M and M
[2002] FMCAfam 384
•18 December 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & M | [2002] FMCA fam 384 |
| CHILD SUPPORT – Application for departure – assessment not reflective of husband’s true financial position – husband’s liquidation of asset previously producing no income with proceeds placed in trust. Child Support (Assessment) Act 1989, ss.3, 4, 114, 117 Savery and Savery (1990) FLC 92-131 |
| Applicant: | S I M |
| Respondent: | P R E M |
| File No: | ADM 2783 of 2002 |
| Delivered on: | 18 December 2002 |
| Delivered at: | Darwin |
| Hearing Dates: | 15 & 16 October 2002 |
| Written Submissions: | 22 & 30 October 2002 |
| Judgment of: | Brown FM |
REPRESENTATION
| Counsel for the Applicant: | Mr McQuade |
| Solicitors for the Applicant: | Adey Lawyers |
| Counsel for the Respondent: | Mr Lindsay |
| Solicitors for the Respondent: | Lempriere Abbott McLeod |
ORDERS
That the wife’s application for departure filed on 4 April 2002 be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADM 2783 of 2002
| S I M |
Applicant
And
| P R E M |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings relate to child support and whether there should be any departure from the child support assessment procedure in respect of two children H J M born 2 September 1992 and Z M M M born
31 January 1995 for the period from 1 July 1999 until 31 December 2002 and all future child support years until both H J and Z M reach the age of eighteen years. The application is governed by the provisions of the Child Support (Assessment) Act 1989 (“the Act”) and in particular section 117 of the Act.
Applications
The applicant in the proceedings is the children’s mother, S I M (“the wife”). The respondent to the proceedings is the children’s father
P R E M (“the husband”). By way of her form 63 application filed on
4 April 2002 the wife seeks departure orders from the applicable child support determinations in respect of the following periods:
i)1 July 1999 to 28 February 2000;
ii)1 February 2000 to 5 June 2001;
iii)6 June 2001 to 31 December 2002;
iv)all future child support years.
The orders that the wife seeks in respect of the first three of these periods, that is from 1 July to 31 December 2002, are the same in each case. In respect of these periods she seeks that the husband’s child support liability in respect of the two children be calculated on the basis that the husband’s child support income is set at $70,000.00 for each year and that in addition to the child support that would be payable by the husband as a result of the application of the relevant child support formula to such an income, he pay the sum of $400.00 per week or “such further or other sum as may be ordered by this Honourable Court on account of the educational expenses of the children”.
In respect of future child support years, the wife seeks that the child support payable by the husband be calculated on the husband’s child support income for such years but that in addition to this sum he pay “the sum of $400.00 per week or such further or other sum as may be ordered by this Honourable Court on account of the educational expenses of the children or further and in the alternative in such amount so as to represent 100% of all the costs relating to the children’s attendance at school including but not limited to books, uniforms, excursions and other activities associated with the children’s attendance”.
The grounds on which each of these applications are made is the same in each case namely:
i)That the Child Support Assessment does not reflect the income, property and the financial resources of the husband.
ii)Further and in the alternative the Child Support Assessment does not accurately reflect the husband’s capacity to contribute to the child support for the children;
iii)The husband has assets and financial resources from which the husband can contribute lump sum child support.
The husband opposes such departure orders and seeks that the child support payments in respect of H J and Z M continue at the rate as they have been currently assessed pursuant to the Act.
In addition to her form 63 application the wife relied on the following documents:
i)An affidavit of her solicitor, Mr Adey filed on 4 April 2002;
ii)Three affidavit of herself filed on 8 August, 27 August and 17 September 2002 respectively;
iii)A statement of her financial circumstances filed on 22 May 2002.
The husband relied on the following documents:
i)An affidavit of himself filed on 29 August 2002;
ii)
A statement of his financial circumstances also filed on
29 August 2002
Each party was represented by counsel at the hearing before me on
16 October 2002 and each of them supported their application by the giving of additional evidence-in-chief and each was cross-examined.
Background
The husband was born on 27 May 1954. The wife was born on
18 February 1955. They married on 26 January 1990. H J and Z M are their only children. The parties separated on 27 November 1997. Orders were made by the Family Court at Adelaide on 21 November 1999 in respect of the division of matrimonial property between the parties and in respect of arrangement for the care of H J and Z M. Pursuant to those orders both children were to live predominantly with the wife. The orders in respect of H J and Z M were varied by the Family Court at Adelaide on 28 February 2002. Pursuant to those orders the children are to live with the wife at all times other than for three weekends out of four and for one half of the school holidays.
The husband is presently employed as a radio announcer. He receives a fixed income in respect of this employment. The husband comes from a farming family in rural South Australia. In the past he has had an interest in his family’s farming property. There is no dispute between the parties that around the middle of 2000, the husband sold his interest in the family farm to his brother for the sum of $500,000.00. The circumstances surrounding this sale will be examined in greater detail later. However as a consequence of the sale a trust was established entitled the P M Family Settlement (“the trust”).
The settlor of the trust was an accountant A C D and the trustees were the husband’s brother and cousin, P L M and L P M respectively. The corpus of the trust was a sum in the vicinity of $280,000.00. The primary beneficiaries of the trust are, amongst others, the husband himself and his children.
Both parties have sought reviews of the administrative assessment of child support payable by the husband. In the context of these proceedings the relevant determinations are as follows:
i)Decision of Senior Case Officer S made on 17 July 2000;
ii)Decision of Senior Case Office P made on 13 August 2001.
