Lincoln and Lincoln

[2015] FCCA 18

FEDERAL CIRCUIT COURT OF AUSTRALIA

LINCOLN & LINCOLN [2015] FCCA 18

Catchwords:
CHILD SUPPORT – Father seeking to set aside binding child support agreement – father asserting financial calamity since agreement executed – mother asserting father wilfully evading his obligations – whether arrears of child support should be discharged – father’s prospects of future income disputed – agreement set aside – arrears not discharged.

Legislation:  
Child Support (Assessment) Act 1989, ss.92, 98U, 136, 137

Applicant: MR LINCOLN

Respondent: MS LINCOLN

File Number: MLC 9041 of 2009

Judgment of: Judge Burchardt

Hearing date: 29 October 2014

Date of Last Submission: 29 October 2014

Delivered at: Melbourne

Delivered on: 19 January 2015

REPRESENTATION

Counsel for the Applicant: Mr Taylor

Solicitors for the Applicant: BTG Legal Pty Ltd

The Respondent: In person

ORDERS

1. The Binding Child Support Agreement between the parties signed

   
   

   15 February 2012 be set aside. 

2. The father pay Child Support as administratively assessed in accordance with the Child Support (Assessment Act) 1989 (“the Act”).

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT MELBOURNE

MLC 9041 of 2009

MR LINCOLN

Applicant

And

MS LINCOLN

Respondent

REASONS FOR JUDGMENT

Introductory

1. The applicant father filed an Initiating Application (Family Law) on

   
   

   26 May 2014, in which he sought to spend time with his son, X (“X”), born (omitted) 2005.  Additionally, he sought to set aside a Binding Child Support Agreement (“the agreement”) signed 15 February 2012 by which, relevantly, he was to pay the sum of $2,100 per month as child support, such amount to be index - linked each 12 months.  There were other periodic payments also to be made. 

2. The dispute about the father’s time with X has been resolved by consent on 30 July 2014, following a section 11F conference.  The dispute that remains is that about the agreement. 

3. The father seeks that the agreement be wholly set aside and that henceforth he be assessed to pay child support by the agency on an administrative basis.  He further seeks that arrears in excess of $20,000 be set aside. 

4. The mother opposes both those aspects of the application strenuously and seeks that the agreement be maintained and that the arrears remain extant. 

5. One of the striking features of this case has been the complete absence of reference in the parties’ materials and submissions to the relevant legislation, but I take it that this is properly characterised as an application pursuant to s.136 of the Child Support (Assessment) Act 1989 (“the Act”). 

6. For the reasons that follow, I am going to set aside the agreement, but I will not set aside the arrears. 

The Facts - Matters that are Non-Controversial

1. The applicant was born on (omitted) 1952 and the respondent was born on (omitted) 1963.  They married on (omitted) 1992 and finally separated on 7 June 2008. 

2. The parties subsequently divorced and I was informed without challenge during the trial that the husband had subsequently remarried and separated again and has a young child by that relationship. 

3. During the marriage the applicant was a very successful businessman with a well known (omitted business) which supported what on any view was a very extravagant lifestyle on the part of the parties.

4. The former matrimonial home was sold for in excess of $5 million, but achieved only a very small degree of equity following payment of the mortgage and any other liabilities.

5. The mother has re-partnered with a Mr K, with whom she and X live.  The commencement date of the relationship may be the subject of some dispute but according to the mother at the time of swearing her affidavit on 23 July 2014 they had “lived together for 2.5 years” (paragraph 16). 

6. X now spends time with his father pursuant to the consent orders made on 30 July 2014.  I note that the section 11F report speaks of considerable bitterness on the part of the mother against the father and the report would, if accepted, support the proposition that the mother had actively sought to prevent X spending time with his father. 

7. It seems common cause that the father ceased paying child support in about October 2013 and, whatever the reason, it seems that from that time on X spent very little, if any, time with his father until the Court intervention in mid-2014. 

The Facts as Asserted by the Parties

1. It is not necessary to spend over much time upon the parties’ affidavit materials.  They were crafted at a time when the parties were primarily concerned with the spend time arrangements about X. 

