MABRY & MABRY - [2005] FMCAfam 656

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MABRY & MABRY

[2005] FMCAfam 656

CHILD SUPPORT – Departure application – earning capacity – whether children being educated in manner expected – private school fees.

Child Support (Assessment) Act 1989
Family Law Act 1975, s.79

Gyselman (1992) FLC 92-279
DJM v JLM (1998) FLC 92-816
Lightfoot & Hampson (1996) FLC 92-663
Wylde & Ballard (1997) FLC 92-71
Mee & Ferguson (1986) FLC 91-716
Dwyer v Maguire (1993) FLC 92-420

Applicant:

MR MABRY

Respondent:

MS MABRY

File Number:

CAM921 of 2003

Judgment of:

Ryan FM

Hearing date:

6 September 2005

Delivered at:

Parramatta

Delivered on:

13 December 2005

REPRESENTATION

Applicant:

In person

Respondent:

In person

ORDERS

That for the period 1 July 2003 until 16 February 2004 the applicant Mr Mabry’s child support income is set at $30,820.28.
For the period 17 February 2004 until 30 June 2005 the applicant

Mr Mabry’s child support income is set at $44,472.44.
For the period 1 July 2005 until 30 June 2007 the applicant Mr Mabry’s child support income shall be calculated by adding to his taxable income 25% allowed deductions relating to expenses claimed in relation to [AQG] (including those repaid on his parents Westpac loan).
In addition to the child support payable pursuant to Order 3 commencing 1 January 2006 the applicant shall pay one half of the children’s school fees, camp fees, building fund and school excursion costs for their attendance at [M] College or any other private fee paying school (provided the later does not involve overall fees greater than those charged by [M] College).
That the Registrar of the Child Support Agency give effect to these departures from administrative assessment.
All outstanding applications are dismissed.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PARRAMATTA

CAM921 of 2003

MR MABRY

Applicant

And

MS MABRY

Respondent

REASONS FOR JUDGMENT

The application

This is an application by Mr Mabry for a departure order from an administrative assessment of child support, which was set by departure. After his reviews and objections failed Mr Mabry filed a series of departure applications in this court on 27 April 2005, 23 May 2005 and 5 July 2005. The difference between the first two and final application is that the earlier applications included applications for s.140 stays. By way of final orders all application sought the following orders: “For my child support assessment to be based on my taxable income for 03/04 to 06/07.” At the start of this hearing Mr Mabry provided a minute of order[1] which sets out the orders and declarations sought. These are set out below:
·Mr Mabry’s assessment income be set at: $20,680 for the 2002/2003 financial year, $18,917 for 2003/2004 and $37,641 for 2004/2005.
·Mr Mabry’s assessable income be set at: $55,000 for the 2005/2006 financial year, $57,000 for 2006/2007 and then revert to the administrative formula as at 1 July 2007 for 2007/2008.
·Ms Mabry’s assessable income be set at $86,086 for 2004/2005, $75,946 for 2005/2006, $78,224 for 2006/2007 and then revert to the administrative formula as at 1 July 2007 for 2007/2008.
·An amount of $35,000 for child support paid by Mr Mabry during property settlement be recorded as a payment on the child support register with a payment date of 1 July 2005.
·All fees and interest charges made to Mr Mabry’s child support account are to be reversed and all interest credits and other payments due are to be calculated and credited to Mr Mabry’s account within twenty-eight (28) days.
[1] Exhibit A
On 5 August 2005 Ms Mabry filed a minute of orders which sets out the relief she seeks in these proceedings[2]. Ms Mabry asks for orders:
·That the application filed by Mr Mabry on 27 April 2005 be struck out and no departure orders.
·That the applicant pays the respondent’s costs associated.
·That the child maintenance be set as per gross income from both parties and that children’s education costs and childcare costs be taken solely into account at the beginning of each calendar year to assess maintenance.
·That no further appeals be sort (sic) by Mr Mabry.
[2] Exhibit B.
It was only at the beginning of this hearing that Ms Mabry became aware Mr Mabry also sought to challenge his 2002/2003 liability. I asked Mr Mabry how it would be proper or just and equitable to permit him for the first time to raise issues concerning 2002/2003 moments before the court embarked on its hearing. Although this had been an issue previously raised with the CSA it had not been raised in these proceedings. Mr Mabry agreed that his late notice deprived Ms Mabry of procedural fairness. Like Ms Mabry, he was keen to finish the proceedings and is tired of the parties’ continuing disputes about child support. Rather than delay the hearing of his substantive application, he abandoned that aspect of the departure application concerning the 2002/2003 year and his applications filed in April and May 2005. As the intent was that this issue not arise again the 2002/2003 aspect of