Both parties sought to review each of these decisions pursuant to the provisions of Part 6A of the Act. However the decision in each case was confirmed.
The decision of Senior Case Officer S was that from 1 July 1999 until 31 December 2001, the husband’s income for child support purposes be fixed at $55,000.00. During the hearing before Senior Case Officer S there was no reference made by either party to the husband’s disposal of his interest in the family farming property to his brother. There was however reference in the decision to the income said to be produced by the property and distributed to the husband. This was in the context of the wife’s objection to the then administrative assessment on the basis that it did not properly reflect the income, earning capacity, property and financial resources of the husband. In that context Senior Case Officer S said as follows:
“It is the case that he (the husband) has an interest in a farming property with other members of his family. I accept by reference to his evidence and documents produced, that his income from that property is so close to Nil as to be disregarded. He and his partners are redeveloping the property which has pasture problems. I accept that for all present purposes it is appropriate to ignore any income he nominally receives from the partnership. Indeed, any income nominally received will not be received by him by way of “cash”.
On that basis the senior case officer determined that only the husband’s income from his employment as a radio announcer should be regarded as income for the purposes of assessing the husband’s child support income. Senior Case Office S found that this was an amount of $55,000.00. Previously it had been $76,792.00, reflecting income nominally distributed to him from the farming property. Senior Case Office S found that the husband had no capacity to pay child support calculated by reference to this sum and further that he had incurred special costs in relation to H J, a child with special needs. As a result of the change of assessment, arrears of child support that had accrued to the husband were discharged.
The decision of Senior Case Officer P was that from 5 June 2001 until 31 December 2002 the child support income of the husband be fixed at $70,000.00. On this occasion it was the wife who sought a change to the administrative assessment of child support. The ground on which she sought to change the assessment was that it did not properly reflect the income, earning capacity, property and financial resources of the parties. By this time it was known to her that the husband had disposed of his interest in his family’s farming property and that the trust had been established. This was the primary reason that the wife brought her application and it was in this context that Senior Case Officer P said as follows:
“Mr M provided to me a group certificate for his broadcasting employer showing a gross payment of $56,842 for the 00/01 year. He indicated that he received $300 in voice-over work for a lounge company and another $1,650 for a communications company in the 00/01 year. He said he had done only one job for $75 with the communications company in the current financial year and did not envisage doing any additional voice-over work this year. This was because his conditions of employment with this broadcasting employer had changed. He was working 44 hours a week and had significant responsibilities over and above his on-air duties. He stated categorically that there was no possibility of any performance bonus for the past financial year.
Mr M informed me that his brother had bought a share of the family farming property paying him $500,000. Out of that money he retired a debt to the family partnership of $65,000 and paid off his house ($140,000) and his car ($15,000). The net figure of $280,000, he donated to a family trust. He said the purpose of the trust was for the children’s education. He was unable to receive any income from the trust. It had invested in a range of investments. Mr M acknowledged that it would be some time before the children were receiving money from the trust for the purpose of their education. He suggested the children would go to a private school. Ms M thought that a private school was unlikely for H J in particular because of his special needs. He currently attends East Adelaide Primary School. The Trustees were Mr M’s brother P and his cousin L M. In his written response, he indicated that one purpose of the trust was that:
“it also quarantines the asset from S M, the other parent”.
Mr M said he decided to get out of the farming property and made a decision not to earn money for himself. His brother P thought it would be useful for him to save money for the children. He acknowledged that part of the reason for the trust fund was to quarantine money from Ms M. As a result of his decision, Mr M had no mortgage and no car payments thus saving $900 and $360 a month respectively. He also acknowledged that he supported his wife who worked almost full-time, 9.00 am to 4.30 pm 9 days per fortnight. He acknowledged that his expenses as listed in his response were expenses of the household.
In the previous decision dated 17 July 2000, Senior Case Office S referred to Mr M’s farming property and accepted that his income from that property was so close to Nil as to be disregarded. At that time, Mr S accepted that the partners were redeveloping the property which had pasture problems.
There has been a significant change since that decision. Mr M has chosen to sell the property, apparently for a net profit of $435,000. He has paid off his house and his car. More significantly he has donated an asset of $280,000 to a trust, thereby making a voluntary choice to deprive himself of income. This has a direct effect on his child support liability. I accept that he may well have modest deductions to offset against his group certificate gross payment of $56,842. However, with a net asset of $280,000, even investing cautiously, I consider he could have earned $14,000. As well, he has the benefit of significantly reducing his ongoing expenditure, having paid off his mortgage and car loan. I am satisfied that Mr M’s income, earning capacity and financial resources are not properly reflected in his current child support income.”
For these reason Senior Case Officer P determined to set the husband’s child support income at $70,000. This figure was based on an income from the husband’s employment as a radio announcer of $56,000 and $14,000 which Senior Officer P calculated would be the return from a sum of $280,000 which had been conservatively invested.
It is agreed between the parties that H J is a child with special needs, although there is no consensus between them as to the extent of those special needs and what approach should be taken to them. H J was diagnosed, when he about six years of age, as suffering from Asperger’s Syndrome, which is a form of autism. This confirmed an earlier diagnosis made when he was aged about three. It is the husband’s position that H J’s difficulties are over-stated and for that reason he has sought that a fresh assessment be made of H J.
It is the wife’s position that, as a result of his difficulties, H J needs to attend a number of activities, including after school and vacation care. He also attends a chess class. There are costs associated with all of these activities. In addition it is her position that Z M also has special needs because of H J’s interactions with her and as a result she too has to attend a number of activities, which results in costs being incurred by the wife.