2. The father’s first affidavit, filed 26 May 2014, deposes to the agreement and annexes a copy and also deposes, albeit in brief detail only, to the liquidation of “(business omitted)” in May 2012, a Part X Personal Insolvency Agreement which concluded, it would seem, on 5 June 2013 and asserts that the father’s “financial circumstances are abject and are at polar opposites as at when I signed the agreement.”

3. The mother’s responding affidavit filed 18 June 2014 was likewise brief.  I note that the agreement was the subject also of consent orders made before the Family Court on 28 February 2012.  I note that the applicant was to pay the respondent $52,000 pursuant to order 1A of the orders made. 

4. The applicant’s son, Y, filed an affidavit which is not now of any significant moment, although I note that each of Y and Z had lent their father $15,000. 

5. The applicant’s affidavit filed 21 July 2014 takes the matter no further. 

6. The respondent’s affidavit filed 24 July 2014 takes considerable issue with the applicant’s asserted lack of resources and complains of the failure on the father’s part to pay child support.  The affidavit, in broad terms, asserts that the father continues to lead an extremely opulent lifestyle.  Significant tranches of bank and other records were annexed to the affidavit in support of this proposition. 

7. I note that in paragraph 13 of the affidavit the mother said:

   “… my relationship with Mr K began in mid 2009 and not 2008 as alleged.”

8. Both parties have since sworn and filed Financial Statements.  Both depose as to very low income and a general absence of any assets of any moment.  The father’s Financial Statement annexes tax returns and other documentation in support of his case. 

The Evidence Given at Court - The Father

1. The father’s evidence was led by his counsel, and although many of the questions were put in a demonstrably leading way, they were not the subject of objection (not surprisingly, as the mother was self-represented).  However, in the circumstances, in my view, nothing now turns on this. 

2. The father said that the amount due under the agreement is now $2,200 per month.  He said he had problems in May 2012 when a liquidator was appointed to (business omitted).  He entered into a Part X agreement which was finally discharged on 15 June 2013.  The father said his circumstances were now different, as shown by his tax returns.  His projected income is some $30,000 per year.  He has been financed by family and friends but is now entering into business as a (omitted).  He has no capacity now to borrow any more money. 

3. The father conceded that his child support payments stopped in September 2013 and he asserted that contact with X stopped as a result.  This difficulty, however, has now been sorted out. 

4. The father said that he suffered a serious accident in 2008, (according to his earlier affidavit material at about Christmas time).  He had six months in bed, having fractured both a fibula and a tibia.  Thereafter he was on crutches for six months and unable to attend to his business, which he had owned for 32 years.  At about this time the effects of the global financial crisis came into play and his (business omitted) franchise was hard hit.  He invested to increase the business but (business omitted’s) share of the market, in fact, halved.  He sold the business and got rid of his debt. 

5. He and the mother had lived in an expensive home which was ultimately sold, albeit as the applicant put it, for $2 million less than its value, this loss as he would put it accruing from the unreasonable failure of the respondent to agree to earlier sale.  It is not necessary for me to make any finding about that aspect of the matter because the fact is the home was sold. 

6. The father said he tried to obtain a living in the (omitted) industry but failed.  His financial company foreclosed and his business was liquidated.  He said that the mother was oblivious and wanted an extravagant settlement.  She would not accept that he had fallen on hard times. 

7. The father said that he obtained his relevant diploma in March 2014 but the (omitted) industry was difficult.  He was conducting his business through a family trust and earns only commissions.  He had earned $30,000 since 1 July 2014 and has two commissions on the way which are likely to be worth $2,000.  The two commissions which gave rise to the $30,000 were a long time in preparation. 

8. The father said in the last few years he has been supported by friends and family.  He referred to annexure 6 to his Financial Statement which shows two bank accounts, one personal and one business, but he conceded that he operated his accounts clumsily, with funds coming in and going out regularly.  He said he had recently met his accountants, who had not charged him, and was now more mindful of the distinction between personal and business expenditure. 

9. The father said he was driving a 2012 Mercedes which belongs to an associate.  That associate lost his licence for a long time and he was not able to sell the vehicle as he did not have the necessary funds to pay out the hire purchase.  The friend suggested that the father could drive it if he paid a small amount plus service and registration.  In addition to service and registration, the applicant is to pay $3,000 to his friend by May 2015, at which time the owner will take the vehicle back. 

