Gallup & Gallup
[2009] FMCAfam 839
•18 August 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GALLUP & GALLUP | [2009] FMCAfam 839 |
| CHILD SUPPORT – Application to set aside a binding child support agreement – meaning of exceptional circumstances – cumulative effect of circumstances. |
| Child Support (Assessment) Act 1989, ss.80C(2), 80CA, 80E(1), 80F, 136 |
| Simpson and Hamlin (1984) FLC 91-576 Daley & Daley [2009] FMCAfam 398 Henricksen & Janz (No.3) [2008] FMCAfam 1343 |
| Applicant: | MR GALLUP |
| Respondent: | MS GALLUP |
| File Number: | MLC 10746 of 2007 |
| Judgment of: | Demack FM |
| Hearing date: | 3 August 2009 |
| Date of Last Submission: | 3 August 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 18 August 2009 |
REPRESENTATION
| Solicitors for the Applicant: | Cooper Grace Ward |
| Counsel for the Respondent: | Mr Combes |
| Solicitors for the Respondent: | Maddens Lawyers |
ORDERS
That the child support agreement entered into on 29 January 2007 be set aside.
That any arrears accrued since 3 February 2009 pursuant to the child support agreement entered into on 29 January 2007 be discharged.
That the father shall maintain the children [X] born [in] 1997 and [Y] born [in] 1996 under his private medical cover at the current level.
That all outstanding applications be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Gallup & Gallup is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
MLC 10746 of 2007
| MR GALLUP |
Applicant
And
| MS GALLUP |
Respondent
REASONS FOR JUDGMENT
The orders sought
The initiating application filed by the then self-representing father, on
3 February 2009 seeks:
The Federal Magistrates Court to wave [sic] paragraph 1a and 1b of the child Support Agreement loged [sic] on 29.01.2007 and have payments assessed through the Australian Child Support Agency.
The child support agreement is annexure 1 of the father’s affidavit of
3 February 2009. The referred-to paragraphs state:
That as and from the date of this Agreement, the husband shall pay to the wife by way of child support for the children of the marriage the total sum of $250- per week (subject to clause 3 hereof), calculated as follows:
a) In respect of the child [X] - $125 per week; and
b) In respect of the child [Y] - $125 per week
The reference to clause 3 seems to be an error as it relates to future contributions to orthodontic work.
Clause 4 though, is relevant:
That as and from the next instalment of child support due after 1 January 2008, the required payment pursuant to clause 1 shall be varied each year in accordance with the variation in the Consumer Prive Index published by the Statistician for All Groups for Brisbane by comparison of the Consumer Price Index as it stands on 30 June immediately preceding the date of variation as compared with the same index at the same day 12 months prior thereto.
Pursuant to clause 5 of the Agreement, the parties were compelled to lodge their agreement with the Child Support Agency for consideration by the Registrar as to it being a registered agreement for the purposes of the Child Support (Assessment) Act 1989 (“the Act”).
The mother also acted on her own behalf at the outset. Her response filed 16 March 2009 sought the following final orders:
1. That the child support agreement lodged on 29th January 2007, paragraphs 1a and 1b remain in force.
2. That the Court consider the mother’s extra costs of private schooling of $28,000 per annum, and modify the current Child Support Agreement in the following areas:
a) the Father pay 100% of all gaps relating to health care and orthodontic work needed for both [Y] and [X];
b) that the Father pay for all school uniforms and school books each year for both children;
c) that the Father cover for the complete cost of flights for the children to visit him each holiday.
3. That the court consider the fact that my financial status has altered significantly due to the stockmarket crash, an area out of my control.
4. Such further orders as the court sees fit.
5. That the Court review Clause 2a of the Child Support Agreement allowing the 6 weeks of the children’s school holiday periods be spent with the Father as the children desire, ie, to be spent in bulk or dispersed throughout the year as it fits with the children’s extra curricular activity.
The reference to the Child Support Agreement in the fifth order sought is erroneous. It should refer to the final order of the Federal Magistrates Court made on 29 January 2007, which reads at 2(a):
2. That whilst the wife and children are living in Melbourne and the husband is living on the Gold Coast, the children spend time with the husband at all times as agreed, and failing agreement, as follows:
(a )For one-half of each Victorian gazetted school holiday to be agreed, in either Melbourne or the Gold Coast;
The matter was listed for final hearing on 13 May 2009. Trial directions made on 31 March 2009 included the filing of a case outline by each party setting out, inter alia, a precise minute of the final orders sought by 4 pm on 11 May 2009.
