in relation to which at paragraph 99.4 it was submitted:
There is no evidence whatsoever of any hardship that would be visited upon the father
Under the heading “Just and Equitable” counsel for the mother addressed hardship and relied on C & S [2003] FMCAfam 464 for the proposition that the primary judge would need to balance the hardship between the parties and the children in deciding whether to grant or refuse the mother’s application for a departure order. Again, attention was focussed on the father’s financial circumstances and his capacity to pay the amount sought by the mother. It is in this context that the primary judge was invited to take into account the father’s wife’s “…very substantial income…” and to exercise her discretion pursuant to s 117(7A)(b)(i).
Counsel then addressed an argument foreshadowed in the father’s case outline document (and advanced on appeal) that by analogy to the application of the formula applicable to the administrative assessment of child support, there ought to be a notional reduction of the father’s income because he also supported his two children by his wife. The argument advanced in counsel for the mother’s written submissions is set out below:
124.If this argument is pursued by the father either in his application of (sic) in defence of the mother’s, it is submitted that it is entirely inappropriate, by analogy, to make any notional reduction to the father’s income with a purpose of determining his obligation to pay child support for the following reasons:
124.1The formula where the child support income is reduced to reflect dependency is premised upon the notion that the obligation to support “relevant dependent children” in some way affects the capacity of the child support payer to pay. In the present case this is demonstrably not so.
124.2The reduction in notional income pursuant to the relevant dependent children provisions derives from a broad brush formula which eschews any input from a reference to the means of the other parent of the relevant dependent children to support them. In the present case no such approach is warranted.
124.3The formula is simply a pragmatic or administrative way of dealing in a generic way with a large portion of the population who fall under the operation of the administrative assessment system. The whole point of being in the departure context is that the formula and assessment process do not work equitably or in a just way for the parties and the children. It is inappropriate therefore to “cherry pick” certain parts of the administrative approach and apply them within the departure context.
124.4It would create a tension with the provisions of Section 117(7A)(b)(i) which clearly enables the Court “in special circumstances” to take into account the income of the new spouse.
124.5If authorities make it clear that once the grounds for a departure exist it is inappropriate to in effect hark back to the administrative formula (see Carlson & Acuff & Anor [2010] FMCA Fam 67 (30 June 2010) at [83]; Byrne & Graham & Anor [2010] FMCA Fam 1116 (11 October 2010) at [48] and Potter & Burbage [2010] FMCA Fam 1009 (7 October 2010) at [17]). (as per original)
Counsel for the father presented submissions in reply (filed 15 April 2013) which address his application first. The four factors referred to as being grounds for departure were repeated and the submission made that in addition to the proper needs of the subject children, the primary judge was obliged to take into account the proper needs of the father’s two children with his wife.
Under the heading “As to Income and Earning Capacity and Cost of the Children”, counsel in effect adopted the “…helpful blueprint…” promoted by counsel for the mother and then submitted that the costs of the children should be borne more equitably than is achieved by the 2008 orders. On the basis that the father’s taxable income was reduced by 19 per cent for his two children and his wife’s income was also disregarded, the court would find his relevant income for the year ended 2012 was $487,760 [11]. In hindsight, the parties’ total taxable incomes for the year ended 2008 was $1.8 million, 80 per cent of which the father earned. With his income percentage now reduced to about 60 per cent (55 per cent if his two younger children are factored in), it was just and equitable that his percentage share of the children’s costs also falls [13].
Counsel then addressed the propriety of the proposed order (s 117(5)). On the basis that the combined annual total costs of the children were $268,164 ($5,157 per week) the father’s child support liability should be reduced. The argument is tidily summarised at [19], [20] and [21] and set out below:
19.To reduce the [father] to 55% of the costs of children necessities payments by him to total $2836.35 per week. At present his household costs of $1724 + $1709 school fees + incidentals = $3433 or more than 55% required on above figures or in excess of the proportion payable by $1165 per week. This would ordinarily mean that to retain the proportionality the [mother] should be contributing $597 per week to the costs of school extras and medical gaps etc and therefore receive no periodic sum.
20.If the [father’s] proportion is not adjusted for the 2 small children and is left at 60% then the total payable by the [father] would be $3094.20 which would necessitate a contribution by the Respondent of $338.80 to the incidentals and extras of the children and no periodic child support by the [mother].
21.On this analysis the [father] would not need to contribute beyond the school fees, associated school costs, medical and dental gap payments and the like to meet his appropriate proportion of the costs of the children.
