Jeffrey and Yali - [2009] FMCAfam 442

FEDERAL MAGISTRATES COURT OF AUSTRALIA

JEFFREY & YALI

[2009] FMCAfam 442

CHILD SUPPORT – Application to stay collection of child support – limited child support agreement – agreement entered into December 2008 – relevance of provisional assessment – husband high income earner – agreement not reflective of parties’ intentions – dispute between parties as to appropriate amount to be paid pending outcome of proceedings – exceptional circumstances.

Family Law Act 1975, s.90G
Child Support (Assessment) Act 1989, ss.3, 4, 12, 34B, 42, 55C, 80C, 80D, 80E, 80G, 92, 96, 136, 136(2), 137, 146B, 146F
Child Support (Registration & Collection) Act 1988, ss.111A, 111B, 111C

Scribe & Scribe (2006) FLC 93-302

Applicant:

MR JEFFREY

Respondent:

MS YALI

File Number:

ADC 4893 of 2008

Judgment of:

Brown FM

Hearing date:

28 April 2009

Date of Last Submission:

28 April 2009

Delivered at:

Adelaide

Delivered on:

8 May 2009

REPRESENTATION

Counsel for the Applicant:

Ms Redman

Solicitors for the Applicant:

Alderman Redman

Counsel for the Respondent:

Mr McGinn

Solicitors for the Respondent:

Scales & Partners

ORDERS

Pursuant to section 26 of the Federal Magistrates Act 1999 the parties and their legal representatives attend a conciliation conference on 25 May 2009 at 9:15am with a Registrar of the court.
That further consideration of this matter is adjourned to 19 June 2009 at 9:30am.

UNTIL FURTHER OR OTHER ORDER

The operation of the child support agreement made between the parties on 9 December 2008 be stayed and an injunction issue and the Registrar of the Child Support Agency be restrained from collecting all arrears and late payment fees of child support pursuant to the aforesaid agreement which has been registered with the Agency for collection.
The Registrar of the Child Support Agency be stayed from collecting child support pursuant to the agreement referred to in order (3) hereof and in lieu thereof from the date of these orders onwards the husband pay to the wife the sum of $350.00 child support per week in respect of the child [X] born in 2001 and $350.00 child support per week in respect of the child [Y] born in 2005 (a total amount of child support of $700.00 per week).

IT IS NOTED that publication of this judgment under the pseudonym Jeffrey & Yali is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
ADELAIDE

ADC 4893 of 2008

MR JEFFREY

Applicant

And

MS YALI

Respondent

REASONS FOR JUDGMENT

Introduction

These proceedings concerns whether it is appropriate for the operation of a child support agreement to be stayed pending an application to set aside that agreement.
The parties to both the proceedings and the child support agreement in question are Mr Jeffrey “the husband” and Ms Yali “the wife”. They are the parents of [X] born in 2001 and [Y] born in 2005. The relevant child support agreement was made on 9 December 2008.
The husband commenced these proceedings on 31 March 2009. On a final basis, he wishes the child support agreement to be set aside pursuant to the provisions of section 136(2) of the Child Support (Assessment) Act 1989.
In the interim, he wishes the Registrar of the Child Support Agency “the Agency” to be stayed from collecting child support from him pursuant to the provisions of section 111C of the Child Support (Registration & Collection) Act 1988.
The child support agreement has been registered with the Agency for the purpose of collection. The wife agrees with the husband that the Agency has interpreted the agreement as requiring the husband to pay her the total sum of $2,500.00 child support per week for both [X] and [Y], when the parties’ intention was that the amount to be paid would be the total sum of $1,250.00 for both children.
The agreement also makes reference to the payment of child care, nanny and private school fees for [Y]. On the basis that this error needs to be corrected, the wife is amenable to there being a stay in collection on the basis that the amount of child support to be collected from the husband by the Agency would be $625.00 per week for [X] and the same sum for [Y], together with fifty percent of any applicable child care, nanny or private school fees.
Apart from this error, which is referable to an error in the drafting of the agreement, it is the wife’s position that the parties freely and knowingly entered into the child support agreement in question and it would be unfair to her if its operation was fundamentally changed, particularly given the short time which has elapsed since it was made.
On the other hand, it is the husband’s position that the court should stay the total operation of the agreement and in lieu thereof the formula provided for the calculation of child support by the Child Support (Assessment) Act 1989 should be applied to the financial circumstances of both parties and the current care arrangements for [X] and [Y], in order to arrive at the appropriate level of child support which the husband should pay, until the ultimate determination of his application to set aside the agreement up to this stage.
The court has broad powers in exercising its jurisdiction under the Child Support (Assessment) Act 1989 and the Child Support (Registration & Collection) Act 1988.[1] In particular, if proceedings have been instituted in the court pursuant to the Child Support (Assessment) Act the court may make an order staying the operation or implementation of both the Assessment Act and the Registration and Collection Act.
[1] See section 111A of the Child Support (Registration & Collection) Act 1988
In particular pursuant to section 111C(3) of the Child Support (Registration & Collection) Act 1988 the court may:
“Pending the hearing and final determination of the proceeding, the court may make such orders as the court considers appropriate staying or otherwise affecting the operation or implementation of the Assessment Act and this Act if the court considers that it is desirable to do so, taking into account the interests of persons who may be affected by the outcome of the proceedings.”
The husband’s substantive application to set aside the child support agreement in question is made pursuant to the provisions of section 136(2) of the Child Support (Assessment) Act 1989. Accordingly, the court has jurisdiction to make the stay sought by Mr Jeffrey, subject to any conditions it thinks appropriate and to prevent the Registrar of the Child Support Agency from collecting any arrears of maintenance, which flow from its interpretation of the agreement.
I have been provided with a letter from the Child Support Agency, which indicates that, as at 17 April 2009, the husband was $7,944.78 in arrears of child support and had accrued a penalty for late payment of $78.27 in respect of those arrears. It is the husband’s case that he has no capacity to meet those arrears and to allow the agreement to remain in force will exponentially compound his difficulties in this regard.
Around about the time the child support agreement was negotiated, the parties reached apparent agreement about the division of their marital property. The wife’s position is that these two agreements are part of a “package”. Ultimately, if the child support agreement is set aside, she would want to revisit the basis for the property orders because of the inter-relationship between the two.

