M and M
[2002] FMCAfam 259
•1 July 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & M | [2002] FMCAfam 259 |
| CHILD SUPPORT – Whether mortgage payments on property the husband wanted to keep should be regarded as ‘necessary commitments’ pending the finalisation of property proceedings. Gysleman v Gysleman (1992) FLC92-289 16 FamLR 99 |
| Applicant: | R M |
| Respondent: | J M |
| File No: | (P)MLM 4201 of 2002 |
| Delivered on: | 1 July 2002 |
| Delivered at: | Melbourne |
| Hearing Date: | 24 June 2002 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr O’Shannassey |
| Solicitors for the Applicant: | Ryan Mackey & McClelland |
| Counsel for the Respondent: | Ms Smallwood |
| Solicitors for the Respondent: | McCarthy Hoey |
ORDERS
That the child support assessment dated 18 January 2001 for the period 1 July 2002 to 30 April 2003 be departed from and in lieu of the child support income amount of $113,542.00 the paying parent’s (the husband’s) child support income amount be fixed at $103,627.00.
That in respect of the child support assessments from 28 March 2001 to 30 June 2002, the paying parent (the husband) be given credit for non-agency payments of $936.00 per annum in relation to those periods.
That the Child Support Registrar forthwith make such adjustments to the register as are necessary to give effect to these orders.
That the application of the husband filed on 5 April 2002 be otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 4201 of 2002
| R M |
Applicant
And
| J M |
Respondent
REASONS FOR JUDGMENT
In this matter the husband has a child support application in relation to his two children aged eight and five. The husband's application is for a departure from administrative assessment of child support for various periods going back to 28 March 2001 and extending through to 31 July 2004. The basis of his application is that he is making various payments, such as mortgage loan repayments and health insurance, which should be taken into account to reduce his child support assessment.
Background
The husband and wife were married in October 1982. S was born in 1994 and L in 1997. The parties separated in September 2000. The children have lived with the wife in the former matrimonial home since separation and have contact with the husband. The parties are still litigating property issues and contact in the Family Court of Australia. The final hearing of those matters is likely to be towards the end of the year. Notwithstanding that those matters will be the subject of a hearing, if not resolved, later in the year, both parties wish this application to proceed as a discrete matter.
When the parties separated the husband was employed as a metallurgist by R Tinto. He ceased his employment with Rio Tinto on 28 February 2001. He then received the equivalent of approximately 11 months of total remuneration, $132,790 plus leave payments of approximately $34,137. These sums totalled $166,927. Tax on the total payments left approximately $125,000 net of which the husband had at the time of hearing approximately $73,000 remaining. The husband obtained another position almost immediately with Ausmelt Ltd in Dandenong. He indicated that he changed his employment so that he could be closer to the children and spend more time with them.
The assets of the parties at the date of hearing consisted of the following:
(a)the former matrimonial home at Merryknoll in which the wife and children are living;
(b)70 acres of land on two titles in the husband's name at Tynong North;
(c)Telstra shares;
(d)the husband's retrenchment package;
(e)the proceeds of the Nissan motor vehicle sold by the wife;
(f)furniture and chattels in the possession of both parties, including the horse float and trailer.
Both parties have some superannuation, but the husband has the more significant superannuation which totals approximately $262,000. The parties' liabilities consist of two loans; one of $256,000 which was the money borrowed to acquire Tynong North, and $29,000 for the Nissan car. Both are secured against the former matrimonial home. The repayments in respect of these loans are being made by the husband. It is the payments in relation to these loans that form the basis for the husband's application.
Child support assessments
On 2 November 2000, the husband was assessed by the Child Support Agency to pay $2084 per month for the period 31 October 2000 to
30 January 2002. For reasons which are contentious, the husband did not pay the amount of this assessment. He paid $1200 per month to the wife. It is common ground that he also paid:
(a)$446 per week being mortgage instalments to the National Australia Bank for Tynong North;
(b)$170 per month to the National Australia Bank for the Nissan Patrol motor vehicle;
(c)rates on Tynong North;
(d)family health benefit subscriptions with Medibank Private which total $158 per month.
In July 2001 the agency wrote to the husband informing him that the Wife had requested that they start collecting the correct assessable amount from him. When a liability is registered for collection, the agency are able to collect retrospectively for a period of three months pre-registration provided a liability existed at that time. The wife also requested them to be collected retrospectively for that three-month period.
