HUGHES & HUGHES

FAMILY COURT OF AUSTRALIA

HUGHES & HUGHES

[2018] FamCA 1079

FAMILY LAW – CHILD SUPPORT AGREEMENT – application to set aside – self-represented litigants – basis of the application appears to be that he no longer has the funds to pay, but the evidence does not support a conclusion that would satisfy the requirements of s 136 of the Child Support (Assessment) Act 1989 (Cth) – application must fail.

FAMILY LAW – CHILD SUPPORT DEPARTURE – where the father seeks to depart from administrative assessments which he says are not a true reflection of his income by virtue of the fact that he has dividends provided to him to discharge Division 7A tax distributions – where there is a decision of the Administrative Appeals Tribunal relating to a discrete period which was also before the Court but around which there was no review application and the father relied upon the decision as some form of evidence – where the Court was not satisfied that the evidence was comprehensive to show financial resources and property which was mentioned in the AAT judgment and as such, the Court did not have sufficient evidence to enable it to make a finding that it was just and equitable to depart from the administrative assessment and that there were otherwise no special circumstances – application must fail.

Child Support (Assessment) Act 1989 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Income Tax Assessment Act 1997 (Cth)

Bank of New South Wales v Rogers (1941) 65 CLR 42
Hezon and Hezon (Child support) [2018] AATA 3062
Thorne v Kennedy [2017] HCA 49

APPLICANT:

Mr Hughes

RESPONDENT:

Ms Hughes

FILE NUMBER:

DGC

3760

2011

DATE DELIVERED:

18 December 2018

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

04 December 2018

REPRESENTATION

THE APPLICANT:

In Person

THE RESPONDENT:

No Appearance

Orders

That the initiating application (as amended) filed on 14 September 2018 is dismissed.
That the application in a case filed on 15 August 2018 is struck out.
That the respondent’s amended response filed 17 August 2018 is struck out.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hughes & Hughes has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: DGC 3760 of 2011

Mr Hughes

Applicant

And

Ms Hughes

Respondent

REASONS FOR JUDGMENT

Mr Hughes (“the father”) filed an initiating application in the Federal Circuit Court of Australia on 15 July 2016 seeking to set aside a child support agreement he had executed with Ms Hughes (“the mother”) on 8 December 2012.
The mother did not participate in the proceedings. The father attended with his wife without legal representation. The complexity of the problem, the variety of documents “filed” and the lack of understanding of evidentiary principles made the Court’s task difficult in a busy duty list.
For the reasons that follow, there is not sufficient evidence to enable me to make the orders sought and the father’s application must be dismissed.

the present application

In its sixth iteration since July 2017 and filed on 14 September 2018 in this Court, the father’s application sought orders that:
a)The child support agreement be “deemed registered in this court”;
b)The child support agreement be discharged;
c)There be a departure from the administrative assessment of child support for four periods:
i)For the period 1 January 2015 to 30 June 2015 the father’s income for child support purposes be fixed at $68,025;
ii)For the period 1 July 2015 to 30 June 2016, the father’s income for child support purposes be fixed at $43,146;
iii)For the period from 1 July 2016 to 30 June 2017, the father’s income for child support purposes be fixed at $47,580; and
iv)For the period commencing 1 July 2017 and ending 30 June 2018, the father’s income for child support purposes be fixed at $20,263.

The Administrative Appeals Tribunal

In an affidavit filed by the father and to which he made reference orally, the existence of a decision of the Administrative Appeals Tribunal of Australia (“the AATA”) became apparent (see Hezon and Hezon (Child support) [2018] AATA 3062 – 4 July 2018). The division of the AATA which heard this case was the Social Services and Child Support Division. The decision to which the father referred the Court showed that not only was the mother a party, but so was the Child Support Registrar. Significantly, the tribunal member noted that under review was the decision of the Child Support Agency for the period from 1 January 2017 to 30 September 2017. It will be immediately apparent that that period is encompassed in the application before the Court.
The application before the AATA arose out of the father’s objection to a decision of a delegate of the child support registrar. His objection was dated 28 July 2017; it was decided by the objections officer on 9 October 2017. Against that decision, the father lodged an application for review with the AATA on 3 November 2017 culminating in the decision reported.
Two observations must immediately be made. First, there is no application before this Court for a review or appeal from the AATA decision. Secondly, it is clear that the father had the opportunity to have that case heard and determined according to law and absent any right of appeal being exercised, my view is that this Court has no basis to hear the father’s application again (or at least that relevant part) in the form of the present application before this Court.
It is clear from what the father says, he disagrees with what the AATA has done but in my view, that is not a matter for me.