The evidence

In his case, the husband relies on the following documents:
i)his application filed on 31 March 2009;
ii)an affidavit of himself filed on 31 March 2009;
iii)a statement of his financial circumstances filed on 31 March 2009.
The wife relies on the following documents:
i)her amended response filed on 27 April 2009;
ii)an affidavit of herself filed on 21 April 2009;
iii)a statement of her financial circumstances filed 21 April 2009.
Necessarily the hearing of the parties’ competing applications in respect of the stay was brief. There was no opportunity for any cross examination of either party. As a consequence, where there is a dispute between the parties regarding a factual matter, I am unable to resolve that dispute in the context of these proceedings. The adjudication of such factual issues must await the final hearing of the matter.

Background

The parties married in 1995. They finally separated on 20 June 2008. Given the date of their separation, they are not as yet divorced. Since June of 2008, [X] and [Y] have lived predominantly with the wife and spent regular periods of time with the husband.
The husband is [occupation omitted]. He receives an annual salary of $283,920.00. The wife is a self-employed [occupation omitted]. She earns an income of $50,440.00 gross per annum. She also receives a family allowance.
The parties negotiated a settlement of issues to do with the settlement of their matrimonial property, in the months after their separation. The resulting orders were approved by the Family Court of Australia, at Adelaide, on 13 January 2009.
The orders envisage a transfer of the parties’ former family home to the wife in exchange for the payment to the husband of a sum of money. Other orders were made in respect of the retention, by each of the parties, of specified items of property, including superannuation.
A notation to the property orders indicated that the parties had entered into a child support agreement. The child support agreement was annexed to the orders. It is this agreement which is the subject of the present dispute between the parties.
From the wife’s point of view, the child support agreement was part of the overall “package” arrived at between the parties to resolve all financial issues, including child support, between them.
The parties currently disagree as to what was the effect of the property orders. The husband asserts that the agreement was one of near equality. The wife’s position is that the actual division of assets was 63/37% in the husband’s favour.
It is the wife’s case that she agreed to a lesser division of assets because the child support agreement envisaged that she would receive the sum of $1,250.00 per week by way of child support for the two children concerned. In these circumstances, she asserts that it is grossly unfair to her for the husband to attempt to evade his child support obligations given that she has been “short changed” in respect of property matters.
The husband did not receive any independent legal advice in respect of either the property orders or child support agreement. The documents in question were prepared by the wife’s solicitor, albeit that the husband agreed to pay half of the legal costs incurred.
The wife’s position is that the husband indicated to her that he felt confident to negotiate on his own behalf, because of his previous legal studies. In addition he was apparently wary of having a lawyer to act on his behalf because of his fears that it would increase the level of conflict between the parties.
The husband does however acknowledge that he agreed to pay chid support fixed in the sum of $1,250.00 per fortnight, which sum was reached after the parties had analysed the wife and the children’s living expenses, including mortgage repayments.
It is the husband’s case that the parties also agreed that the amount of child support payable by him would change if there was some material change in either his or the wife’s circumstances such as him becoming unemployed; the wife inheriting a significant sum of money; or a change in interest rates.
It is the husband’s position that a proviso to this effect was originally inserted into the property orders. This is so. Order 1 of the orders of 13 January 2009 was subject to the condition: “unless the husband ceases to pay the agreed child support weekly amount of $1,250.00, at which time the financial settlement agreement becomes subject to renegotiations.”
This aspect of the parties’ property settlement did not pass the scrutiny of the Registrar, who ultimately approved the orders. The court was, for self apparent reasons, unwilling to approve final property orders which envisaged the prospect of a subsequent renegotiation of their terms.
Accordingly, this clause was excised from the orders concerned. Some initials, of a person unidentified to me, appear beside the necessary excision. The figure noted in the order, but subsequently removed, reinforces the parties’ respective positions that they mutually agreed upon a sum of child support, for both children, in total, of $1,250.00 per fortnight.
It is the husband’s position that he did not appreciate that the two documents concerned – the child support agreement and the property orders – were legally independent of one another. It is his evidence that the “renegotiation clause” was intended, at least by him, to apply to the child support agreement primarily.
It seems to be the case that the child support agreement between the parties was prepared by the wife’s solicitors. In its terms it is described simpliciter as a child support agreement made pursuant to the provisions of section 84 of the Child Support (Assessment) Act.
In particular, it is not designated as being either a binding child support agreement or a limited child support agreement. In its recitals, the agreement states that the wife has “neither applied for nor obtained an assessment [of child support].” Accordingly, it seems a reasonable supposition that the terms of the agreement were not negotiated by reference to any child support assessment, either actual, provisional or notional.
The obligations cast upon the husband are set out in clause 4 of the agreement. They read as follows:
“4.1 The liable parent will pay or cause to be paid to the mother child support as follows:
4.1.1The sum of $1,250.00 per week with respect to each of the two infant children of the marriage, such sum to be indexed pursuant to the CPI as at 1 November each year.
4.1.2Fifty percent of all child care, nanny and private school fees with respect to the child [Y].
4.2    Private School Fees
4.2.1The liable parent to pay to the mother 50% school fees incurred by the child [Y] at a school attended by the child as may be agreed between the parties until the child reach her tertiary education.
4.3    Further Support
4.3.1The liable parent shall maintain private and medical insurance at a family rate until the happening of a child support terminating event is defined by section 12 of the Act.
4.3.2That the liable parent pay or cause to be paid the following expenses for the children within 7 (seven) days with the wife delivering accounts to the liable parent:-
a)50% of all medical and dental expenses incurred on behalf of the children.
b) reasonable expenses attached to school sport, excursions, books, school clothing, music, other lessons and educational expenses.
4.4    That within 14 (fourteen) days of the date of this Agreement the parties to all things and sign all documents necessary to cause this agreement to be registered with the Child Support Agency for the purposes of registering liabilities in this Agreement.”[2]
[2] See father’s affidavit at annexure DBJ3
Given the contents of clause 4.1, the Agency cannot be criticised for taking “too literal a view” of the agreement, which clearly specifies that the periodic amount of child support will be $2,500.00 per fortnight, in total, for both children, subject to an annual CPI increase.
Apart from medical and incidental educational expenses, the agreement makes no provision for any termination event in respect of the agreement. Accordingly, on its face, the agreement was intended to continue indefinitely.
The terminating events specified in section 12(1) of the Child Support (Assessment) Act include the death of any subject child or the cessation of eligibility of a child to be subject to a child support assessment by reason of such matters as the child leaving Australia or marrying.
The wife lodged the child support agreement with the Agency on or around 3 March 2009. For the obvious reasons outlined above, the Agency interpreted the husband’s liability in the sum of $2,500.00 per fortnight together with half of all incidental payments incurred in respect of the care of the two children concerned. Concurrently, ostensibly at least, with the Agency accepting the agreement, it initiated a “provisional notional child assessment.”
This calculated the husband’s liability for child support in the sum of $390.39 per week for the two children concerned. At the same time, the Agency issued an actual child support assessment, on the basis of the child support agreement made 9 December 2008.
This latter assessment provided for child support to be paid for [X] and [Y] at the rate of $1,250.00 each from 27 February 2009. The actual assessment indicates that the agreement, so far as periodic payments of child support was concerned, would end on [date omitted] 2023. This would be the date prior to [Y]’s eighteenth birthday.
The provisional notional assessment indicates that any child support agreement must provide for a sum of child support greater than or equal to the provisional notional assessment [see Child Support (Assessment) Act] section 80E(2).[3]
[3] This provision applies to limited child support agreements
The husband sought legal advice, on 6 March 2009, shortly after the agreement had been ratified by the Agency. As a result, he began paying child support at the rate of $390.00 per week, which is the amount provided by the provisional assessment. He lodged an objection to the actual assessment of child support based on the parties’ agreement. The parties have been unable to agree on the terms of any subsequent child support agreement, either limited or binding.
As previously indicated, the Agency’s acceptance of the agreement in question and its interpretation of the periodic payment clause have resulted in the husband accumulating a liability for a considerable amount of arrears. These arrears have continued to accumulate, given that he has been paying child support based on the provisional notional assessment.
[X] attends [S] College. However, her school fees are paid by her maternal grandparents. The wife assesses her liability for the children’s educational expenses as being $110.00 per week and nanny fees for presumably [Y] as being $180.00 per week. At this point, it is difficult to assess, in specific dollar terms, what is fifty percent of “all child care, nanny and private school fees with respect to the child [Y].”
I have been provided with several emails which have passed between the parties, both before and after the agreement in question was executed. Both parties acknowledge that these emails are the basis of much of the negotiations between them. These negotiations also included the wife’s father, who was also extensively involved in the process.
It is clear that the husband acted on his own behalf throughout these various negotiations. It is his case that he trusted the wife’s father, who although not legally qualified, was a person who had been involved in court processes in the past. The husband now acknowledges that he was remiss in not obtaining his own legal representation.
Some of these negotiations included how the wife would service a mortgage on the parties’ former family home, which would include the sum she would have to borrow to pay out the husband pursuant to the agreed property orders.
The husband’s position is that he initially agreed to make a higher fortnightly payment to the wife, prior to the discharge of the parties’ joint existing mortgage on the property in question.
It is his position that he understood that this aspect of the agreement would be revisited after the joint mortgage had been discharged and he had been paid out of the property in question. The wife does not agree.