The issues
It is the wife’s position that at the time of the decision by Senior Case Officer S made on 17 July 2000, the husband had already entered into the arrangements to sell his interest in the family farming business – a fact of which neither Mr S nor she was aware at the time. Accordingly, the wife asserts that, at that time, there was no proper basis on which Mr S could have concluded that the husband had neither the capacity to pay the arrears that then stood nor that the husband was unable to continue paying child support at the rate that had been previously assessed up to that time. It is therefore her position that there should be a departure from the assessment of Senior Case Officer S for the period from 1 July 1999 until the commencement of the determination of Senior Case Officer P. She asserts that the child support income of the husband should be fixed at $71,000.00 for this period, a sum slightly in excess of the sum she originally sought in her form 63 application. This being a proper reflection of the income, property and financial resources of the husband at the time, particular his interest in his family farm and it subsequent realisation into the sum of $500,000.00 around the middle of 2000.
It is the wife’s position that in respect of the period from 6 June 2001 until 31 December 2002, the period covered by the determination of Senior Case Officer P, the correct child support income is the figure of $70,000.00 as fixed by the Senior Case Officer.
In her form 63 application, in addition to the alteration of the husband’s child support income as the basis for the calculation of child support payable by him, the wife has also sought an order that the husband pay the sum of $400.00 per week or “such further or other sum as may be ordered …on account of the educational expenses of the children”. As the evidence unfolded there appeared to be no evidentiary basis for the selection of the sum of $400.00 per week. I suspect that the sum related to possible private school fees for the children. However in final submissions, counsel for the wife indicated that his client sought an assessment that the husband pay “all of the children’s school fees, all of the children’s school book and excursion costs, all of the children’s uniform costs, Z M’s Joey subscriptions and expenses, including uniform costs, the costs of Z M’s attendance at choir, the costs of H J’s attendance at chess and the children’s orthodontic, medical and dental expenses”. The wife gave some evidence in respect of these expenses in her evidence, which I will set out in due course.
The wife also seeks such a departure order in similar terms for each subsequent child support year from 1 January 2003 onwards. This period will conclude when Z M becomes eighteen – that is on
31 January 2013. Obviously it is impossible to attribute a dollar value to such a departure order for such an extensive period. Indeed it is still uncertain which schools the children will attend and what the likely costs of that will be. The husband, in his evidence, indicated a willingness to pay such costs if he was presented with evidence that the expenses had been incurred.
It is the husband’s case that his interest in his family farming property, both before and after it was realised, has been properly taken into account in the deliberations of both Senior Case Officers S and P and accordingly it is not appropriate for there to be any departure from the currently prevailing determinations.
It is also the husband’s case that the type of expenses in respect of which the wife relies to found her application for departure are standard expenses associated with the care of children and as such do not justify a departure from the existing determinations.
The husband is critical of the manner in which the wife’s claim was originally framed and in particular her application for a departure allowing her the sum of $400.00 per week or such other sum as assessed by the Court in respect of these education expenses. It is the husband’s position that the wife has been deliberately disingenuous in the way in which the claim has been presented and the sum sought bears no resemblance to the reality of the current situation of the children concerned.
The law
These proceedings are governed by the Child Support (Assessment) Act. Pursuant to section 3 of the Act the parents of children have the primary duty to maintain their children. This duty has priority over all other commitments a parent may have, other than the necessary commitments to enable the parent to support him or her self, or any other child that that parent may have a duty to maintain.
The objects of the act are described in section 4(2) as being intended to ensure:
“4(2)
that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
that the level of financial support to be provided by parents for their children should be determined in accordance with the legislatively fixed standards; and
that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them;….”
The Commonwealth Parliament has seen fit to allow parties to negotiate outside of the confines of the Child Support (Assessment) Act and also to enable the Courts, in special circumstances, to depart from the administrative assessment of child support.
The provisions relating to departure are contained within Division 4 of Part VII of the Act. There are additional particular objects of this division outlined in section 114 which 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 of their parents; and
that parents share equitably in the support of their children.”
The provisions of section 117 of the Child Support (Assessment) Act empower a Court to make an order for departure from administrative assessment in special circumstances. Section 117(1) provides as follows:
“ (i) that in the special circumstances of the case one or more of the grounds for departure outlined in section 117(2) exist before a Court can make an order for departure;
that under section 117(1)(b)(ii) it would be just and equitable, as regards the child, the carer entitled to the support and the liable parent,
that it would be otherwise proper to make a particular departure order.”
If these three conditions are satisfied then the Court should make the departure order sought.
In Savery and Savery (1990) FLC 92-131 Kay J said that “special circumstances” were “facts peculiar to the particular case which set it apart from other case”.
In the Marriage of Gyselman (1992) 15 FLR 219 at 225 the Full Court of the Family Court said as follows of the phrase “special circumstances”:
“Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.”
Section 117(2) of the Act sets out the various grounds for departure. It is not necessary to outline each of the various grounds available other than to say that in the present case the wife relies on the following grounds:
2)That in the special circumstances of the case, the administrative assessment has resulted in an unjust and inequitable determination because of the income, earning capacity, property and financial resources of the husband – section 117 (2)(c)(i).
Although she does not specify it explicitly as a ground in her application it seems clear that the wife also relies on the special needs of the children, particularly H J as a ground on which to found a departure application namely
That in the special circumstances of the case, the costs of maintaining the child are significantly affected by the special needs of the child – section 117(2)(b)(i)(B).
