K & M (No.2)
[2007] FMCAfam 920
•2 November 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| K & M (No.2) | [2007] FMCAfam 920 |
| CHILD SUPPORT – Departure application – no full and frank financial disclosure – special circumstances – just and equitable – not just and equitable to allow departure application – not otherwise proper to allow departure application – whether future review and departure applications ought be restricted – injunctions over funds and property – whether injunctions ought be discharged – disposition of funds and property – lump sum child support – costs. |
| Child Support (Assessment) Act 1989 (Cth), s.117(2)(c) and (5) |
| Chang & Su (2002) FLC 93-117 PAK & GM [2007] FMCAfam 524 PAK & GDK [2004] FMCAfam 92 Tate & Tate (2000) FLC 93-047 |
| Applicant: | P A K |
| First Respondent: | G M |
| Second Respondent: | M K |
| File Number: | MLC 1038 of 2007 |
| Judgment of: | Lucev FM |
| Hearing dates: | 22 June; 30-31 August; 4 September; 1 October 2007 |
| Date of Last Submission: | 1 October 2007 |
| Delivered at: | Darwin (by telephone to Melbourne) |
| Delivered on: | 2 November 2007 |
REPRESENTATION
| Applicant: | Mr P. K in person |
| Counsel for the first Respondent: | Mr Hoult |
| Solicitors for the first Respondent: | Hardys Lawyers |
| Counsel for the second Respondent: | Ms Piggot |
| Solicitors for the second Respondent: | Bradleys Lawyers |
ORDERS
The Applicant Husband’s application filed 23 March 2007 for a departure order be dismissed.
The Applicant Husband be restrained from filing any further:
(a)review application with the Child Support Agency; or
(b)departure order application with any court having jurisdiction under the Child Support (Assessment) Act 1989 (Cth),
without first obtaining leave of this Court.
That any monies in Cheque Account No. 000 with the Westpac Banking Corporation in the name of G N Pty Ltd (or similar name) be paid to the Child Support Agency in reduction of arrears of child support, on or before 4.00 pm 16 November 2007.
The injunction restraining the sale, disposal, encumbrance or further encumbrance of the property situate at S, Victoria, be discharged.
That in relation to costs:
(a)any party seeking costs file and serve written submissions including orders sought by 4.00 pm on 16 November 2007;
(b)written submissions in response to the written submissions in paragraph (a) of this Order be filed and served by 4.00 pm on 23 November 2007; and
(c)the Court will determine costs, if any, on the basis of the written submissions without oral hearing.
Otherwise, any extant applications be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DARWIN |
MLC 1038 of 2007
| P A K |
Applicant
And
| G M |
First Respondent
| M K |
Second Respondent
REASONS FOR JUDGMENT
Introduction
P A K[1] married G M[2] on March 1982. The Husband and Former Wife separated on January 2002. There are three children of the marriage, the oldest is now aged 19 and there are twins now aged 13.
[1] “Husband”.
[2] “Former Wife”.
It is in respect of child support for the three children of the marriage to the Former Wife that the Husband has made application for a departure order from an existing child support assessment.
The Husband remarried in September 2005 to M K[3] There is one child of that marriage. That child is one year old.
[3] “Current Wife”.
The Husband and the Current Wife say that they have separated during the course of, or because of, these proceedings (and other proceedings related to the enforcement of child support). There is a dispute about that issue.
Issues
The following issues arise in this case:
a)whether the Husband’s departure application ought to be granted;
b)whether the Husband ought to be restrained from making future review and departure applications (an application ultimately not pressed by the Former Wife, but which the Court has considered, in any event, for reasons set out in more detail below);
c)whether a lump sum child support payment ought be ordered;
d)associated with whether a lump sum child support payment ought to be ordered, whether the Current Wife’s property at S, Victoria[4] ought to be the subject of orders for sale and appropriate distribution of the sale proceeds by way of a lump sum child support payment;
e)the appropriate disposition of a sum of money at bank in the name of G N Pty Ltd;[5] and
f)payment of the costs of this matter.
[4] “H S Property”.
[5] “G Funds”.
Departure application
The application was made on the basis that in the special circumstances of the case the administrative assessment of child support was unjust and inequitable.[6] The application was initiated on the basis that the Husband’s income was under $30,000 per annum at a time when his child support income had been fixed at $105,500 per annum with effect from 1 June 2005.
[6] Child Support (Assessment) Act 1989 (Cth), s.117(2)(c) (“Assessment Act”).