The child support agreement?

An immediate question arises about why there is a child support assessment and/or review process if there is an extant child support agreement. The answer lies in the fact that the agreement when executed, provided a clause that the father would pay child support according to the administrative assessment process. I return to the agreement further because it is the father’s application for the agreement to be discharged.

The mother’s position

On 23 August 2016, the mother filed a response in the Federal Circuit Court seeking a dismissal of the father’s application and further orders that he pay arrears. The third iteration of this response was filed on 17 August 2017 in that same court. There, the mother sought dismissal of the father’s application and enforcement of his obligations to pay school fees going back to 2016.
In August 2017 the parties also had extant parenting proceedings in the Federal Circuit Court. Those proceedings were compromised by final consent orders. At that time, the mother was represented by lawyers but weeks later, with the child support issue still extant, those solicitors withdrew from the proceedings.

the proceedings in the Federal circuit Court

When the matter came before the Federal Circuit Court on 11 July 2018, the father appeared without legal representation and the mother did not appear at all. The proceedings were then transferred to this Court on the stated basis that it would be expected to take five days. It seems that the learned Judge considered there was to be a dispute about parenting issues as well.
Indeed, there was a dispute about parenting issues but the mother had not attended the court. The form of the father’s complaint about the parenting issues came from an application in a case which he filed after the matter was transferred to this Court. The conclusion I have drawn is the father raised the parenting dispute with the trial judge and that gave rise to the transfer.

The parenting proceedings

The parenting dispute seems to be that the mother, who consented to the orders in August 2017, has not provided the relevant child for contact. Indeed, it seems that she is keeping her address somewhat of a secret as well.
The father filed an application in a case in this Court on 15 August 2018 which simply sought that the parenting orders made in 2017 be “enforced”. As I explained to him, seeking that order was pointless and what he needed to do was to bring a contravention application because the Court otherwise was hamstrung as to the nature of any orders it could make. The father seemed to accept that. Accordingly, the application in the case filed on 15 August 2018 is struck out.

Pre-trial hearings

After the case was transferred to this Court, a directions hearing was conducted on 31 August 2018 at which the mother again did not attend. The registrar adjourned the father’s applications to another directions hearing on 5 October 2018 and directed that the Court serve the mother with the relevant orders.
On 5 October 2018, the mother did not appear for a third time and the registrar ordered that unless she filed an amended response by 31 October 2018, the father have leave to proceed on an “undefended” basis. Again, the registrar ordered the orders be served by the Court.
The proceedings were then adjourned to the judicial duty list for hearing on 4 December 2018. Notwithstanding the registrar’s order, the mother did not file any material nor did she attend on 4 December 2018. That does not give rise to any default orders being made