On 2 July 2001 a second assessment for a monthly amount of $2084 was raised for the period 28 June 2001 to 30 January 2002. In August the husband received a third assessment for the period 31 October 2000 to 27 June 2001 for the same amount. Also in August 2001, the husband applied to the agency to be credited with non-agency payments. The payments he sought to be credited were the two mortgages and the rates and the health insurance premiums that he was paying. The agency would not credit the husband with these payments as the consent of the other party is required, and the wife did not agree.
Therefore, the husband made applications to the agency which ultimately provided the jurisdiction for a departure application to this court:
(a)On 20 August 2001 he sought a departure from the current assessment to $1200 per month.
(b)On 12 October 2001 in a written decision the agency reduced the child support to $1978 per month for the period 1 May 2001 to 30 June 2002. This reflected the husband's changed income. There was a fourth assessment for the same amount.
(c)The husband filed an objection pursuant to section 98X of the Child Support (Assessment) Act 1989.
The objection was dealt with by the agency. The decision was to confirm the existing assessment and reject the husband's application to have credited to him non-agency payments. That objection and the decision formed the jurisdictional basis for the husband's application for a departure made to this court. Two further assessments have issued since that time.
The first was because of a change in the exempt income amount. The second, which is the sixth and current assessment, is for the period 1 July 2002 to 30 April 2003 and is for an annual sum of $27,487. It is based on a child support income of $113,542 per annum. There are currently arrears outstanding to the agency as a result of the husband's failure to pay the full amount of the existing and past assessments. As at January this year, there was approximately $12,000 outstanding. The husband seeks a credit for $18,368.37 for payments made for mortgages and health insurance for the period 28 March 2001 to 3 March 2002.
Applications
The husband's application filed 5 April 2002 seeks to depart from the administrative assessment of child support pursuant to the provisions of section 117 of the Child Support (Assessment) Act 1989 for the following periods:
(i)to the sum of $621 per month for the period 28 March 2001 to 31 March 2002;
(ii)to the sum of $663 per month for the period 1 April 2002 to 30 April 2003;
(iii)to the sum of $663 per month in respect of the period 1 May 2003 to 31 July 2004.
(iv)thereafter in accordance with the Child Support (Assessment) Act.
Alternatively, the husband seeks that the sum of $18,368.37 be credited against his liability for child support for the period 28 March 2001 to 31 March 2002 and thereafter he pay child support for the children:
(a)for the period 1 April 2002 to 30 April 2003 in the sum of $663 per month;
(b)for the period 1 May 2003 to 31 July 2004 in the sum of $663 per month;
(c)thereafter in accordance with the Child Support (Assessment) Act.
At the commencement of the hearing an aide-memoire was handed up by the husband's counsel which indicated that as an alternative approach the court could adopt the formula which Kay J had applied in the case of Morrison v Morrison (1990) FLC 92-136. That formula, if applied, would provide for an assessment of $1446.24 per month.
There are two grounds on which the husband relies in support of his application. He relies upon section 117(2)(A)(iii)(a) that in the special circumstances of the case the capacity of the husband to provide financial support for the children is significantly reduced because of the commitments of the husband necessary to enable him to support himself. Secondly, he relies upon section 117(2)(C)(i) that in the special circumstances of the case the capacity of the husband to provide financial support for the children is significantly reduced because his income is less than the child support income amount used in the formula assessment.
The law
The provisions of the Child Support (Assessment) Act applicable in this case are to be found in section 117 of the act. Section 117(1) provides that:
“Where an application is made to the court for an order in the special circumstances of the case the court must be satisfied that one or more of the grounds for departure in subsection (2) exist and that it would be just and equitable as regards to the child, the carer entitled to child support and the liable parent and otherwise proper to make a particular order under this division.”
The criteria for determining whether it is just and equitable and otherwise proper are set out in section 117(4) and (5) of the act. Section 117(2), which sets out the grounds for departure, provides that the grounds, and in this case the ground relied upon by the husband, is as follows:
“that in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of commitments of the parent necessary to enable that parent to support himself or herself.”
Subsection 117(2)(C) provides that:
“In the special circumstances of the case, application in relation to the child of the provisions of this act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income earning capacity, property and financial resources of either parent of the child.”
The Full Court of the Family Court in Gysleman v Gysleman (1992) FLC92-289 16 FamLR 99 which is reported in (1992) FLC 92-279 has set out the three-stage approach that must be taken when considering an application for departure. First, the court must consider whether one or more grounds for departure in section 117(2) have been established. If so, the court must then determine whether it is just and equitable within the meaning of section 117(4) to make a particular order and thirdly, whether it is otherwise proper within the meaning of section 117(5) to make a particular order. The court must address each of those three separate issues.