The father, still representing himself, did this under cover of an affidavit filed 6 May 2009. There he sought:
1 - That the child support agreement made the 29.01.2007 (The agreement) be discharged at 03.02.2009
2 - That the arrears pursuant to the agreement by calculated to 03.02.2009
3 - That the parties seek admin assessment of child support through the Child Support Agency
4 - That the parties agree that I, Mr Gallup will pay the arrears outstanding, pursuant to the agreement at 03.02.2009 within 12 months of the date of the administrative assessment
5 - That in addition to the administrative assessment I, Mr Gallup will pay for private health cover for [Y] and [X]
6 - That there will be no arrears calculated by the Child Support Agency or the parties between 03.02.2009 and the date of a new assessment issuing
7 - That all other parts of the agreement stay in place as agreed to
The mother failed to file her case outline as directed and on the morning of trial, through her counsel, filed her late case outline in which the final orders sought were thus stated:
The wife now seeks orders for the husband’s application to be dismissed.
An adjournment followed.
For the new trial date, the now-represented father, filed a case outline in which the following orders were sought:
The father seeks an order for the child support agreement entered into in January 2007 to be set aside, an order that any arrears that have accrued since 3 February 2009 be discharged and an order that he pay private health cover for the children the subject of the agreement.
The mother’s position remains that she seeks the application dismissed. There have been no further orders sought on parenting issues.
It seems to me, that the essential application is to set aside a registered child support agreement, and to consider the making of a departure order limited to the arrears and the on-going payment of private health cover, both pursuant to s.136 of the Act.
Background
The parties commenced cohabitation in 1994 and married [in] 1995. They separated on a final basis some time in late 2006, apparently around about September. The father is a German national and the parties not only cohabited and married in Germany but lived together in Germany at the commencement of their marriage for around five or six years. There are two children of the marriage both of whom were born in Germany: [Y] born [in] 1996 is presently aged 13; [X] was born [in] 1997 and is presently 12.
The parties had lived together in south east Queensland during their marriage. The mother’s family of origin is from Victoria. The father’s family of origin are still in Germany. By agreement between the parties the family moved to Victoria. Separation occurred not long after and the father returned to Queensland.
Litigation was commenced with respect to property and parenting proceedings and was settled on a final basis on the first court return date on 29 January 2007. The child support agreement was entered into on the same day as part of the same negotiations.
The husband had sought in his property application for an order which would adjust the property 70 per cent in his favour. The wife had sought an order which would adjust the property 60 per cent in her favour. The orders which were made by consent reflect something close to a 50/50 outcome.
Both parties were represented by lawyers at the time of the final orders and child support agreement being entered into.
The parenting orders provided for the children to live with the mother in Victoria and to spend time with their father during school holiday periods in Queensland and for other times should the father be able to attend in Victoria. The orders provided for the costs of the airfares for the children for their time with the father during school holidays to be shared equally between the parents.
The evidence
The father is the applicant and is the payer of the child support. He relies on the following documents:
a)His application filed 3 February 2009;
b)
His affidavits filed on 3 February 2009, 26 March 2009 and
6 May 2009,
c)An affidavit of his solicitor Mary Kay Feeney filed 31 July 2009, annexing copies of correspondence from the Child Support Agency to the father.
The mother relies on the following documents:
a)Her response filed 16 March 2009;
b)Her affidavits filed 16 March 2009 and 7 May 2009;
c)Her financial statement filed 15 May 2009;
d)An affidavit of her solicitor Justin Serong of 6 May 2009 annexing Child Support Agency correspondence.
The parties were both cross-examined.
The trial was conducted via videolink. The mother and her counsel were in Melbourne and the father and his solicitor advocate were in person before me in Brisbane. There were some minor difficulties at the commencement of the father’s evidence with the volume. These were corrected quickly.
It seemed to be that both parties gave their evidence honestly and to the best of their ability. Mr Gallup’s second language is English, and he is sufficiently fluent for there to be no question as to his capacity to fully participate in proceedings without the need for any assistance from an interpreter.