The wife’s position is that the parties freely negotiated with one another and agreed that the husband would provide the sum of $2,500.00 per fortnight towards the children’s living expenses; fifty percent of the children’s private health insurance and additional medical and dental expenses; fifty percent of [Y]’s child care, nanny and private school fees; and all of the children’s incidental educational expenses, such as uniforms, books, excursions, music lessons and the like.
She acknowledges that there was some discussion as to what would occur in respect of child support in the eventuality of the husband losing his employment. However, other than these discussions, it is her position that she and the husband agreed on what was to be a “binding” agreement. In support of her position, she points to the fact that the husband has an “MBA, [has] studied commercial law and claims to have a good knowledge of the law.”[4]
[4] See wife’s affidavit at paragraph 19
On this basis, the wife’s position can be summarised from the following extract from her affidavit material:
“I say that the Child Support Agreement was not obtained by fraud or failure to disclose material information, that no undue influence or duress was exerted upon the husband or that there has been any significant change in the circumstances of either the husband or I, or either the children, with respect to this Agreement. That Agreement provided for an annual rate of child support taking into account the expenses of the children and I.”[5]
b)The husband’s financial circumstances
[5] See wife’s affidavit at paragraph 27
The husband is a well paid administrator within the South Australian Public Service. He earns $5,460.00 per week, which equates to an annual salary of $283,920.00.
His major recurrent weekly expenses are: tax ($2,100.00); superannuation ($492.00); rent ($440.00); miscellaneous insurance ($75.00); food ($280.00); utilities ($90.00); car running expenses ($165.00); clothing ($100.00); entertainment ($120.00); cleaning ($80.00); household supplies ($50.00); medical and pharmaceutical ($130.00); holidays ($100.00); and miscellaneous expenses ($145.00).
This leaves a surplus of income over expenditure of just over $1,000.00 per week. I have not included in the list outlined above expenses tabulated by the husband which relate directly to the children. These include education and nanny expenses ($175.00) and children’s activities ($40.00). In addition, the husband attributes significant components of his other areas of expenditure to consumption relating to the children.
I take it that these expenses relate to periods of time when the children are in his care. I have not been advised precisely how much time the children are currently spending with Mr Jeffrey. The cost percentage delineated in the provisional notional assessment indicates that the husband’s cost percentage for both [X] and [Y] is twenty-four percent, which indicates the children are in his care between fourteen and thirty-five percent of the time.[6]
[6] See Child Support (Assessment) Act at section 55C
The applicable child support care percentage indicates that the husband has “regular care” of [X] and [Y], which means they spend between 52 and 127 nights per annum in his care, which equates to two to four nights per fortnight. Accordingly, I accept that the husband is likely to provide a significant level of financial support to the two children concerned, prior to any actual calculation of child support.
Although Mr Jeffrey must be regarded as a high income earner, he cannot be said to have a high level of personal asset backing. He has savings of $153,000.00; accrued superannuation of $160,000.00; and two motor vehicles worth $43,000.00 in total. He has modest debts relating to credit cards.
I appreciate that the calculation of Mr Jeffrey’s weekly expenditure is a somewhat artificial task. He himself concedes as much because he has indicated that many of the figures for his weekly expenses are estimates.
However, the impression I have of the husband’s financial situation is that he is not currently labouring under a significant amount of financial pressure, apart from that created by the applicable child support assessment, which both parties acknowledge is double the amount which was initially agreed between them.
Putting aside this assessment, I calculate that Mr Jeffrey has the capacity to contribute around twenty percent of his recurrent net income to child support purposes before he suffers any great need to rein in his weekly expenditure and make significant lifestyle changes.
However, I again acknowledge that this is a somewhat arbitrary exercise. It makes no provision for Mr Jeffrey to be able to save and make provision for unforseen exigencies, particularly potential unemployment. In the longer term, I am also uncertain whether he has adequate resources to purchase accommodation for himself or indeed whether he wishes to do so.

