Lloyd and James

[2016] FCCA 372

FEDERAL CIRCUIT COURT OF AUSTRALIA

LLOYD & JAMES [2016] FCCA 372

Catchwords:
FAMILY LAW – Property division – child support.

Legislation:

Family Law Act 1975, ss.75(2), 79

Child Support (Assessment) Act 1989, s.117

DJM v JLM (1998) FLC 92-816
Wastle and Wooster (Kay J, unreported, judgment delivered 23 July 1996)
Re Marriage of Reese (1997) 73 Cal. App. 3d 120 120 [140 Cal. Rptr 589]
Prpic & Prpic (1995) FLC 92-574

Applicant: MS LLOYD

Respondent: MR JAMES

File Number: SYC 6442 of 2013

Judgment of: Judge Brewster

Hearing dates: 14, 15 and 16 September 2015

Date of Last Submission: 29 October 2015

Delivered at: Parramatta

Delivered on: 2 March 2016

REPRESENTATION

Counsel for the Applicant: Mr Levy

Solicitors for the Applicant: Newnhams Solicitors

Counsel for the Respondent: Mr Wong

Solicitors for the Respondent: Watts McCray

ORDERS

1. That the monies held in trust from the proceeds of the sale of the property known as Property G be divided between the parties as follows:

   (a)To the wife the sum of $130,000.

   (b)To each of the parties one half of the balance then remaining.

2. That against the other each party be entitled to retain the chattels in his or her possession and the choses-in-action in his or her name.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 6442 of 2013

MS LLOYD

Applicant

And

MR JAMES

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter concerns competing applications by the parties with respect to property division and an application by the wife for a departure order under the Child Support (Assessment) Act and that child support be paid in a lump sum.

Background

1. Each party is 54 years of age.  They commenced to live together in (omitted) 1990 and were married on (omitted) 1993.  They separated under the same roof in late 2012 and physically separated in June 2013 when the husband left the parties’ home in Property G.  A Divorce Order was granted on 7 October 2014 but in this judgment I shall call the parties the husband and the wife respectively.  There are two children of the marriage, X who was born on (omitted) 1998 and Y who was born on (omitted) 2003.

2. The husband is from (country omitted) and the wife from Australia.  When they commenced their relationship they were living in (country omitted), each having moved there in 1990.  In 1993 they lived for a period in the (country omitted) and from July to October 1994 in (country omitted).  In October 1994 they moved to Australia and have remained here since.  As I have indicated they separated under the one roof in late 2012 and physically separated when the husband left the matrimonial home on 19 June 2013.  This was pursuant to an Interim Apprehended Violence Order that the wife had caused to be obtained against the husband.

The Parties’ Applications

1. The wife, who is the applicant, seeks that monies held in trust be divided 65.5% to her and 34.5% to the husband.  She seeks that from the husband’s share lump sum child support be paid to her and that there be a departure order in relation to the periodic sums to be capitalised.

2. The husband seeks that from the trust funds a debt to his sister in law be repaid, that he receive the sum of $98,466 and that the balance be divided equally.  He opposes any departure order or lump sum order. 

Discussion

1. In this matter I shall adopt a four stage process. The first stage will involve making findings as to the pool of assets. The second stage will involve considering contributions made by or on behalf of each party, whether in the form of assets brought into the relationship, contributions made during the relationship whether financial or non-financial and contributions made after the parties separated. The next stage will involve a consideration of such of the matters set out in section 75(2) of the Family Law Act as may be relevant. The final stage will be to decide what order is just and equitable.

2. Each party seeks that I alter their existing interests in property. I have the power to do so under section 79 of the Act. Notwithstanding that each party asks me to do so I am precluded from taking such a course unless I am satisfied that it is just and equitable (section 79(2)). Having regard to the length of the relationship, the contributions of various types made by the parties and the fact that there are two children of the marriage I am satisfied that it is just and equitable to make an order which alters their interests in their property.

The Pool

1. The most significant asset is a joint account with (omitted) Bank which as at the date of the trial had a balance of $1,643,415.  This represents the balance of the proceeds of the formal matrimonial home situated at Property G to which reference will later be made.