10. The father deposed that he had been living in his present flat in (omitted), for 18 months and the lease has 18 months to go.  He had tried to remove himself but had been unable to break the lease.  He said he had no other assets other than home fixtures.  He said his present circumstances were diabolical. 

11. The father said his sons can no longer help him financially.  His elder son’s wife is pregnant and his younger son is starting a business.  The father does not wish to borrow from friends because he is not sure he can repay.  He said he was not able to meet the repayments to those from whom he had already borrowed. 

The applicant under cross-examination

1. The father confirmed that the sale of his business in 2011 generated $3 million which he applied to debts.  The former matrimonial home was sold in 2010 for $5.1 million, but provided a net payment of $5 million which went on the mortgage.  A relatively small amount leftover of some approximately $100,000 went into the applicant’s successor business.  That business was subsequently liquidated and no funds were leftover.  The father conceded that he has not paid the amounts due in the property settlement, but said that these were subsumed within his Part X agreement and that the respondent was paid the same as everyone.  The dividend, however, was small. 

2. When asked why he had not worked for the last four years, the applicant gave what I thought was convincing evidence that he had been trying desperately to obtain employment.  He is 62, going on 63, and simply could not get back into the (omitted) business which is, in any event, a young man’s business.  He tried a number of companies, which he named, but said he believed he was regarded as damaged goods.  Tellingly, he said it was very humbling to have to go looking for a job.  He had not thought he would not work for four years. 

3. When taxed with the quantum of his rent, he confirmed that he pays $700 per week rent, and that his flat overlooks (omitted).  He said his son, Y, gave him accommodation in his home for three months, but he then had to move.  He said he thought he would go better than he has, and he has a two bedroom flat so his son can live with him.  He said he moved after his marriage ended 18 months ago and confirmed the existence of another child, aged three.  He said he uses his apartment as an office and it has a meeting room.  He said if he broke his lease, his reputation would be tarnished.  The lease was signed in May 2013. 

4. The father said he had not stopped paying child support.  He was just not able to pay. 

5. When asked why he had paid Mr H $5,000 instead of contributing such amounts to child support, he said that this was because it was very caring of Mr H to support him.  Then Mr H needed the moneys and he felt he had to repay him.  He said further, and perhaps tellingly, that he knew that X was not in need when living with his mother.  The applicant said, “It’s my privilege to pay child support, not my obligation”. 

6. The father was cross-examined about the amounts he had actually paid by way of child support.  In my view, the amounts paid are probably slightly less than the father sought to convey.  

7. In re-examination, the father admitted that he owes some $24,000-$25,000 in child support. 

The evidence of the mother

1. The mother’s submissions, which were effectively evidence in the circumstances, albeit unsworn, were that the father had shown he had the capacity to pay but he just did not wish to.  The mother asserted between June and August 2014 $34,000 had gone into and out of the applicant’s bank account and his lifestyle was not that of a struggling person.  Approximately $120,000 per annum was going in and out of his account.  He was in breach of Court orders and had also not paid the $50,000 financial settlement.  The mother sought that the application be dismissed.  The applicant had not reduced his expenditure and he simply stopped paying child support to keep his lifestyle.  She made reference to the $3,000 per month rent the applicant was paying. 

2. The mother said she works part-time in (occupation omitted), having commenced in September 2014, making approximately $500 per week.  She said it was not her responsibility solely to support X.  She said the applicant just does not want to support X.  He had earned $30,000 in three months. 

3. The mother adopted her affidavits as true and correct when sworn. 

The mother under cross-examination

1. The mother conceded that she receives $80 per week in family tax benefit.  She said at the time she swore her Financial Statements she was not working.  She met her expenses previously by using her credit card and the assistance of her partner.  She said she had not worked from the end of June 2014 to September 2014.  She did not know her partner’s income but it was substantial. 

2. The mother confirmed that she had been overseas three times this year.  All such travel had been paid for by her partner.  She had been to (country omitted), (country omitted) and (country omitted) on separate occasions.  She said that her partner does not pay for her clothing or entertainment and she has to work to support her son.  She did not accept that the applicant was earning anything less than $120,000.  She asserted that he had not worked for four years and that there was a cash component in his earnings.  She did not accept that the applicant has an income of $30,000 per annum. 