Both the parties had prepared poorly for their respective cases. The father had not completed a financial statement, but rather sought to rely on an annexure to an earlier affidavit where he had set out some financial matters. On the business day immediately prior to the trial, the father had caused his solicitors to fax to the solicitors for the mother some 300 pages of financial records as disclosure. It is fair for the mother to be critical of this action. However, the father had earlier annexed to an affidavit a number of financial documents, none of which he was cross-examined upon.
Likewise the mother failed to present her financial circumstances in a way which provided all of the evidence which would have been helpful. For example, the mother says that her mother has been assisting her financially to the tune of some $20,000 during the last year, yet provides no evidence as to the nature of this assistance.
It seems to me, that bearing in mind that the parties each commenced the litigation without the assistance of legal representation, that the deficiencies in their evidence and their respective lack of understanding as to what may be relevant to the Court’s determination, are simply matters to be taken into account when assessing the evidence and do not reflect any dishonest or manipulative behaviours. The situation, of course, is made all the more difficult due to the intractable conflict between the parties and the consequent absence of communication directly between them. I must simply do the best I can with the evidence I have to hand.
The legislative framework
The application seeks to set aside a child support agreement which has been accepted by the Registrar of the Child Support Agency. The legislative scheme was significantly altered by the amendments contained in the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 which came into effect on 1 July 2008. Pursuant to the changes in the legislation, the Registrar of the Child Support Agency was required to consider the parties’ agreement for registration. It is clear from the correspondence received by the father at that time, that the Registrar was causing that work to be undertaken and the father was advised that he may make an objection and seek a review of the decision to accept the child support agreement. No such objection was made.
The documentation from the Agency demonstrates that the Agreement was accepted by the Registrar’s delegate. On the face of the accepted Agreement there is nothing to indicate whether the Agreement is binding or limited, other than the declaration that “part of the agreement ends on [date omitted] 2015” which is the day before the younger child’s 18th birthday. In that sense, the Agreement is not limited in time.
The definitions for a binding or limited child support agreement are found in ss.80C(2) and 80E(1), respectively, of the Child Support (Assessment) Act 1989.
Section 80C relevantly provides:
(1) An agreement is a binding child support agreement if:
(a) the agreement is binding on the parties to the agreement in accordance with subsection (2); and
(b) the agreement complies with subsection 81(2).
(2) For the purposes of subsection (1), an agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is in writing; and
(b) the agreement is signed by the parties to the agreement; and
(c) the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i) the effect of the agreement on the rights of that party;
(ii) the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and
(d) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(e) the agreement has not been terminated under section 80D; and
(f) after the agreement is signed, either the original agreement or a copy of the agreement is given to each party.
Section 80E provides:
(1) An agreement is a limited child support agreement if:
(a) it is in writing; and
(b) it is signed by the parties to the agreement; and
(c) it complies with subsection 81(2); and
(d) either:
(i) it meets the conditions in subsection (2), (3) or (4), as the case requires, (assuming the agreement is accepted by the Registrar); or
(ii) it has been accepted by the Registrar under section 98U.
The significant difference is the strict requirement for legal advice and proof of the giving of advice before an agreement can be considered binding.
It is clear in this matter that the parties entered into their agreement on the day that they entered into their final consent orders for both parenting and property matters. It would seem clear and logical that the negotiations for all three separate matters where undertaken as a package and that there was a consideration of all of the matters by the parties at the time. Both parties were legally represented and their respective representatives witnessed the parties’ signatures. It is perhaps reasonable to infer that given their representation at the time that the parties sought and took the advices of their lawyers. Given the gulf in the orders initially sought in the property proceedings, it is also reasonable to infer that the parties both compromised their positions, at least when it comes to final property adjustment.
The fact of the making of the Orders by Federal Magistrate Baumann on 29 January 2007 demonstrates that his Honour considered the property orders to be just and equitable and the parenting orders to be in the best interests of the children. His Honour would not have had to be satisfied that the property orders were only just and equitable when read in conjunction with the child support agreement. He child support agreement was not an order of the Federal Magistrate, but was an agreement separately entered into by the parties, albeit on the same day and as part of the same negotiations. There are public policy considerations which support the separation of matrimonial property adjustment from parenting issues and both from child support liability.
What the child support agreement does not contain is the certification as to independent legal advice as particularly required under the amendments. To that extent, the agreement, cannot be said to be binding, although on the face of the Agency’s document declaring the agreement to be accepted, it makes no mention of the agreement being in any way limited. It seems to me, that the amendments have created a fictional category of binding child support agreements and the subject agreement here, is caught by this fiction[1].
