KEENAN & QUIGLEY
[2007] FMCAfam 228
•1 May 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KEENAN & QUIGLEY | [2007] FMCAfam 228 |
| CHILD SUPPORT – Application for departure – application for lump sum payment of child support – father transferred property into a trust account – whether the father has provided full and frank disclosure – whether private school fees be credited against child support liability. |
| Child Support (Assessment) Act 1989, ss.117, 121- 125 |
| Bendeich 16 FLR 371 Bolton v Bolton (1992) FLC 92-309 DGM & JLM (1998) FLC 92-816 Gilmour (1995) FLC 9259 Gyzelman (1992) FLC 92-279 Jones v Dunkel (1959) 101 CLR 298 Prpic v Prpic [1995] FLC 92-573; 18 FLR 388 S & S (2000) FLC11 |
| Applicant: | MS KEENAN |
| Respondent: | MR QUIGLEY |
| File number: | PAM 2183 of 2006 |
| Judgment of: | Henderson FM |
| Hearing dates: | 12 September 2006 & 4 April 2007 |
| Date of last submission: | 4 April 2007 |
| Delivered at: | Parramatta |
| Delivered on: | 1 May 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Schroder |
| Solicitors for the Applicant: | Martin Bullock Lawyers and Attorneys |
| Counsel for the Respondent: | Mr Alexander |
| Solicitors for the Respondent: | Yates Beaggi Lawyers |
ORDERS
The wife’s application for lump sum child maintenance is dismissed.
The Administrative Assessment for child support dated 8 March 2005 be departed from.
The father, Mr Quigley, pay child support for the children of the relationship, [X] born in 1999 and [Y] born in 2002 as follows:
(a)For the period 8 March 2005 to 28 March 2006 by:
(i)Attending to payment of all fees and expenses relating to the child [X]’s enrolment at [S] School.
(ii)In payment of an additional amount at the annual rate of $14,400.00
(b)For the period 28 March 2006 to 30 June 2010:
(i)In payment of all school fees with respect of the attendance of either child at [S] School.
(ii)In payment of an additional sum at the annual rate of $24,000.00 per annum.
IT IS NOTED that publication of this judgment under the pseudonym Keenan & Quigley is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM 2183 of 2006
| MS KEENAN |
Applicant
And
| MR QUIGLEY |
Respondent
REASONS FOR JUDGMENT
The matter of Keenan and Quigley came on for hearing before me on
12 September 2006 in relation to the mother’s application seeking a departure from an assessment of child support and an order for payment of child support by way of lump sum. The matter was initially listed for hearing in April 2006, however the matter could not proceed as the father had filed no material.
The matter was part heard from September 2006 to 4 April 2007 when the hearing resumed.
The applicant mother was represented by Mr Schroder of Counsel and the father by Mr Alexander of Counsel
Parties Applications
The precise orders sought by the mother were that the father pay private school fees for the children [X] born in 1999 and [Y] born in 2002 and that from 28 March 2006 child support be increased to $24,000 per annum from $14,400.00 per annum and that payment of child support be paid by way of a lump sum in the amount of $275,000.00.
The father sought orders that the mother’s application be dismissed and that child support be paid in accordance with the formula which amount has been agreed by the parties at present to be $14,400.00 per annum.
The evidence
For the mother I have read the following:-
a)Her amended application filed 19 May 2006.
b)Her affidavit filed 6 September 2006, excluding paragraphs, 7, 9, 10, 12, 15, 16, 17, 18, 19, 20, 23, 35, 36 and 42 which related to children’s issues. The parties agreed on parenting issues in March 2006 when orders were made that the children live with their mother and spend time with their father on alternate weekends and during school holidays.
c)Her financial statement filed 6 September 2006.
The exhibits tendered by the mother was as follows:-
a)
Wife’s Exhibit 1 –letter from the Child Support Agency dated
16 March 2007 showing arrears of child support at $840.00.
b)
Wife’s Exhibit 2 – copies of the Husband’s National Australia Bank MasterCard, being in particular transactions of internet transfers of $1,260.00 on 23 October 2006, $2,500.00 on
3 November 2006, $850.00 on 25 August 2006, $3,200.00 on
13 September 2006 and $1,000 on 14 September 2006.
c)Wife’s Exhibit 3 - An SMS message on the mother’s mobile phone from the father’s mobile phone.
d)
Wife’s Exhibit 4 – outstanding Child Support of arrears as at
4 April 2007 in the amount of $840.00.
e)Wife’s Exhibit 5- Child support assessment dated 16 March 2007.
f)
Wife’s Exhibit 6 – the figures prepared by the wife’s counsel,
Mr Schroder in relation to calculation of lump sum child support.
For the father I have read the following:-
a)His amended response filed July 2006.
b)Affidavits filed 27 April 2006 and 11 September 2006
c)Financial statement sworn 27 April 2006, 11 September 2006 and 4 April 2007.
d)Exhibits attached to his affidavit of 11 September 2006.