After considering these various basis for departure and whether or not in the special circumstances of the case it is appropriate for a departure order to be made, the Court must then consider section 117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought.
Section 117(4) of the Act reads as follows:
“117(4) 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 a particular order under this Division, the court must have regard to:
the nature of the duty of a parent to maintain a child (as stated in section 3); and
the proper needs of the child; and
the income, earning capacity, property and financial resources of the child; and
the income, earning capacity, property and financial resources of each parent who is a party to the proceedings; and
the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
himself or herself; or
any other child or another person that the person has a duty to maintain; and
direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
any hardship that would be caused:
to:
the child; or
the career entitled to child support;
by the making of, or the refusal to make, the order; and
to:
the liable parent; or
any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.”
Finally it is necessary for the Court to consider section 117(5) and determine where or not it is proper to make the departure order.
Section 117(5) reads as follows:
“117(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
the effect that the making of the order would have on:
any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.”
In Gyselman (supra) the Full Court of the Family Court said at page 240 as follows:
“As we have already indicated, the exercise under section 117 involves three steps. The first, which we have already examined, is whether one or more of the grounds in subsection 2 has been made out. The legislation then requires the court to consider whether any proposed order is “just and equitable” and “otherwise proper”.
It is clear therefore that each of these three steps must be addressed by the court as a separate issue, namely:
1)Whether one or more of the grounds of departure in section 117 is established, if so:
2)Whether it is just and equitable within the meaning of section 117(4) to make a particular order;
3)Whether it is otherwise proper within the meaning of section 117(5) to make a particular order.
Further, from a consideration of the case of Hides v Hatton (1997) FLC 92-759 it is clear that the court must follow this three step process in respect of each year for which a departure order is sought.
The evidence
The parties have apparently been engaged in litigation of one sort or another with each other for many years. The conflict between them has become deep and entrenched. As a result they have become deeply suspicious of each other. Sadly they are unable to communicate readily with one another. In these circumstances it is hardly surprising that they each harbour grave reservations concerning the motivation of the other in respect of any action taken in respect of the children or the provision of financial support for them. The husband characterises the wife as grasping and avaricious. The wife characterises the husband as disingenuous and mean in respect of the provision of financial support for the children.
Although the parties harbour a deep suspicion of one another and mistrust everything the other says, I found each of them to be a pleasant person and generally I found each of them to be a truthful witness. However there can be no doubting that each of them, but particularly the wife, is blinded by what he or she sees as the righteousness of their respective cause.
In these reasons for judgement, findings of fact are made on the balance of probabilities, having regard to the evidence, and my observations of the parties. In what follows, statements of fact constitute findings of fact.
a) The wife’s evidence
The wife is currently engaged in home duties. As a result her major sources of financial support for herself and the children is social security payments and the child support she receives from the husband. Her total income is $570.00 per week. She owns a car worth $10,000.00 and has a modest portfolio of managed investments worth $9,658.00. She is currently living in rented accommodation. Her rent of $230.00 per week along with her food purchases for herself and the children of $150.00 per week form her major recurrent expenses. On any view she is not in a strong financial position. There can be no doubt that the vast majority of the funds that she received on the settlement of the parties’ matrimonial property have been consumed.
The wife has not been in regular paid employment since 1990. She quite frankly admitted that she is not currently seeking work and has no plans to do so. In the past she has made craft items for sale in her garage which she has sold to nurseries and the like. At the present time it is her position that the needs of the children, particularly H J preclude her from seeking employment outside the home. However she is currently studying nursery practice at a local Agricultural School. The fact that the wife has not sought work is a major bone of contention between her and the husband. It being the position of the husband that the wife would rather pursue him for money rather than work herself. It is the wife’s position that as a result of H J’s special needs and the consequences of those on Z M, she is not able to work.
As has already been indicated, H J has been diagnosed with Asperger’s Syndrome, which is a form of autism. As a result H J does not interact with other children easily. He has had difficulties at the schools he has attended up until now. Originally he was attending a private school but it was thought that he might be more suited to a public one. Both he and Z M are currently attending the East Adelaide School. However, from the mother’s perspective it has been far from smooth sailing as far as H J’s attendance at East Adelaide is concerned. Her evidence was that H J is frequently sent home from school due to problems with his behaviour. It is her position that it is essential that she be home to attend to him when this occurs. Needless to say the occasions when he is sent home cannot be predicted. H J enjoys playing chess. As a result he attends a chess club regularly.
It is the wife’s position that, due to his condition, H J attempts to dominate Z M and as a result Z M needs to attend activities on her own. These include membership of a choir and attending calisthenics and Joeys. It is also her position that she and Z M need “time out” from time to time and as a result it is necessary for her to have respite care and for H J and Z M to attend vacation and after school care from time to time.
Much of the wife’s evidence was taken up with details of her expenses in respect of H J and Z M’s extracurricular activities and the cost of care for them.
The school fees in respect of the children are currently $350.00 for each of them per annum. This fee will increase by $15.00 next year. The children also have uniform expenses related to their attendance at school. The children each require a minimum of 2 long sleeve polo shirts, 2 short sleeve polo shirts, 3 pairs of shorts, a hat and 4 windcheaters each year. Z M requires a number of gingham school dresses each year. The cost of these items is in the vicinity of $366.00 per child per year. H J attends a chess club. This costs $20.00 per term. Both H J and Z M have also attended a number of school camps. These cost between $75.00 and $100.00 each. There is one camp each term.