Mr Mabry’s claim will be dismissed.
This was a surprisingly difficult hearing. Although she has considerable business acumen and experience Ms Mabry came to court without even a pen or paper. She was clearly irritated by the proceedings and did little to assist the court’s understanding of salient factual matters. At the start of the hearing I encouraged the parties to assist the process by remaining focussed on the matter at hand and to leave personal antipathy to one side. I encouraged good manners and asked each to accord the other a reasonable opportunity to present their case and to not speak over the top of each other. It was pointed out this was not an appeal and the parties needed to prove before me the facts each relied on. As to a considerable extent this involved examination of documents, I encouraged them to provide relevant source material. The necessity for supporting and source documents was emphasised by Federal Magistrate Mowbray on 6 June 2005 when the matter was listed for final hearing. My concerns about the paucity of original and source documents which addressed the parties’ contentions could not have been a surprise to either party. Within a short period of the hearing starting it became plain my words fell on largely deaf ears. Time and again the parties spoke over the top of each other and engaged in overtly offensive and belittling exchanges. Maintaining order was far more difficult than it should have been. While I received some relevant documents, predominately from Mr Mabry, unfortunately I received few independent financial records. With respect to the parties their conduct and lack of preparation has hampered the process.

Background

Mr Mabry was born [in] 1967.
Ms Mabry was born [in] 1969.
The parties married [in]1987.
They have four children. Their children are [A] born [in] 1989, [S] born [in] 1990, [B] born [in] 1991 and [L] born [in] 1997.
When the parties married Ms Mabry was working at [N] and Mr Mabry worked [in the financial industry]. After [A]’s birth Ms Mabry started [occupation omitted] from home. In October 2000 she started working part time at [H] (now [R]).
Mr Mabry continued to work [in the financial industry] until July or August 2000 when he resigned and purchased a [omitted] business, ‘[AQG]’. The parties purchased the business in Mr Mabry’s name for $46,000. The purchase price comprised $10,000 goodwill and $36,000 plant and equipment. The parties borrowed $70,000 from Mr Mabry’s parents in order to complete the purchase. This $70,000 covered the purchase price and other set up costs plus a fund used to supplement day to day living expenses. In order to advance the $70,000,

Mr Mabry’s parents drew down on a previously established Westpac loan secured against property they own. It appears the reason the parties borrowed the $70,000 from Mr Mabry’s parents is as a consequence of their own indebtedness. Basically, the parties were unable to raise additional funds in their own right.
When the parties started the [omitted] business, Ms Mabry was working full time, part time with [H] and part time doing [omitted] work from home. In October 2001 she started working full time at [H] as well as running the [home] business. When she needed to work weekends or after school, which her [omitted] work regularly required,