The exhibits tendered by the father were as follows:-
a)Husband’s Exhibit 1- the wife’s initial application seeking review of the child support assessment.
b)Husband’s Exhibit 2 -The decision of Ms W, Child Support Officer, dated 6 March 2007, being the current assessment.
c)Husband’s Exhibit 3- The insolvency petition of [Ms Keenan], the mother.
d)Husband’s Exhibit 4 - his financial statement sworn the day of the hearing.
e)Husband’s Exhibit 5 –letter from the Child Support Agency dated 19 January 2007 showing that at that date the father was in credit of child support of $316.00.
The father and mother were examined and cross examined.
The law
The cases of Gilmour (1995) FLC 9259 and Gyzelman (1992) FLC 92-279 set out the manner in which a departure application is to be determined under s.117(2) of the Child Support (Assessment) Act (The Act). The process involves a three stage approach.
Mr Schroder handed to me two decisions by my fellow Federal Magistrates which applied the principles of Gilmour’s case. I found the decision of my brother Federal Magistrate Brewster in S & S (2000) FLC 11 to be of assistance in so far as the analysis of the three staged approach in such matters is concerned.
Section 117(2) of the Act is as follows:
Grounds for departure order
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i) the duty of the parent to maintain any other child or another person; or
(ii) special needs of any other child or another person that the parent has a duty to maintain; or
(iii) commitments of the parent necessary to enable the parent to support:
(A) himself or herself; or
(B) any other child or another person that the parent has a duty to maintain; or
(iv) high costs involved in enabling a parent to care for any other child or another person that the parent has a duty to maintain;
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i) because of high costs involved in enabling a parent to care for the child; or
(ia) because of special needs of the child; or
(ib) because of high child care costs in relation to the child; or
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child; or
(iii) because an amount (the additional amount ) of a liable parent's child support income amount was earned, derived or received by the liable parent for the benefit of a resident child or resident children of the liable parent; or
(iv) because an amount (the additional amount ) of an entitled carer's child support income amount was earned, derived or received by the entitled carer for the benefit of a resident child or resident children of the entitled carer.
Sections 121 to 124 of the CSA Act concern applications for lump sum child support. I propose to deal with the departure application first as many of the matters I must address are common to each section and there is a degree of overlap.
The first stage of the approach is that I must be satisfied that there is sufficient evidence, or that a case has been made out, that in the special circumstances of this case there is a ground of departure under s.117(2) of the Act. The only basis under the Act upon which the wife seeks to base her departure application on is s.117 (2)(c).
The gravamen of the mother’s case is clear and a simple. The mother contends that the father has minimised his true income in various ways and thus minimised his child support payments. To support this contention the mother asserts that since February 2005 the father has transferred, gifted or otherwise dealt with significant property and financial resources in his name to minimise his taxable income and financial resources the effect of which is to further minimise his child support obligations.
Additionally the mother contends that the father’s actions in dealing with property that was previously in his name is of such concern that the Court could not be confident he will pay child support in the future and thus lump sum child support ought to be ordered.
The second limb of an application under s.117(2) of the Act is to determine the financial capacity of the parents including their ability to earn income as well as the actual income being earnt. Capacity includes not just income being earnt but the income that could or has been earnt in the past together with totality of the property and financial resources of each parent. The court in DGM & JLM (1998) FLC 92-816 is authority for the principle that taking lesser paid work as a means to reduce child support will not be tolerated by the court and is not a reason of itself to depart from an administrative assessment.
The third stage of the process under 117(4) is that I must be satisfied that it is just and equitable to make the order I determine should be made, and finally under s.117 (5) that is it otherwise proper to make the orders.
Short and relevant chronology
In 1967 the mother is born.
In 1975 the father is born.
In April 1998, the parties cohabit.
In 1999 [X] is born, aged 7.
In 2002, [Y] born, aged 4
On 14 August 2003, the parties enter into a child support agreement.
During April 2004 the parties separate for the final time.
In January 2005, the father enrols [X] into [S] School without the mother’s prior knowledge or consent. The father pays the school fees and claims non agency payments.
In February 2005 the mother declares herself bankrupt.
On 17 February 2005, the mother applies for a review of the assessment of child support.
On 3 May 2005 a decision is given by Mr D on the mother’s review application. Mr D capped the father’s child support income at the highest possible level due entirely to the father’s failure to provide any documentation to him to show that that although he was seized of assets worth over 2 million dollars, the debts on the assets resulted in a minimal equity. Child support was capped at $19,585.00 per annum.
The father takes until 5 August 2005 to object to Mr D’s decision. He asserted the time lag was that he was only then in possession of the documents that he needed from the bank to support his net asset position. He was granted leave to file his objection out of time, a course the mother objected to, and a re-assessment was carried out. Thus this father knew in April 2005 what the decision was but took until August 2005 to make the objection.
On 28 September 2005, the amount of child support was reduced to $14,400.00 as the officer was satisfied the father did have significant liabilities in respect of his significant land holdings.
The Father’s financial position
The father’s attitude to Mr D and his failure to produce documents at that time has been repeated in this hearing. It became clear in cross examination of the father by Mr Schroeder that he had failed to produce necessary documentation to the court or the mother such as cheque butts, BAS statements, tax returns of his companies, trusts or himself. The documents that were produced and tendered were all obtained by subpoena by the mother.
