G and G
[2003] FMCAfam 326
•14 August 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| G & G | [2003] FMCAfam 326 |
| CHILD SUPPORT – Application for a departure order to vary a child support assessment under s.117 and lump sum payment – where the CSA seeks to recover arrears – where a garnishee order had been made – where the father challenges the Child Support Agency assessment – where no reasons for CSA change of assessment are provided on the grounds of privacy – whether there are any special circumstances. |
Child Support (Assessment) Act 1989, s.117
Child Support (Registration and Collection) Act 1988, sub-s.116(2)
Savery and Savery (1990) FLC 92-131
In the Marriage of Gyselman (1992) 15 FLR 219
Hides v Hatton (1997) FLC 92-759
Prpic v Prpic (1995) FLC 92-574
| Applicant: | MG |
| Respondent: | KG |
| File No: | PAM 1325 of 2003 |
| Delivered on: | 14 August 2003 |
| Delivered at: | Parramatta |
| Hearing date: | 30 July 2003 |
| Judgment of: | Raphael FM |
REPRESENTATION
| Counsel for the Applicant: | Mr D Maddox |
| Solicitors for the Applicant: | Matthews Dooley & Gibson |
| Counsel for the Respondent: | Mr Harper |
| Solicitors for the Respondent: | Legal Aid Commission NSW |
| Solicitor for CSA: | Mr McCulloch Australian Government Solicitor |
ORDERS
THAT for the periods 1/4/02 to 30/6/02, 1/7/02 to 30/6/03 and 1/7/03 to 30/6/04 there be a departure from the provisions of Administrative Assessment of Child Support payable by the liable parent MG for the children AG born 21/10/93 and KG born 5/11/94 as follows:
THAT for the first of the said periods the liable parent’s child support income be fixed in the sum of $60,500, in the second said period the liable parent’s child support income be fixed in the sum of $46,000 and in the third said period the liable parent’s child support income be fixed in the sum of $48,500 and the obligation to pay child support otherwise assessed in accordance with the provisions of the Child Support (Assessment) Act 1989.
THAT the Child Support Registrar be requested to make the necessary calculations and to amend the Child Support Register accordingly.
THAT any arrears of child support calculated by the Child Support Registrar be charged upon the liable parent’s property known as 182 C Street, SG, with power in the Registrar to sell the same in the event that the said arrears are not repaid within a period of six months from the date of these orders.
THAT there be liberty to any of the parties to apply, limited to matters in relation to the enforcement of these orders.
THAT the application filed on 27 March 2003 be otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM 1325 of 2003
| MG |
Applicant
And
| KG |
Respondent
REASONS FOR JUDGMENT
Proceedings
These proceedings involve an application by the father for departure from the administrative assessment of child support for the years 2000/2001 and 2001/2002, that there be a fresh administrative assessment of child support for the year commencing 1 July 2002, that his liability for support for 2001/2002 should be reduced to $3,840.00 and that the accepted income amount for the applicant for the 2001/2002 child support year should be varied to $12,000.00. There is also an application by the mother that there be no departure from the assessments up to 30 July 2003 but there be a departure for the period 31 July 2003 to 30 July 2006 and that there be a lump sum paid for that period. Finally, the Child Support Agency (CSA) has intervened and seeks to recover arrears certified under sub-s.116(2) of the Child Support (Registration and Collection) Act 1988 in the sum of $27,881.93 as at 30 July 2003.
Background
The parties commenced a de facto relationship in 1992 at which time the father was an apprentice bricklayer. On 21 October 1993 their first child (a son) was born. On 18 June 1994 the parties married. On 5 November 1994 their second child (a daughter) was born. On 25 December 1994 the mother considers the parties finally separated. The father considers this took place on 12 August 1995. The parties are now divorced.
The father is a bricklayer by trade. The mother is a hairdresser. The mother fell into bankruptcy on 26 July 2000. It is not clear whether she is still a bankrupt. Under the normal statutory provisions she would not be as at the date of the hearing. On 5 February 2001 the father remarried. The mother has also re-partnered. On 4 July 2001 a daughter was born to her and her new partner. The son of the parties is an epileptic who has also been diagnosed with Tourette’s syndrome. The relationship between the father and his second wife has broken down as has the relationship between the mother and her new partner.
Various assessments for child support have been made. The father’s payment record in relation to child support has not been good. In or about November 2000 the CSA garnisheed the bank account of the father in the sum of $23,922.00 of which $5,336.97 was remitted back to the father. The Child Support Registrar initiated a change of assessment decision, changing the father’s child support assessment from the sum of $5,645.00 per annum payable, based upon a child support income amount of $32,178.00 to $18,556.00 per annum payable based upon a child support income amount of $80,000.00. The father has not been paying in accordance with this order. He has been paying at the rate of approximately $100.00 per week. The current arrears, which include payments for late penalties, appear to relate to the period since the reassessment previously referred to.