Service of documents

There is no direct evidence that the mother has been served with the orders mentioned earlier. I can confidently conclude that she knew of the proceedings (as distinct from the hearing) because she participated in them until July 2018. She also can be seen to have acknowledged the existence of the proceedings by her involvement in the AATA proceedings.
The difficulty arising from the service requirements under the Family Law Rules 2004 (Cth) (“the Rules”) is that the father does not know of the mother’s address. The Federal Circuit Court made a location order in 2017 and hence, the Court did know her address. That gave rise to the orders of the registrar for service of documents.
Enquiries made by the father are said to have produced little even though a process server was engaged (apparently by the Court). This person was said to have served the mother but did not return or file any service documents. An attempt was then made by the Court at service on the mother by registered post but the envelope was returned unclaimed.
To establish the mother’s knowledge of the proceedings, the father relied upon text messages which were cryptic at best, but hardly flattering of the mother. A clear inference can be drawn from a text message sent to the father that she was well aware that he was proceeding with this litigation.
I am satisfied the mother is aware of the proceedings.
Chapter 7 of the Rules provides the mode of service of documents. The relevant rules here are rr 7.02, 7.05, 7.06 and 7.07 of the Rules. I could not be confident that service has been effected by the stated means in the rules but because of what I have earlier mentioned, I consider r 7.18(1)(b) of the Rules should be applied. The relevant notification as to the substantive issue has been brought to the mother’s attention as she joined issue with the father. Notice of the hearing was contained in the various orders which the Court provided to her and she acknowledged by her text message to the father that she was aware of the proceedings. Her cryptic message refers to criticism of the father not paying attention to his children’s needs.
I am satisfied the mother has had an opportunity to participate and refuses to do so. Service requirements under the Rules upon the mother are therefore dispensed with.

An undefended application?

As the mother has failed to comply with the registrar’s orders and not attended on the hearing on 4 December 2018, it must be understood that she is no longer seeking the orders in her extant response. That was filed on 17 August 2017 and as she has not prosecuted it, it is struck out.
It is trite to say that the Rules of the Court do not define an “undefended proceeding”. This Court is not a court that provides for judgment in default of participation or defence of a claim. Indeed, the father has to prove each of the elements to which I refer below, and most importantly, the rules of evidence have to be applied. To the extent that they can be ameliorated to some extent because of the father’s position as a litigant in person, those matters have to be given such weight as the Court thinks appropriate in the circumstances.

Registration of the child support agreement

The solicitors who acted for the father when he first sought to set aside the relevant agreement sought an order (which the father has replicated) that the agreement be “deemed” to be registered. That loose language is apt to mislead.
Rule 4.19 of the Rules reads as follows:
Child support agreements
A person who makes an application in relation to a child support agreement must register a copy of the agreement with the court by filing one of the following:
(a) an affidavit attaching the original agreement;
(b)an affidavit attaching a copy of the agreement and stating that the copy is a true copy of the original agreement;

(c)an affidavit stating that the original agreement has been lost and the steps taken to locate the agreement, and attaching a copy of a document received from the Child Support Registrar setting out the terms of the agreement as registered by the Child Support Agency.

On 15 July 2016 in the Federal Circuit Court, the father filed an affidavit drawn by his lawyers.
Paragraph [5] of that affidavit said that the child support agency accounting documents showed the “agreement has been registered by the Agency”. Be that as it may, r 4.19 of the Rules was not complied with and the agreement has never been formally registered with the Court. The same affidavit attached what the father described as a “true copy” of the agreement. Clumsy though that may be, I consider the agreement attached to the affidavit is now (if it was not then) registrable and I accept it for such registration. To the extent necessary, an order can be made that the agreement is registered.