In the context of discussion about the mother’s financial circumstances, at [25] it was submitted by counsel for the father that:
The court would not be concerned about the overall financial circumstances of the parties beyond the realization that the [mother] showed in the (sic) her oral evidence that the practice of financing her tax liability on the security of her home has had to stop as there is no equity in effect remaining and that practice can be seen to have been ruinous.
What was said to be the mother’s “uncontrolled or inappropriate expenditure” was discussed and the submission made that the difference in the parties’ net worth was due to the father’s more modest spending habits and “the considerable financial support” he received from his wife. We interpolate that it was common ground that the value of the father’s property exceeded the mother’s and that she would shortly sell her home so as to pay “very significant debt”. To paraphrase, it was submitted that it would not be proper to require the father to pay a greater proportional share of the children’s costs as a consequence of his greater net worth.
As to hardship, it was submitted at [30]:
There was no clear evidence of hardship to the [mother] as after she eliminates her onerous liabilities her income will be more than adequate to reasonably support herself and the children, when they are in her care.
Counsel for the father went on to submit at [34(VI)]:
The applicant does assert that in the overall context of his level of debt and reducing income to have a retrospective departure order as sought for in excess of $100,000 would be a hardship to visit upon him …
There followed repeated references to the proposition that the father’s capacity to pay was demonstrably affected by his obligation to support his two younger children (e.g. [40]) and the notion that those children and the father ought not, in effect, to be left totally reliant upon the income earned by his wife. The remaining relevant submissions focussed on whether the court should, as the father sought, disregard his wife’s income.
Our analysis of the issues before the primary judge demonstrates that the father did not assert that he was unable to pay the amount required under the 2008 orders. However, hardship was raised as was whether the outcome proposed by the mother was just and equitable. Particularly in relation to the effect the proposed orders would have on his ability to support his two younger children and the point at which it would be improper to have his wife overwhelmingly responsible for their and his necessary commitments.
Senior counsel for the father, appropriately in our view, made no submissions that there existed exceptional circumstances which would enable the father to prosecute his appeal on a different basis or in conflict with the case that was run below.
Grounds 1 and 2 – grounds for departure in the father’s case
Grounds 1 and 2 were argued together. These grounds focus upon the
primary judge’s determination that the father failed to establish a ground for departure as required by s 117(1)(b)(i) of the Act.
We have already set out the four factors upon which the father based his argument as to special circumstances and that in relation to three of those factors the primary judge was satisfied his circumstances had changed. Although it was established that the mother’s income had increased from $367,642 for the financial year ended 2008 to $384,359 in 2012, her Honour viewed this increase as being modest and not, as the father argued, significant. Other than to assert that her Honour’s failure to adopt the father’s categorization was erroneous, senior counsel for the father said nothing about why what is ultimately a question of weight would justify intervention.
Before we discuss the other factors relied upon by the father, it is useful to point out that once an order has been made departing from an administrative assessment, before there can be a variation or departure from that existing order, not only must a change in circumstances be established, that change must constitute “special circumstances” as that term is described in s 117(2) of the Act (Liesert v Nutsch (1996) FLC 92-665, Bryant& Bryant (1996) FLC 92-690, Wild v Ballard (1997) FLC 92-771). The point being, that it is not enough that the father established a change in circumstances which might be special if measured against an assessment issued by the operation of the administrative scheme, the changes needed to be special when measured against his liability as set by a departure order. Thus, and by way of example, the particular expenses to a person of modest means whose child support liability is set by reference to the administrative formula may well amount to special circumstances but be inconsequential for a person with a significant income whose child support is set by reference to an order made by departure.
However, the primary judge did not discuss or analyse the significant amount of evidence about the impact the various changes had on the father’s circumstances. To the extent these matters were considered at this stage at all, her Honour said that the changes in circumstances upon which the father relied when considered in the context of his substantial income and that in relation to his two children by his wife she also earned a substantial income and was well able to contribute to their children’s expenses, meant that the changes were not special.
We agree with senior counsel for the father that her Honour could not simply regard an additional child as being effectively irrelevant or disregard the fact that the father’s expenses for the children had increased significantly. In order to determine whether the changes were significant it was necessary to consider how these circumstances affected his financial circumstances.