[1] See the case of Daley & Daley [2009] FMCAfam 398 per Brown FM where his Honour likewise describes a post-amendment agreement which on the face of it appears to be binding due to the lack of an end date other than the child’s 18th birthday, but does not have the certification of legal advice as falling within the administrative fiction (paragraph 38) created by the amendments.
The reason that this is important arises from the consequences that flow from seeking to set aside either a binding or a limited child support agreement. Neither style of agreement may be varied (see ss.80CA and 80F) but they may be set aside pursuant to the provisions of s.136(2):
(2) If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:
(a) that the party's agreement was obtained by fraud or a failure to disclose material information; or
(b) that another party to the agreement, or someone acting for another party:
(i) exerted undue influence or duress in obtaining that agreement; or
(ii) engaged in unconscionable or other conduct;
to such an extent that it would be unjust not to set aside the agreement; or
(c) in the case of a limited child support agreement:
(i) that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
(ii) that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement); or
(d) in the case of a binding child support agreement--that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.
There is no suggestion here that the agreement was entered into by either party under duress or obtained by fraud or any other unconscionable conduct. If the agreement is a limited one, then the test would be whether there had been significant change such that it would be unjust not to set the agreement aside. If the agreement is a binding one, then it may only be set aside if there are exceptional circumstances that have arisen since the making of the agreement that will mean the applicant or children will suffer hardship if the agreement is not set aside. Clearly the test for the setting aside of a binding agreement is more stringent, requiring as it does the need for exceptional circumstances.
The provisions of s.136(2)(d) require the following elements to be demonstrated before a binding agreement can be set aside:
(a) the examination of the circumstances that have arisen since the agreement was made;
(b) whether those circumstances are exceptional and
(c) because of those circumstances, the applicant (in this case) will suffer hardship.
The meaning of “exceptional circumstances” was considered by the Full Court of the Family Court in Simpson and Hamlin (1984) FLC 91-576. The case there was focussed on a s.79A (of the Family Law Act 1975) application where the head relied upon by the applicant wife was s.79A(1)(d):
“in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order,…”
At 79,657, the Full Court stated:
The question therefore was whether the change which occurred in this case was such as to “take it out of and beyond the ordinary circumstances in which such change might be reasonably expected to occur”.
And at 79,658, the Court stated:
What amounts to “exceptional circumstances” is very much a question of fact and degree.
The Court then went on to comment that in that case, they may have reached a different conclusion, but they felt that the Trial Judge’s decision properly fell within his discretion and that it would not be disturbed by them on appeal.
Bearing in mind that the question before me is one of child support and not property adjustment, it seems to me that it is proper that I consider the application in the light of the objects and principles of the applicable Act.
Section 3 of the Child Support (Assessment) Act 1989 provides:
Duty of parents to maintain their children
(1) The parents of a child have the primary duty to maintain the child.
(2) Without limiting subsection (1), the duty of a parent to maintain a child:
(a) is not of lower priority than the duty of the parent to maintain any other child or another person; and
(b) has priority over all commitments of the parent other than commitments necessary to enable the parent to support:
(i) himself or herself; and
(ii) any other child or another person that the parent has a duty to maintain; and
(c) is not affected by:
(i) the duty of any other person to maintain the child; or
(ii) any entitlement of the child or another person to an income tested pension, allowance or benefit.
And the objects of the Act are set out in s.4:
(1) The principal object of this Act is to ensure that children receive a proper level of financial support from their parents.
(2) Particular objects of this Act include ensuring:
(a) that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
(b) that the level of financial support to be provided by parents for their children should be determined in accordance with the costs of the children; and
(c) that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
(d) that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them; and
(e) that Australia is in a position to give effect to its obligations under international agreements or arrangements relating to maintenance obligations arising from family relationship, parentage or marriage.
(3) It is the intention of the Parliament that this Act should be construed, to the greatest extent consistent with the attainment of its objects:
(a) to permit parents to make private arrangements for the financial support of their children; and
(b) to limit interferences with the privacy of persons.
Whether the present situation is exceptional, it seems to me, must be considered in light of these objects.
In other parts of the Act, the expression “special circumstances” is used. Is this the same as “exceptional circumstances”?