The agreement

This dispute is about school fee obligations and health insurance, but otherwise as I have mentioned, the parties agreed that the administrative assessment of child support should apply to them. In my view, the reference to the assessment should realistically be seen as not excluding the involvement of the registrar in the usual administrative process, nor excluding the jurisdiction of the Court to determine any setting aside of the agreement. The dilemma is whether the father understands the complexity. He made clear that he had spent all his money and could not afford a lawyer, but that simply exacerbated the problem.
The agreement was signed on 8 October 2012 by both parents. Attached to it were two certificates of independent legal advice. The father’s solicitor wrote that he had provided the father with legal advice about his rights. On the base of the certificate, the following appears:
I, [Mr Hughes] confirm that prior to signing the attached agreement, I received the legal advice referred to above and the above statement by my lawyer stating that this advice had been given to me.
(emphasis in original)
In his affidavit filed 15 July 2016, the father swore:
[8]When the agreement was entered into my periodic child support was set at $121 per week…At that level of periodic child support I considered that I could meet the level of expenses (non-periodic child support) which the agreement required me to.
[9]Those (non-periodic child support) expenses are in the order of around $10,000 per annum. If this matter runs as a tri al I shall bring to court with me and seek to tender into evidence copies of my banking and other financial records which substantiate what I say in that regard.
In his affidavit filed 22 June 2018, the father adopted a slightly different approach by swearing:
[59] …
(a)at the time of signing the agreement I did not read and/or did not understand the terms of the agreement as outlined in paragraph 8 of the agreement…The terms of the agreement were never discussed or negotiated by my then solicitors stop I did not know that terms such as terms of the agreement in paragraph 8 are possible and legal. I have been diagnosed with Severe Learning Disability caused by Dyslexia…I didn’t understand any of the property settlement forms in full and was following the solicitors instructions.
(b)I fully trusted the solicitor I engaged back then from ([B Lawyers]) to look after my file and to alert me to any disadvantages there might be. I had a greater trust in this particular solicitor compare (sic) to other solicitors from any other firms as he was recommended by my wife’s friend of many years who also works for ([B Lawyers])…I did not receive a written legal advice in relation to entering into the agreement during…The only advice I recall from my then solicitor was a verbal advice during my appointment with him prior to the 8^th of October 2012 stating ‘you paying for the school fees now? You will be paying in the future?’ The terms of the agreement were never discussed verbally or in writing by my solicitor. There was no attempt from my solicitor to negotiate the terms of the agreement with the other party.
(emphasis in original)
The paragraphs of the agreement which are relevant are paragraphs [4] and [5] which set out his obligations. Paragraph [8] to which he refers simply sets out what each of the parties had considered. Ironically, this agreement said that they had considered potential change in residential arrangements for the children, various states of employment, re-partnering and future birth of children of either of them, along with changes of school and property. Thus, whilst the father did not understand what formed the basis of the agreement, he understood paragraphs [4] and [5].
The father’s affidavit went on to say that at the time he signed the agreement, his then girlfriend (presumably now his wife) had a miscarriage and the relevant period which encompassed the day upon which the agreement was executed was a “very stressful and difficult time”. There is no evidence as to whether or not he told the solicitor, or indeed more importantly, the mother of his problems. He signed the agreement and most importantly, signed the page upon which the solicitor had written and signed that legal advice had been given.
The father’s affidavit went on to say that he signed the agreement “under duress” from the mother. This had something to do with the fact that she “used to tell” him that she was mentally unwell and threatened to kill herself during 2011 and 2012. He would then have to go and take the children into his care and he said that he did what the mother wanted (that is, signed the agreements) for benefit of the girls “and to keep the peace”.
Duress is one of the grounds upon which a Court can set aside a child support agreement so that evidence becomes relevant to the matters to which I turn below.
The father said that after the agreement was signed, the mothers “ill-health” was never mentioned again.
Insofar as the evidence just mentioned is directed to the child support agreement, the statements of the father do not sit comfortably with the agreement itself. It is disturbing that in the absence of the mother, none of his assertions can be adequately tested. However, I have had the benefit of reading the AATA decision[1] where the mother did participate. The father wanted that decision taken into account although I am not sure why. I propose to treat the father’s evidence cautiously because it is easy to make the claims to set aside the child support agreement when no one challenges his evidence.
[1]Hezon and Hezon (Child support) [2018] AATA 3062