However, we also agree with the submission made by senior counsel for the mother that even though the father failed to establish a ground for departure, because a ground for departure was made out in the mother’s case, it was nonetheless open to the primary judge to determine that it was just and equitable and otherwise proper to make the departure order sought by the father (Johnson & Johnson (1999) FLC 98-004 per Finn J at [49]). However, as we will discuss later, the effect of the changes upon the father’s financial circumstances and which the primary judge analysed in the mother’s case for departure, meant he was either unable to contribute to the support of his two younger children or had little capacity to do so. It follows that in deciding the father failed to establish a ground for departure the primary judge did not take into account a relevant consideration and fell into error.
To the extent that senior counsel for the father argued that the primary judge overlooked “… that there was agreement as to special circumstances existing in relation to both departure applications” (Father’s Summary of Argument, filed 27 February 2014, [23]), we agree with senior counsel for the mother that the concession was not made.
As we understand it, this submission was based upon [104] of counsel for the wife’s submission made to the primary judge, filed 12 April 2013, that “[i]n the present case there can be no doubt that special circumstances are acknowledged to exist by each of the parties given that they both bring departure applications”.
By this submission, we understand counsel for the mother to have done no more than point out the parties were agreed that the administrative formula for the assessment of child support did not and should not be applied and that the assessment of child support should be determined by departure. It is not a concession that the father established grounds for departure in relation to his application. If there is any doubt about this, one need do no more than consider counsel for the mother’s opening submission to her Honour that the father’s application for a variation of the departure order was without foundation to appreciate that the threshold element to his case was always in issue.
Ground 1 is established.
Ground 3 – “appropriate” – or “just and equitable”
Ground 3 concerns the child support departure orders made on the mother’s application. Notwithstanding the challenge articulated in ground 3(a) senior counsel for the father confirmed that no issue is taken with the primary judge’s determination that the mother established a ground for departure. The focus of this ground being on the process of reasoning as to the quantum of the variation which was ordered and determination that those orders are just and equitable. Whether individual findings which form part of her Honour’s reasoning process were available will be considered when the remaining grounds are discussed.
It is submitted that s 117(4)(d) of the Act required her Honour to calculate the father’s child support liability by reference to his income after tax and not his available taxable income. If that argument fails, it is argued in the alternative that justice and equity nonetheless required that income tax be taken into account. Although this later point is unarguably correct, the issue is better dealt with after we have considered the children’s proper needs.
Section 117(4)(d) refers to income and not “net income after tax”. We see no reason why the word “income” would be given anything other than its ordinary meaning. Secondly, to interpret the word “income” in the manner asserted would require us to depart from well settled jurisprudence. Reference need only be made to cases such as Bassingthwaite v Leane (1993) FLC 92-410 and Humphries & Humphries (1993) FLC 92-430 to appreciate that the provision is concerned with total income and the manner by which tax losses and allowable deductions, for example, and the treatment of taxation generally is to be taken into account may differ from case to case. In other words, the first proposition advanced by senior counsel for the father does not reflect the law.
It is then argued that her Honour’s reasoning process is flawed by a failure to properly apply s 117(4) and in particular s117(4)(g): being the failure to consider the hardship which the orders would visit on the father. For the mother is it argued that the father seeks to advance an argument not made in the court below and, even more tellingly, in conflict with the case advanced at first instance.
Although no reference is made to it in her Honour’s reasons as we identified earlier, at [25] of counsel for the father’s closing submissions, it was submitted:
The court would not be concerned about the overall financial circumstances of the parties beyond the realization that the [mother] showed in the (sic) her oral evidence that the practice of financing her tax liability on the security of her home has had to stop as there is no equity in effect remaining and that practice can be seen to have been ruinous.
These submissions need to be considered in the context of the many references in the father’s case about the effect his two young children had on his financial situation and his obligation to contribute to their support. Although the only reference made by counsel for the father to s 117(4)(g) was in relation to retrospective orders, the issue of hardship was clearly raised by the father’s application and what he said was the effect of the 2008 orders on his ability to contribute to his younger children’s support. We do not accept that the father conceded, in effect, that s 117(4)(g) was irrelevant or that his case was run on the basis that the court need not consider the effect of the orders on the father or his capacity to meet his financial obligations to those children.
The remaining sub-grounds to ground 3 focus on the manner in which the primary judge calculated the children’s proper needs, in particular, by the inclusion of accommodation costs.
It is useful if we tabulate the effect of these findings, noting that no provision is made for the payment of taxation.