The mother is no longer working because, she says, of the necessity to look after the elder boy. The father originally ran his bricklaying business as a sole trader. He then commenced to run it through a company now known as “TEPL”. Although he is now the sole shareholder and director of this company he was formerly in partnership with his wife in it. His wife had an accountancy background. The father accepts that any income produced by the wife for the benefit of the company was minimal.
The Law
The provisions of section 117 of the Child Support (Assessment) Act empower a Court to make an order for departure from administrative assessment in special circumstances.
Section 117(i) provides as follows:
“i)That in the special circumstances of the case one or more of the grounds for departure outlined in section 117(2) exist before a Court can make an order for departure;
ii)that under section 117(1)(b)(ii) it would be just and equitable, as regards the child, the carer entitled to the support and the liable parent; and
iii)that it would be otherwise proper to make a particular departure order.”
If these three conditions are satisfied then the Court should make the departure order sought.
In Savery and Savery (1990) FLC 92-131 Kay J said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases.”
In the Marriage of Gyselman (1992) 15 FLR 219 at 225, the Full Court of the Family Court said as follows of the phrase “special circumstances”:
“Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.”
The grounds for departure
Section 117(2) of the Act sets out the various grounds for departure. After considering these various bases for departure and whether or not in the special circumstances of the case it is appropriate for a departure order to be made, the Court must then consider section 117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought.
Section 117(4) of the Act reads as follows:
“117(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:
–the nature of the duty of a parent to maintain a child (as stated in section 3); and
–the proper needs of the child; and
–the income, earning capacity, property and financial resources of the child; and
–the income, earning capacity, property and financial resources of each parent who is a party to the proceedings; and
–the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
himself or herself; or
any other child or another person that the person has a duty to maintain; and
–direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
–any hardship that would be caused:
to:
the child; or
the carer entitled to child support;
by the making of, or the refusal to make, the order; and
to:
the liable parent; or
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.”
Finally, it is necessary for the Court to consider section 117(5) and determine whether or not it is proper to make the departure order.
Section 117(5) reads as follows:
“117(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
–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
–the effect that the making of the order would have on:
any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.”
In Gyselman (supra) the Full Court of the Family Court said at page 240 as follows:
“As we have already indicated, the exercise under section 117 involves three steps. The first, which we have already examined, is whether one or more of the grounds in subsection 2 has been made out. The legislation then requires the court to consider whether any proposed order is “just and equitable” and “otherwise proper”.
It is clear therefore that each of these three steps must be addressed by the court as a separate issue, namely:
a)whether one or more of the grounds of departure in section 117 is established; if so:
b)whether it is just and equitable within the meaning of section 117(4) to make a particular order;
c)whether it is otherwise proper within the meaning of section 117(5) to make a particular order.
Further, from a consideration of the case of Hides v Hatton (1997) FLC 92-759 it is clear that the court must follow this three-step process in respect of each year for which a departure order is sought.
The grounds for departure upon which the father bases his claim are found at s.117(2)(c)(i) “because of the income, earning capacity, property and financial resources of either parent or the child…”
Applicant’s evidence
The applicant filed two affidavits dated 6 May and 30 July 2003 and a Form 17 Financial Statement. He deposed to the fact that his income tax assessments indicated a taxable income in the year ending 30 June of $29,735.00 and for the year ending 30 June 2000 $60,971.00. For the year ending 30 June 2001 his income tax was assessed in the sum of $32,178.00. He states that for the year ending 2002 his income is expected to be no more than $14,000.00. He has not filed a tax return or received a tax assessment for the year ending 30 June 2002 but there was provided to the court as Exhibit 2 the balance sheets and profit and loss accounts for TE for that financial year. This indicated a profit for the year in the sum of $9,436.00 after tax and an operating profit before tax of $13,479.00. He stated that he was forced to close his business in November 2002 as he could no longer afford to pay wages of his staff. He stated that the best year he had ever had, in which he earned approximately $60,000.00, was due to the Olympics and this was unlikely ever to recur again. Since February 2003 he has commenced working on a full time basis and since that time his income has been approximately $1,000.00 per week gross.
There was annexed to the applicant’s affidavit the decisions of the CSA. The applicant challenges these decisions and in particular the final assessment of his earning capacity at $80,000.00 per annum. These decisions give a history of the attempts to recover child support from the father and his reaction to them. I do not think the father significantly disagreed with this history.