Evidence
Many of the facts in the case were not in dispute; rather it was how the law should be applied to the facts. There was, at least , one contentious issue. The husband asserted that at a mediation between the parties in January 2001 the wife had agreed to accept $1200 per month directly from the husband and that the balance of the assessment, which was for about $2000 per month, would be met by the husband paying the wife's share of the mortgage for Tynong North and the car. The wife did not agree that the parties had reached this agreement. The husband conceded that there was no enforceable agreement which complied with the provisions of the Child Support (Assessment) Act 1989, but asserted that there was at least a moral agreement constituted by the fact that the parties at mediation had come to a consensus.
I find that there was no such agreement. The husband made a proposal to the wife to which the wife did not overtly reject. This, however, has to be seen in the context of the circumstances of the parties at that time. The wife had been attending mediation at his request and may have been in fear of him. The husband informed her that all he could afford to pay was $300 per month and the wife accepted this at face value. Her lack of resistance may have caused him to believe that he had an agreement, but it was never confirmed in writing and was never in any enforceable form. The wife did not seek to have the agency collect the correct amount from the husband until July 2001. Although the collection was backdated to March, the wife did not seek to enforce the assessment amount for any earlier period.
The wife's financial position
The wife's income consists of $200 per week from her salary as a part-time librarian. She receives $8 per week dividend from Telstra shares and $239 from Centrelink being a parenting payment and family allowance. In addition, she receives child support from the husband, but has no other income. She sets out the weekly expenses for the children as being $414 and her expenses as being $329 per week.
I find these expenses to be reasonable in all the circumstances. It is clear that after meeting her own necessary commitments the wife has little capacity to contribute to the support of the children.
At separation the wife retained the Nissan Patrol motor vehicle. The vehicle was traded in for $40,000 and she purchased a smaller car. From the proceeds of sale of the vehicle she purchased a Toyota Camry wagon for approximately $15,625. The balance of the proceeds of approximately $24,000 were retained by her. She has used these moneys to pay legal fees and to support the children since separation. There is very little of those funds available to her now. Both parties have spent a considerable amount on legal fees as a result of proceedings before the Family Court of Australia.
The husband's financial position
The husband's income is $100,152 from salary. In the current financial year he received an overseas allowance of $2700 and he has a car supplied with a fringe benefits tax value of $3475. When the husband received his redundancy payment it was approximately $125,000 net. Between March 2001 when he received it and June 2002 he has spent $52,000. He accounted for $26,000 in payment of his legal fees. He was unable to account with any precision for the remaining $26,000 which he said was spent supporting his living expenses and the loans he is making on behalf of the parties.
He asserted that his fixed monthly expenditure was as follows:
| Loan repayments | $2070.00 |
| Rent | $932.00 |
| Health Insurance premiums | $158.00 |
| Child Support | $1000.00 |
| Net income after tax | $5330.00 |
| Available funds | $1170.00 |
This leaves him with only $1170, that is, less than $300 per week on which to live and meet all other costs.
The parties appear to be ad idem that it appears likely that the wife will retain the former matrimonial home as part of the property proceedings. The husband wants to keep Tynong North and has resisted selling the property, although it is clearly an expense to him. Rather than sell the property, he seeks to be given credit for the payments he is making towards the property on the wife's behalf. His argument is that as the wife is likely to get 60 per cent of the property settlement, as he sees it, he is paying 60 per cent on her behalf towards Tynong North and the other car loan and it is these sums which should be taken into account to reduce his liability to the Child Support Agency. He frankly admitted in cross-examination that he thought the wife should ultimately be responsible for her portion of the mortgage payments because they were increasing her equity. His reasoning was that if the child support income was the only source of her capacity to do so, then it was reasonable to offset her child support payments against her share of the mortgage payments that he was making.
The loans themselves are set up in two accounts. There is a flexi-plus mortgage which is an account into which the husband's income is paid. Payments for Tynong North and also for the car loan come from this account. The husband also uses this account for living expenses and child support. At separation, the account was $27,000 in debit. At the end of May 2002 it was approximately $30,000 in debit.
The husband's case is put in two parts; the first is that the payments that the husband has been making towards the mortgage, which he sees as being on behalf of the wife, should be credited to him in one form or another. The second is that his present income is less than the amount of the existing assessment which provides for the child support income amount to be capped at $113,542 the maximum child support income amount. Although it was not demonstrated precisely how this amount was calculated, it was submitted on behalf of the husband that it appeared that the agency had taken into account in some form the redundancy payments received by the husband.