c) The wife’s financial circumstances

The wife is employed as a [occupation omitted]. I assume on a part-time basis. She earns $970.00 gross per week, which equates to an annual salary of $50,440.00. She also receives a family allowance of $112.00 per week.
Her major recurrent weekly expenses are tax ($242.00); superannuation ($85.00); mortgage payments ($600.00); miscellaneous expenses including insurance, rates and credit card debts ($151.00).
Ms Yali estimates her other recurrent weekly expenses, including unavoidable expenses such as food and utilities, as being $1,365.00 per week. These include nanny expenses of $180.00 per week.
Accordingly, her recurrent expenses are somewhere in the vicinity of $2,450.00 per week or a little over $120,000.00 per annum. Given her income, it is clear that she does not have the capacity to support her present financial needs on her current salary.
One of the themes of the various negotiations between the parties is that they would ensure that their separation did not unduly impact upon the children, particularly in terms of their prior care arrangements and standard of living. Accordingly, it seems inherent in those negotiations that the husband recognised and accepted that this would require him to contribute a significant portion of his income to the wife as child support.
There does not seem to me to be anything exceptional in the various living expenses calculated by the wife. They seem to be the type of expenses one would expect to occur in a comfortably off middle class family.
Again, the impression I have is that the wife has not as yet had to significantly modify her standard of living following the parties’ separation. However, I accept that I have not as yet heard any detailed evidence in respect of this issue.
Like the husband, the wife does not enjoy a large degree of personal asset backing. Her major asset is her home, which is subject to a significant mortgage. She has a motor vehicle and modest savings and superannuation. Apart from her mortgage, she does not have significant debts.