Mr Mabry cared for the children.
In April 2002 Mr Mabry leased a car for Ms Mabry for $35,000. The following month he leased a V8 utility which was intended for business use. The utility did not serve its purpose and not long afterwards he leased a truck for $45,000.
In October 2002 Ms Mabry resigned from [H]. Upon resignation she received two months pay of about $6,000. These monies were used to pay the mortgage and other household expenses during November and December 2002.
In November 2002 the parties refinanced their home at [omitted] which provided an additional $20,000 used to pay out some of their unsecured debts.
Ms Mabry resigned her paid employment in late 2002 it appears, from at least her perspective, so the parties could expand [AQG]. Mr Mabry claims his wife’s decision to resign all paid employment placed the family under considerable financial pressure and he encouraged her to resume paid employment. The parties leased another [equipment omitted] and Ms Mabry sought additional contracts. In any event, other than placing a number of telephone calls, Ms Mabry did not become involved in the business. Whilst her telephone calls resulted in a few additional contracts, at the same time other contracts ended. Ms Mabry agreed with Mr Mabry’s proposition that until she stopped paid employment in late 2002, from the time he established the business she was the primary income earner in the family.
The parties separated on 17 February 2003. At separation Mr Mabry continued to work in the [omitted] business and it appears Ms Mabry stopped all paid work. Within a few days of separation Mr Mabry gave Ms Mabry the computer upon which he ran the business and she maintained her personal records. He then spent $6,000 purchasing two new computers. He bought two because he did not wish to connect his business computer to the internet. When they separated, in addition to the [omitted] business, the parties owned the home in which they lived at [omitted] and three negatively geared investment properties. All properties were mortgaged. By separation, the parties had reduced their indebtedness to Mr Mabry’s parents to approximately $62,000. By agreement, all four properties were sold, giving both parties a capital gains tax liability for the 2003 tax year.
In May 2003, the parties used $46,575 from the net sale proceeds to pay out their joint credit card liabilities. In the two years preceding separation between them, the parties’ credit card debt increased by $45,000. After paying their credit cards, as at 10 July 2003 approximately $82,600 was held in trust on their joint behalf. It appears that after paying out their four mortgages, including the funds paid on credit cards, the parties paid a further $90,000 towards joint matrimonial liabilities prior to their final settlement. This did not include repaying Mr Mabry’s parents. Ten thousand dollars was paid to the children’s school which means the parties jointly paid the children’s 2003 private school fees.
On 27 August 2003 the parties, both of whom were represented, entered into consent property orders[3]. Simply put the orders provided:
·Mr Mabry’s [omitted] superannuation was split with Ms Mabry receiving a splitable payment using a base amount of $16,262.
·The remaining trust funds were distributed so that Mr Mabry received $37,500 and Ms Mabry the balance.
·Mr Mabry received [AQG] subject to its liabilities in relation to which he indemnified the wife.
[3] Exhibit B.
Mr Mabry’s parents intervened in the proceedings and are parties to the orders. Concerning [AQG], the relevant orders are set out below:
·That the husband shall be declared the sole beneficial owner of the business (including all plant and equipment) currently trading as “[AQG]’ and the husband shall immediately indemnify the wife in respect of all liabilities associated with the business, including the liability to pay tax, which includes, but is not limited to, income tax, goods and services tax, capital gains, penalty tax and interest: any outstanding money owing to Esanda Finance, loans to Mr and Ms M and any outstanding rent for plant and equipment. The husband charges the business to the amount of any liability to Mr and Ms M as first priority subject to those already existing.
·The wife will not come within a radius of 200 kilometres from the base of operations of the business known as ‘[AQG]’ from a period of three years from the date of these orders, without the written consent of the husband, directly or indirectly whether solely or jointly with, or as a director or shareholder or otherwise, establish, carry on, be engaged, concerned or interested in any business of the description referred to in order 4(sic) above order 4 (sic) above or carrying on any business in competition with or likely to become operative with any business of the same description of that referred to in order 4, or permit her name to be used in connection with any such business.
Relevantly, the parties noted, “That the husband and the wife each acknowledge and declare that they regard the making of these orders as a full and final settlement as between themselves in respect to property orders and spouse maintenance under Part VIII of the Family Law Act 1975 (as amended).”
By way of cash adjustment at final settlement, Ms Mabry received about $45,000 and Mr Mabry approximately $37,500. Both parties had loans for which they were thereafter solely responsible. The loans for which Mr Mabry accepted responsibility significantly exceeded those for which Ms Mabry was responsible.
To the extent Mr Mabry alleges these orders provide advance payment of child support, I reject his submission. The orders are entirely silent concerning child support. If Ms Mabry received net assets worth more than those Mr Mabry received, she received these assets by way of s.79 adjustment of property and not a combination of property adjustment and child support. When these orders were made, the court made the orders upon being satisfied that the orders are just and equitable within the meaning of s.79(2) of the Family Law Act 1975. Mr Mabry is not entitled to use these child support proceedings as a backdoor method for challenging the efficacy of the property orders.
At separation the three elder children attended [M] College,