Respite care is provided to the mother by the Carer Support and Respite Centre at no cost to her. This is not the position in respect of vacation and after school care. H J attends at vacation care on three days out of every five. The children attend excursions on two occasions each week. These cost up to $20.00 each. After school care costs $1.90 per session per child. At present, between them, the children attend four sessions a week. I calculate this at a total cost of approximately $300.00 per annum. Vacation care would be in the vicinity of $480.00 per annum. It is the wife’s case that, due to H J’s special needs it is appropriate that he attend afternoon care and vacation care and that these are activities that he enjoys.
Z M’s extra curricular activities are choir, Joeys and calisthenics. Joeys’ fees are $148.00 per term. There are camp and uniform costs on top of this. Z M’s attendance at calisthenics costs up to $350.00 per annum. This includes the cost of classes, costumes and equipment hire. Choir costs $40.00 per year.
Z M apparently requires some orthodontic treatment. No details of the anticipated cost of this treatment were provided.
Even the most cursory tabulation of these figures indicates that they do not total anywhere near the sum of $400.00 per week. However during the course of her evidence, the wife indicated that she sought the sum of $3,000.00 per annum for each child to cover these expenses in addition to the child support that had been paid to her to date. She sought these sums from the date of each child’s commencement of school, which in H J’s case was 1997 and Z M’s case was 1999.
b) The husband’s evidence
It is the husband’s position that the current child support assessment and the previous ones as determined by Senior Case Officers S and P reflect an appropriate level of financial support to be provided for the children by him and properly reflected his financial position both before and after his interest in the family farm was realised.
However, in addition the husband gave evidence, which I accept, that he also had bought some items of uniform for each of the children. He also indicated that he was prepared to pay the full cost of any orthodontic treatment required by Z M as well as her subscription and other expenses related to Joeys, her attendance at choir and callisthenics and all her expenses related to school fees, uniforms and provision of books for school at East Adelaide. He was also willing to pay H J’s school, uniform and book fees as well as necessary excursion costs and the cost of chess. However in the circumstances he did not regard it as reasonable that he make any financial contribution toward after school or vacation care as the wife was not in full time employment and accordingly was available to care for the children at these times.
The husband is employed as a radio announcer by the A R N. His currently weekly income is $1,061.25 before tax. I accept his evidence that he works standard office hours and no overtime or other professional engagements, particularly voice over work, are currently available to him. In the past he has had some limited work from doing voice overs for advertisements, however he is not entitled to any “residual” fee in respect of these advertisements. I accept that at the present time he does not have capacity or time to seek out any such engagements as he is fully occupied in his current position.
The husband shares his home with his present partner, Ms E. She works part time for a bank and receives a weekly salary of $210.00 net per week. The husband conceded that he paid all the household expenses in respect of himself and Ms E. He also assisted her with the purchase of a second hand 1986 mercedes motor car worth $12,000.00.
The circumstances surrounding the establishment of the P M Family Settlement is the central issue in this case. It is the husband’s evidence that prior to the realisation of his interest in the family farming property he was being “squeezed” financially as he was deeply indebt and as a result was struggling to pay the necessary child support that he had been assessed to pay. His brother was aware of the situation and it was in those circumstances that the offer came from him to the husband to transfer his interest in the family farm to other members of his family. It is the husband’s evidence, which I accept, that this transaction was subject to a number of conditions. Firstly that the husband would immediately reduce his level of personal debt so that he could more easily manage his financial affairs, particularly child support. Secondly that any cash balance would be secured in such a way that it would not be accessible by the husband himself but rather would be placed in a form in which it could be used to benefit his family, particularly H J and Z M. The husband very frankly in his evidence indicated that one of the attraction of the trust arrangement was the funds made available from the sale of his interest in the farm would be “quarantined” both from his own financial lassitude and also from any possible claim on it from the wife. The husband himself is a potential beneficiary of the trust.
It is the husband’s evidence, which I accept, that prior to the establishment of the trust, he received no actual payments of income directly from the family farming business and that any distributions of income to him from this source were purely nominal. However the amounts were included in his tax returns from time to time. Accordingly it is his position that his only source of income at all relevant times has been his income from his employment as a radio announcer. The husband’s group certificate for the year ending
30 June 2000 indicates an income of $58,390.00 was received from his employers for this period. From this sum he was able to claim the deduction of some expenses incurred in earning his income for that year. I also accept that he was nominally distributed the sum of $16,354.00 from the farming business resulting in an income of $65,891.00.
I accept his evidence that at all relevant times this income was an amount in the vicinity of $56,000.00 per annum and that this sum is reached by allowing some deductions and disregarding the farm income. This was essentially the finding of Senior Case Officer S in respect of the period from 1 July 1999 to 31 December 1999.
The tension that is created by this evidence is that subsequently the husband was able to sell this asset that had produced no discernible income for him to his brother for the not inconsiderable sum of $500,000.00. This transaction was concealed from the wife and was not disclosed to Senior Case Officer S at the time of the conference on 4 July 2000, although I have no doubt that it was well in train by that stage. Certainly the husband had received an offer to purchase his interest in the farm from his brother. In those circumstances and particularly in light of the high level of mistrust between the parties, it is hardly surprising that the wife should regard the entire transaction with a high degree of scepticism. This is especially when one of the principle reasons the transaction was structured in the way that it was, was to quarantine the funds from her. I find it difficult to accept that the husband did not think that the transaction was relevant to the question of child support. He after all was directing, with the assistance of his brother, the dispersal of the sum of $500,000.00. Certainly the wife subsequently considered it to be so once she became aware of it. I have little doubt that the husband was well aware once the wife became aware of the transaction, if indeed she ever did, that this would indeed set the “cat amongst the pigeons”.