The legal principles applicable

At this stage, it is important for the parties to note that I am not dealing with the substantive issue between them, which is whether or not the child support agreement dated 9 December 2008 should be set aside.
Rather, what I am determining is whether the operation of the agreement should be stayed, pending the determination of the main issue in the case and, if so, what alternative arrangements should be made to provide for the financial support of [X] and [Y].
As previously indicated, it is the wife’s position that the husband should be held to the terms of what the parties ostensibly agreed in December of 2008, namely that Mr Jeffrey should pay her the sum of $1,250.00 per week or $65,000.00 per annum, together with the other incidental payments set out in the agreement.
On the other hand, it is the husband’s position that the operation of the agreement should be stayed entirely and in lieu thereof he should pay Ms Yali an amount of child support strictly referable to the legislatively calculated amount of child support for children of the ages of [X] and [Y], given the current care arrangements for the children. This would result in him paying an amount of $390.00 child support per week or $20,280.00 per annum.
It is clear from the terms of section 111C(3) of the Child Support (Registration & Collection) Act that the court has a broad discretion in respect of granting a stay in the collection of child support. The court is directed to make whatever stay order it considers appropriate, after taking into account the interests of any person who may be affected by such an order.
In general terms, in granting any stay, the court should consider the following matters:
·Whether refusing to grant such a stay will make any subsequent proceedings regarding the applicable child support assessment or agreement nugatory or of no consequence;
·The balance of convenience to the parties concerned, particularly where financial hardship will fall if the stay is or is not granted;
·The financial needs of any child affected and how those needs should be properly supplied;
·Any delay in bringing an application for the stay in question;
·The bona fides of the stay;
·The merits of the substantive application.
In addition, pursuant to section 111B of the Child Support (Registration & Collection) Act 1988 the court has a wide range of general powers. These include an order for the payment of a weekly, monthly, yearly or other periodic amount of child support and the power to make any orders, which it considers appropriate.[7]
[7] See Child Support (Registration & Collection) Act 1988 at section 111B(1)(b) and (l)
Section 111B was inserted as a result of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006. Its operation commenced on 1 January 2007. The relevant explanatory memorandum indicates that the purpose of the legislation was to simplify the relationship between the courts and the new child support scheme.
The law relating to the variation or discharge of the provisions of child support agreements, by court order, has been significantly changed by the same amending legislation. However, the portions of the legislation dealing with child support agreements commenced on 1 July 2008.
The overall legislative regime of child support, in Australia, both in terms of its calculation and collection is created by two complementary pieces of legislation – the Registration & Collection Act and the Assessment Act. Both pieces of legislation have been significantly amended. In addition, the two pieces of legislation have different objects as a result of their differing legislative aims.
Pursuant to section 3, the principle objects of the Child Support (Registration & Collection) Act 1988 are to ensure that children receive the financial support that their parents are liable to provide and those periodic amounts are paid on a regular and timely basis.
Pursuant to section 3 of the Child Support (Registration & Collection) Act 1988, the parents of children have the primary duty to maintain their children. This duty has priority over all other commitments a parent may have, other than the necessary commitments which enable that parent to support him or herself, or any other child that the parent may have a duty to maintain.
The objects of the Child Support (Assessment) Act are described in section 4(2) as being intended to ensure:
“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 legislatively fixed standards; 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;”
Section 4(3) of the Child Support (Assessment) Act recognises the desirability of parents reaching agreement for the financial support of their children. When interpreting the Act, the section requires that “the Act should be construed, to the greatest extent consistent with the attainments of its objects:
a)to permit parents to make private arrangements for the future financial support of their children; and
b) to limit interferences with the privacy of persons.”
The rationale of a number of recent major changes to both the Family Law Act and the child support regime is the recognition by the legislature that conflict between separated parents is potentially extremely detrimental to the emotional and psychological wellbeing of children. These changes come about in part in response to a Ministerial Taskforce chaired by Professor Parkinson.[8]
[8] In the Best Interests of Children – Reforming the Child Support Scheme; Report of the Ministerial Taskforce on Child Support – published May 2005.
In particular, disputes over child support have been and are likely to continue to be a major source of ongoing and significant conflict between separated parents and, as such, to pose a potential threat to the wellbeing of children.
In this context, the legislature is supportive of parents making private and binding agreements in respect of the provision of long term financial support for their children, which reflect the personal circumstances and overall reality of their own individual circumstances. The hope being that such consensual arrangements will lessen the potential for conflict between separated parents.
However, for obvious reasons, notwithstanding well meaning legislative intent, not all separated parents are in a position to agree upon how their children’s financial needs are to be met following parental separation.
Such parents need to have recourse to a legislatively mandated process, which provides accessible mechanisms for both the calculation and collection of child support. The necessary hallmarks of such a system being that it will be possible to readily calculate the amount of child support to be levied, depending upon the care arrangements for any child concerned and the financial circumstances of his or her parents.
One of the more significant, if not the most significant consequence of the amendments brought about by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 is a change to the formulaic basis provided by the administrative scheme for the calculation of child support.
The intent of the various new applicable formulae was said to be that they would be more reflective of the actual financial needs of children affected by the child support system, as they would be based on actual empirical research. The amendments concerned were also said to be fairer, as they provided more recognition of the various possible graduation in the division of parenting time between the parties to any given child support assessment.
In his second reading speech regarding the new legislative regime, Mr Brough, the relevant minister at the time, said as follows:
“The new formula, on the other hand, will explicitly be based on the costs of children, as drawn from Australian research showing the real cost of children for the level of their parents’ income and the children’s ages. An ‘income shares’ approach will be used so both parents will have the same amount deducted as self-support, both parents income will be taken into account in establishing the costs of the children, and the resulting costs will be apportioned between the parents according to their share of the combined income.”[9]
[9] See Hansard (House of Representatives) for Thursday, 14 September 2006 at page 1
In the past, there has been much controversy occasioned about the application of strict percentage figures to the income of high wage earners to calculate child support amounts. As a result, in the past, the applicable legislation has fixed a cap after which any increase in income is irrelevant to the calculation of child support. This cap has been previously applied to only one parent’s income, who was dubbed “the liable parent”.
Under the new legislative regime, new formulae will apply to the calculation of child support payable. Specific percentages will be applied to the combined child support income of both parents income. The amount of child support payable will be calculated, in percentage terms, by reference to this combined amount.
Section 42 of the Assessment Act, which previously provided a formula for fixing the capped rate by reference to only the liable parent’s income now applies to the parents “combined child support income”.
The percentages will change with the number of the children applicable and the ages of the children concerned. In terms of the maximum amount of child support payable, it will be referenced to 2.5 times the “male total average weekly earnings (MTAWE)” and apply to the parents concerned’s combined income. This figure is also annually calculated by the Australian Bureau of Statistics.
Subsequently a “cost percentage” will be applied to each of the liable parents, depending on their respective level of care of any child or children concerned. This too will be expressed as a percentage.
Accordingly, the legislative changes have inaugurated a more complex and subtle formula, which will change the applicable cost percentages and when they cut in and out, depending on how much time any relevant child spends in the care of each of his or her parents.
Given the structure of the applicable legislation, it is useful to outline some of the Taskforces’ recommendations, which gave rise to these changes, particularly in terms of the application of the child support formula to parents who are high income earners.
Firstly, in its recommendation six, the Taskforce recommended that, pending the final outcome of any application, under child support legislation, the court should have a wide discretion to make any orders respecting the staying, collecting or assessing of child support. This recommendation appears to be reflected in the provisions of section 111B of the Child Support (Registration & Collection) Act 1988.
Secondly, in its first recommendation, the Taskforce recommended that the basic child support formula should involve first working out the costs of children by reference to the combined income of their parents, and then distributing those costs in accordance with the parents’ respective capacities to meet those costs, taking into account their share of the care of the children involved.
In calculating the cost of children, the Taskforce asserted that the relevant formula should reflect two phenomena primarily. Firstly, expenditure on children rises with the age of the children concerned; and, secondly as income rises, expenditure on children rises in absolute terms, but declines in percentage terms.
The new child support regime continues to recognise that it is potentially arbitrary and unfair to apply a percentage to the income of high wage earners in order to calculate child support amounts. Rather, in keeping with the objects of the applicable legislation, the costs of children should not be calculated strictly by reference to the actual incomes of their parents but should be determined by reference to legislatively fixed standards, which were based on statistical research.