If this is so, in my view, it would be unfair to the husband because those payments will ultimately be taken into account in relation to property settlement. In my view, the husband should be paying child support, subject to any other findings I may make, on the basis at least of his correct income which, in my view, should be calculated as being salary of $100,152 and the value of the fringe benefit tax in relation to the car of $3475.
The husband asserts that the payments that he is making fall within section 117(2)(A)(iii)(a) of the act, that is, that his ability to pay the existing assessment is significantly reduced because of the commitments being the loan repayments and health insurance which are necessary to enable him to support himself. The husband relies upon two decisions of the Family Court of Australia to support his argument. The first is Morrison v Morrison, to which I have referred which is a decision of Kay J and the second is Gyselman v Gyselman, to which I have also referred which is a decision of the Full Court.
In Gyselman v Gyselman, amongst other things, the Full Court was required to determine whether the payment of pre-existing liabilities such as made in a case like this one, fall within section 117(2)(A)(iii)(a), that is, commitments of the parent necessary to support himself or herself. After dealing with a number of previous single-judge authorities at page 79-071, the Full Court refer to the decision of Morrison v Morrison:
“Kay J after referring to the provisions contained in (A)(iii)(a) and (C)(i) said at page 77,928 to 77,929, "It seems to me that the problem in this case cannot comfortably be characterised as falling within either of the literal grounds set out. With a significant stretching of the English language the obligation to pay pre‑existing debts can be possibly seen to be a commitment of the husband necessary to enable him to support himself, although I suspect that the word "support" has more to do with his ongoing day-to-day needs for basic necessities rather than his obligation to meet his commitments to his creditors.
Similarly, it is a fairly large quantum leap in determining the meaning of the phrase "financial resources" of either parent to take into account liabilities of either parent.
The legislation, however cannot be seen in a vacuum. It has got to be seen and read as workable, having regard to the real commercial world that people live in. In my view, in order to obtain some just and equitable payment of moneys by one parent to another when there is child support involved the court cannot ignore the existence of the pre-marital debts and that somewhere hidden in either of the two grounds I have identified is a legislative basis for me to take into account the matters raised in this case.
There may be many cases where there are pre-existing debts with assets capable of ready realisation to meet those debts. In such circumstances it would be inappropriate to depart from an administrative assessment merely because it is commercially more comfortable for one party to carry on by retaining such assets whilst defaulting on child support obligations.
Even if it may be inappropriate or an inconvenient time to realise an asset having regard to current market forces, in my view, that may not of itself come within the phrase "special circumstances of the case" as outlined in section 117(2).
But where you have a recent separation and the only asset is a modest home, whilst there are proceedings pending for the appropriate determination of the rights of the parties, it is not in my view incumbent upon the person left in possession of the home to immediately arrange for a re-financing or a sale of the home so as to minimise the other outgoings that have been brought about by pre-separation debts and maximise the amount of income available for child support.”
The Full Court in Gyselman v Gyselman went on to consider the conflicting authorities. At page 79-073 they said:
“Thus, a clear and important difference of approach is evident in these cases. Firstly, as to the scope of the term "commitments necessary to enable the parent to support himself" and secondly, as to the liability of debts and repayment of debts which do not fall within the narrow construction adopted in Barber's case. The Barber/Degeer approach was to adopt a narrow interpretation of (a)(iii) so as to exclude commitments which are not seen to be essential for that person's own support. The Morrison approach is to adopt a broader or more liberal view of the interpretation and application of that provision.”
The Full Court then at page 79-074 considered three possible approaches and said:
“In the absence of any clear legislative direction, it appears to us that the present state of the law requires the courts to approach the matter by adopting (c above) that is, in determining the financial capacity of the respondent to meet the claim for child maintenance there is to be deducted from his income unavoidable or compulsory expenses together with necessary living expenses.”
At page 79-075 the Full Court said:
“It follows from what we have said that paragraph (C)(i) should be interpreted so as to include liabilities where that is appropriate. It would we think be artificial in considering the capacity of a non-custodian to provide financial support for his children to include his property and financial resources but necessarily to ignore his liabilities. The term "property and financial resources" normally means their net value, not their gross value. Separate debts should not be treated as being excluded from (C)(i). However, we emphasis that it does not follow from the fact that a particular debt satisfied ground (C)(i) that it should lead to a departure order. The other components of section 117 must also be considered.”
Conclusion
The wife asserts that the husband could have sold Tynong North. The husband concedes he could have sold it, but he wants to keep it as his share of the ultimate property settlement. In my view, that would not necessarily be an unreasonable position to adopt, although of course the question of the obligation to support the children is an important one. However, more importantly in this case is the fact that the husband's redundancy payment, which was originally $125,000 net and remains at $73,000, was a fund which was always available to assist him in meeting these payments. He could, for example, have used that fund to repay a large portion of the debt and reduce the mortgage payments.