The father explained that his financial circumstances were instrumental in the split up between himself and his wife. They agreed to sell their assets and pay their debts. For a short period they moved into a house owned by her parents after their own house was sold. Their own house was built on land owned by his wife. He had done the bricklaying work in the building of the house. It would appear that her parents provided some finance for the building of the house and considered that they had an interest in it. The evidence appeared to be that at the end of the day the parents allowed them $100,000.00 which they split equally. This and the company was all that he took away from the marriage. He used the $50,000.00 as a deposit to purchase some land upon which he intended to build a house. At the time he utilised the money in this way he accepts that he had obligations to the CSA with which he was not complying. He told the court that when he decided to purchase the land he thought there was a possibility that he and his wife would get back together again and that was why he did it. He has not yet started work on the house.
Much of the cross-examination of the father involved looking in detail at the accounts prepared by his accountant. These accounts show a turnover for the company for the year 2002 of $268,953.00 but with an operating profit of only $13,479.00. The father explained that in the bricklaying business a company such as his would sub contract work to other bricklayers and that it was reasonable to expect that out of any contract payment 50% would go to the sub contractors. The main contracting company would then have to pay for the mortar, the machinery that was used, insurances and transport. In the accounts the sub contractors are costed in at $150,000.00 which is 56%. The building materials come in at $50,443.00. The gross profit was only $67,103.00. The expenses include wages and salaries that the father says was partly the wages of a trainee. The motor vehicle expenses of $15,820.00 includes the lease of his wife’s BMW and to that extent does not accurately reflect the true profit of the company. The telecommunications of $4,606.00 is probably rather high and includes some personal use but even taking these matters into account, the total profit of the company would not exceed $22,000.00 before tax.
The father was questioned about why he would work for a company earning so little when he could work for himself earning much more. He pointed out that he liked to be his own boss and he believed he had a responsibility to ensure that all his debts were paid when he was working. He explained that bricklayers usually work eight hours a day but were not paid on days of inclement weather. There was little work to be had for about six weeks around the Christmas period and in his view the average self-employed bricklayer could only expect to be working full time for 37 weeks of the year.
There was tendered as part of Exhibit 3 an application which the father made to the Colonial on 23 January 2003 for a loan which he was going to use to purchase the land and build the house. In that application he indicated that he was earning approximately $46,000.00 per annum.
The wife’s evidence
The wife gave evidence on affidavit but she was not required for cross- examination. Her affidavit supports her claim of her son’s disabilities and indicates why, at the present time, she is looking after him full time.
Findings of fact
I was not in receipt of any evidence which would lead me to find that the father’s income tax returns for those years for which they were produced were not accurate. The real issue in this case as it developed before me was the father’s earnings in the year ended 2002, his earnings in the year ended 2003 and his earning capacity. It is unfortunate that the applicant has not filed a tax return for the year ended 2002. Whilst I note that I am not satisfied that the accounts prepared by his accountant are inaccurate I also note the father’s reluctance to comply with his child support obligations after the agency had garnisheed the $25,000.00 odd from his bank account.
Doing the best I can with the figures before me and accepting much of the father’s evidence about the earnings of bricklayers, which was not significantly challenged, I think that the father’s earning capacity for the financial year 2001/2002 – 2002/2003 was around the figure of $47,000.00 which he gave to the Colonial in his finance application.
I am unable to see how the figure of $80,000.00 was reached. The CSA did not provide any assistance in this, and I note that it did not give the applicant clear explanation of how the figure was arrived at. As the father says in his submission:
“In seeking to establish the grounds for a departure, the father and the court need to look at the reasons by which the father was assessed at having a child support income of $80,000. At page 3.4 of the notice of decision, the senior case officer says:
‘I am prevented for privacy reasons for disclosing the evidence and consequential findings of fact which the officer to conclude that even as a sole trader Mr G had a child support income of $80,000.’
That is, the father is before the Court seeking to prove that there should be a departure, that is prevented ‘for privacy reasons’ from knowing the facts and assumptions upon which the assessment of $80,000 was made.”
I would sympathise with the father being caught in this Kafkaesque situation. It would seem to me that the inability of the child support authority to advise the applicant of why it made an assessment of a particular sum in his case would amount to “special circumstances” sufficient to warrant the inquiry permitted by s.117 of the CSA Act.
Application of the law to these facts
The first point I must consider is whether there are any special circumstances in this case. I have to do this in relation to each of the periods for which a departure is requested.