When the mother commenced her proceedings in the child support agency in February 2005, the father was in his own right and capacity seized of considerable assets. They were:
a)A company described as [W] which he was the sole director and share holder.
b)[W] owns property at Property K, which has a [business omitted] located upon it. This property is not encumbered but is clearly a part of the father’s security with the National Australia Bank. In the husband’s affidavit of 27 April 2006, the property was given a value of $560,000.00 for stamp duty purposes.
c)The father was the sole director and secretary of a company described as [B], which company operated a [omitted] shop at the Property K property. The business of the [omitted shop] was leased to an identity separate to the husband.
d)A property at Property C, NSW upon which was erected three townhouses, each rented out. In the father’s affidavit of 27 April 2006, the property was valued at $750,000.00 for stamp duty purposes with a loan balance of $748,000.00. Additionally the father’s evidence was that there was a short fall of mortgage payments over rental income received of $1,900 to $2,000.00 per month.
e)A property at Property R, being the property that the father had lived in from time to time. The property is valued again for stamp duty purposes at $300,000.00 with a mortgage of $340,000.00. This property is currently rented.
f)A property at Property P NSW which in his affidavit of 27 April 2006 had a value of $310,000.00 again for stamp duty purposes and as at today’s date has had constructed upon it twelve townhouses which are rented out. The townhouses were constructed during 2006 with a loan from the National Australia Bank of $1.825 million negotiated with the Bank by the father in August/ September 2005. The father entered into a contract for construction of the townhouses in September 2005, with construction commencing in February 2006.
g)Between the date of the first review hearing and the father filing his objection out of time the father had secured a substantial loan for the construction of 12 townhouses on the Property P property and had entered into a contract for their construction. The had sufficient financial savvy in August 2005 to obtain a loan for $1.825 million from the National Australia Bank and sign a contract for the construction of townhouses, however he asks the Court to accept that he had not been in a fit mental state to get his bank documents together and lodge his objection to the assessment within time.
h)A property at Property B with a value of $210,000.00 for stamp duty purposes and a mortgage of $250,000.00. This property is also rented
Although the valuations the father attached to his affidavit were for the purposes of stamp duty they are the only values I have. I note however that each of the properties has a mortgage of a greater value then the asserted value and that a valuation for stamp duty purposes may be lower than the market price.
By the time the matter came before the Federal Magistrates Court in 2006 the father’s financial position had changed considerably.
The father set up the Quigley Familiy Trust, “the Trust”, on 1 January 2006. The disposition of his property is reflected in his financial statement sworn 26 April 2006. The father had gifted to the Trust, the property at Property P, and the property at Property B.
By the time the father filed his financial statement on 11 September 2006, he had sold [B] for $2.00.
By the time of filing and swearing his third financial statement the day of the part heard hearing on 4 April 2007, the father had gifted the property at Property K to the Trust. The father still owned Property C and Property R
Thus the father’s financial position as at 4 April 2007 had substantially changed from his financial position at the commencement of the mother’s review proceedings with the Agency in February 2005 when the father was the owner of all the named real estate. From the period 17 February 2005 to the date of the hearing before me in April 2007 the father transferred 3 significant and valuable items of real estate to the Quigley Familiy Trust and his one share in [B] was sold to the Trust.
The father then gave evidence concerning the sale of his share in [B] for $2.00 to the Trust. That company ran a business of a [omitted] shop on the site. The husband had been the owner of the site before its gifting to the Trust.
The father said [B] had a debt of $144,000.00 and the purchasers of [B] took over the lease and took over the debt for him. Yet he asserted in his affidavit material, and before me, that he was continuing to pay the loan of $144,000.00 because the purchasers of the business had failed. The purchasers either bought the business or they did not. The father gave no satisfactory explanation for this inconsistency.
Payment for leasing the [shop] and the business is now income of the Trust. Had the father not gifted the [business] to the Trust this would have been income in his hands. Had the father not sold his share in [B], income earnt from running the shop would have been income in his hands. Income from both sources would, after carrying out his taxation liabilities have been the father’s to disperse as he saw fit. All income is now in the Trust’s control with the father being the sole discretionary Trustee.
The father’s evidence was that [B] had a gross turnover of about $500,000.00 to $600,000.00 from the operation of the [shop omitted]. [B] was sold on 31 August 2006 to the Trust for $2.00 a time after which the mother had commenced proceedings in this Court for lump sum child support. The father gave evidence that the [shop] on the site has now been leased to new tenants and he hopes to make $10,000.00 profit over the next twelve months on that lease for [B], which is now part of the Quigley Familiy Trust.
The father has a shortfall of $1,900.00to $2,000 per month to the National Australia Bank in respect of the various mortgages over his properties, yet there is no evidence that he has been unable to meet that debt on any occasion.
The father had two cars in 2006 which were burnt out by the time of the April 2007 hearing. The cars had cost him $1000.00 per month in lease payments alone not including insurance, registration and running costs .This outgoing together with the mortgage in respect of the various properties he then owned or the Trust now owns resulted in a shortfall of no less than $3,000 per month. There is no evidence of any default in any payments by the father to the bank or finance company.