2012
2013
Mother’s Taxable Income
$384,359
$413,452
Proper needs for the children
$143,676
$166,751
Balance available
$240,683
$246,701
Father’s Taxable Income
$602,173
$602,160
Proper needs for the children
$198,148
$138,520
School Fees
$88,868
$88,868
Balance available
$315,157
$374,772
Quite properly there was no submission to the effect that by taking into account the cost of accommodation so as to determine the proper needs of the children, her Honour acted contrary to authority. A submission of that nature could not be maintained (see Gyselman and the cases which follow). Rather, the focus of this challenge is that her Honour was in error because:
·the mother would shortly sell her home in favour of rental accommodation and her ongoing accommodation costs were therefore uncertain;
·accommodation costs are relatively fixed and to order an adjustment on the basis of them introduces an element of subsidisation of one form of accommodation for another;
·when calculating the parties’ expenses for the children, they did not include the costs of accommodation; and
·for the 2013 year the primary judge over-discounted the father’s weekly accommodation costs of $1,424 at 33 per cent.
The primary judge accepted the mother’s evidence that in relation to her net worth, her liabilities exceeded her assets. Concerning the home in which she and the children live, the mother’s evidence was that her home would be sold and the liabilities secured against it discharged. She would then rent a four bedroom home within walking distance of the father’s home which would cost significantly more than $1,400 per week and up to about $1,700 per week. On this basis, the mother anticipated that she would pay the same amount in rent as she did on her mortgage.
For the financial year ended 30 June 2013 and following, the primary judge calculated the accommodation expenses for the children while with the mother by reference to schedule A of her affidavit dated 5 April 2013 (not 8 March 2013). The effect of this is that in relation to accommodation, the judgment proceeds on the basis that the mother would have rent of $1,452 per week of which $1,089 is attributable to the children. It is appropriate to observe that no submissions were made to her Honour that the mother’s future accommodation costs were uncertain.
The submission about subsidisation fails to take into account that the
primary judge was entitled to include accommodation costs as part of the children’s proper needs.
As to the third point, senior counsel for the father properly concedes that merely because both parties approached the quantification of the children’s proper needs without accommodation costs, this did not require that
her Honour adopt the same approach. Indeed, that the court might adopt a different approach was specifically acknowledged by counsel for the father in her submissions in reply in relation to which it was submitted “[i]f the Court seeks to adopt any other figures then care needs to be taken as the costs put forward by [the mother] in her various Statements of Financial Circumstances vary greatly and cannot be seen to be ‘consistent’ as [the mother’s] counsel (par 63) would contend” (Father’s submissions in reply, filed 19 April 2013, [30]). The inclusion of accommodation costs does not demonstrate error in the reasoning process. Nonetheless it is appropriate to observe that some of the difficulties which now arise might have been avoided had her Honour invited submissions on the approach which was ultimately adopted.
As to the fourth matter raised, the primary judge, at [135], recognised that the $138,788 annual amount which the father pays towards his and his wife’s mortgage was only a portion of the total payment they met jointly. That the father’s wife made mortgage payments was not overlooked by her Honour. In circumstances where her Honour did no more than accept the father’s evidence as to the amount he paid towards his and his wife’s mortgage, we see no error by her Honour attributing 66 per cent of the expense met by the father for costs of accommodating the children.
The final challenge raised under the rubric of ground 3 concerns her Honour’s failure to explain the basis upon which it was determined that the father should pay 35 per cent of the mother’s costs of care (proper needs). Although we agree it would have been desirable for her Honour to have explained the basis upon which she selected that percentage adjustment rather than any of the others for which the parties contended, it is possible to discover how that figure was reached. It will be recalled that the primary judge did not average the father’s income for the years under consideration or at all. We apprehend that for the year ended 2013 her Honour calculated the mother’s net taxable income after the children’s proper needs were taken into account, then did the same exercise in relation to the father. The outcome of those figures for the year ended 2013 was then divided which resulted in the balance of available income for the mother being 65.65 per cent of the balance available to the father. The gap was even wider in preceding years. However, using the most recent and favourable outcome to the father, her Honour decided there would be a 35 per cent adjustment for the children’s proper needs in the mother’s care paid by the father. On at least a theoretical basis, this approach was available. Whether or not it resulted in a just and equitable outcome will be addressed later.
What is then advanced is that her Honour’s process of reasoning fell into error because she failed to take into account that after the father paid child support and income tax, he had little if no capacity to contribute to he and his wife’s two children’s expenses, or indeed to meet his own commitments. It is common ground that the primary judge did not make findings as to the father’s own necessary commitments or the amount he needed to contribute for his other children (s 117(4)(d)).