3. When taxed with the proposition that the $50,000 payment owed to her was one of the debts comprised in the Part X agreement, the respondent said that she was a secured creditor because the sum concerned was court ordered. 

4. The respondent was then cross-examined in some detail about the payments made by the applicant.  She accepted that the payments put to her, which she accepted, amount to approximately $3,500. 

5. In re-examination the mother pointed out that the trip to (country omitted) was a trip organised by (omitted) and paid for by them, and that she had attended as Mr K’s partner.  She tendered exhibit R1, the child support history, which shows the indebtedness on the part of the applicant. 

Final submissions

The father

1. Counsel submitted that the applicant’s position had changed.  His business was grossing $30,000 (and would of course involve expenses).  An income of $80,000 per year was asserted to give rise to an assessable child support obligation of $763 a month.  Accordingly, according to counsel, the $2,200 figure presupposed a much more substantial income.  He submitted that the agreement was untenable.  So far as arrears were concerned, the applicant had not been able to pay since September 2013.  He had borrowed from friends and from family and repaid some loans.  He knew that X was being cared for by the mother and her partner, the partner being wealthy.  Counsel referred to the psychological report annexed in the material.  The arrears were said to be over $20,000 and it was up to the Child Support Agency to chase that debt.  Counsel submitted that this debt should be discharged.  He submitted it was not fair and equitable to require Mr Lincoln to pay arrears because he did not have the money. 

The mother

1. The mother submitted that the application should be dismissed as there were no exceptional circumstances.  The applicant had not reduced his expenditure when his income reduced.  He simply reduced his child support payments.  He had repaid others instead.  He had dishonoured his obligations to the mother and prioritised everyone ahead of her.  She said there was no evidence of the various loans that were asserted and that loans to Mr G and to Mr M were in fact in the applicant’s Part X agreement.  She asked why they would loan him money.  She said that the applicant was not suffering but just did not want to pay any money at all.  She said it was not Mr K’s obligation to support X. 

Findings about the facts

1. I should make it clear that both witnesses impressed me as being in the main honest and truthful, although it is clear that the bitterness arising out of the failure of the relationship and the circumstances now obtaining has probably distorted both the perceptions and memory of each of them.  Some of the things said by the applicant were said with evident sincerity and I have recorded some illustrative examples in the earlier recitation.  The bitterness of the mother towards the father and her very clear view that the father has simply put others ahead of X and herself was palpable. 

2. There seems to be no doubt that Mr Lincoln, whose business was almost a household name in Victoria, suffered significant misfortunes between 2008 and 2013.  His business was sold and a successor business was liquidated.  What is a little difficult to make out, however, is why the applicant entered into the agreement in 2012 when, according to him, his affairs were at such a low ebb.  I have not traversed in these reasons for judgment the account given by the father of negotiations leading up to that agreement, which were not the subject of challenge. 

3. In my view, it is more probable than otherwise, especially bearing in mind that generally I found the father a good witness, that in February 2012 he thought his future was far rosier than it has in fact transpired to be.  He said on more than one occasion that he thought he would go better than he has and his embarrassment in not paying back his family and friends was palpable. 

4. By way of contrast, however, the applicant did not seem to me to evince the same embarrassment about not paying his child support.  While his failure to pay child support and his direction of some $5,000 to Mr H is certainly questionable, on balance, in my view it does not attract quite the measure of criticism the mother advances.  I can understand that as a person formerly somewhat in the public eye, it might well be thought important for Mr Lincoln to discharge a debt to a person who had gone a long way out of his best interests in advancing funds and who then required them urgently, as I understand to have been the case. 

1. Nonetheless, it is understandable that the mother feels that the father has simply maintained his lifestyle and put her, so to speak, at the bottom of the list.  The father continues to live in expensive accommodation in a very desirable part of Melbourne.  He is driving around in an extremely expensive car.  Even the petrol and servicing must be extremely expensive, and I note that he is to pay the owner of the car some $3,000 in 2015. 

2. The truth of the matter, as is so often the way in contested cases, in my view lies somewhere between the parties’ competing positions.  On the one hand, the mother’s assertion that the father still has an income in six figures and is simply not paying child support out of spite, is overstated.  Materials filed suggest that the father has nothing of that sort of income. 