The father’s evidence was that the draw downs of equity in the NAB loan and his Workers Compensation payments covered this significant shortfall of $3,000 per month. This shortfall was in addition to his necessary living expenses. I am not satisfied the father has disclosed sufficient income to cover all the disclosed outgoings and living expenses incurred by him.
On 22 September 2006, $50,500.00 was paid off the father’s credit card. The father gave evidence that this came about by drawing down on the NAB re-finance. The father said he could not remember making that payment. I do not accept that evidence. On 26 September 2006, another payment of $10,000.00 was paid into the credit card. That payment was made ten days after giving evidence in court before me in September 2006 when the father had required a break from giving evidence as he felt a seizure coming on, was struggling with and having difficulty remembering dates, times and places and not able to comprehend his own financial affairs.
The question is whether the father’s moving of assets, failure to cooperate with the mother or the court in failing to bring documents to the court, asserting a lack of knowledge or understanding of his own personal affairs, yet demonstrating a capacity to engage in complex financial arrangements such as establishment of a Trust, borrowing of money and signing contracts for construction is sufficient to show that the father is:
a)not disclosing his real income; and/or
b)will not pay child support in the future.
As at April 2007 the father was in paid employment earning $60,000.00 per annum. Previously he had been unemployed and on worker’s compensation at various times.
The Quigley Family Trust
A copy of the Trust Deed of the Trust created by the father on
1 January 2006 is annexed to his affidavit filed in April 2006. He is the sole Trustee.
The father asserted a lack of understanding of the Trust Deed. The father admitted he set up the trust to acquire assets and minimise tax, to acquire assets for the children and to benefit them. I do not accept the level of understanding he professed to have regarding this deed.
The father did not reveal in his April 2006 affidavit that he had paid $18,890.00 by way of stamp duty to set up the trust nor did he disclose other costs, such as legal costs, necessary to set up the Trust or other associated costs including the transfer of properties to the trust.
The father agreed with Mr Schroder in cross examination that the stamp duty of nearly $19,000.00 was paid by way of drawing down of a line of credit in relation to the mortgage of $1.825 million for the development of the Property P property and that he was in arrears of child support at that time.
The father expressed in his affidavit of April 2006 that he was in poor health and had to live with his parents. He further asserted that the Trust, which is a discretionary trust, was established owing to his deteriorating state of mental and physical health and with a view to providing for the long term financial benefit and interests of his children, [X] and [Y].
There was not a shred, jot or scintilla of objective medical evidence produced by the father in relation to his alleged deteriorating mental health in January or April 2006 or any time prior to or subsequent to those dates.
Indeed as I see the evidence, the father’s alleged deteriorating mental health is at odds with his actions from February 2005 for the following reasons.
The first was that on several occasions in cross examination
Mr Schroder would make an error and refer to the property at
Property P as the father’s property. The father quickly corrected
Mr Schroder in September 2006 and April 2007 that the property was now owned by the Trust. I remain unconvinced regarding the father’s health issues.
Secondly, there has been absolutely no benefit flowing to the Quigley children from the creation of the Trust. Rather, significant debt was incurred in order to create the Trust. The children will not obtain any benefit from the Trust unless there is a distribution of income. It is clear that the father has invested in property for the long term capital gain. The Trust Deed gives him power and control over the assets, he can dispose of property, he can lease, licence, or carry on a business, borrow money and that is precisely what the father has done. The changing of ownership of the property into the Trust has not affected the father in his carrying on of a business of property development and management.
Thirdly, there is a significant tax benefit to the father in creating the Trust for which there can be no criticism, however for him to suggest that there is a benefit today for his children from the Trust can not be supported.
Fourthly, the father brought along no books of account, profit and loss statements of any company, the Trust or any business, credit card statements, cheque butts, etc. This is particularly relevant to [B] in which company he had a director’s loan of $60,000.00 and a turnover of $500,000 to $600,000 per annum. The father was pressed by
Mr Schroder that [B] and the loan account had given him a tax benefit in that he had the use of $60,000.00 upon which no tax was paid by him as it was classed as a director’s loan. The father would make no such concession.
Fifthly, the father’s vagueness on his financial affairs with words such as ‘I have difficulties with this”, “I have a post traumatic stress disorder”, “I cannot remember.” was unconvincing. During cross examination in September 2006 the husband said he was going to have a seizure and needed to go out of the witness box. That opportunity was afforded to him and the hearing was adjourned for an hour and a half. At 2.30pm the father said he was well enough to proceed with the hearing and the hearing continued.
Although the father sought to be vague on the issue of the director’s loan it was clear he knew precisely the benefit he obtained from such a loan. He was able to tell Mr Schroder that the $60,000.00 loan account was made up of two credit cards, one for $50,000.00 and one for $10,000.00. There were no statements brought to court by the father in relation to the loan accounts, they were obtained by the wife under subpoena. Those credit card statements, Wife’s Exhibit 2, show various internet transfers into the father’s credit card in addition to the $60,000.00 payment and the father was unable to assist the Court as to the source of various internet transfers.