The effect of the orders is best understood from the following table.
2012
2013
Mother’s Taxable Income
$384,359
$413,452
Proper needs for the children
$143,676
$166,751
Balance available
$240,683
$246,701
Plus child support
$50,286
$53,559
Net Income
$290,969
$300,260
Father’s Taxable Income
$602,173
$602,160
Proper needs for the children
$198,148
$138,520
School Fees
$88,868
$88,868
Balance available
$315,157
$374,772
Less child support
$50,286
$53,559
Net Income
$264,871
$321,213
We accept that for the 2012 financial year the uncontroverted evidence is that the father was liable to pay tax in the amount of $244,509. When taxation is deducted from the income left to the father (as found by her Honour), he had $20,362 with which to meet all of his other financial commitments, including contributing to his sons’ expenses. It will be recalled that the primary judge made findings about the father’s mortgage repayments. Of the $138,788 he paid in 2012, $91,600 was applied to the children’s proper needs. In the absence of findings that these expenses were excessive or inappropriate it follows that the father was not left with enough to even pay his share of his mortgage. When the same exercise is undertaken for the 2013 financial year, and assuming the same level of taxation, he was left with $76,704 to meet his expenses including $25,176 for his mortgage.
We agree with senior counsel for the father that the payment of income tax could not be treated as in effect discretionary expenditure and the failure by the primary judge to consider income taxation is a failure in the reasoning as to the justice and equity of the order.
Ground 3(c) is made out.
Grounds 4 - 6
Grounds 4 to 6 were argued together and to a considerable extent repeat the matters raised in ground 3. However, we are here invited to consider the overall outcome and whether it was open to her Honour to conclude the orders are just and equitable. As we will shortly discuss, the effect of the orders was to leave the mother in a considerably better income position than the father.
So as to understand the effect of her Honour’s orders and the challenges made by grounds 4 – 6, it is useful to again set out the effect of her Honour’s findings but this time with the parties’ respective taxation liabilities being taken into account.
2012
2013
Mother’s Taxable Income
$384,359
$413,452
Proper needs for the children
$143,676
$166,751
Balance available
$240,683
$246,701
Plus child support
$50,286
$53,559
Net Income
$290,969
$300,260
Less Taxation
$155,376
$155,376
Available Income
$135,593
$144,884
Father’s Taxable Income
$602,173
$602,160
Proper needs for the children
$198,148
$138,520
School Fees
$88,868
$88,868
Balance available
$315,157
$374,772
Less child support
$50,286
$53,559
Net Income
$264,871
$321,213
Less Taxation
$244,509
$244,509
Available Income
$20,362
$76,704
As has already been discussed for the year ended 2012 the father was left with insufficient income to meet his mortgage repayments and no capacity to contribute to his younger children’s support. Based on the findings made by the primary judge it necessarily follows that he was unable to meet his commitments. After the payment of his share of the mortgage in the 2013 year the father was left with $51,528 to meet his commitments and to contribute towards the support of his other children. Because the primary judge failed to earlier consider the financial effect on the father of his changed circumstances, the effect of s 117(4)(d) is that she was required to make necessary findings about his commitments and to address this issue before she could be satisfied the orders would be just and equitable. The primary judge erred by not doing so.
In light of the fact that the mother is not obliged to contribute to the support of any other child or another person it was incumbent on her Honour to explain why it was just and equitable that from 2013 the mother should have more than double the father’s available income.
It follows that the father has established error which would justify his being given leave to appeal. However, we must now consider the mother’s application in an appeal so as to determine whether we should exercise our discretion in favour of leave.
Application to Adduce Further Evidence
The mother’s evidence revealed attempts made by her solicitors to secure ongoing financial disclosure from the father. Notwithstanding his advice on 5 April 2014 that he would provide copies of his 2013 individual taxation return and returns in relation to a Trust, he has not done so. For her part, the mother has continued to keep him informed of her financial circumstances. The mother does not seek to introduce evidence about her financial circumstances.
She also seeks to introduce information published on the web page of the place of which the father is an employee, the gravamen of which is that for the financial year ended 2013 the firm made record profits and profits per employee at his level rose 10 per cent to US $1.2 million. This is approximately double the income which the father disclosed in the proceedings at first instance. Troubling as this is, it raises more questions than it answers. For example, it is not possible to reconcile the 10 per cent increase in partner profit for the preceding year with the evidence adduced in these proceedings and about the father’s income.