The most significant problem with the Husband’s application in this case was his lack of full and frank disclosure.[7] Since the Court’s judgment in PAK 2007(No 1), the situation with respect to disclosure has not improved, and there have been further instances of non-disclosure, partial disclosure, or disclosure only under the pressure of rigorous cross-examination. Three examples will suffice:
a)since May 2007 the Husband has been earning approximately $100,000 a year in employment with I in Adelaide. The fact of the employment was not disclosed at the hearing on 22 June 2007 which led to the judgment in PAK 2007 (No 1), and was disclosed, at best, reluctantly during the course of these proceedings;[8]
b)the failure to disclose that the property at S, Victoria[9] had been sold and that the Husband had received settlement proceeds exceeding $30,000; and
c)the failure to disclose that the Husband lost approximately $25,000 of the above-mentioned settlement proceeds gambling.
[7] PAK v GM [2007] FMCAfam 524 (“PAK 2007 (No 1)”).
[8] Transcript 30 August 2007 at 13-15.
[9] “S Property”.
Otherwise, the Court refers to what it said in PAK 2007 (No 1), from which position there has not been much change.
The law is clear: there is a duty in proceedings of this type on every party to provide full disclosure of their financial position. If full disclosure is not provided the Court is at liberty to make appropriate inferences and findings from the non-disclosure, and not to be unduly cautious in doing so when making findings or drawing inferences against the non-disclosing party.[10]
[10] Tate & Tate (2000) FLC 93-047; Chang v Su (2002) FLC 93-117.
The Husband disputes the child support assessment based on his earning income of $105,500 per year for the assessment period commencing 1 June 2005.
The Husband’s ultimately said that his income at the time the assessment was made was $20,000 per annum.
Because of the Husband’s non-disclosure there are significant questions in relation to sums of money from companies which the Husband either controlled or was associated with which are simply unable to be answered. For example:
a)to whom was the profit of $41,000 in P L for the year ended 30 June 2006 paid, and was it paid in whole to one person, or in parts to various people or entities;[11] and
b)the accounting for depreciation of approximately $20,000 in P L.[12]
[11] Transcript 30 August, 2007 at 50.
[12] Transcript 30 August 2007 at 51.
The evidence is clear that in December 2006 the Husband (via P L) received $50,000 from the sale of T S.[13] Payments were made from that sum on the mortgage of the S Property, and on the Husband’s credit card debt.
[13] Transcript 30 August 2007 at 21-22.
The evidence also establishes that the Husband sold the S Property, and was either in the process of doing so, or did so, very shortly after this Court, on 22 June 2007, refused to grant an injunction restraining the sale of the S Property. The Husband received settlement proceeds of $34,000 from the sale of the S Property. The Husband told the Court that he gambled away approximately $25,000 of that sum in one night in a casino in Adelaide. What happened to the remainder is unclear.
Even on the most basic analysis the Husband has had income, or at the very least funds he might personally dispose of, passing through his hands, including the $50,000 he was paid for his share in the business of T S and the $34,000 settlement proceeds from the S Property since 1 June 2005. Not one cent of those sums was paid in discharge of his child support obligations.
It is noteworthy that the above sums do not include any sum for the P L profit. They also do not include director’s fees of $43,000 paid in the financial year ending 30 June 2006 from T S.[14] The Court simply does not believe the Husband when he says he did not receive the director’s fees. Also not included are sums that the Husband says he received ($189.00 per week) from Centrelink. Further, they do not account for the fact that during this period of time the Husband also drew down on the RAMS mortgage for the S Property, and was spending somewhere between $1,000 to $2,000 per week on credit cards in his name.
[14] Transcript 30 August 2007 at 51-52.
The departure application is completely devoid of merit. Its disposition was made exceedingly more difficult than it ought to have been by the applicant’s failure to fully and frankly disclose matters that ought to have been disclosed previously. The Husband, if not dishonest, was certainly not candid to the degree or in the manner required.
In any event it is clear that the Husband has had access to substantial sums of money since 1 June 2005 that he has failed to disclose. The Court cannot, because of the failure to disclose, draw firm conclusions about precisely how much money he has accessed. On the available incomplete disclosure made by him it is a minimum of $127,000 in addition to his $20,000 per annum wage from P Logistics and Centrelink payments. When regard is also had to the unspecified value to him of a leased vehicle or vehicles, and the amount drawn down from RAMS, the Court considers that he has probably had access to monies exceeding $200,000 over about a two year period since 1 June 2005. Because of his failure to fully and frankly disclose the Court cannot accurately assess when various sums of money were received, and in all the circumstances considers it appropriate to draw the inference that since 1 June 2005 the Husband’s child support income has not fall below the $105,500 per annum assessed by the Child Support Agency. It follows that the assessment was not unjust or inequitable. Further, the Court does not, in all the circumstances, consider it to be otherwise proper to vary the existing assessment.[15]
[15] Assessment Act, s.117(5).