The father changed the Real Estate Agent who managed his property at Property C because he said they were not carrying out management of the property correctly in terms of checking the property, ensuring the property was in a neat and tidy condition and following up the payment of rent. This was at a time the father said his health was so bad he had to set up a Trust and make all decisions with his father and Mr H. His actions in changing his management agents at that time is completely inconsistent with his assertions of incompetence or difficulty coping.
Findings on Father’s Evidence
The father endeavoured to abdicate his obligation to bring to this court important and necessary documents regarding his financial affairs with those often heard words “no I do not have them, I gave them to my accountant and, I pay people to do this work for me”. That evidence did the father no good.
The father gave evidence at page 36 of the transcript that he had a debt of $80,000.00 in legal costs. When pressed by Mr Schroder it became clear that those costs were in relation to criminal proceedings as well as these proceedings and costs of the re-organization of his company structures, properties and setting up the discretionary trust. Much of those costs were company costs and clearly not his personal liabilities.
When pressed and unable to answer a question the father resorted on many occasions with “I don’t work, I have people, I have been trying to regain my health for the last 3 to 6 months intensely and for a total four years, I can’t recall, I have a stress disorder”. The father said he relied on his friend Mr H who dealt with the solicitor on his financial and other affairs. Mr H then told the father what to do and sign. When the answer to a question was not to the father’s liking he sought to distance himself from the answer and referred to his father or Mr H. Neither Mr H nor his father filed affidavits in these proceedings.
The father had some significant double standards. He asserted the mother was disguising her real income from hairdressing at home. His evidence was quite distressing in the transcript at page 41. He said he expected the mother who was caring for his two young children, aged
6 and 3 to go out and obtain full time employment. At the same time his evidence to the Court was that his ill health prevented him from working yet he failed to file any medical evidence to support his claim.
The father said he believed the mother has been fraudulent about the income from her hairdressing and that she was earning far greater amounts of money than disclosed in her financial statement. The double standard was breathtaking at this point. When the father was pressed on his share holding, ownership of properties, reasons for the transfer of properties into a Trust after the commencement of these proceedings, he said at page 42 of the transcript “I struggle with both short term and long term memory and with supporting documents I could give you those answers but straight off my head, I can not.”
The father gave evidence at page 59 of the transcript if he could do things “in a calm, calculated, like, sit down and work things through, yeah, I then get my head around things and I do understand things”. It was then put to him that when he drafted his affidavit and financial statements this would have been carried out in a calm, calculated manner. The father admitted it took a lot of time to draft the affidavit and he was calm and collected. However the father’s affidavit, his oral evidence and reality differed in many respects.
The father gave evidence that the land upon which the [business omitted] operated had in November 2005 become part of the Quigley Familiy Trust. It is clear from the documents annexed to the husband’s affidavit that the Trust was not created until 1 January 2006. The father would not concede that the Quigley Familiy Trust could not have possibly held property in November 2005 in its own name as it was not created. He would not answer the question and alleged he was confused and did not understand the question. I reject that evidence.
The father admitted that the children have received no dividends from the Quigley Familiy Trust, there has been no distribution to the children from the Trust and was asked “well how does the setting up of this trust benefit the children?”
At page 62 of the transcript he replied “because of tax reasons and my health, it was decided both by my father and Mr H that we set up a trust for the children, like the Quigley Familiy Trust”. The father then said he paid about $2,000.00 to set it up, yet at the commencement of his cross examination he said $19,000.00 at minimum was paid in stamp duty.
On 5 July 2006, the father purchased, in his capacity as trustee of the Quigley Familiy Trust, two shares in [C] Pty Ltd which was a business operated in Queensland. The other share holder is a Mr D, a friend of the father’s and a business acquaintance.
When Mr Schroder put to the father that he had continued to build townhouses, purchase shares in other business in early and mid 2006 and maintain his property development he did not agree. However that is precisely what the father has done and for him to continue to assert that today and in September 2006, that he was not well, unable to take care of or manage his own affairs and that he needed to quarantine his properties from his own ill health in a trust is not borne out by the evidence.
There is no medical evidence tendered to support the father’s assertion he had been unwell for four years, indeed the evidence of his own activities is to the contrary. I am entitled to draw an adverse inference under the principles set out in Jones v Dunkel (1959) 101 CLR 298 in that his failure to call medical evidence to support his alleged condition means that it would not have been in his interest and I will draw that adverse inference.
The father’s evidence was that he received no benefit from the trust, any assets in the trust or from any business operated by the trust. Yet at page 69 of his September 2006 affidavit he sates that the purchase by him in his capacity as trustee of a one share interest in the business of [C] Pty Ltd, was a business opportunity for him and that he thought when he regained his health he may be able to work in that business and so generate an income.
At paragraph 8 of the September 2006 affidavit, the father said the purchase price for the share in [C] was provided by way of a loan advanced by the National Australia Bank. In cross examination by
Mr Schroder, it became clear that the purchase cost to the father of the [C] share was $1.00.