Federal Magistrate Brown in Daley & Daley [2009] FMCAfam 398 at paragraph 88 was:
not persuaded that there [was] any significant qualitative difference between “special” circumstances and “exceptional” circumstances.. In [his Honour’s] view, what [was] required, in the case concerned, is for it to be out of the ordinary run of cases and to be marked by some characteristic which render it unusual or something other than commonplace.
In contrast, Federal Magistrate Wilson in Henricksen & Janz (No.3) [2008] FMCAfam 1343 at paragraph 32 found that there was, indeed a difference between the two:
Further, even if the father demonstrated that the financial circumstances had changed, he has to show two additional matters to enliven the discretion in s.136(2)(d) Child Support (Assessment) Act. The first is that the change of circumstances was exceptional. Neither party referred to any judicial or other authority as to what this term meant. The word commonly means unusual or out of the ordinary. It is curious that the word ‘exceptional’ is used in s.136(2)(d) of the Act, whereas ‘special circumstances’ is used in s.117. That phrase has attracted judicial interpretation in cases such as Gyselman & Gyselman (1992) FLC 92-279 and Hides v Hatton (1997) FLC 92-759. Ordinarily consistency in the interpretation of terms in a statute is a fundamental construct of statutory interpretation. The use of a different term would signify that the draftsman of the legislation in s.136(2)(d) intended not to use the concept of special circumstances but rather something different. That view is reinforced by the language of s.136(4)(b), which presupposes a two step process: first, the proof of exceptional circumstances, so as to set the earlier agreement aside; and, secondly, the proof of special circumstances to fix a new method or amount of child support.
“Exceptional”, it seems to me, carries with it something more than “special”. In its most basic sense, “exceptional” is derived from “except”. This provides the starting point for understanding that the word is meaning to exclude or create a barrier. Circumstances, then, which are “exceptional”, must be outside the normal experience, in such a way that they are the exception and something more than a minor abnormality. As the exceptional circumstances are arising in the context of change, the expression in Simpson and Hamlin op cit seems apt: that the change was such as to “take it out of and beyond the ordinary circumstances in which such change might be reasonable expected to occur.”
The legislation clearly contemplates the relevant circumstances being in the plural, and I may well consider that although severally no circumstance was exceptional, jointly, their character changed to create exceptional circumstances.
The circumstances at the time of entering the agreement
When the parties left Germany the father cashed in his German superannuation funds so as to apply that money to the purchase of a business in Australia. It took the parties approximately nine months in Australia to purchase a business. That business made the parties no money and was later sold for the amount it was purchased for. In the earlier proceedings with respect to final orders for property adjustment, the wife deposed to that first business incurring a capital loss. It was clearly an unsuccessful business venture.
The parties subsequently purchased another business which fared better and which provided an income for both the father and the mother. That business was sold at the time that the parties were contemplating moving to Melbourne and in anticipation and facilitation of the move. It was sold on the basis that the father would continue to be employed as the manager for a limited time frame to assist the new owner.
For a time, then, the father was to work in Brisbane and visit the mother and children in Melbourne where the family had consensually moved. It was during a visit to his family in Melbourne that the father came to understand that his relationship with the mother was over.
Within a matter of months, in his then distressed condition, the father was dismissed from that employment. The father considers that his dismissal was in part to do with his depressed and anxious presentation and perhaps to do with legitimate business concerns.
The parties have also had the benefit of a family trust. They have used that trust as a vehicle to have a margin loan for the purposes of substantial share trading. At the point of their property orders in January 2007 their shares were in the order of $1.2 million but were heavily encumbered by the margin loan. Both the husband and the wife through those final orders for property adjustment, received shares then valued in the order of $200,000 to $220,000. The orders provide that the wife receive $10,000 prior to the balance being divided equally. As I understand the parties’ financial position, these shares were their only truly substantial asset at the time, having sold their heavily encumbered matrimonial home and business in preparation for their move to Melbourne.
It is acknowledged by both of the parties that during the marriage the father had difficulties with depression and the misuse of alcohol. They seem to agree that these difficulties became more apparent and intrusive in their lives when the parties lived in Australia.
At the time that the parties entered into their child support agreement the father had recently been dismissed from his position in his former company but had yet to have his last day of work. The mother had commenced employment in Victoria. The father was anxious and depressed and misused alcohol following the end of the relationship and during the time that the negotiations were happening. The mother was concerned that due to the father’s past form with respect to depression and alcohol misuse that she could not with any confidence rely upon his continued payment of child support in a way which would provide her with the certainty that she desired.