Although we are persuaded that the evidence should be admitted in response to the father’s application for leave to appeal, we are not persuaded that on this basis leave to appeal should be refused.
Disposition of the child support appeal
Having found merit in grounds 1, 3(c), 4 and 6, the application for leave to appeal will be granted and the appeal allowed. Orders 11 and 12 of the orders dated 10 May 2013 will be set aside.
Although the father also asks that all existing orders for the payment of periodic child support be discharged as and from 1 July 2013, that order will not be made. Rather, both parties’ applications for departure orders will be remitted for rehearing before a judge other than the primary judge.
The Costs Appeal
By Appeal EA164 of 2013 there are four challenges raised in relation to the order for costs made on 18 October 2013 that the father pays half the mother’s costs of the substantive proceedings. Each challenge asserts that the father was denied the opportunity to be heard in relation to the order for costs of the “substantive proceedings” with the sub-grounds providing different particulars about why this is so.
The first sub-ground asserts that because the mother did not seek costs of the parenting proceedings, her Honour erred by requiring the father to pay half of her costs of the substantive proceedings. This ground misstates the nature of the order which her Honour made. As her Honour’s reasons for making the order for costs demonstrate at [63] she was astute to the fact that the mother’s application for costs related only to the child support component of the hearing. Between [63] and [75] of those reasons, and under the heading “costs of the substantive proceedings in relation to departure from the child support orders” her Honour analysed the various matters which persuaded her that an order for costs should be made in relation to the child support proceedings in favour of the mother. There is simply no basis to challenge the order for costs on the premise that her Honour in fact made an order for costs in the parenting proceedings. What actually occurred, is that as the judge who presided over a composite hearing her Honour used her judgment to apportion the time and costs taken in the parenting component compared to the child support component of the hearing.
The next challenge asserts error because her Honour made an order different to the order sought by both parties. The mother actually sought that the father pays her costs on an indemnity basis, which order was not made. As we understand the challenge, it is that by ordering the father should pay half of the mother’s costs of the substantive hearings, in and of itself, amounted to error. No submissions were made in support of this proposition and it is rejected.
Quite sensibly, there were no submissions advanced in support of the contention that her Honour gave no indication that she contemplated an order of the type that was made.
As to the fourth challenge, it proceeds on the basis that there was no evidentiary foundation for her Honour’s decision to apportion the costs of the parenting and child support components of the hearing in the manner which she did. As we have already indicated, her Honour was ideally placed to determine the appropriate apportionment. We observe that there is nothing raised in any of these challenges, which suggest that the child support component of the proceedings was in fact something less than the equal portion which
her Honour said it was.
Although it is not a ground of appeal, both senior counsel addressed the submission made by senior counsel for the father that because the order for costs was substantially based on the mother’s success, the father’s lack of success and an offer of settlement made by the mother prior to the hearing, the costs appeal should be further considered after the outcome of the child support appeal is known. This approach did not find favour with us and, as is our usual practice, we required that the challenge be addressed on an either/or basis as to success or failure. Stated simply, senior counsel for the father said that if the father was substantially successful in the child support appeal, then the primary basis upon which the order for costs was made fell away and the order for costs should be set aside. In response, we were informed by senior counsel for the mother that the parties had reached agreement in relation to the quantum of costs and thus the costs appeal was moot. Although senior counsel for the father did not dispute there was an agreement as to the quantum of costs payable by the father, it was submitted that there is a difference between agreement as to quantum and whether the agreed amount should be paid. We agree.
We also agree with the submission by senior counsel for the father that the order for costs was substantially, if not overwhelmingly, based upon the father’s lack of success, the mother’s substantial success and that she achieved a significantly better outcome than the offer for settlement. As a consequence of the outcome of the child support appeal, those factual premises cannot stand and the order for costs will be set aside.
Costs of the Appeal
In the event the father was successful in the appeals, he sought an order that the mother pays his costs. The mother opposed such an order and in so doing pointed to the father’s superior asset position and total income.
We are not satisfied that an order that the mother pays the father’s costs would be proper. In our view, his material misstatement of his income to which reference has already been made outweighs his success.
In the alternative, both parties sought costs certificates for the appeal and any rehearing. The appeals have been allowed on the basis of errors of law and orders to that effect should be made.
I certify that the preceding one hundred and thirty one [131] paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Murphy & Aldridge JJ) delivered on 1 October 2014.
Associate:
Date: 1 October 2014
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