2. The wife also has the following bank accounts:

   a)NAB (omitted) $3,338

   b)NAB (omitted) $11,370

   c)(omitted) Bank (omitted) $120,050

3. The wife also has 882 (omitted) shares, 1785 (omitted) shares and 2825 (omitted) shares.  The value of these shares differs from day to day but as at the date this judgment was prepared the (omitted) shares were valued at about $65,500, the (omitted) shares at about $9,500 and the (omitted) shares at about $14,600.

4. The wife has a Volvo motor vehicle which the parties agree is valued at $5,000.

5. The husband has the following bank accounts and the figures are as at the date of the hearing:

   a)NAB (omitted) $115,616.

   b)NAB (omitted) $31,404.

   c)NAB (omitted) $741.

   d)NAB (omitted) $332.

   e)NAB (omitted) $278.

   f)NAB (omitted) $447.

6. There is also (omitted) account which has zero balance at the date of the hearing and an account (omitted).  The balance sheet provided at the hearing said that the balance of that account was not known.  I assume that it is not considered significant.

7. The husband has a motor vehicle which the parties agree is valued at $10,400.

8. There is also an (omitted) account which is in the joint names of the husband and his sister in law.  At the date of the hearing it stood at $28,525.  There is a dispute as to whether this should be taken into account.  I am satisfied that this represents money paid into the account by the husband’s brother post separation and I do not include it in the pool.

9. The parties were unable to agree as to the value of furniture, contents and art work that each has retained.  Neither produced any valuations at the hearing.  On 29 October 2015 I made an order that the parties had 21days to either agree as to the value of these items or make a decision as to whether or not to obtain valuations.  I further provided that if the court were advised that valuations would be prepared judgment would be deferred until the valuations where to hand.  The order provided that if the court did not hear from the parties within 21 days these items would be disregarded for the purpose of this judgment.  The court has not heard from either of the parties concerning this issue and consequently these items will not form part of the pool.

10. Included in the balance sheet are items described as “addbacks/S75(2) adjustments” as follows:

    a)Partial distribution of the proceeds of the sale of former matrimonial home received by the wife in September 2013 $103,345.

    b)Partial distribution of the proceeds of the sale of the former matrimonial home received by the wife on 26 September 2014 $100,000.

    c)Partial distribution of the proceeds of the sale of the former matrimonial home received by the husband in September 2013 $103,565.

    d)Partial distribution of the proceeds of the sale of the former matrimonial home received by the husband on 26 September 2014 $100,000.

    e)Funds withdrawn from (business omitted) by the husband in May 2014 $23,998.

11. Each party also received $120,000 from the sale proceeds pursuant to an order made 4 August 2015.

12. I shall not be adding these matters back but they will be taken into account in this judgment.

13. The wife has debts which were incurred post separation which I shall not deduct from the pool.  There are (omitted) Bank credit cards which at the date given in the balance sheet of 20 April 2015 were in debit to the tune of $3,464, a HELP debt of $24,015, GST payable to Australian Taxation Office of $7,553 and a debt to (omitted) of $4,800 which would be referable to one or both of the parties’ children.  Given the fact that they are post separation debts and having regard to the size of the pool and the distributions made are not substantial I do not deduct them from the pool but will take them into account.

14. The husband has a (omitted) Bank credit card debt which he said was $112,000 as at the date of the hearing.  I do not know its level as at the date of separation if it existed at that time.  I assume that it is a post separation debt.  As will be seen I regard the husband’s post separation financial troubles as a self-inflicted wound.  I do not deduct it from the pool or take it into account.  He also would have me deduct from the pool a debt to his sister in law of $113,306.  This was also incurred post separation.  The same comments apply to this debt.  In addition I am not satisfied that it will be required to be repaid.

15. Each party has accumulated superannuation.  The wife has superannuation with (omitted) Bank and (omitted) Super.  Her (omitted) Bank superannuation fund at the date of the hearing was $126,609 and her (omitted) superannuation was $26,349.  The husband has a self-managed fund known as the Mr James Superannuation Fund which at the time of the hearing stood at $160,295.  He also has a small (omitted) Retirement Plan which stood at $3,170.