Setting aside a Child support agreement

Section 80C and the sections immediately thereafter of the Child Support (Assessment) Act 1989 (Cth) relate to the question of how child support agreements are binding. For the purposes of the present hearing, I am satisfied that the relevant agreement is in writing and was signed by all the parties to it. Notwithstanding what the father says, the agreement certainly contains a statement to the effect that the father (along with the mother) had been provided independent legal advice from a legal practitioner as to the effect of the agreement on their rights, the disadvantages and advantages of making the agreement and otherwise, the provisions of s 80C of Child Support (Assessment) Act 1989 (Cth) are satisfied.
Section 80CA of the Child Support (Assessment) Act 1989 (Cth) makes clear that a binding child support agreement must not be varied. It can certainly be terminated and replaced with a new agreement. That is not the case here. However, s 80D of the Child Support (Assessment) Act 1989 (Cth) provides that a binding child support agreement may be terminated by a court order setting aside the previous agreement under s 136 of the Child Support (Assessment) Act 1989 (Cth).
Section 136 of the Child Support (Assessment) Act 1989 (Cth) provides that the court may set aside the agreement if satisfied that the agreement was obtained by fraud or failure to disclose material information or that a party exerted undue influence or duress in obtaining the agreement or engaged in unconscionable or other conduct to such an extent that it would be unjust not to set the agreement aside.
Another ground for setting aside a Child support agreement is where there are exceptional circumstances that have arisen since the agreement was made such that the applicant (in this case the father) would suffer hardship if it was not set aside.
Section 136 of the Child Support (Assessment) Act 1989 (Cth) then goes on to provide what is to happen in the event that such an order is made.
It will therefore be seen that the Court has to search the father’s material to see whether one of the grounds in s 136 of the Child Support (Assessment) Act 1989 (Cth) applies. For the reasons that follow, I find that none of the evidence supports any of those grounds. In my view the evidence does not reach the required standard and there are certainly no exceptional circumstances here.
Turning to the grounds that I have identified, the first is that the agreement was obtained by fraud or failure to disclose material information. Nothing that I can find in the father’s affidavit material supports such a conclusion.
The second possibility is that the mother exerted undue influence or duress or engaged in unconscionable or other conduct to such an extent that it would be unjust not to set the agreement aside. The father relies upon the evidence to which I have referred about his unfortunate state with his girlfriend over those days and more importantly, the pressure applied to him by the mother saying that she would take her own life if he did not agree. In respect of the latter, the evidence is so vague that I am unsure exactly when the circumstances arose and what was said. Nothing indicates that he told the solicitor of the pressure that he was under, and to the extent that he had the unfortunate situation with his then girlfriend, presumably, he could have asked for further time before the document was executed. Nothing indicates whether he raised that subject with anybody else. Importantly, to satisfy the test of duress, undue influence or unconscionable conduct, the father has to show that it was in obtaining the agreement that the pressure was so applied to him.
In Thorne v Kennedy [2017] HCA 49, the High Court of Australia examined a case in which a financial agreement relating to property proceedings was challenged. The issue there was whether the applicant could justify a claim of duress or unconscionable conduct. The plurality described undue influence or duress as having boundaries that were blurred. As their Honours observed, undue influence can arise from widely different sources, one of which is excessive pressure. The evidence of the father does not indicate how excessive the pressure was, in particular, at the time that the agreement was signed, or what the mother had said to him.
The plurality also referred to Bank of New South Wales v Rogers (1941) 65 CLR 42 where McTiernan J at [61] characterised the absence of undue influence as a “free and well-understood act”. Williams J referred to “the free exercise of the respondents will”. If those sorts of concepts are examined in this case, nothing indicates that the father’s free exercise of will was overborne. As his evidence observed, he was content to avoid problems.
The plurality in Thorne v Kennedy (supra) went on to say that whether a person’s act was “free” required consideration of the extent to which that person was constrained in assessing alternatives and deciding between them. The father’s evidence above indicates that he had not discussed with his lawyer paragraph [8] of the agreement, which effectively said that everyone had taken into account the degree of difficulty in making changes to the agreement where their personal circumstances might change. Be that as it may, presumably, the only alternative would have been for him not to have paid school fees and the like for his children but he would have otherwise been paying child support as assessed. As the High Court went on to say, at the very least, the judgmental capacity of a party seeking relief must be “markedly sub-standard” as a result of the effect upon the person’s mind of the will of another.