The husband was at pains to portray himself as not a particularly sophisticated businessman. His evidence was that the transaction was the sole idea of his brother and his brother took all the necessary steps to put the transaction together. It was also his evidence that the transaction was very much subject to the stipulation imposed by his brother that the proceeds of sale be used to retire his personal debt and for the purposes of setting up a family trust. However there can be little doubt that this option was chosen as a means of securing the funds, as far as possible, from any possible claim by the wife.
The husband might not have been aware directly what form this possible claim would take. However, given the antipathy between the parties, there can be no doubt that the husband anticipated some form of claim against the proceeds of sale and was at pains to defeat it far as possible. Although I did not hear evidence from the husband’s brother, I have no reason to believe other than that he shares the husband’s antipathy for the wife. Although I accept the husband’s evidence that the transaction was conceived by his brother, I have no doubt that he understood its practical ramifications and acquiesced with them. I also accept his evidence that part of the appeal of the scheme was to put the funds out of his own personal reach for his own financial protection.
The husband was not aware of the specific date on which the contract for the sale of his interest in the farm was actually executed. The document bears the date 30 June 2000. The husband believes that the contract was backdated. At any event there is no doubt that the husband began to receive the proceeds of the sale from 3 August 2000 onwards. He paid off the mortgage on his home of $137,286.39. He paid off his motor car loan of $14,202.15. He repaid his mother the sum of $5,191.52 in respect of a debt he owed her. He paid off his credit card debt of $5,653.23. He paid of a personal loan of $6,980.00. He paid off his debt to the partnership that operated the family farm and of which previously he had been a partner.
There can be no doubt that this transaction substantially transformed the financial position of the husband. He became almost debt free over night and the number of demands on his income from his position as a radio announcer was dramatically reduced. There now can be no doubt that he is substantially more financially secure than the wife. The sum of at least $169,313.29 passed through his hands in a few days. He now has assets to the value of $223,961.95, in the main consisting of his home worth $200,000.00; his car worth $13,000.00 and some investments. He has accrued superannuation amounting to $40,365.55. He has moderate debts of $27,000.00. Some of this debt relates to the cost of legal fees arising out of these proceedings.
The corpus of the trust amounted to shares and cash to the value of $291,604.28. The trustees of the trust are the husband’s brother and cousin. The evidence indicates that no portion of this sum has as yet been directed by the trustees in such a manner as to directly benefit either H J or Z M. However, in the past, following the decision for Senior Case Office P, the trustees have paid the husband the sum of approximately $400.00 per month in order to enable him to pay the difference between his level of child support as previously assessed and the level of assessment following this decision. The husband rather coyly suggested in his evidence that the trustees “would look favourably” at any suggestion from him regarding payment of future school fees or orthodontic expenses. Certainly at the present time the husband is considering enrolling both children in private schools, although I do not know what the attitude of the wife is to these proposals. I think that I would be naïve if I did not think that the husband would be able to strongly influence both his brother and his cousin in respect of the future disposition of any of the trust funds. The husband himself is a beneficiary to the trust.
However, in the circumstances of this case I accept that the trust was established, as the husband has indicated, as a means of providing the children in future with a private education and, if appropriate, to enable them to attend university. I do not believe that the trust was a sham as far as this aim was concerned. However the husband and his brother were both at pains to ensure that the wife was kept as isolated as possible from any decisions concerning the future financing of these matters. This may do the husband no great credit, but in the circumstances of this case, it is understandable.
One of the paradoxes of this case is that although the children have not as yet directly benefited from the trust, there is no doubt in my mind that they will so benefit in future. In that sense the trust was set up, not as a means of avoiding paying sums for the benefit of the children, but rather as a means of avoiding paying child support to the wife for use by her as she saw fit. This situation speaks eloquently of the suspicion between the parties.
This leaves two major issues to be determined in the case. Firstly how are the various sums that went through the husband’s hands around August of 2000 and which so radically transformed his financial position, to be regarded for child support purposes. Secondly what are the consequences for the assessment of child support of the trust, which in a legal sense is not controlled by the husband but which was created as a result of the sale of an asset previously owned by him. It will also be necessary to look at the position prior to 30 June 2000 and the period of time covered by the first decision of Senior Case Officer S.
Application of the law to these facts
It is necessary for me to follow the three-step departure process in respect of each period in respect of which a departure is sought.
a) Departure application for the period from 1 July 1999 –
5 June 2001
Although the wife’s application speaks of the child support assessment for the periods from 1 July 1999 – 28 February 2000 and for the period from 1 February 2000 – 5 June 2001, the decision of Senior Case Officer S was for the period from 1 July 1999 until 31 December 2001. However this determination was modified by the decision of Senior Case Officer P which dates from 5 June 2001. Accordingly I propose to deal with this period which straddles the period before and after the sale of the husband’s interest in the family farm around the middle section of 2000. Although for obvious reasons the determination does not differentiate between the two periods, there is an obvious distinction between them.