When he was questioned on the inconsistency of that evidence with that in his affidavit, he said his mate, Mr D, who owned the other share, had obtained a $60,000.00 loan from the NAB against his house to buy the business. However the husband had said he as Trustee did not own any stock, plant or equipment, just owned one of the shares valued at $1.00. The affidavit is inconsistent with and not reconcilable with the father’s oral evidence.
The father was then pressed on whether the property at Property R is the operating premises of the [C] business. The father would not agree. He did agree that the assets of [C], which is the $60,000 worth of assets that Mr D purchased, were at Property R. These assets are machinery and other equipment to work on vehicle camshafts.
It was put to the father that Mr D is working at the premises at
Property R. The father did not agree. He did agree that Mr D was at Property R sorting out the machinery because the machines are very old. The father then gave some strange evidence. He said that he did not accept that the pieces of equipment bought by [C] were valuable. The father said that if you buy new machines they cost around $130,000.00, however they had machines worth around $10,000.00 which if they were fixed up would be worth $130,000.00. The father’s evidence on this issue was just untruthful and I do not accept what he says.
This evidence together with the father’s prior evidence makes it abundantly clear that the father operates the Trust for his own benefit. He uses the Trust to generate income in a tax effective way to purchase, sell and otherwise deal with assets he owns or did own and as a vehicle to continue in his significant property development and property holding, together with activities in the motor industry. The father is a business man.
I accept the mother’s evidence that in August 2006, the father sent her a message. “Now we can stop playing silly buggers and get into it fair dinkum. Better get Mario to start refinancing. My turn to run you in circles”. This was a month prior to these proceedings commencing and at the time the father began transferring properties into the Trust. The father denied he sent the message and some claim was made by him the mother had edited the message. On the second day of the hearing I accepted the mother’s evidence that this was a message received by her, she had saved it in her phone and had she edited the message the father’s mobile phone number would have been deleted from the message, and that as the message she tendered still contained his mobile phone number the message was not edited.
It was fairly clear that the father was spending half his time in Queensland during the later part of 2006. Under cross examination the Court discovered the father who is now in Sydney is living with his girlfriend. The father clearly said in answer to a question concerning his living arrangements “Ms E now lives with me”. He was then asked why he did not include Ms E in his financial statement. His answer was evasive he said “I said she will be living with me”. That was just a lie. The father changed his evidence to suit the circumstances.
The father’s girlfriend has a job and is earning $50,000.00 per annum plus super and she works in the city. It was clear the father had been living with Ms E in Queensland and he failed to be truthful on this issue believing the real situation would not assist his case. It was put to the father by Mr Schroder that during the last half of 2006, the father had been attending Queensland, conducting a business and earning income. There is some force in that submission as the father had credits payments on credit cards of substantial sums of money, the source of which he was unable to explain.. This is particularly relevant as he said at this time he was living off the NAB loan of $1.825 million and his workers’ compensation payments.
By the time the matter came on for hearing, the father had obtained full time employment as a manager of a [omitted], earning $1,547.00 per week. It seemed to be a fairly permanent job and with his extensive experience in the car industry and as a business person, he appeared to be quite well suited and equipped for this job. The father said on many occasions he now had his health back although still opined he was vague and had difficulties remembering what he had done in the past.
The father agreed that the only asset that he could sell today as Trustee was land upon which the [business] operates as it is unencumbered.
The financial statement he filed in April 2007 made no mention of the girlfriend he was living with or the disposition of the monies received from the burnt out motor vehicles. The father gave evidence that he was living in Queensland for the later half of 2006 yet it was clear from the documents tendered in his credit card he was also living in New South Wales.
The father produced virtually no documents to this court to support his assertions and any documents that were produced were by the mother’s subpoena. BAS statements were not produced, no income tax returns, and no pay slips in relation to his new job.
There is no affidavit from Mr H or the father’s father who he said were running his affairs in 2005 and 2006 when he was unwell.
The chronology of this matter is very important because as soon as the mother challenged the assessment made in February 2005 that the father was to pay $94 a month support for the children the father sets about a course of divesting himself of assets. The father failed to bring documents to support his claim for the hearing before Mr D in April 2005, although the hearing had been rescheduled on two occasions for the father’s benefit. The father then lodged his appeal out of time and the decision was changed again.
At the time the mother lodged her first query to the decision of the Child Support Agency in February 2005 the father owned all 5 of the properties mentioned and [B]. As at today he owns two only and each is fully encumbered.
I find on the evidence today that the father is a property developer and investor and will continue in that business and maintain his full time employment.
I accept the submission of Mr Schroder that the reason the father did not lodge his documents to Mr D on 20 April 2005 was because he had not at that time entered into the significant loans with the National Australia Bank of $1.825 million to develop his property at Property C. However by August 2005 he had done so and thus he lodged his objection.
The father would have known that had he not had that significant loan he would have been asset rich and there may have been no change to the assessment. The father significantly encumbered his properties after the mother commenced the proceedings with the Agency in February 2005 and has now transferred 3 properties to the Trust.