The father in his submissions has limited his request for departure to two periods. The first being the 1/4/02 to 30/6/02 and the second 1/7/02 to 30/6/03. The father suggests that in regard to the first period the assessment should be based upon his taxable income for the year 2000 in the sum of $60,500.00 and for the second period it should be based upon his 2001 taxable income of $32,500. Both of these figures are considerably less than the $80,000.00 which was assessed. The father’s advisers are right in saying that the appropriate taxable income year to be considered for the first period is the year 2000/2001 and a tax return has been obtained for that period. Subject to being satisfied on the three step approach that I can make a departure I would utilise the taxable income of $60,500.00 for that purpose. I am satisfied that there are special circumstances which would warrant a departure from the administrative assessment of child support in this case because the administrative assessment of child support was determined in a figure which is not born out by the facts. I have accepted the father as a credible witness and as no evidence has been provided which would indicate to me that his income was $80,000.00 or, indeed any figure in excess of the amount of his tax return, I think that the administrative assessment has resulted in an unjust and inequitable determination because of his income earning capacity.
I am also satisfied that in respect of this first period it is just and equitable to make the order based upon the father’s disclosed income. As I have said, there is absolutely no evidence that he has artificially reduced his income in respect of the year to which the assessment relates. In saying this I have taken into account the alleged conversations between the father and the CSA officer in which he told the CSA officer that he did not intend to work. This conversation occurred shortly after the father had had a substantial amount of money garnisheed from his bank account. I do not think it matters whether what the father said was carried out or not because he has now accepted that for this period he is to be assessed on his previous years earnings which he stated, and I accept, were the highest that he ever earned.
I also find that it is “otherwise proper to make the order which I propose to make.” Although this may result in a lesser sum being paid to the mother, and possibly to a burden upon the State, a do not think that a liable parent should be made to pay in accordance with an assessment for which no justification is provided and which does not appear on the documents to have been warranted just because, if he pays on a proper basis, the other parent would be entitled to some governmental support.
In respect of the second period from 1/7/02 to 30/6/03 I cannot make an assessment based upon the father’s taxable income. This is because he has not received an assessment for that period. I have found on the evidence that was given to me that his earning capacity for that period was not less than $46,000.00 per annum before tax but after deducting expenses. This is the figure that the applicant admitted to in his application for the loan. It accords with his evidence of the earnings of bricklayers. I do not accept the submissions made by the mother that I should use figure $69,000.00. That assumes a rental from a property that has not yet been built and which because of the father’s obligations for child support may not be built for some time.
I have earlier found that the three-stage process in respect of the first departure period entitle me to make a departure order. The figure which I have come to in relation to the applicant’s earnings for the second assessment period, is even smaller than the first. There is therefore even more reason why I should make a departure for that period.
The mother’s application
The mother wishes me to make a lump sum child support order for three years in advance totalling approximately $54,000.00. In Prpic v Prpic (1995) FLC 92-574 that court stated:
“Capitalisation orders may well be appropriate where there are difficulties in enforcement or where it is proper to sever the financial link between the parties. However, as a general rule, given that payment of child support depends upon circumstances prevailing from time to time, which circumstances cannot be predicted with any significant degree of certainty, it seems to us that the provision of child support by way of lump sum should not be considered to be a readily available alternative but one that is only exercised where there are circumstances that make it appropriate to do so.”
The grounds upon which the mother says it is appropriate in this case is the significant arrears and the existence of a property upon which the father’s payment can be attached. I accept that the father’s record in relation to child support payments is not good. He effectively made hardly any payments other then the substantial lump sum that was taken away from him by garnishee. He has recently been making payments in the sum of $100.00 per week but this is considerably less than he would have had to pay on an income of the type which has been found. The father also used his only free money, the $50,000 from the sale of his former matrimonial home, to invest in another property rather than pay his child support debt.
On the other hand, because of the orders which I have now made the father’s arrears are considerably less than that being claimed by the child support agency. The father has indicated that he is now in regular employment and I do not think that the general rule concerning the provision of child support should be departed from in this case. What I do think should be done is that the arrears of child support which I propose to ask the agency to calculate should be charged upon the father’s property and that the CSA should be permitted to sell that property if the arrears are not paid within the time that I propose to order. The agency suggested that the period be limited to three months. I think a more reasonable period would be six months but I would propose to give the CSA liberty to apply if regular payments of current support are not made.
I am not prepared to accede to the mother’s request that I fix child support for the next three years. I am prepared to fix child support for the year 2003/4 in the sum of $48,500.00 representing my assessment of the father’s earning capacity based upon evidence previously recited and taken into account a CPI increase.
The orders that I have made and which are contained at the commencement of this judgment are intended to reflect these reasons.
I do not propose to make an order for costs because I do not consider that any one party has succeeded against all the others and because I think given the circumstances of this particular assessment it was not unreasonable for any of the parties to be here.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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