The departure application will be dismissed.
Future review and departure applications
The Former Wife’s application to prevent the Husband from filing future review and departure order applications was not particularly pressed. However, the Court has considered the matter, and in light of all the materials available to it, considers that it is appropriate that before any future review or departure order application is filed that the Husband seek leave of the Court to do so. The Court considers it appropriate to make such an order on the basis:
a)of the Husband’s non-disclosure, not only to this Court, but also to the Child Support Registrar (as revealed in the application filed by the Husband which referred to and appended materials in the Child Support Assessment process);[16] and
b)that even toward the end of these proceedings the Husband complained that the amount of $6,000 restrained in the G N account ought to be released to him because he was unable to pay rent, in circumstances where his own financial statement indicated a significant surplus of income over expenditure subsequent to his obtaining employment at I in Adelaide.
[16] The Delegate of the Child Support Registrar came to the conclusion that the Husband had not made full and frank disclosure of his financial position in the application for departure. That makes it even more surprising that he failed to do so before this Court.
The Court simply has no confidence that if there is a future change in the circumstances of the Husband that he will not endeavour to use that change in circumstances opportunistically,[17] and that administrative and judicial resources would not be wasted in the same manner that they have been wasted in this case. This is a case which, with proper disclosure, ought to have been disposed of by this Court in one day. In the end, it took up five sitting days. The failure of the Husband to make proper disclosure, and his subsequent “drip feed” disclosures under cross-examination, together with his failure to make proper disclosure (on his own materials) to the Child Support Registrar make it desirable that the Husband not be allowed to waste precious administrative and judicial resources in like manner in the future. The Court also notes that in prior proceedings in PAK 2004 this Court was critical of the Husband’s then evidence of his own financial affairs and the financial affairs of P L, and described his evidence as vacillating in “an opportunistic way”.[18] It is clear that notwithstanding prior criticism, on three separate occasions, of the manner in which the Husband has given evidence and failed to fully disclose, that he has conducted himself in the same manner in this case, right to the end. In those circumstances the Court believes it is appropriate to restrain him from making him future applications for review or departure orders without the leave of the Court.
[17] See PAK v GDK [2004] FMCAfam 92 at para. 32 per Bryant CFM (“PAK 2004”).
[18] PAK 2004 at para. 32 per Bryant CFM.
Greenmount funds application
There was no dispute that the G F are completely under the control of the Husband, notwithstanding that they are in the bank account of the corporate entity. The Court previously restrained the disposition of those funds by the Husband because it had a concern that the asset would be dissipated, that in turn being based upon, in particular, the Husband’s conduct.
The G F are presently the subject of an injunction restraining their removal from the bank account. The Court will order that those funds be paid to the Child Support Agency.
H S property and lump sum child support application
If a lump sum is to be paid to the Former Wife some asset or fund from which the sum can be drawn must be identified. The difficulty in this case is that the Husband’s non-disclosure or partial disclosure under cross-examination, and his evidence in any event, indicates that there is no asset or fund (the G F apart) from which a lump sum could be drawn. The Former Wife points to the H S Property as being one in which there is presently equity and from which a lump sum can be drawn. In order to make an order for a lump sum payment the Court would have to order the sale of the H S Property, and an appropriate distribution of the proceeds of the sale. To do so, the Court would have to be satisfied that funds otherwise payable for child support have been jointly dissipated by the Husband and the Current Wife for their joint benefit.
Ultimately, and despite the very convoluted nature of the financial evidence, most of which eventually came from the Current Wife,[19] there does not appear to be any dispute that the Current Wife received funds from the Husband drawn down on the RAMS mortgage on the Sd Property and deposited into her Commonwealth Bank Account. The Current Wife says that those monies were returned to the Husband, and that in fact that during the period prior to separation she paid to the Husband the sum of $82,307.60 and that she contributed to the Husband’s financial position by payment to him of a sum of around $25,000 in excess of the RAMS mortgage draw downs.
[19] And to her credit, at short notice she co-operated fully with the Court in this regard.
The question remains however whether or not the funds drawn down from the RAMS mortgage on the S Property were in fact used for the joint benefit of the Husband and the Current Wife to the extent that it was sufficiently significant to warrant the Court concluding that the joint benefit or the use of those funds contributed to improve the Current Wife’s financial position or to prevent the payment of child support payments by the Husband.