Mr Mabry’s old school, and [L] attended [S] Primary School. This is relevant to Ms Mabry’s assertion that Mr Mabry should pay higher child support than that merely provided for by the administrative assessment process, because the children are being educated, “in the manner that was expected”. This issue generated a great degree of heat between the parties during the hearing, with sarcasm flying between the parties irrespective of my efforts to contain their behaviour. Mr Mabry was intent on demonstrating that before the children were enrolled at his alma mata, Ms Mabry indicated that she believed the children could receive an acceptable education in the state school system. Ms Mabry was intent on showing that Mr Mabry was ignorant of his children’s desire to continue at their schools and, by implication to her at least, a poor parent. She was deaf to his protestations that the parties have been unable to afford to continue the children’s education at private fee paying schools. Standing back from the overt hostility it is unarguable that well prior to separation the parties’ jointly enrolled their children at [M] College and [S] Primary. From this I infer the parties agreed their children should receive a private school education at [M] College, a decision Ms Mabry has properly implemented and for which she and Mr Mabry have continuing responsibility, but only to the extent they can afford to.
After separation all four children resided with Ms Mabry. Mr Mabry moved into a caravan park where he lived for about three months. He had spasmodic contact with the children before moving into rented accommodation for which he was paying $320 per week. He decided to try living in Brisbane and in about September/October 2003 moved there. The effect of this is that from separation until December 2003, other than for short periods of contact, Ms Mabry was exclusively responsible for the children’s care. In the period immediately following separation, she decided against pursuing full time employment and stopped her [omitted] work. It appears her reasons were twofold. Firstly, with their parents’ separation and the loss of their home, the children were living through a traumatic period and their interests required Ms Mabry to give them her undivided attention. I agree that this was reasonable. Secondly, as a single parent, Ms Mabry did not have the same flexibility in pursuing part time or weekend employment as she had whilst the parties’ marriage continued. During school term childcare costs would have been significant, as was the case during school holidays. In the circumstances, her decision to delay returning to work, part time or full time was reasonable, and Mr Mabry’s arguments that Ms Mabry’s earning capacity was greater than assessed by the Child Support Agency fail.
On 9 September 2003 Mr Mabry sold the business, including plant and equipment and assignment of current contracts for $34,000. Plant and equipment comprised $22,000, being [omitted]. Prior to Ms Mabry cold calling [businesses omitted] looking to attract new contracts, the business had annual contracts or arrangements worth approximately $77,000 per annum. Additional work required throughout the year produced extra income. Ms Mabry’s telephone calls produced contracts with four new [clients, between them worth $26,500 per annum. At the same time as these additional contracts were established, the parties lost their contract with [P] worth $8,000 per annum, and another unidentified school. On this basis Ms Mabry asserts the business had the capacity to earn gross income of at least $120,000 per annum which she submitted in return resulted in the potential for a significantly increased child support income, much greater than the $18,917 (his prior years taxable income) initially used to assess

Mr Mabry’s child support liability.
On the sale of the business, Mr Mabry remained liable for his V8 utility lease (approximately $44,000), truck (approximately $44,000), computers (approximately $6,000) and a second [equipment omitted] ($10,000 rental agreement). The second [equipment omitted] was sold in October 2003 and it appears the associated lease was paid out.
After Mr Mabry sold the business, it appears he had a period of unemployment before starting working for real estate agents doing property maintenance.
In October 2003 Ms Mabry obtained employment as a [omitted] earning $32,000, considerably less than she was earning prior to separation. However because of her child care responsibilities the Child Support Agency reasonably accepted this represented her earning capacity at that time.
On 18 December 2003 [A] commenced living with Mr Mabry.

Mr Mabry withdrew [A] from [M] College and enrolled him in a local government school.
In early February 2004 the parties agreed that [L] would live one week with her mother and the following with her father on an alternating cycle. From about 10 February 2004 [L] was living with her father full time. This means that during most of 2004 [S] and [B] resided with

Ms Mabry and [A] and [L] resided with Mr Mabry. [L] returned to live with Ms Mabry on about 22 November 2004. [A] returned to reside with Ms Mabry on 1 August 2005. Because for periods some of the children lived with Mr Mabry, there were two child support cases raised with the CSA. At times this resulted in confusion, with decisions in one case inconsistent with the other. In the end the two cases were aligned and nothing now turns on earlier inconsistencies. Neither party challenges the percentages applied by the CSA arising from the children’s living arrangements.

On 17 February 2004 Mr Mabry commenced full time employment in [D] on a starting salary of $55,000 per annum.
In a letter to the CSA dated 26 January 2005 Mr Mabry informed the agency he recently sold the truck (saving $750 per month) and his V8 utility (saving another $750 per month). He had refinanced his outstanding business loans by extending the Westpac loan facility arranged through his parents. Overall his loan and lease repayments have fallen from $2,400 to $909 per month. Mr Mabry says he now owes his parents approximately $120,000. Relevantly, by refinancing the business Mr Mabry gave effect to the indemnity, as in doing so he protected Ms Mabry from any potential claim from creditors.
Presently the children have little face to face contact with Mr Mabry.
On 6 June 2005 the court granted a partial stay of the current child support assessment ordering that pending further order Mr Mabry pays $734.50 each month.