Mr Schroder submitted that the mother’s position is that but for the credits of GST in relation to the father’s development of the Property C property her children would have received no child support from their father for the entirety of the year 2006.
It was also submitted to me that the father’s assertions in relation to the primary reason for setting up the Trust namely to benefit the children, has simply not come to pass. I accept that submission.
The final submission of the mother was that the father has set about a course of conduct to put himself into an asset rich and income poor position and there is much force in that submission. The issue now is has the mother satisfied me on the evidence that the father is hiding or failing to disclose his real income such that the application of the administrative assessment would result in an unjust and inequitable determination of the level of child support provided by the liable parent?
The application for a lump sum payment.
Turning to the lump sum aspect of the application. I do not accept the submission that the father is in arrears of child support in any meaningful way.
The real issue is whether the evidence satisfies me that these children are at some risk of their father not paying child support in the future because I find he has paid child support in the past.
Section 121 of the Act is the relevant section states:
Additional particular objects of this Division include ensuring:
(a) that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both their parents; and
(b) that parents share equitably in the support of their children
The matters I must have regard to when making such an order is set out in s.124(1) of the Act:
Where:
(a) a custodian entitled to child support or a liable parent makes an application to a court under section 123; and
(b) the court is satisfied that it would be:
(i) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(ii) otherwise proper;
to make an order that the liable parent provide child support for the child otherwise than in the form of periodic
Section 124 (2) sets out the matters I must have regard to:
In determining the application, the court must have regard to:
(a) the administrative assessment in force in relation to the child, the carer entitled to child support and the liable parent; and
(a) any determination in force under Part 6A (departure determinations) in relation to the child, the carer entitled to child support and the liable parent; and
(b) any order in force under Division 4 (departure orders) in relation to the child, the carer entitled to child support and the liable parent; and
(c) whether the carer entitled to child support is in receipt of an income tested pension, allowance or benefit or, if the carer entitled to child support is not in receipt of such a pension, allowance or benefit, whether the circumstances of the carer are such that, taking into account the effect of the order proposed to be made by the court, the carer would be unable to support himself or herself without an income tested pension, allowance or benefit; and
(d) the effect that the making by the carer entitled to child support of an application under section 128 (Pensioners entitled to apply to have assessed child support not reduced by more than 25%) would have on the order proposed to be made by the court (and any statement included in the order under section 125).
Section 124 continues:
(3) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make an order under subsection (1), the court must have regard to the matters mentioned in subsections 117(4), (6), (7), (7A) and (8).
(3A) In having regard to the earning capacity of a parent of the child under paragraph 117(4)(da), the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied as mentioned in subsection 117(7B).
(4) In determining whether it would be otherwise proper to make an order under subsection (1), the court must have regard to the matters mentioned in subsection 117(5).
(5) Subsections (2), (3), (3A) and (4) do not limit the matters to which the court may have regard.
I also have power under s.125(2) to order that the Child Support is not to be credited against the liable parent's liability under any relevant assessment, in this case the school fees paid for the children by the father. This can occur only if I am satisfied that in the special circumstances of the case, it would be:
(a) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(b) otherwise proper;
that the child support should not be credited.
In the event I make a finding under s.124 that payment of support otherwise than by way of periodic amount should occur I am required under s.125 to determine whether that payment should be or not be credited against a liable parent’s liability under any administrative assessment. I was not addressed on this section of the Act by either Counsel.
Mr Alexander submitted to me that there is a significant hurdle for any parent to overcome to satisfy this court that a lump sum payment ought to be made and this is particularly so where children are young and parenting orders may change in the future. It is true that the current child support assessment is underpinned by the mother continuing to be the primary parent.
On the evidence I have found that the father has maintained his child support payments for the children and the arrears of $840.00 are long standing and relate to non agency payments being school fees.
It was also submitted to me that the Trust Deed which was in evidence before me would not permit the father to sell the property because it would be a benefit to him as Trustee. I think I could overcome that issue if I was minded to make a lump sum order.
Mr Alexander pressed on me that these were the salient matters:
a)the children have no special needs and that is agreed,
b)child support is being paid in accordance with the assessment
c)on the mother’s own evidence she spends $280 a week on her children and the father by his child support payments meets 100% of the cost of his children.
d)thus there are no special circumstances because the father exceeds payment of the formula having regard to his income,
e)as the father’s payment exceeds the needs of the children it does not require the mother to put any monies towards the needs of the children.
f)The father now has employment and has a source of income by which he can maintain regular child support payments; and
g)there is simply no evidence to support that even if I undid the Trust arrangement that there would be sufficient equity to satisfy lump sum payment.
An old but highly relevant authority in this area of law is
Prpic v Prpic[1995] FLC 92-573; 18 FLR 388 which is a decision of the Full Court of the Family Court of Australia on 21 December 1994. In that matter the husband received a substantial payment by way of workers claim. The husband had, as it was then, custody of the four children of the marriage, His Honour made a decision that the husband was to receive 82.5% of the matrimonial property and the wife 17.5%. His Honour then departed from the Child Support Assessment from $81.00 per month to $150.00 per month and then capitalised that amount. The wife appealed.