There is no evidence before me as to what the child support agreement at that time reflected in reference to what the assessed amount would have been.
The circumstances since the agreement was entered into
Post separation the father says that his difficulties have become more acute and that he has sought and received medical attention with respect to both his anxiety and depression. He was greatly distressed by the end of his relationship with the mother and the resulting diminution in his time with the children. He clearly keenly felt the loss of the family unit. The loss was exacerbated by the distances involved. He was living in south east Queensland and the mother and the children were living in Melbourne. He was therefore not able to see the children regularly.
In his depressed condition, the father unsuccessfully sought new employment. He had previously been self-employed but was not then in a financial position (and perhaps an emotional position) to purchase another business.
He used his capital to support himself, which included a holiday to Thailand. There he met Ms C, a Thai national, with whom he commenced a relationship. He returned to Thailand some seven times during 2007 and 2008 in furtherance of that relationship. They married in Easter 2008 and together have a daughter [Z] who was born on the Gold Coast [in] 2008.
The father’s new wife lives in Australia on the basis of a visa which for the first two years prohibits her from either working or receiving government benefits.
It took the father until the end of 2007 to find employment. The position was [in the Retail Industry], which is the same industry as the parties’ last business. Not long after commencing his new job, the father had to urgently return to Germany where his mother had taken ill. It was not until February 2008 that the father was able to return to working. The father had, yet again, used his capital for his everyday spending, which has included his child support agreement liability and his contribution to the children’s travel to spend time with him which occurred during 2007 and 2008, but which has, regrettably, not been occurring pursuant to orders in 2009.
The father, it seems, applied perhaps about half of the share portfolio to his living expenses during the many months post separation that he was unemployed. Other than the moneys which he realised from the shares, the shares have otherwise come to become worthless because of the general fall in share prices globally.
The mother’s portfolio likewise has been diminished. She says that she’s only received perhaps between $16,000 and $18,000 from the shares and that the rest has simply gone through the diminution in value brought about by the global financial crisis. She has she has no shares to her name at all.
The mother is presently employed [in the Administrative Industry]. She earns about $60,000 per annum.
The parties otherwise have no assets of any worth. The father has in recent months purchased around $30,000 worth of shares, which as I understand it, are again subject to a margin loan.
Both of the parties have debts to the Australian Taxation Office.
The mother is presently spending more than her income allows. She is receiving financial assistance from her mother. Both of the children are now attending fee paying schools. The mother says that this was necessary because of difficulties both children were experiencing in state schools. Prior to separation, on the Gold Coast, the children had attended a private school. Upon moving to Melbourne, the parents had agreed that they could not then afford school fees. They agreed the children should go to state schools. The change back to a fee paying school was not agreed to by the father on the basis that he could not afford to contribute to the costs. The mother proceeded to enrol the children in fee based schools. She has not been able to afford the fees and relies on her mother for assistance. The mother says that she is around $20,000 in debt to her mother. I note that the father’s child support debt is only in the order of some $3,000. Clearly, even if the child support agreement is not set aside, the mother’s expenses if continued at the present level will only increase her indebtedness.
Agreement versus assessment
The child support agreement which the parties entered into on
29 January 2007 is annexure 1 to the affidavit of the father filed
3 February 2009, it provided that the father shall pay to the mother by way of child support for the children the total sum of $250 per week being half each in respect of each child. It also provided that the father would maintain the children at the then current level under his private health cover. It also provided with respect to payments for a half share of any gap for any orthodontic work in the future. The weekly amount was indexed. The indexation means that the present level for child support pursuant to the agreement is $134.76 per week per child.
There is no evidence before me as to what the assessed amount would be by the Child Support Agency in the event that the Agency was being asked to assess. The best I have is that the father says that the Agency have advised him that the amount would be in the order of $150 per week for both children.
It is therefore clear that the father seeks to, effectively, decrease the child support that he pays by half. He also seeks the discharge of arrears which are presently in the order of $2,000 or $3,000.
Are the circumstances exceptional?