3. On the other hand, however, the father’s position is not as bad as he says it is.  The fact is that he has earned some $34,000 in recent times.  It is asserted that his business has expenses but no evidence has been put forward of any moment to support that generalised proposition.  Although the father said that the $30,000 was the fruit of a lengthy gestation period, the father is a man of business acuity and, in my view, is likely to earn rather more than he is prepared to concede.  It is not possible to say exactly how much as his finances have been, as he himself conceded, poorly managed, at least of recent times.  The fact is, however, that his available income will, on any view, increase significantly when his lease finishes in 2015.  It will be well open to him to get far cheaper accommodation than that in which he presently lives.  Likewise, he may well have to adjust his style in cars to something more modest and suited to his reduced income. 

4. What is clear, however, is that whatever his income is, the father is in simply no position whatever to pay $2,200 per month in child support. 

5. I further note that although the mother sought to paint a picture of her living, so to speak, largely financially independently (leaving aside accommodation and food perhaps) the reality is that she is in a relatively long-term (five or so years) relationship with Mr K and has his full support.  I note that he attended court with her.  He acted as something akin to a McKenzie friend at times. 

The Operation of the Facts as Found upon the Law

1. One of the striking features of this case has been the complete absence in the materials filed and submissions made of any reference to the Child Support legislation, the Family Law Rules or, indeed, any other relevant instrument, such as this Court’s rules. 

2. I take this to be an application filed pursuant to s.136 of the Child Support (Assessment) Act 1989 (“the Act”). No formal proof has been provided that the agreement was accepted by the Registrar under s.92 or s.98U of the Act. But the proceeding has advanced on the footing that the Court has jurisdiction to entertain the application. And while the statute self-evidently cannot be estopped, I note that the agreement was itself appended to orders made in the Family Court.

3. In the circumstances it would appear, doing the best I can in the absence of any relevant submissions, that the applicant is asserting, pursuant to s.136(2)(d), that there are “exceptional circumstances, relating to a party to the agreement or a child in respect of whom this 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”. 

4. I note that, pursuant to s.137, if the agreement is set aside under s.136 the Court has broad powers to make such orders as are considered just and equitable for the purpose of preserving or adjusting the rights of a child or a party to the agreement (s.137(2)).

Conclusion

1. In my view, it is clear that there are exceptional circumstances relating to the father that have arisen since the agreement was made.  The exceptional circumstance is that the father simply cannot pay the $2,200 per month he agreed to pay in 2012.  As I understand it, he paid until September 2013.  Such payments must have come out of the moneys he borrowed from others from time to time, but that source of revenue is no longer open to him. 

2. While one could edge around the issue in a number of different ways, the fact is that I accept that the father is not able now to pay the sum he previously agreed to pay and plainly it is just and equitable that the agreement should, therefore, be set aside.  He should from now on be the subject of administrative assessment. 

3. So far as the arrears are concerned, however, I take a different view.  The father’s income, in my view, is likely to be significantly greater than he asserts.  Whether this is because of an honest pessimism or a deliberate underestimate, I am not able to say.  But I have no doubt that he will make more than he says. 

4. While the father has deposed to reasons why he did not seek to come to Court earlier, the fact is that the arrears have arisen at least substantially during a period where he was taking no active steps to challenge the matter, i.e., from September 2013 until the proceedings were issued in 2014.  It is also clear from the materials the parties originally filed that the precipitating factor was the dispute about X spending time with his father and not the agreement. 

5. However contradictory it might seem at first blush, it seems to me just and equitable that the extant debt should remain.  Its collection will be a matter for the Child Support Agency.  Contrary to submissions from counsel for the applicant, it is not just and equitable to discharge the arrears.  The applicant entered into a bargain with the respondent and if he had adjusted his lifestyle, in my view, it would certainly have been possible for him to have met it for a longer period than he did. 

6. Accordingly, I will set aside the agreement, pursuant to s.136 of the Act, and direct that the father pay child support in respect of X as assessed by the Child Support Agency and from time to time. I will give the parties an opportunity to read this judgment in case there are any ancillary orders that may be sought which I might have overlooked.

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Date:  19 January 2015