In relation to the issues concerning lump sum child support and departure the Full Court found that His Honour’s discretion had miscarried and that there were no special circumstances existing such that a departure order would be made.
In relation to the lump sum determination, their Honours said as follows. They reported Justice Mushin’s ratio in the case of Bendeich v Bendeich 16 FLR 371. His Honour said there:
"The rationale underlying the general approach of the court was that the longer a lump sum order operates the greater the chance of change in circumstances necessitating a variation of that order, thereby making the order unjust. Those changed circumstances might be in relation to the liable parent, custodial parent or the children. Incomes may increase or decrease and children may change their living arrangements from one parent to another.”
An important difference their Honours found when discussing matters concerning lump sum payment is the decision made by a trial judge as to whether a liable parent would probably, or would probably not take steps to avoid obligations in the future to pay periodic payments and thus grant a lump sum order.
In the decision of Bolton v Bolton (1992) FLC 92-309 His Honour Justice Cohen found that the husband would probably take steps to avoid his obligations if a periodic order were made so he granted a lump sum. Contra that to the decision of Bendeich where Mushin J was not satisfied that the husband would default in his future obligations and therefore ordered periodic payment.
A second and important factor is that in the matter of Bolton Justice Cohen found that the parties’ financial position was unpredictable and impossible to be determined at the date of the trial. In Bendeich, his Honour Justice Mushin found that the parties’ financial position was highly predictable and therefore he declined the invitation to capitalise future child support payments.
Their Honours in Prpic went on to say:
Capitalisation orders may well be appropriate where there are difficulties in enforcement or where it is proper to sever the financial link between the parties. However, as a general rule, given that payments of child support depend upon circumstances prevailing from time to time which circumstances cannot be predicted with any significant degree of certainty, it seems to us that the provision of child support by way of lump sum should not be considered to be a readily available alternative but one that is only exercised when there are circumstances that make it appropriate so to do.
They supported His Honour Justice Mushin’s rationale in Bendeich. They overturned His Honour Justice Graham’s order for lump sum child maintenance.
Thus the question for me is: are there circumstances in existence which make it appropriate in this proceeding to exercise my discretion to order lump sum child support?
On the facts before me I do not think those circumstances exist for the following:
Firstly, the father has not been in substantial arrears of child support for a significant period of time. The most child support arrears he has ever had are $840.00 and when one takes into account the non-agency credit payments for children’s school fees of $1,400.00.
Secondly, the father has continued to pay child support since separation commensurate with his income as disclosed at the time. He continues to make that child support payments.
Thirdly, the children are very young, being only 7 and 4 years of age.
Fourthly, the fact that child support in 2006 came out of monies from a GST tax credit does not mean that the father himself has not caused or made payments of child support. His child support liability to his children has been paid.
Fifthly, the husband now has secure employment earning an income of $60,000.00 per annum. The father has accepted an administrative assessment of $14,400.00 per annum, an amount greater than he would have to pay on his disclosed income.
There has not been a failure of the father to meet his obligations to pay child support in the past. It is for the mother to satisfy me that such circumstances exist which would cause me to vary from the rationale of Bendeich’s case that child support be paid on a periodic basis based upon the parties’ financial circumstances and children’s needs from time to time. Therefore the mother must fail on her application for a lump sum
The second ground is whether I should order a departure from the administrative assessment of $14,400.00.
This matter has come about, as I see it, by the father’s failure to fully disclose his financial position to the mother by the movement of assets between himself into a Family Trust and his dereliction to give full and frank disclosure to this court. This has caused the mother to be suspicious of and not accepting anything the father says in relation to his financial position.
I am not satisfied after having heard the husband’s evidence that he has been frank in his disclosure of his real income. I had great difficulty in accepting much of his evidence regarding, his ill health, incapacity to manage his own affairs, reasons for conduct, and sources of money to pay debts. I find the father’s income to be greater than that disclosed by him
In these circumstances I find there are special circumstances, namely the father’s failure to give full and frank disclose of his real financial position which may then result in an injustice to the children as they may then not have an equitable share in their father’s financial resources and thus the mother’s departure application will succeed.
Private school fees
The last remaining question is whether I should make an order that the payment the father makes for private school fees be credited against his child support, that is, a non-periodic payment.
I am of the view that this assessment ought to be departed from. In the event that the father wishes his children attend a private school that can be a matter for him to pay out of his income as he deems appropriate. For the payment of private school fees to in any way, shape or form diminish the monies available for the mother to care for these children and provide for their day to day needs is, as I see it, a special circumstance under s.117(4) of the Act, namely that these children are not having their proper needs met by way of the assessment as it currently stands because a significant proportion of the assessment is credited against their father paying for private school fees, which school fees do not put food on the table, clothe them and do not provide for their accommodation.
Therefore, I will make an order that payments made by the father towards the children’s private school fees are not to be credited against his liability for child support as assessed by the Child Support Agency.
I certify that the preceding one hundred and thirty-three (133) paragraphs are a true copy of the reasons for judgment of Henderson FM
Associate: D. Ferreira
Date: 1 May 2007