On the evidence it is clear that if there has been a joint benefit derived from the use of the RAMS mortgage draw downs by the Current Wife it has not had a direct impact upon her equity in the H S Property. She originally borrowed $126,000 to purchase that property some two and a half years before she met the Husband. She presently owes $127,000 on that property. The property has increased in value to the point where she appears to have equity of about $75,000 equity in the property. There is no evidence that any of the RAMS draw down funds were used to make any payment in relation to the H S Property mortgage.[20]
[20] The property is encumbered by way of mortgage to the Commonwealth Bank.
The question still remains however whether any benefit from the RAMS draw down funds contributed, or enabled, the Current Wife to benefit from the use of those funds, or to prevent the payment of child support payments by the Husband.
An examination of the Current Wife’s Commonwealth Bank Account does indicate that on most occasions when money was received from a RAMS draw down it was dispersed within a matter of a few days to the Husband. Further examination reveals that on the majority of occasions when funds were dispersed to the Husband they went to:
a)make a mortgage payment on the S Property;
b)meet the liabilities of P L;
c)pay sums of money off the Husband’s credit card; and
d)pay monies owing by the Husband to the ATO.
There were seemingly some benefits to the Current Wife arising from the RAMS draw down funds. They included:
a)on-going use of a vehicle, leased by P L, but more recently paid for by RAMS draw downs channelled through the Current Wife’s Commonwealth Bank Account (and perhaps on some occasions even paid for indirectly by the Current Wife herself from her own funds), although that benefit is not quantified;
b)the payment of the mortgage on the S Property, in which she was living until June 2007;
c)payment of hospital and medical expenses associated with the birth of the child of her marriage to the Husband; and
d)the payment of some, again not quantified or quantifiable in absolute terms, normal household expenses.
The Current Wife gave evidence that except in relation to the items of normal household expenditure none of the above items were matters on which she would ordinarily have expended money. Given that, and given the inordinate difficulty in quantifying the sums concerned, together with the difficulty in quantifying the difference between that sum and what the Current Wife might ordinarily have expended, it is difficult to quantifiably trace how much money might be said to have been used for the Current Wife’s benefit. The Court has come to the view that it is not possible to determine such as sum. Further, the Court has come to the view that, by and large, and with the exception of items of ordinary household expenditure, the benefit was not joint, for two reasons:
a)the Current Wife did not want the benefit of the other items; and
b)those items were largely for the Husband’s gratification, either in a business sense (such as the lease of the vehicles) or in a personal sense to gratify his own ego by impressing his wife, and perhaps his associates.
The Court is also not persuaded that the Husband would not have drawn down the RAMS mortgage in any event to fund his personal lifestyle, including gambling, or that any additional settlement proceeds from the S Property might not have been dissipated by the Husband in the same way as he dissipated the majority of the actual settlement sums, that is by losing them gambling.
In all the circumstances, the Court is not persuaded that:
a)there is a readily identifiable quantifiable sum that can be said to have been used for the joint benefit of the Husband and Current Wife;
b)in any event, that apart from an unquantifiable sum of ordinary household expenses, the funds expended were truly for the benefit of the Current Wife, and some of the funds expended were for the benefit of the child of the marriage; and
c)it is possible, and probably likely, in the Courts view that the Husband might have dissipated available funds in any event.
For those reasons, any benefit obtained by the Current Wife, either solely or jointly, is in the Court’s view, both unquantifiable and minor. In those circumstances, the Court does not consider that there ought to be an order for the sale and distribution of the proceeds of the H S Property. The fact that the H S Property has, it would seem, always been paid for and maintained by the Current Wife separately, reinforces the conclusion that no order for its sale ought be made.
The Court has considered the evidence concerning the Current Wife’s admission that the RAMS draw down funds were paid into her account, rather than a P L account, because to do so would result in the funds being taken by the Child Support Agency because they were the Husband’s funds. In this way, payment of child support by the Husband was seemingly avoided. It was not however, for the reasons set out above, avoided for the Current Wife’s benefit. By contrast to the Husband, the Current Wife’s candour was refreshing, and made her evidence believable. The Current Wife explained that the funds were paid to her account in circumstances where she believed (wrongly as it turned out) that the Husband was already paying significant amounts of child support, and that those amounts had doubled. That was what he had told her, in effect, and she had believed him. The Current Wife was largely ignorant of the Husband’s financial affairs until very recent months. A new bride, much younger than her husband (by sixteen years) she simply believed what he told her. Whilst there can be no doubt what she did was wrong, motivated as it was by an appreciation of the fact that the monies were being moved to avoid the reach of the Child Support Agency, there is nothing in the Current Wife’s evidence which warrants adverse findings or inferences being drawn in respect of other issues in this matter. As the Court has indicated above she has been refreshingly honest, and the Court believes her evidence.