The relevant explanatory memorandum read as follows:
“Child support assessments will be based on the actual costs of children, which have been determined according to Australian research showing that, as parental income rises, spending on children rises in dollar terms but falls as a percentage of income, and that expenditure on children increases as they get older. The costs of children for Part 5 represent the best estimate of the amount that parents, on average, spend on their children according to their income.”[10]
[10] Explanatory memorandum to the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Bill 2006 (circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, The Honourable Mal Brough MP)
As previously indicated, the upper limit for the calculation of child support is now 2.5 times the male total average weekly earnings. As I understand matters, this figure is currently slightly in excess of $140,000.00. Accordingly, if the combined income of the parents concerned exceed this amount, the child support formula will not apply to such sums.
In this context, I turn to the child support agreement in question in this case. The amending legislation has created two new specific forms of child support agreements, which were previously unknown – binding child support agreements and limited child support agreements. Again this aspect of the legislation in question came into force from 1 July 2008 onwards.
The agreement in question in this case was created after the inauguration of the new legislative regime. However, it is unclear to me how much reference either the parties or the wife’s legal advisors had to the various applicable provisions. As previously indicated, the agreement in question does not specifically allude to whether it is intended to be a binding child support agreement or a limited one.
Section 80C(2) of the Assessment Act sets out the requirements for a binding child support agreement. Such agreements must:
·Be in writing and signed by each of the parties;
·Contain a statement and certification that each party has received independent legal advice, in respect of the agreement, particularly regarding:
Ø The affects of the agreement on the rights of that party;
Ø The advantages and disadvantages, at the time of the making of the agreement, of entering the agreement in question.
These provisions mirror those concerning financial agreements in the Family Law Act 1975.[11] In the case of each legislation, an agreement is binding if and only the provisions of either section 80C (binding child support agreements) or section 90G (financial agreements) have been complied with. The central pillar of each provision is that the parties to both type of legislatively sanctioned agreement receive independent legal advice.
[11] See Family Law Act 1975 at section 90G
The provisions contained in section 80C seem to embody the government’s preferred ethos that parents should be free to negotiate about how and in what form child support will be paid, provided that they do so on a level playing field. The level playing field being provided by the fact that each will have a lawyer and will presumably be given a “warts and all” picture of what is and what is not in any particular agreement for each of them.
Child support agreements potentially have serious and long term financial ramifications – for the children and parents concerned and also the Commonwealth Government, which provides financial support to the vast majority of care providing parents through the family tax benefit scheme. As a result, it is the government’s intention that binding child support agreements should be fairly and freely made between parties, after they have negotiated on an equal footing.
Limited child support agreements are defined in section 80E of the Assessment Act. There is one fundamental difference between a binding and a limited child support agreement. For the latter, it is necessary for there to be an active administrative assessment of child support in place.[12] For the former, there need not be such a nexus between the agreement and the mainstream child support regime.
[12] See Child Support (Assessment) Act at section 92(3)
Limited agreements:
·Do not require the provision of independent legal advice to be enforceable;
·Must be for an amount which is either greater to or equal than the amount of child support administratively assessed;
·Like binding agreements, must be in writing and signed by each party to it.
The circumstances, which will permit the termination of a limited child support agreement, as opposed to a binding child support agreement, are also different. Binding agreements can only be terminated:
·By a subsequent binding child support agreement [Child Support (Assessment) Act section 80D(1)(a)];
·By a termination agreement;
·By a court order made pursuant to section 136.
Limited agreements can be terminated:
·By agreement between the parties formalised in either a further binding or limited child support agreement;
·By an order under section 136;
·By a termination agreement;
·If the agreement is more than three years old, by the written notice of either party [80G(1)(e)];
·If the amount which would have been paid pursuant to the applicable administrative assessment of child support changes by more than 15% in circumstances not contemplated by the agreement [the administrative assessment is referred to as the notional assessment – see section 80G(1)(d) and section 146B];
·If there is such a 15% variation from the notional assessment either party to the agreement may give 60 days written notice to terminate the agreement.
The child support agreement in this matter was made on 9 December 2008. Accordingly, it is governed by the new legislative regime. As such, there is no issue about whether or not the agreement has “transitioned” to the new system and is deemed to be a binding child support agreement.
In the absence of a comprehensive statement that each party has received independent legal advice, it cannot be a binding child support agreement. Accordingly, the agreement in question can only be a limited child support agreement.
No administrative assessment of child support was in force when the parties entered into their agreement. Accordingly, there seems a high likelihood that neither party had any regard to what would have been the level of child support, as administratively assessed, when they reached agreement in respect of the level of periodic child support to be paid.
The existence of a child support assessment, be it notional or otherwise, is an essential prerequisite for the assessment of the Family Tax Benefit Part A. Regardless of what level of financial support parents agree on in respect of their children, the Family Tax Benefit is calculated pursuant to the notional assessed amount of child support.
Such notional amounts can be reviewed on the request of either party to a limited child support agreement; or every three years if no such review occurs; or in any case, if the amount of child support that is payable under the limited child support agreement changes by more than fifteen percent [Assessment Act: section 146F].
It seems to be the case that it was the wife who made application to the Child Support Agency, for acceptance of the agreement, which is the subject of these proceedings. This engages Part 6 of Division 4 of the Assessment Act.
Pursuant to section 92(1) if the Registrar accepts a child support agreement, being satisfied that it has been properly made, he is obliged to give effect to the agreement. An agreement is somewhat circularly taken to be properly made if it is indeed a child support agreement [section 88].