He rejected this when it was put to him in cross-examination and said that the equity would not be as great if he had done so. But the husband could also have used some of the capital to pay the mortgage payments in advance prior to the hearing. The fund has always been available for him to do so. In fact, what the husband has done is use some of the capital to support his living expenses while using his income to pay the mortgage. There has never been any impediment to the husband using that capital fund to make mortgage payments. The husband was quite frank in indicating that the reason that he had not wanted to do so was because he sees a forensic advantage to himself in the property proceedings in having the wife bear a share of the cost of the mortgage.
He also indicated that he believed that this was the best way that he could increase the equity of each of the parties in the property and conserve their assets. However, their assets have not been conserved. The moneys received by the husband have now reduced to $73,000 and only $26,000 of that sum was attributed by the husband to legal expenses. I do not accept the husband's argument that he could not have used capital to meet mortgage repayments in the period between now and the hearing in the Family Court had he wished to retain that particular asset.
Having regard to section 117(2)(A)(iii)(a), whatever the motivating factor is, the husband has always had funds available to him to meet the payments until the hearing. He has not had to meet them out of his own income and therefore they are not, in my view, “necessary commitments” of the husband to enable him to support himself because there has been a fund available from which they could be met. Having regard to subsection (C)(i) to the extent that the liabilities of the husband should also be taken into account under subsection (i) in my view, because there was another fund available to meet these expenses, the application of the formula did not result in an unjust or inequitable determination of the level of financial support.
There is no reason why the payments that the husband makes towards the mortgage could not be taken into account at the final hearing of the property proceedings if they are paid or have been paid from capital (always of course, subject to the discretion of the trial judge). There is equally no reason why the payments should take priority over the child support which the wife clearly needs for the support of the children when they are being made to retain an asset which the husband wants to keep and which can be retained in another way.
This case is, in my view, entirely different from Morrison's case upon which the husband so heavily relied. In Morrison's case the asset in question was the former matrimonial home. In this case it is land. In Morrison's case there was very little income and no other funds from which the payments could be made. In that case the husband was working at two jobs and had a gross income of $49,500 and had to meet pre-existing debts from that income, as well as child support. The position in this case is entirely different. The husband has a significant income, and furthermore, there is capital which can be used to retain an asset which the husband wants to retain. It is within the husband's power to make submissions to the Family Court in relation to the property proceedings to have whatever payments he makes treated equitably if the wife is to be regarded as having an interest in that property. In my view, therefore, in relation to the loan repayments, no ground under section 117 has been established.
In relation to the health insurance payments, the husband has been paying $158 per month. In his financial statement the husband says that he is paying $18 per week in relation to the children, that is to say, that is their share of the health insurance cover. This is a total of $936 per annum. The husband's assessment for child support has been a reasonably significant one. I do not see any reason why the husband should have to pay health cover for the children over and above that amount. In my view, it is reasonable for the children's portion of the health cover to be credited against the assessments that the husband has otherwise had to pay.
It appears that the parties have now reached an arrangement whereby the husband will cease paying health cover for the children and the wife will make her own arrangements. Certainly the husband is now on notice that he is not required to make any further payments and for the assessment period from 1 July onwards I do not propose to take into account any health insurance payments.
Then there is the question under section 117(2)(c)(i) whether the husband's income at the present time should be taken into account. The child support assessment, as I have indicated, assesses the child support at the maximum level. For reasons I have already expressed, in my view, it would be inequitable and unjust for the child support to be assessed at a level beyond the husband's present income level or to include redundancy payments, as it appears likely that they will be taken into account in the property proceedings. I assess the husband's present level of income as being salary of $100,152 plus the fringe benefit tax value of his car at $3475 making a total of $103,627. There should be a departure from the provisions of administrative assessment for the period 1 July 2002 to 30 April 2003 which is the assessment period in which the statutory maximum income has been used as the child support income amount.
In coming to this decision I have regard to the provisions of section 117(4) and (5). In my view, it is just and equitable to make the order as the husband will already, pursuant to the assessment, be making a substantial contribution towards the support of the children. Having regard to the needs of the children as set out by the wife and the other matters in section 117(4), I am satisfied that it would be just and equitable. I am also satisfied that it would be proper, pursuant to section 117(5), for reasons which are really identical to those which I have described relating to section 117(4). This is a matter in which the responsibility for the support of the children should be that of the parents, not the community.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Mardi Jarvis
Date: 3 September 2002
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