Contributions

1. The date the parties commenced their relationship the wife had savings which she puts at $60,000.  The bulk of this would have come from a compensation claim following a motor vehicle accident.  She received $48,000 with respect to this claim in (omitted) 1989.  She also owned a property in (omitted) which she sold in 1992 receiving $38,263.  The husband does not concede that these monies existed at the date the parties commenced to live together.  However I accept the wife’s evidence in this respect.

2. There is a dispute about the assets that the husband brought into the relationship.  The wife says that he had savings of approximately $50,000.  The husband says that he had assets in the form of a vendor note of approximately $A1,150,000 and cash at (omitted) Bank in various currencies which he says was about $US350,000.

3. The husband is a (occupation omitted) and a businessman and was involved in various projects when he worked in (country omitted).  The vendor note that he refers to he says relates to a business which he sold.  He says he also owned real estate in (country omitted).  He says that he was a successful businessman and that he was able to acquire significant assets.

4. The difficulty the husband faces in having me make a finding in his favour in this respect is that there is no documentary evidence supporting his contention.  He said that he had attempted to obtain such evidence but was unable to do so.  Given the time that has elapsed since the parties commenced their relationship I do not find it surprising that there would be no records at this time.

5. Notwithstanding the lack of documentary evidence in support of the husband’s contentions I accept his evidence.  I am not satisfied that the figures he gives are necessarily completely correct.  I accept however that when the parties commenced their relationship he had substantial assets.

6. The husband also had a company (omitted) Pty Ltd which he set up in (country omitted) and which he says provided a substantial dividend stream to him from 1990 to 1993.  He puts the figure over those three years at about $US1 million.  Again there is no documentary evidence to corroborate this but I accept his evidence.  Again I cannot be satisfied that the figure of a $1 million is correct but I accept that (omitted) Pty Ltd provided a substantial dividend stream.

7. Up until the birth of the first child both parties worked in (country omitted).  The husband says that his salary was in the order of $US150,000 to $US180,000.  I accept his evidence in this respect.  His employer also provided him with a rent free flat.  The wife is a (occupation omitted) and was employed in this capacity.  She does not state what her income was but concedes that it was less than that earned by the husband.

8. Neither party was in employment when they were in the (country omitted) or (country omitted).

9. In Australia the husband earned more than the wife but I am satisfied that she tailored her employment to enable her to have more time to care for the children.  From 1998 to 2009 I do not take into account the fact that the husband’s income exceeded that of the wife.  In effect I regard the contributions of the parties from this time, whether financial or as a homemaker and parent, as equal.

10. The parties purchased the Property G property in (omitted) 1996 for $655,000.  This was purchased without the assistance of any borrowings.  For reasons which I need not discuss it was registered in the wife’s name.  The monies used to purchase it came from the parties’ savings which can be traced back to each party’s initial contribution and the income each earned in (country omitted).  I am satisfied that the husband’s contribution to the acquisition of the Property G property greatly exceeded that of the wife.

11. Extensive improvements were made to the property after its purchase.  These were carried out in 1998, 2003 and 2009.  The total cost was about $520,000.  These were funded from the monies the parties brought to Australia and from income.

12. When the parties moved to Australia they had substantial savings.  The wife estimates that they were about $1million.  By the time the parties separated they had reduced to about $100,000.  In this respect it is to be noted that these monies were in an account of the wife and used by her post separation.  However about $40,000 of this was from an inheritance received by her in 2009 and 2010.  I also take into account the monies withdrawn by the husband from (business omitted).

13. In 2009 the husband gave up paid employment to pursue what the wife calls a “structured finance project.”  It is not necessary to describe what that involved.  He hoped to sell his project to a bank and told the wife that if the deal succeeded he would make a very large sum.  In fact nothing came of this project.  From 2009 until separation I am satisfied that the contributions of the wife, in the form of her parenting contributions and her income, (which from 2009 to 2012 was in the order of $42,000 gross from her employment and $37,946 from an inheritance) should be given more weight than the contributions of the husband.

14. Post separation the wife has been the primary parent.  Neither child has spent any significant time with the husband.  She has cared for the children without any significant financial assistance from the husband.  He has paid a total of $2,388 in child support since the parties separated.  I take account of the fact that the wife took from the marriage about $100,000 but recognise that a part of this came from an inheritance.

15. I take into account that from June 2013 until the Property G property was sold in September 2013, the wife had the benefit of occupying that property.