I do not find that the father’s will was markedly affected. I rely on the words that he used to which I have already referred.
Insofar as the father relies on duress, it is difficult to see the distinction between duress and undue influence here.
Nothing in the evidence supports a conclusion that the father thought that he had no alternative in respect of the specific parts of the agreement to which he now objects.
Insofar as the father suggests that the mother’s conduct in threatening to take her own life and assertions of mental illness was unconscionable conduct, the plurality in Thorne v Kennedy (supra) observed that a conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to their own best interest”. Their Honours said before they could be a finding of unconscientious taking of advantage, it also generally had to be shown that the other party knew or ought to have known of the existence of the special disadvantage. One possibility was that the father’s personal dilemma with the miscarriage of his then partner could have given rise to that but there is no suggestion that he raised that is a problem with the solicitors or indeed the mother such that he was not of a clear mind to enter into the agreement. Accordingly, nothing I can find in his evidence indicates that the mother’s conduct was unconscionable in the circumstances.
It is clear from s 136 of the Child Support (Assessment) Act 1989 (Cth) that the circumstances under which a court can interfere with a child support agreement are very limited. I have done the best I can in the absence of any submissions by the father, to trawl through pages of his affidavits and other documents. Nothing supports a conclusion for which he advocates and his application in respect of setting aside the child support agreement must fail. The fact that he seems to assert that he was not aware of the difficulty in changing it as a result of a change of financial or personal circumstances does not assist him having regard to the restrictions under which the Court can operate.
Section 136(2)(d) of the Child Support (Assessment) Act 1989 (Cth) however, permits the Court in exceptional circumstances that have arisen since the agreement was made to set aside if satisfied that (in this case) the father would suffer hardship. Focusing again only on the question of the non-periodic payments, it is clear that the father’s case is that he does not have the necessary resources and income to make the payment. To an extent however that arises as a result of his decisions subsequent to the agreement to start a second family. It would seem apparent from his affidavit that things have not worked out as successfully as he would have hoped, and accordingly he has had to reduce his hours of work to assist his wife who already had limited income.
The circumstances under which the father applies have to be exceptional. There is no definition of “exceptional” in the Child Support (Assessment) Act 1989 (Cth) and this particular part of the legislation has to be seen in context. The context here is that parties understand that changes do occur in their lives, particularly in circumstances where second families are being contemplated as they undoubtedly were here. There is no evidence to indicate that the specific terms of the agreement were not read to the father and in the circumstances, I see no reason why the presumption of regularity ought not to apply to the certificate.
In essence, the father refers to his work capacity and indicates that in 2014, his full-time work capacity changed to part-time as a result of the birth of his first son. He had a second child in 2015 which then extended his part-time work capacity. In 2016, he had part-time capacity in the first part of the year and full-time capacity in the second half of the year because both children were in child care when he worked, but he also worked from home.
In 2017, according to the father, his full-time work capacity returned to part-time due to his own health and caring responsibilities. In April 2017 he had no work capacity and that seems to be the same in July.
There is no challenge to this evidence, but it is the fact that he chose to have this second family which militates against a finding that there were exceptional circumstances. Taking on those obligations is quite normal and as such, with the priority of the child support obligations already, whether he comprehensively understood them or not, he chose to take the risk. As such, the circumstances cannot be exceptional. Similarly, even if he had anticipated that he would be able to have a second family and continue to work, he did not factor in the prospect of the medical problems of that second family which seem to have now arisen. It must be kept in mind that the obligations to which he committed himself under the agreement related to private school fees. In my view, he cannot now say that his circumstances have changed to such an extent that he no longer can afford to make those payments. If indeed there are contractual obligations with the relevant schools, those are matters that can be dealt with at times in the future. There is no application by the mother to enforce the payments under the agreement and to the extent that the child support agency intends to do so, they would no doubt have contemplated the question of how the enforcement would or would not succeed.
Accordingly, the father’s application to set aside the child support agreement must fail.