Pursuant to section 34B(1) the Registrar is also required to assess the annual rate of child support payable immediately after accepting the agreement. Pursuant to section 146B the Registrar is also required to make a provisional notional assessment, which is the basis of any required maintenance income test for the allocation of the Part A rate of Family Tax Benefit.
As previously indicated, the relevant provisional notional child support assessment, in this case, was issued on 16 March 2009. I have not been advised that there was any prior assessment of child support, either provisional or otherwise, prior to this date.
Section 92(3) reads as follows:
“The Registrar must refuse to accept a limited child support agreement if, immediately before the application for acceptance of the agreement is made, no administrative assessment is in force in relation to the child.”
Pursuant to section 96, if the Registrar accepts a child support agreement, he is obliged to immediately notify each party to the agreement of the decision.
On 16 March 2009, the Registrar’s delegate wrote to the husband indicating that it had accepted an application for child support from the wife. As a consequence, an assessment for the period 27 February 2009 to 26 May 2010 was made.
On the same date, letters were sent by the Agency to the husband including a provisional notional child support assessment and indicating that a child support agreement had been accepted.[13]
[13] See exhibit DBJ8 to the husband’s affidavit filed 31 March 2009
Accordingly, on 16 March 2009, Mr Jeffrey received three separate notices from the Agency, which detailed three separate statutory steps the Registrar had taken in respect of the parties’ child support arrangements.
It seems therefore, at first blush, to be the position that the Registrar has exercised his various obligations under the Act, regarding the parties’ child support agreement, either concurrently or, if the assessment of child support is taken to have been made first, it can only have been nominally done so. I can understand why the Registrar would take such an approach, for administrative convenience and bearing in mind the contents of section 92(1).
However, for the purposes of section 92(3), there is some artificiality in how the administrative assessment has been created, the existence of which is legislatively required to be an essential prerequisite for the acceptance of a limited child support agreement.
The Registrar requires the notional assessment fundamentally so that he or she can determine whether the periodic amount of child support payable pursuant to a limited agreement is either equal to or greater than the provisional amount. In addition the provisional assessment is relevant for Family Tax Benefit purposes.
It would also seem to me, given the nature of limited child support agreements, that the parties to them need to know the import of any provisional assessment so that they can exercise any rights arising to them under section 80G, particularly in regards to termination.
The circumstances, which will permit the termination of a limited child support agreement, as opposed to a binding child support agreement, are also different. Binding agreements can only be terminated:
·By a subsequent binding child support agreement [Child Support (Assessment) Act section 80D(1)(a)];
·By a termination agreement;
·By a court order made pursuant to section 136.
Limited agreements can be terminated:
·By agreement between the parties formalised in either a further binding or limited child support agreement;
·By an order under section 136;
·By a termination agreement;
·If the agreement is more than three years old, by the written notice of either party [80G(1)(e)];
·If the amount which would have been paid pursuant to the applicable administrative assessment of child support changes by more than 15% in circumstances not contemplated by the agreement [the administrative assessment is referred to as the notional assessment – see section 80G(1)(d) and section 146B];
·If there is such a 15% variation from the notional assessment either party to the agreement may give 60 days written notice to terminate the agreement.
Accordingly, limited agreements have the scope for automatic termination. They can be terminated after a specific period of time – a period greater than three years; or they can be terminated if there is a disparity of more than fifteen percent, when the agreement is compared to the applicable administratively assessed amount of child support.
As such, in the case of limited child support agreements, there remains at least a nominal nexus between the statutorily based formula and the agreement, particularly in the sense that there must be some form of administrative assessment in place. The notional assessment process also has relevance for family tax benefits.
No such requirements are necessary for binding child support agreements. Hence, by necessary implication, the prerequisites for their enforceability are greater. Essentially, each party is required to receive exhaustive and independent legal advice about the implication of such an agreement, presumably also including what are the implications of departing from the safety net of the formula based system.
The grounds for setting aside child support agreements pursuant to section 136(2) are limited to a number of specific circumstances namely: where the agreement is vitiated by fraud, undue influence or unconscionable conduct; there has been a significant change in circumstances; the annual rate of child support payable under the agreement is not proper or adequate; or exceptional circumstances arise after the agreement was made. The section reads as follows:
“136(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.”
If the court set aside either a binding child support agreement or a limited child support agreement pursuant to the provisions of section 136(2) the court has a discretion to depart from what would otherwise be the applicable administrative assessment, provided special circumstances exist and it would be both just and equitable and otherwise proper to do so [section 136(4)].
Accordingly the departure provisions of Part 7 of Division 4 are potentially enlivened by an application to set aside a child support agreement regardless of whether either of the parties concerned has made such an application. In addition, the court is empowered to make any necessary consequential orders if an agreement is set aside [section 137]. Any such orders are to be informed by considerations of justice and equity.
On a final basis, it is the husband’s case that exceptional circumstances exist in the current case to warrant setting aside the agreement in question. The wife’s position is that no such exceptional circumstances exist, particularly because Mr Jeffrey fully understood what he was committing to in financial terms, albeit that the agreement in question does not accurately represent that agreement.
In this sense, she resists what she sees as the husband’s opportunism to seek to revisit the agreement because of the error which has occurred. It is her position that the husband willingly elected not to seek legal advice in respect of the agreement and she should not be penalised by his decision in this regard, as the husband has had ample opportunity to acquire information about the legal consequences of the child support agreement, including its variance from the statutory formula, if he had wished to do so.[14]
[14] See Scribe & Scribe (2006) FLC 93-302