16. As I have indicated the parties purchased the Property G property in 1996.  At that stage they had substantial savings.  Had this case fallen to be decided in, say, 1998 the contribution based division would have greatly favoured the husband.  But that was 18 years ago.  Twenty years have elapsed since the Property G property was purchased and since the parties had $1 million in savings.  Much has occurred since.  Each party has made contributions since either as an income earner or a home-maker and parent.  Improvements have been made to the home, although it must be recognised that a part, perhaps a substantial part, of the monies utilised for the improvements can be sourced to the parties’ savings when they moved to Australia and they are mainly referable to the husband.  The market increased the value of the home.  Since the husband gave up paid work up until separation the wife’s contributions exceeded his.  Since separation she has had the care of the children with modest child support. 

17. To summarise the contribution aspect of the process, I find that the husband’s contributions up to the birth of the parties’ first child exceeded those of the wife and but for his contributions the parties could not have purchased the Property G property unencumbered.  I recognise that the substantial savings the parties brought to Australia could not have been accumulated but for the financial contributions of the husband.  It must be recognised however that a significant time has elapsed since his contributions were greater than those of the wife and the contribution based division is affected by the lapse of time and the contributions made by the wife since that time.  I find that there is no distinction to be drawn between the parties’ contributions from 1998 to 2009 but from 2009 until separation I regard the contributions of the wife as more significant than those of the husband.  The parties have now been separated for going on 3 years and in that time the wife’s contributions as a parent must be taken into account.

18. In making a contribution based division I have regard to the fact that from the proceeds of the sale of the Property G property each has received $323,565.  I also have regard to the assets each party now has.

19. In my opinion an equal division is appropriate.

Section 75(2) Factors

1. The wife has the continuing care of the children and it will be going on for 6 years before Y turns 18. 

2. When asked his occupation at the commencement of his evidence the husband said that he was a “capitalist”.  He does not work as an employee.  I will discuss the situation insofar as this is concerned when I address the issue of child support.

3. As I have indicated the wife is a (occupation omitted).  She has a (qualifications omitted) from the (omitted) University.  She was admitted as a (occupation omitted) in 1986 following completion of further professional studies.  She has recently completed a (qualifications omitted) at the University (omitted).  She is presently employed and states in her financial statement filed on 24 August 2015 that she has a gross income of $797 a week.  She also receives income from dividends of about $600 a week and says that she earns $1,452 a week as a self-employed (occupation omitted).  She also receives government benefits in the form of the Family Tax Benefit of $382 a week.  She says that she suffers from chronic pain from a tumour in her leg and takes painkillers for this condition.  There is no evidence that this will have any impact on her capacity for employment.

4. As I have indicated the wife has the continued care of the two children.  As a result of my refusing to make a departure order the child support she will receive in future is likely to be modest at best.  The husband has been assessed as currently liable to pay child support in the sum of $224.75 a month or about $52 a week.  This will change in August 2016 to a nil assessment up until February 2017.  Whether or not a subsequent assessment will re-instate child support is unknown but it is likely to be in an amount much less than one half of the costs associated with caring for Y.  Both children attend private schools.  The wife proposes that this continue.  She says, and I accept her evidence, that the parties agreed that private schools were appropriate.  She estimates that school fees will amount to a total of about $240,000 by the time Y completes year 12.

1. In my opinion section 75(2) factors significantly favour the wife. I have fixed the adjustment as a lump sum and not as a percentage. I have made an order that from the monies held in trust the wife receive the first $130,000 and the balance be equally divided. This results in her receiving from those monies $260,000 more than the husband.

Conclusion

1. Looking at the case overall I am satisfied that this is a just and equitable result.

Superannuation

1. Neither party sought that I make a superannuation split.  Even if such an application had been made I would not have acceded to it.  Neither party has substantial superannuation and their entitlements are more or less equal.  As I have indicated I am precluded from altering the interests of the parties in their property unless it is just and equitable to make such an order.  In my opinion that test has not been satisfied.

Child Support

1. As I have indicated the husband has been assessed to pay child support in the sum of $224.75 per month.  This assessment runs until 5 August 2016.  He has been assessed for the period 6 August 2016 to 2 November 2016 as not being liable to pay child support and the same assessment is made for the period 3 November 2016 to 28 February 2017.  The current assessment is based on the husband’s child support income being $47,219 per annum and this is the amount used to calculate the nil assessments from August 2016 to February 2017.