The Former Wife put much emphasis on the fact that the separation between the Husband and Current Wife was a sham.
The basis for the Former Wife’s assertion that the separation was a sham was quickly demolished by cross-examination by Counsel for the Current Wife. In particular, the cross-examination resulted in the Former Wife conceding that it was possible that people who separate might do so on the basis that they maintain a civil relationship for the sake of the children, and that as a consequence of that, the two parties (in this case the Husband and the Current Wife) might continue to periodically visit each other’s homes for the purpose of spending time with the child of their marriage.[21] In those circumstances, it was conceded to be entirely possible that the allegedly separated parties might travel between Adelaide and Melbourne (which are not that far apart in an Australian context as to make that difficult in either time or space) to see, and for the benefit of, the child of the marriage.
[21] Transcript 1 October 2007 at 10-11.
The Current Wife’s evidence concerning the separation was, in the Court’s view, both believable and plausible. Against a background of increasing tension because of increasing difficulties with the Husband’s business enterprises and on-going child support disputes with the Former Wife, the Husband moved out of the S Property in April 2007. The Current Wife said that she felt that they emotionally separated in May 2007. There was a final physical separation, in the sense of moving from the matrimonial home, when the S Property was sold in June 2007.[22] The Current Wife spoke of her “broken marriage”,[23] and that the situation between the parties had “deteriorated”[24] since the emotional separation. In those circumstances, the Court concludes that the separation is a real one, not a sham, and that no adverse finding or inferences ought be drawn against the Current Wife because of the separation.
[22]Transcript, 1 October 2007 at 27-29.
[23] Transcript, 1 October 2007 at 44.
[24] Transcript, 1 October 2007 at 52.
In reaching the above conclusion the Court has also had regard to the Current Wife’s evidence that she is prepared to move to Adelaide from Melbourne to allow her child to be close to, and to have, a father.[25] That evidence is not evidence that the parties are not separated, but rather, evidence of the Current Wife’s evidently fierce desire to ensure that her child has a father, albeit one who has faults that she acknowledges, and that she is prepared to move to Adelaide, but not necessarily to live with or resume her relationship with the Husband, if that is in the best interests of the Child.[26]
[25] Transcript, 1 October 2007 at 27.
[26] Transcript, 1 October 2007 at 27-28 and 55.
Consistent with the Court’s view of the Father’s lack of candour, the Court has not had any regard to the evidence of the Father in relation to the separation, and also, the desire that he expressed to restore the relationship once these proceedings have ended. The Court is cognisant of the possibility, based on the Current Wife’s evidence, that she and the Husband may reunite at some time in the future, although on the evidence the prospects of that have diminished rather than increased as the months have gone by, but that possibility does not diminish the fact that they are presently separated, and the probability is that they will remain so.
As indicated above, the Court will not make an order for the sale and distribution of proceeds of the sale of the H S Property.
It follows from the foregoing that there is no identifiable asset or fund pool from which a lump sum child support order could be funded. In those circumstances, the Court will not make a lump sum child support order.
The existing injunction in relation to the H S Property will therefore be discharged.
Costs
Given the outcome of these proceedings where:
a)the Husband has been unsuccessful in his application for a departure order;
b)the Former Wife has been partly successful (in relation to the G Funds) and partly unsuccessful (in relation to the H S Property and lump sum child support); and
c)the Current Wife has been successful in having the injunction on the H S Property lifted and in defeating the application for its sale and distribution of the proceeds of sale,
it is appropriate that the Court give the parties time to make written submissions in relation to costs.
Orders will issue providing for written submissions on costs to be filed and served and for the Court to determine the question of costs on the basis of the written submissions without oral hearing.
Conclusions
For the reasons set out above the Court will order that:
a)the Husband’s departure order application be dismissed;
b)the G Funds be paid to the Child Support Agency;
c)there be no order as to the payment of lump sum child support;
d)there be no order that the H S Property be sold and the proceeds of sale be distributed;
e)the injunction on the H S Property be discharged; and
f)there be written submissions concerning costs, the question of costs to be determined by the Court without oral hearing.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 16 November 2007
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