The departure application

I have already referred to the evidence of the father about his work capacity. Although confusing, it seems that the evidence shows that the father was in a business which relied upon his carpentry skills. The problems he had of a personal nature relating to the care of his new family seem to have exasperated his partner which brought about the ending of the business arrangement. What followed was that the agency responsible for the assessments relied upon the taxation returns (to which the father now objects), on the basis that they are not reflective of what he really earned. This argument comes from Div 7A of the Income Tax Assessment Act 1997 (Cth).
The father relied upon an affidavit of Mr C, filed on 22 June 2018 and prepared by the father himself. The accountant could only report what he had been told by the father’s previous accountants D Accountants. Leaving aside the admissibility of this evidence, it is clear that the previous accountants were involved in the structure of the father’s former business. The father’s income seems to have come through the Hughes Family Trust and as best I can determine, the Trustee was then distributing to E Pty Ltd.
The father’s accountant said that the father was a director and shareholder of F Pty Ltd, and in that entity, a variety of loans were created between 2008 and 2012. The loans totalled $185,178.37.
It is quite telling that the accountants wrote:
These funds were used by (the father) to fund his and his family’s lifestyle. As tax was not paid on these funds at that point when (the father) separated from [F] Pty Ltd, the company allocated a dividend to his shareholder entity, the [Hughes] Family Trust, to clear this loan out. The majority of this dividend was then distributed to [E] Pty Ltd. This occurred in the 2016 financial year and is reflected in the 2016 accounts and tax returns accordingly.
It was the accountant’s view that the retained profits held by E Pty Ltd, which totalled $182,087, should not be taken into account in the father’s 2017 financial year because it “did not represent genuine income or a resource for funds”. That, in reality, seems to be saying that he earned the money but he had to pay back the tax debt.
The chronology seems to be that for a number of years during which these loans were created in F Pty Ltd, the parties were still together or at least precede the child support agreement. It is the father’s argument that relying upon his accountant, what is referred to in his tax return is not what he actually received.
This issue was comprehensively considered by the AATA member at [40] of the reasons of the tribunal. The member wrote that he did not consider the income and resources of the father had any significant impact upon the father’s ability to contribute to the child support. There was a finding that there was no evidence that the father had alternative sources of income or additional financial resources from those that had been declared and it was acknowledged that the father still owed $42,000 in relation to the Division 7A loan but he also had credit card debts of around $60,000. As the tribunal member observed, the repayment of the credit card debt and the ATO debt did not take priority over his responsibility to provide for his children. Accordingly, various findings were made.
As I earlier observed, it is not appropriate for the Court to endeavour to do anything with that decision as no review application has been filed. Accordingly, for a period of nine months commencing on 1 January 2017, which the father seeks to claim here, cannot succeed. The dilemma is that there is an overlap between the relevant periods. It is hard to see how this Court has any entitlement to dabble in the period from 1 October 2017 until 30 June 2018 without some evidence of what has happened to the Division 7A loan dividends. The evidence of the accountant Mr C has indicated that the retained profits in E Pty Ltd will have to be distributed to enable the company to be closed. This was planned over a period of the next two tax years.
Relying upon what Mr C said, that must apply to the 2017 and 2018 financial years. Mr C said that he expected that the father would receive income for the 2018 year estimated to be around $21,000 rather than whatever the distribution was. It remains unclear to me what distributions were to be made in that year. Mr C said that in 2015, there was a modest amount of about $6,000 attributable to the distribution and in 2016, the distribution was $34,000. In 2017, there did not appear to be any significant distribution at all. In 2018, no indication is given as to what the distribution (if any) will be. I am not prepared to assume that the debt has to be paid within a specific time or what arrangements the father has made either personally or through his accountants to the Australian Taxation Office.
Accordingly, in respect of the 2018 year, even allowing for the overlap with the AATA decision, there is not sufficient evidence to enable me to determine what the correct income (or indeed source) figure is.
In respect of the period prior to the AATA decision, only half of the year 1 July 2016 to 30 June 2017 falls outside of the decision. It was the father’s argument that the child support agency should use his income of $47,580 as the appropriate amount. Mr C said that the taxable income reported for 30 June 2017 was $43,944 whereas in reality, the “true income” that the father received was $47,580. I am unable therefore to work out how the Division 7A loan dividend has any impact at all on the father’s income. He has therefore not satisfied me that there are circumstances here to indicate that his taxable income is being used by the child support agency incorrectly. Below I turn to the question of how the relevant provisions have to be satisfied.
The father sought that for the period from 1 July 2015 to 30 June 2016, his actual income should be fixed at $43,146. That is, the amount that the accountant says is his “true income”. However, that is where the Division 7A loan comes in and clearly a distribution has been made to discharge the debt. I returned to that issue below, but it must be evident that the income has been derived from a trust and that previously, no tax had been paid on the relevant earning.
In respect of the 2015 year for which the father sought a departure for a period of six months, there had been a distribution of a dividend which increased his taxable income by about $6,000.
Accordingly, there are two periods that require some consideration having regard to what the father has to establish.