Although the wife’s application does not specify as such, I take it that she relies on both the grounds that H J has special needs and that the assessment of Senior Case Officer S does not properly reflect the income, property and financial resources of the husband both before and after the sale of his interest in the farm. The first step that is incumbent on the wife is for her to establish that there are special circumstances in this case that warrant the departure from the assessment on the basis of either of these grounds.
It is the wife’s case that such special circumstances existed both before and after the sale of the husband’s interest in the farm. The special circumstances on which she relies, which she contends take this case out of the ordinary, are the circumstances surrounding the sale by the husband of his interest in the family and that firstly he received a considerable sum of money to discharge his debts and secondly the decision that was made to inaugurate the family trust with it corpus of capital in the region of $290,000.00. By implications she argues that at the time of the decision of Senior Case Officer S, which resulted in the cancellation of an amount of arrears, the husband had the capacity to pay these arrears.
I do not agree in respect of the period from 1 July 1999 until the end of June 2000 that such special circumstances existed. I accept in this period that, although the husband had an interest in a piece of property that he was subsequently able to realise for a substantial sum of money, this property did not in fact produce for him any income in addition to that on which Senior Case Officer S based his decision. The fact that subsequently this asset was sold and realised the significant sum of money that it did, does not in my view amount to special circumstances. Certainly not on a retrospective basis. Similarly, it is in my view irrelevant that the wife feels aggrieved that the asset was not given more significance in the property proceedings.
The wife also relies on the fact that the husband has indicated in his evidence that he would be willing to pay many of the expenses relating to the children in respect of which the wife seeks reimbursement as amounting to special circumstances. I do not agree. In my view it is not uncommon for parents to pay willingly many expenses of a comparatively minor nature independently of any relevant child support payment. The willingness of the husband to pay the children’s school fees, their orthodontic expenses and the fees related to their extracurricular activities such as chess and callisthenics does not take the case out of the ordinary run of the mill cases. I agree with the submission made on the part of the husband that these are not special expenses but rather can be regarded as standard expenses that are routinely incurred in respect of children of Z M and H J’s ages and background. Certainly I do not believe that it can be established that these expenses related specifically to the special needs of H J in particular, or of Z M, by reference to her relationship with H J. Similarly I do not agree that the expenses that the wife has incurred in respect of after school and vacation care amount to special circumstances that would justify a departure from the relevant administrative assessment for the period prior to 30 June 2000. In my view it would not be reasonable to say that such special circumstances existed in the light of the fact that the wife has indicated that she has chosen not to seek work so as to be able to be at home to be able to attend to both H J and Z M on a full time basis.
The position is somewhat different after 30 June 2000. At this stage the husband’s plans to realise his interest in the family farming property were well advanced. The parties concerned chose to date the relevant contract of sale with this date as the date on which the transaction was completed. The wife is right to be suspicious of the husband for concealing the transaction from her and from Senior Case Officer S at the conference of 4 July 2000. I think it would be naïve for the husband to think otherwise than that the transaction had great significance in respect of the assessment of his child support. Certainly, he must have known that the wife would consider it as relevant and after all, one of the reasons he decided on the arrangement was so as to make his child support easier to pay by reducing the level of his recurrent debt. This radical change of his circumstances was not reflected in the relevant child support assessment between 30 June 2000 and the 5 June 2001, when Senior Case Officer S’s determination was amended by the subsequent assessment of Senior Case Officer P. For this period, I accept that special circumstances exist to justify a departure from the assessment for this period of a little under a year as, for this period the relevant assessment did not reflect the husband’s income, earning capacity property or financial resources of the husband. There is an artificiality in the fact that Senior Case Officer P’s assessment begins approximately one year after the radical transformation in the financial circumstances of the husband.
I suspect that the wife feels greatly aggrieved at what she sees as the disingenuousness of the husband in concealing the sale of his interest in the family farm from her. I also suspect that she feels in some way cheated that what was described as being essentially a worthless asset to Senior Case Officer S and which was perhaps taken as such by her in the matrimonial property proceedings, was subsequently able to be sold for such a significant sum.
It is not the purpose of these proceedings to look behind the matrimonial property proceedings between the parties. I accept the husband’s evidence that it was a condition of the husband’s sale of his interest in the farm to his brother that the husband should retire his then current level of debt. The consequences of this were that the husband paid off the debts on his home and car. He argues that he was able to do this as a consequence of capital that he received following the matrimonial property settlement in the form of his share of the family farm. It is his position that after the sale of this interest, his assets or income did not change in value significantly but rather changed their form. In my view this argument cannot be sustained. In my view the change in circumstances of the husband was dramatic. He went from having an asset that essentially produced him no income to one which could be used to significantly reduce his level of debt. There can be no doubt in my mind that following this event he was significantly better off.
The next step that must be considered in respect of this period from
30 June 2000 until 5 June 2000 is whether it would be just and equitable to make a departure order for the period concerned. It is the husband’s position that for the entire period concerned that he has been essentially a salary earner and that the reduction of his level of debt has not changed the level of income that he has received, rather it has made it easier for him to pay the required child support. It is his position that his capital has been reasonably and prudently placed into providing him with a secure home to live in and a car to drive. In essence it is his position that he has not contrived his affairs to deprive himself of income but rather he had taken steps to make it easier for him use his recurrent income for child support purposes.