2. The wife seeks that there be a departure order under section 117 of the Child Support (Assessment) Act.

3. The husband objects to my making any departure order.  He objects on both technical grounds and, as I understand it, on the grounds of prejudice to him should the wife be permitted to pursue this issue.  I am satisfied that I have jurisdiction given that there are pending proceedings in relation to other financial matters before me.  I am also satisfied that the husband has had ample notice of the wife’s position and the basis on which she brings her claim.

4. Essentially the wife’s position is that the husband’s actual income does not represent his income earning capacity and child support should be reassessed based on his income earning capacity as opposed to his actual income.  She further seeks that it be capitalised, that is paid in a lump sum from the husband’s share of the trust monies. 

5. In the past the husband has earned substantial income as an employee.  In her trial affidavit the wife sets out his taxable income from 2001 to 2009.  In this period of time his taxable income averaged about $260,000 a year.

6. The husband says, in effect, that the times when he was employed at this sort of salary were halcyon days which have come to an end as a result of the Global Financial Crisis of 2007.  I accept this to a degree.  However I find that were the husband to pursue paid employment he would be able to earn an income much greater than the amount he actually earns.  The wife in her Financial Statement says that she earns from her employment about $120,000 per annum and I believe that the husband could earn at least that amount if he chose to look for employment.

7. The reason the husband has chosen not to pursue paid employment is the hope that ultimately there will be a fortune to be made by putting together a business deal.  To date his efforts to realise this goal have been unsuccessful but, as I understand it, he believes that the potential rewards justify his decision not to seek paid employment.

8. There is ample authority for the proposition that the court does not have to take a parent’s actual income as the only factor relevant to his or her capacity to pay child support. Section 117 sets out various matters which must be satisfied before a departure order is made which in this case would not reflect the income of the husband. Section 117(2) sets out the grounds for a departure order and paragraph (c) of that section provides that one of the grounds is that, in the special circumstances of the case, application in relation to the child of the provisions of the Act relating to an 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 because of, inter alia, the earning capacity of either parent. Section 117(4) provides that in determining whether it will be just and equitable to make a departure order the court must have regard to, inter alia, the earning capacity of each parent. 

9. The Full Court addressed this issue in a number of cases but I need only refer to one, DJM v JLM (1998) FLC 92-816. In that case the husband who had been employed as a management consultant earning at least $200,000 a year gave up this job to become an academic at a salary of about $81,000 a year. In that case commencing at paragraph 17.6 the Full Court reviewed a number of previous decisions and said as follows:

   17.6  ... In Rowe, (unreported decision of  Fogarty J., delivered 12 December 1994), the earning capacity of the father was relevant to the issue of the quantum of child support payable.  In 1991 the father had been retrenched.  After an unemployment period of 8 months he began selling carpet tiles.  He remained in that job for approximately two years earning about $40,000 per annum.  He then entered into a business with himself and his new wife earning about $15,000 per annum.  His Honour said:

   “The position for the wife was equally clear-cut, namely that the husband had a well paid job, there was no legitimate reason for him to leave, and his child support income should be assessed upon that basis.

   In my view, the circumstances here overwhelmingly support the wife’s approach and it is impossible to give effect to the husband’s position.  There are a number of difficulties about his case.

   Firstly, if one accepted the husband’s reasons for leaving they do not justify that step, given his responsibilities to his children.  No doubt there are a number of people in the community who work in employment which they do not like and who would prefer to work elsewhere or not at all.  That is not a choice they can readily make against the background of the Child Support Scheme.  There is no suggestion here the work was affecting him in any significant physical or emotional way which would prevent or make it dangerous or undesirable for him to continue in that employment.  It was rather he did not like the job of selling tiles and felt he was over qualified for that position.  Now I do not know whether it is a congenial or uncongenial employment, but it was earning a significant income and he is not in my view, entitled to throw that in at the expense of the children.”