Conclusions

The legislation applicable to this matter is both complex and novel. It seems to me to be the case that the husband has demonstrated that he has, at the very least, an arguable case to have the agreement in question set aside because exceptional circumstances exist. In addition, he may have ground to terminate it because of variance from the provisional assessment.
Firstly, the parties agree that their agreement, as interpreted by the Agency, does not reflect what they actually agreed would be the level of periodic payments of child support for [X] and [Y]. Accordingly, they each acknowledge the need to vary the form of the agreement. They are now in dispute about what is the appropriate level of child support for these two children.
The husband had no legal advice when he entered the agreement in question. That was his prerogative and given that the agreement has been taken not to be a binding child support agreement was not an essential prerequisite to its acceptance by the Agency.
However, in my view, one of the essential elements of a limited child support agreement is a nexus between the agreement in question and the provisional assessment of child support. A limited agreement can only be for an equal or greater amount than the provisional assessment. In addition, one of the raison d’etre of limited agreements is that they are more easily terminated, if there is a change of circumstances.
A strict interpretation of section 92(3) of the Assessment Act would indicate that the existence of an administrative assessment is an essential pre-condition for the acceptance of a limited child support agreement.
At least on a prima facie basis, the relevant administrative assessment in this matter was made concurrently with the acceptance of the agreement in question. Certainly it was not disseminated to the parties, particularly to the husband, prior to the effective assessment, based on the parties’ agreement, being issued. As such it does not appear to have been part of their decision making process.
As a result, neither Mr Jeffrey nor Ms Yali contemplated any deviation from the notional assessment. In Mr Jeffrey’s case it seems clear he did not know about it and the agreement itself is silent about the issue, other than its preamble indicates that Ms Yali has not applied for an assessment.
In addition, it seems to the legislature’s intention that the parties to a limited agreement will be able to bring such agreements to an end, if they fall out of kilter with what the applicable administrative assessment would be. One party alone can give notice of an intention to terminate on this basis on the giving of twenty-eight days notice [Assessment Act section 80G(2)(d)].
In this case, there is far more than a fifteen percent divergence between the notional assessment and what is to be paid pursuant to the agreement, either as interpreted by the parties themselves or the Agency. This factor, of itself, would appear to present a ground for termination of the agreement, regardless of whether or not exceptional circumstances have arisen.

It would appear to be illogical to assert that this divergence is not relevant because the provisional assessment is taken to have pre-dated the agreement itself and was not relevant to the “contemplation” of the parties when they entered the agreement. Particularly given it appears likely that neither party had any regard to what the actual assessment would be, when they entered into the agreement in question.
The wife’s position is that she should not be penalised because the husband did not attend to finding out this basic and preliminary matter. Rather, she asserts that the parties concentrated on the actual costs of the children and mutually agreed upon a figure of child support to be paid. Thus, in terms of the nature of the agreement reached between the parties, the existence or otherwise of a notional child support assessment was irrelevant to what they actually agreed.
Such an argument would be more compelling in the case of a binding child support agreement, which would require the parties to negotiate in a context where each had been independently informed of the pros and cons of entering into such an agreement, particularly I presume the consequences of opting out, either permanently or for an extended period of time, of the formulaically based method of child support calculation.
However, this is not the case here. The parties agreement is a limited child support agreement (although not explicitly expressed as such). As such, it is subject to a number of automatic factors which lead to its termination. In addition, the rationale of such agreements is that there is a nexus between the amount of child support payable pursuant to them and the legislatively based methodology.
Given all these various factors, I am satisfied that the husband is likely to be able to demonstrate that the child support agreement in question is significantly flawed. What implications this has for the property agreement between the parties, I am unable to discern at the present time.
The husband has wasted little time in bringing his application for a stay before the court. Given the current interpretation of the agreement in question, arrears of child support are continuing to mount significantly. In all these circumstances, it is my view that it is clearly appropriate to restrain the Agency from collecting the arrears from the husband, until the finalisation of his substantive application.
The husband is a well paid public servant. He currently has a capacity to pay a significant level of child support to the wife for [X] and [Y]. The flavour of the various negotiations between the parties was that the husband agreed that he would contribute a significant proportion of his income towards the children’s financial support.
The legislature, in adopting the recommendations of the Ministerial Taskforce on child support, has recognised that expenditure on children, by their parents, rises as parental income increases but not necessarily in strict arithmetical progression. As such, it is both artificial and arbitrary to fix the amount of child support payable by high income earners by reference to a percentage of their income alone.
In addition, one of the rationales of the currently legislatively mandated regime, for the calculation of child support, is that the applicable formula will be based on what it actually costs to support a child in dollar terms, given the financial context of his or her parents.
This formula leads to an outcome which attributes a sum of around $20,000.00 as being the husband’s portion of the sum required to financially support [X] and [Y]. The Agency’s figure for the total cost of two children under the age of twelve years, which is to be apportioned between two parents, whose combined child support income is over $141,063.00 is $26,802.00 per annum or $515.42 per week.
The sum currently being collected by the Agency, pursuant to its interpretation of the agreement in question, is $130,000.00 per annum, which I accept that Mr Jeffrey has no realistic capacity to pay. For her part, Ms Yali seeks the payment to her of $65,000.00 per annum in child support, which is around twenty-three percent of Mr Jeffrey’s gross income or thirty-seven percent of his income after tax.
In this overall context, I must balance the convenience of each of the parties, particularly in regards to financial hardship, until this matter can be ultimately determined, in the fixing of the child support, to be paid.
Given the husband’s high income and his acknowledgement that he would pay a significant component of his income in child support, given the particular needs of [X] and [Y], I have come to the conclusion that it would be appropriate for him to pay child support for the two children in question at the rate of $700.00 in total per week. This equates to a sum of $36,400.00 per annum, which is just over twenty percent of his net income.
The amount is significantly greater than the provisional assessment and to my mind takes into account the husband’s significant income and the fact that the wife has arranged her affairs in the expectation that she will receive a significant level of child support from the husband, particularly given the children’s idiosyncratic expenses, such as nanny and child care fees.
Given the inter-relationship between the child support agreement in question and the parties’ matrimonial property settlement, which the wife wishes to re-visit, I agree with the submission of Mr McGinn, counsel for the wife, that it is appropriate for the parties to attend a financial mediation conference to see if they can reach a mutually satisfactory accommodation with one another now that both are represented.
At an earlier stage, both parties wished to avoid the emotional stress, both for themselves and the children, of a potentially protracted and expensive legal case. The parties are to be commended for this attitude. As this judgment shows, there are many potential pitfalls in child support agreements, even for the intelligent and well resourced. I wish the parties well in their discussions, now both are legally advised.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.

I certify that the preceding one hundred and seventy (170) paragraphs are a true copy of the reasons for judgment of Brown FM

Associate: P Smith

Date: 8 May 2009