In my view it would not be just and equitable to make the departure order for the period from 1 July 1999 to 5 June 2001 that the wife seeks. I accept that although considerable sums have passed through the husband’s hands in the period and his level of debt has fallen dramatically, the fact remains that his actual income has remained static. It is on the basis of that income that his child support debt has been calculated. The money that he has received has been used to pay off debt. This was not a case where income that the husband might otherwise have received has been channelled into assets as a means of defeating a child support assessment. At the present time the husband does not have any asset that he could easily realise to pay any retrospective assessment of child support for the period. In my view it would be unfair to require him to pay such arrears when otherwise, on the basis of the income he actually received, he has paid a not inconsiderable amount of child support. Accordingly, for these reasons, I am of the opinion that the wife’s application for this period must fail.
b) Departure Application for the period 5 June 2001 – 31 December 2002
This is the period covered by the determination of Senior Case Officer P. Clearly the Senior Case Officer was aware of the arrangements that the husband had entered into in respect of the sale of his interest in the family farming property and as a consequence of them made adjustment to the earlier determination of Senior Case Officer S.
Although, in her application for departure, the wife speaks of seeking an assessment of child support based on an child support income of the husband of $70,000.00, in final submissions she sought an assessment based on a child support income of $71,000.00. The special circumstances on which she sought to rely for this period are the same as those set out earlier.
In my view, in respect of this particular period no such special circumstances exist. Senior Case Officer P did factor into the assessment the fact that the husband had divested himself of a large sum of money that had the potential to earn him a regular and calculable amount of income for the period concerned. In that sense the Senior Case Officer did look behind the trust. It is not within the power of the husband to direct that the trust be dissolved and its assets used in another way. In those circumstances it is difficult to see what other course could have been adopted by the Senior Case Officer other than to do what was done, that is make some assumption in respect of the level of income that such a sum would generate and impute that income to the husband.
Nor do I believe that the fact that the husband received a significant sum of capital from his sale of his interest in the family farm and used this sum to reduce his level of personal debt in respect of his home and motor car amounts to such special circumstances. The fact remains that the exercise did not result in the generation of any additional income for the husband which was received directly by him. Without doubt the wife is critical of the financial legerdemain involved in the exercise. But throughout it, the husband remained an employed radio announcer receiving a salary and it is on the basis of that salary that his child support has essentially been based. The wife may feel that it is unfair that the husband is now significantly better off than he was previously and that perhaps an asset that was under valued in other proceedings has proven to have greater value than was otherwise thought. However the fact remains that the husband’s income has remained static throughout the relevant period. In my view it cannot be said that the husband has used the cash that he received directly from the sale of the farm in a manner calculated to defeat the child support assessment. In fact the contrary is the position.
For reasons already provided I am not of the view that the fact that the wife has incurred expenses of the type that have set out in respect of H J and Z M and the fact that the husband is willing to pay the vast majority of them are such as to take this case out of the ordinary run of cases. Nor do I think is the fact that the husband substantially supports his current partner financially at the present time.
Even if I had have been of the view that special circumstances existed in this case in respect of the period concerned, I would have been of the view that it would have been inequitable to depart from the current assessment. In my view it would have been patently unfair to recalibrate the assessment on the basis of a difference between $70,0000.00 and $71,0000.00. The distinction in the overall circumstances of this case is small indeed.
c) The period from 1 January 2003 – onwards
In respect of the period from 1 January 2003 to 31 January 2013, the wife seeks an order that the “in addition to any administrative assessment of child support the husband pay all of the children’s school fees, all of the children’s school book and excursion costs, all of the children’s uniform costs, Z M’s Joey subscriptions and expenses, including uniform costs, the costs of Z M’s attendance at choir, the costs of H J’s attendance at chess and the children’s orthodontic, medical and dental expenses.”
In my view there is a certain level of artificiality, in the circumstances of this case of prescribing all of these payments for the next ten years. As I have found there is nothing extraordinary about the current payments for such matters as Joeys, chess and callisthenics to justify a departure from the current level of administrative assessment. In any event there can be no certainty about whether either child will continue in their current activities. The level of expense involved in Z M’s orthodontic treatment is not known and in any event the husband has indicated a willingness to pay the expense involved and I have no reason to disbelieve his undertaking in this regard.
At this stage it is uncertain what the future cost of H J and Z M’s education will be. It seems clear that the husband wishes both children to have a private education and that this will result in considerable expense. I am uncertain whether the wife will agree to the husband’s proposals in this regard or not. The husband may be criticised for acting independently of the wife in this regard. However that is not the point in these proceedings. It seems to me that the real issue between the parties is who of them will control the actual payment of the children’s future educational expenses.
I have no reason to disbelieve either the husband or his brother that their stated intention in establishing the trust was to provide for the future education expenses of the children. If the parties are able to agree on which school H J should attend, it seems likely that those expenses will start in the New Year. I have no reason to believe that the trustees of the trust will not agree to make the necessary payments involved. As I have said, one of the paradoxes of this case is that the trust was established to provide for the future financial support of the children rather than as a means of reducing its level. It seems likely that the husband will remain a wage earner for the foreseeable future and as such the level of his child support will be readily calculable together with any necessary imputations as a result of any income nominally attributed to him from the trust. However in future it will also be the case, I think, that the trustees will begin to make distributions from the trust in favour of both H J and Z M. This may be unpalatable to the wife. However, given these somewhat complicated circumstances, there exist, in my view, no special circumstances to warrant the making of such future departure orders as the wife currently seeks. How the trust deals with future education expenses for the children must necessarily determine what is the appropriate level of child support that the husband should pay. At this stage it is premature to make such determinations.
Accordingly, for all these reasons, I have formed the view that the wife’s application must be dismissed.
I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: Lynnette Chin
Date: 18 December 2002
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