   17.7  In Scott and Scott (1994) FLC 92-457, the Full Court, after reviewing a number of decisions concerning the manner in which the capacity to pay maintenance could be established, when determining an issue of the capacity of an unemployed person to pay child maintenance, said at 87,739:

   “In summary, whilst the above cases establish that in some circumstances an unemployed parent without income may be held to have an earning capacity or financial resources sufficient to justify an order that he or she contribute to the support of his or her children, they are not authority for the proposition that in all such circumstances such a conclusion must or should be reached.  If they establish any principle of general application it is only that being unemployed and without income is not of itself necessarily an answer by a parent to an application for child maintenance.  The circumstances in which the parent became unemployed or without income, the reasons for it, the nature of his/her previous employment and the efforts (if any) which he or she has subsequently made to obtain employment are all relevant matters for consideration by the court in deciding whether the parent has any and what earning capacity such as to justify an order for child maintenance.  Even in the absence of any current income or earning capacity, a parent may be required to pay maintenance for his/her children if he/she has property or financial resources which are or ought reasonably to be available for that purpose. 

   It is ultimately a question of fact, in each case, whether an unemployed parent without income or financial resources has any earning capacity, and if so the extent of it.  However, we are of the view that such an unemployed parent with no particular qualifications or skills for employment could not be held, at least in times of high unemployment such as currently exists in this country, to have a current earning capacity sufficient to support an order for maintenance unless he/she has recently given up, without good reason, secure remunerative employment, or unless, having become involuntarily unemployed, he/she has made no reasonable efforts to obtain employment for at least a significant period of time.”

   17.8  That passage was applied by Kay J in the decision of Scott v Stauder, (unreported, judgment delivered 20 November 1996) where a father with a liability to pay maintenance had left a secure job as a solicitor with the Director of Public Prosecutions earning $100,000 a year, in order to “strike out on his own in private practice, with a view to building for himself a future with more attractions to him than the position he had held with the DPP”.   His Honour said,  after quoting the passage of the Full Court from Scott, supra:

   “Now, the passage from Scott can be read, on the facts of this case, as not only referring to ‘unemployment’ and being ‘without income’ but to ‘under employment’ and being with ‘less than adequate income’.

   If I read that into the passage it reads effectively that in some circumstances an underemployed parent may be held to have an earning capacity or financial resources sufficient to justify an order that he or she contribute to the support of his children and that being underemployed and without adequate income, is not of itself necessarily an answer by a parent to an application for child maintenance.”

   17.9  Kay J’s conclusion was that it was reasonably open for the husband in Scott and Stauder to change his career path with a view to seeking in the long term a more lucrative and perhaps rewarding path.

   17.10    A similar problem arose in the child support decision of Wastle and Wooster (Kay J, unreported, judgment delivered 23 July 1996) where the husband was a professional golfer, eking out a living on the Asian golf circuit and barely covering expenses.  There was evidence that he could obtain secure employment with a club as a teaching professional which would have given him significantly more rewards in the short term than he was achieving on the playing circuit.  Kay J said:

   “It may well be that his dream to play the professional circuit and make a living of it will become an indulgence which can no longer be justified after a reasonable time attempting to play it.  His obligation to pay child support is dependent upon his earning capacity, not the manner in which he chooses to exercise that capacity.  But given the glittering prizes which can follow from success within his chosen occupation, given his comparative youth, it may well be that the time has not yet come when it can be said that he has exhausted his opportunities to fully extend his earning capacity.

   I would have thought myself that if another two years pass and there is no significant change in the present circumstances, then it may well be that the tribunal assessing child support would look more closely at alternative methods of Mr Wastle earning a living, rather than being a touring pro.  If one has a degree or qualifications that will earn significant amounts of money, or more money than one is earning, and one chooses not to exercise one’s earning capacity, then in many circumstances that can be seen as an indulgence which should not be continued at the expense of the children and the custodial parent.”

10. In my view the decision in Wastle and Wooster is comparable to the present case.  The husband chooses not to seek paid employment because of the “glittering prizes” that he perceives may be attainable if he can put together a business deal.  In my view he has had long enough to realise that goal and in this case, were I free to follow the above cases, I would assess his capacity to pay child support on the basis of his earning capacity.  The wife earns about $120,000 per annum and I believe that the husband is capable of earning at least the same amount.