The father would have me take into account the following cumulative factors to demonstrate that the circumstances here are exceptional:
a)His pre-existing mental health which was worsened by the breakdown of the matrimonial relationship and the loss of time with the children and the subsequent impact upon his capacity to find employment bearing in mind his history of self-employment;
b)Due to the longer than expected period of unemployment, his need to use his capital to support himself;
c)His new relationship with his now wife having to be facilitated between Australia and Thailand;
d)That his new wife’s visa restrictions mean that she will remain a financial burden to the father for at least the first two years of her time in Australia;
e)That the father and his new wife have a child together, for whom, only the father can receive government benefits and his wife cannot contribute at all financially;
f)That the father’s new child is a legitimate cause for expenditure by the father and should be taken into account;
g)That the main capital base of the father’s was a share portfolio, and that is now worthless following the downturn in the share market due to the present global financial crisis.
Further, the father points to the timing of his application being after his resources had completed diminished as demonstrating that he gave the payment of child support due priority within his expenditure.
The mother submits that none of the facts raised by the father in and of themselves create exceptional circumstances and further, some were known to the father at the time that the agreement was signed. It is submitted that some of the other situations complained of by the father are the result of adult decisions and choices made by the father whom it would be unjust to take into account in so far as if he had not made those decisions he would still be in a position to pay the agreed amount. Effectively, it is submitted on behalf of the mother that the father cannot take the benefit of these decisions to the detriment of the children of the first marriage. It is not exceptional for example, for a party to re-partner or to have a subsequent child, or for a person to have some emotional sequelae arising from the end of a marriage, or for people to experience periods of unemployment in their lives. It was further submitted on behalf of the mother that the global economic downturn should not be used to demonstrate exceptional circumstances as to do so may open the floodgates of litigation. In any event, the mother has been as adversely affected by the reduction in the parties’ respective share portfolios as the father.
It seems to me that it is clear that the parties’ financial positions looked rosier at the time of the signing of the agreement than they do now. They each had substantial financial resources in the form of their share portfolios in the order of $200,000. The mother had a job and the father had only just lost his. He had not experienced a long period of unemployment and could not have envisaged that he would have the difficulty that he subsequently experienced in finding further work.
It was not unreasonable, it seems to me, at a time when the share portfolio was healthier and chid support was being attended to pursuant to the agreement, for the father to use some of his capital to holiday to Thailand. That he there commenced a relationship with his now wife may not be exceptional, although it must be acknowledged that the furtherance of that relationship, along with the present marriage and birth of a child, created a financial impost on the father. The father has a duty to maintain his new wife and their child but that duty is not of higher priority than his duty to maintain the subject children.
The father’s mental health remains a factor about which the court has little evidence to guide it. There is the briefest of reports from a general practitioner annexed to the father’s affidavit of 26 March 2009. Dr J states on 23 March 2009:
This man is known to me for eight years, since 2001. I am his General Practitioner.
In 2006 and 2007 I treated this man for mental anxiety and depression, he was prescribed medication. He has made a recovery but continues to have slight relapses from time to time.
Final separation occurred in late 2006. The child support agreement was entered into in January 2007. The father travelled to Thailand during 2007 and then brought his now wife to Australia in early 2008.
The father’s unemployment continued until December 2007. Shortly after commencing work, his mother, in Germany, took ill and he travelled to Germany to be with her. When he returned to Australia, he brought his mother with him. He then recommenced employment with the same company in February 2008.
The brief report from the general practitioner is in line with the father’s own report of when, in particular, he was experiencing more acute distress and in need of medication. The mother, likewise, confirmed that the father’s mental condition deteriorated during the time that the relationship was breaking down.
Throughout 2008 the father was employed at an income level much lower than he had experienced in the business that he had owned and operated in conjunction with the mother up to the point of separation. He commenced earning $38,000 per annum, plus commission. Over time that has increased, to $42,000, and then to $45,000, and is presently, $60,000 per annum, plus commission. According to the father, sales are presently so low however, that he is not making any commission. Throughout 2008, the father’s expenses apparently out-stripped his income, and he drew on his capital to support himself, his wife and child and to pay his child support agreement liability.
Between 30 June 2008 and 1 January 2009, the father’s share portfolio had reduced from a market value of $314,375 to $43,455. I have no evidence before me to help me understand what share trading was undertaken by the father. But I can make the same criticism of the mother. The mother was quite clear in her evidence that she had no shares to her name and that this was the doing of the global economic downturn. The mother had only realised a small amount of her stocks – less than $20,000, whereas the father had managed to realise around $100,000 of his stocks before the rest had become worthless. It seems to me that both the father and the mother have been adversely affected by the loss of their shares. I have no reason to consider that either of them has negligently or wastefully allowed that to happen. Neither of them presents themselves, or the other, as having such expert knowledge that they should have done something to ameliorate their losses.