The child support legislation

The father does not set out specifically what ground he relies upon but I have concluded that he is asserting that under s 117(2)(c) of the Child Support (Assessment) Act 1989 (Cth) , the administrative assessment would result in an unjust and inequitable level of child support.
The first point is the father has to establish special circumstances. That is, he must show that there is something in this case out of the ordinary. The irony here is that the father’s accountant indicates that for a number of years, the father (and possibly the mother) had the benefit of a tax arrangement under which they did not pay tax and used the funds of the company for the purposes of their lifestyle. In effect therefore, the tax obligations catch up with people who ultimately have to pay out these loans. He now wants to say that this is not his true income because he is paying his tax debt from the distributions that had previously been withheld but against which he “borrowed” to fund his lifestyle but without having to pay tax. I think most members of the community who did not have the benefit of that structure would look askance at a Court simply ignoring his past tax dealings. The father’s argument is that his present circumstances do not permit him to pay, but of course, he had the benefit of the income and resources of a taxation scheme that presumably was not available to most employees in this country.
Although I have read the decision of the AATA, I am reluctant to rely too much on what findings were made there because I am not entirely sure that the evidence that the father is presenting to this Court is exactly the same. The question however remains whether the Court should permit him to reduce his income for child support purposes, when in reality, having been a participant in the company structure, he would have clearly known that sooner or later, this taxation liability would have had to of been met.
I do not know what arrangements, if any, he can make through his accountants with the Australian Taxation Office, but I suspect on the basis of the accountant’s evidence, there is no suggestion that he can avoid those taxation liabilities.

The child support formula is designed to give some consistency across the nation in the assessment process. The fact that the father does not now have access to that income because of his decisions to meet his obligations to his new family, creates a dilemma. On the father’s evidence, he neither has the income as reflected in his tax return any longer because it was earned in a period over two years ago but there is insufficient evidence to enable me to say how he was living during that particular period of time and why he prioritised some lifestyle expenses including the support of his new family over his obligations to fund his first family. For example, much of the focus of the father’s evidence was on his income, but as the AATA member observed, there was evidence that in 2016, the father sold out of the business entity for the sum of $50,000. I do not know from the father’s evidence what happened to that money and how he prioritised not only the obligations to pay for the support of his first family under the child support agreement, but also the looming tax debt that his accountants must have been conscious of.
The AATA reasons also point to the fact that in April 2016, and again not mentioned by the father in his evidence before this Court, he began another company which was deregistered in October 2017. I do not know what, if any, costs were involved in that and why they were not appropriated towards the obligations to which I have already referred.
It is important to note that an applicant for relief under s 117 of the Child Support (Assessment) Act 1989 (Cth) must show not only that there are special circumstances in relation to this case that make the level of child support under the administrative’s assessment unjust and inequitable, but that the financial circumstances are transparent. The father filed a financial circumstances statement on 22 June 2018 which shows that he has a limited amount of cash in the bank and an 18-year-old motorcar. No explanation has been given for what happened to the monies received in the entity to which the AATA referred.

Conclusion

Thus, having done the best I can with the documents provided by the father and the absence of any cogent submissions as to what I should do with all these items that I have found trawling through his evidence, I could not be satisfied that he has established special circumstances or that it would be just and equitable for me to depart from the assessments in any of the years to which he claims relief.
Accordingly, the father’s application must fail.

I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 18 December 2018.

Acting Associate:

Date: 18 December 2018

[2018] FamCA 1079

18 December 2018

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