11. However the law has changed since those cases were decided.  In 2005 the Government set up a Ministerial Taskforce on Child Support.  In its report the Taskforce made a number of recommendations and addressed a number of issues.  In relation to the issue of a parent earning an income lower than that which he or she could earn the Taskforce said as follows:

    Determinations that a parent’s capacity to earn is higher than his or her actual income are amongst the most contentious of all Child Support Agency decisions. Either parent could, in principle, be caught by this provision, but in practice non-resident parents, mainly fathers, are affected. Fathers have complained that this discretion is used unfairly in such situations as where their earnings have been reduced as a result of poor health experienced after separation and divorce, where they have reduced their working hours to allow for contact with their children, or where they have undertaken study to improve their longer-term financial prospects.

    The Taskforce recommends that ‘capacity to earn’ should be given clear legislative definition. Parents should only be deemed to be earning more than they are in fact earning, based on unutilised earning capacity, where, on the balance of probabilities, a major motivation for reduced workforce participation is to affect the level of child support payments.

12. The first paragraph makes perfect sense to me.  The second paragraph seems to be something of a disconnect.  If a parent reduces his or her income by reason of poor health, the need to have contact with the children or to undertake studies to improve their longer term financial prospects then the law as expounded in the cases to which I have referred would indicate that there should be no departure order.  It is not apparent to me why the recommendation was made that a departure order should only be made if “a major motivation for reduced workforce participation is to affect the level of child support payments.”

13. It seems to me that cases such as those that I have cited represent a common-sense approach to the problem where a parent is capable of earning a substantial income but chooses not to.  Essentially the test is what is reasonable in the circumstances.  Sometimes undertaking further studies might result in a short term reduction in child support but promise a long term increase and that overall the benefits to the child or children justify lower child support.  Sometimes a decision to reduce one’s income is reasonable because of health problems or to spend time with the children.  There may be many other good reasons.  In other circumstances however the parent’s decision to reduce his or her income is not justifiable.  Sometimes a compromise can be reached such as in Wastle and Wooster. 

14. Nevertheless in 2006 the Legislature adopted this recommendation and enacted Section 117(7B) of the Child Support (Assessment) Act. To paraphrase that section it allows the court to determine that a parent’s earning capacity is greater than is reflected in his or her income for the purpose of the Act only if the court is satisfied that, amongst other things, “the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.”

15. It seems to me that as the law stands at the moment a father who was a professor in a Faculty of Fine Arts who decided to give up that position to become an artist on a greatly reduced income could avoid a departure order if it were established that his wish to become an artist was long-standing and therefore that it could not be said that a “major purpose” of that decision was to reduce child support.  In other words his children should go without to support his preferred lifestyle.  But they would be only collateral damage.

16. In my view a sensible approach is found in the Californian case in Re Marriage of Reese (1997) 73 Cal. App. 3d 120 120 [140 Cal. Rptr 589] which was cited with approval in DJM v JLM where the court said as follows:

    Once persons become parents, their desires for self-realisation, self-fulfilment, personal job satisfaction and other commendable goals, must be considered in context of their responsibilities to provide for their children’s reasonable needs.  If they decide they wish to leave a simpler life, change professions or start a business, they may do so, but only when they satisfy their primary responsibility: providing for the adequate and reasonable needs of their children.

17. That approach however did not, it appears, commend itself to the Ministerial Taskforce.

18. I am quite satisfied that the husband’s motivation for refusing to seek paid employment is not that he wishes to avoid paying child support.  His motivation is the glittering prizes that he hopes he may one day realise.  Perhaps someday he will do so.  Perhaps he will someday be rich beyond the dreams of avarice.  But by that time both children may be independent.

19. Thus had this case been heard prior to the amendments in 2006, I would have made a departure order on the basis that the husband’s income is less than the income he could earn if he chose paid employment.  As it is I am precluded from doing so.

20. Should I nevertheless make a departure order on the basis of the monies that the husband will receive from the division of the proceeds of the sale of the Property G property? In my opinion the answer is no. There would be an element of double counting given the section 75(2) adjustment I have made in favour of the wife based on her care of the children with modest child support. In addition the Full Court case of Prpic & Prpic (1995) FLC 92-574 indicates that the fact that a parent who is paying minimal child support receives an amount by way of property settlement does not, of itself, justify a departure order.

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

Date:  2 March 2016