The father has a responsibility to support his children and submits that the most appropriate way for that to happen would be through an assessment by the Child Support Agency. He says that he would continue to pay for private health cover and that fact may be the basis for a departure order.
The legislature have provided for parents a mechanism by which they can come to private arrangements for the payment of child support and the intention clearly is that those who enter into such an arrangement should not be lightly excused from the arrangement as to do so would take away the certainty which both parties had contracted into. It follows therefore that the situation must be exceptional for a court to set aside this agreement.
As this is the application of the payer, it seems to me that it his hardship, in particular, to which I must have regard. The fact that the mother is already in debt due to the impost solely on her of the school fees is not properly a matter for my direct consideration. It is the circumstances, which must be exceptional, which create hardship for the father that the focus of the enquiry. If the agreement is set aside, then the options for the parties include assessment by the Child Support Agency, or a departure order made by the Court.
It seems to me that none of the factors, of themselves, put forward by the father are exceptional but that cumulatively they take on a different character, which I find to amount to exceptional circumstances. It could not have been within his knowledge or contemplation that he would lose the ability to supplement his income through his share portfolio due to the downturn in the share market at the same time as having difficulty finding work, while still responding emotionally to the end of a marriage and the loss of regular meaningful face to face contact with his children, made more difficult because of his history of misusing alcohol and being depressed, whilst forming a new relationship with a woman who has no lawful capacity to assist with bringing income into the household, and who bears him a child, thus creating a further financial burden.
I am satisfied in all the circumstances that the agreement of 27 January 2007 should be set aside.
Consequential orders
I move then to whether I should make an order under s.136(4) which provides:
(4) If:
(a) the court sets aside a child support agreement under this section; and
(b) the court is satisfied as mentioned in paragraph 117(1)(b) (departure orders);
the court may make an order under Division 4 of Part 7 without an application having been made under section 116.
I am satisfied that the father’s actions in not applying to set aside the agreement until he reached a point where he no longer had the capacity to keep up with his contracted agreement demonstrate the he understood his obligations and duties and the binding nature of the agreement.
Since commencing his employment, the father’s income has increased steadily. Any assessment done by the Child Support Agency would, of course, reflect, from time to time, the father’s present income level.
The offer of the father to continue to pay the private health cover for the subject children should not be refused and should always sit outside any liability that he otherwise has for child support.
I do not consider that I otherwise have evidence before me which would allow me to determine, in the manner that the Child Support Agency would be able to determine, the amount of child support that the father should now pay. I do not propose therefore, to do anything with the ongoing payment of child support other than to leave in the hands of the delegates of the Child Support Registrar.
That leaves then only, the issue of the debt which has accumulated since the father’s filing of the application. That amounts to a little over $3,000[2]. The father had advised the mother in late 2008 of his increasing difficulty in meeting his agreed payments. The mother then caused the monies pursuant to the agreement to be the subject of agency collection. The father brought his application in early 2009 and in lieu of an interim hearing, the court offered the parties an early trial date. That earlier trial date did not proceed upon the father’s application for an adjournment on the basis of the mother’s stark change of position on the morning of the trial and the father’s then self-representation.
[2] The last document in annexure “A” of the affidavit of Mary Kay Feeney of 31 July 2009 indicates that as at 29 July 2009 the balance owing was $3,054.29 of which some $186.20 accounted for penalties for overdue amounts.
I have earlier been critical of the both parties preparation for trial and failure to adduce all the evidence which may have had relevance. There is no greater criticism to be levelled at the father in that regard.
The father has continued to pay some monies to the agency although something less than provided for in the agreement. There is nothing before me which would cause me to consider that since filing his application the father had ceased to understand his responsibilities or was sitting on his hands until the court decision was made. I am satisfied that the debt which has now accumulated is a reflection of the father’s capacity to pay only.
In those circumstances, that the father should be excused from the debt which has accumulated since the filing of his application. I do not have the power to excuse the father from the penalties imposed by the Child Support Agency.
The orders, then, will be in terms of those set out in the father’s outline of case document filed 28 July 2009.
I certify that the preceding one hundred and one (101) paragraphs are a true copy of the reasons for judgment of Demack FM
Associate: E Crutchfield
Date: 18 August 2009
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