Relevant law – child support

The obligation to pay child support is created by the provisions of the Child Support (Assessment) Act 1989. Section 3 contains the obligation that parents maintain their children. The objects of the Act are found in section 4. Each of the objects needs to be borne in mind when deciding an application under the Act. Section 4(3) of the Act recognises the desirability of parents reaching agreement for the financial support of their children. Sections 114 and 121 identify that the further objects of Divisions 4 and 5 of Part VII include:
a)that the 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
b)that parents share equitably in the support of the children.
The Full Court of the Family Court in Gyselman (1992) FLC 92-279 set out a three step process that courts must follow in determining an application for a departure order under s.117. The first step is whether one or more of the threshold grounds in s.117 is established. If so, the next step is whether it is just and equitable within the meaning of s.117(4) to make a particular order. The final consideration is whether it is otherwise proper within the meaning of s.117(5) to make a particular order.
An issue in this matter is whether the court might properly base its decision on earning capacity rather than actual income. It is clear from DJM v JLM (1998) FLC 92-816 that a court can take into account earning capacity in situations other than those in which a person has deliberately weakened his or her economic position in an attempt to avoid their responsibility to pay child support. What distinguishes these cases from cases in which the court does focus on the actual and reduced income in calculating the level of child support seems to turn on whether the person acted reasonably in all the circumstances in taking the step that led to the reduced income.[4] What is reasonable must be determined not only in light of the particular facts but also in the light of the particular area of law involved. In child support cases an important part of the context for determining what is reasonable is the explicit statement of the Objects of the Act in s.4 in which there is reference to the parents, “capacity to provide financial support”. Thus a different answer to the “what is reasonable” question may be given in spouse maintenance compared to child support proceedings. Partly, this is because child support legislation prioritises the obligations of parents to support their children.
[4] See, for example, discussion in DJM v JLM
In Lightfoot and Hampson (1996) FLC 92-663 and Wylde and Ballard (1997) FLC 92-771 the principals established in Mee and Ferguson (1986) FLC 91-716 are identified as relevant to a departure application that concerns costs associated with attendance at private fee paying schools. In essence, the principles that emerge from that case are as follows:
a)Where the non-custodian has agreed to the child attending a private school, that person is liable to contribute to the fees involved so long as and to the extent that he or she has a reasonable financial capacity to do so.
b)Where the non-custodian has not agreed to the child attending such a school, he or she is not liable to contribute to those expenses unless there are reasons relating to the child’s welfare which dictate attendance at that school, rather than a non-private school. In such a case the non-custodian is required to contribute to the extent that he or she has a reasonable financial capacity to do so.
c)The mere fact that a non-custodian can afford the fees or is a wealthy person is not in itself a reason for imposing that liability.
Once a departure application is properly before the court the court may determine the application for departure from future administrative assessment. Lindenmeyer J dealt with this issue in Dwyer v Maguire (1993) FLC 92-420. His Honour held,
“In any event I believe that the structure of the Act is such that once a valid application for departure has been made, it throws open for consideration by the court the question of departure from the administrative assessment provisions of the Act not only in respect of any current or past child support years, but also in respect of any future years. Although nothing in the Act says so specifically, I think it is clear by inference from provisions such as ss118(2), 119(1) and 119 (2). Section 118(2) provides that in the making of an order under s118 the court may make different provisions in relation to different child support years. Section 119(1) provides that upon a departure order becoming final, the Registrar must immediately take such action as is necessary to give effect to that order “in relation to any administrative assessment that has been made” (my emphasis), but s 119(2) then goes on to provide “subsequently making an administrative assessment…. while the order is in force, the Registrar must act on the basis of the provisions of this Act as modified by the order.” (my emphasis) See also, regulation 9, which says that the court may make orders containing provisions of various kinds, including “(e) the period for which the variation is to remain in force”.

Special circumstances of the case – is there a ground for departure ?

Mr Mabry asserts his actual income bears no relationship to the basis upon which his child support liability is calculated and that the respondent’s earning capacity exceeds that used by the Child Support Agency. Individually or combined these factors are said to amount to special circumstances. Ms Mabry says special circumstances arise because of the costs she incurs educating the children at [M] College or receiving private school education and her child care costs.
In relation to the years under challenge, Mr Mabry’s business and tax records show that his taxable income is as follows:
·For the financial year ended 30 June 2003 Mr Mabry’s taxable income was $38,244. This includes capital gains on investment properties of $17,564. As the capital gains related to the disposition of matrimonial assets, his effective taxable income should be treated as $20,680[5]. This is because both parties received the benefit of the realised assets with the sale proceeds taken into account in the property settlement. That year, the [omitted] business produced gross income of $81,214 in relation to which Mr Mabry claimed expenses totalling $57,851, producing a net income from the business of $23,363.
·For the financial year ended June 2004 Mr Mabry’s taxable income was $7,601[6]. His taxation returns shows the business produced a gross income of $31,273 in relation to which he claimed $43,228 expenses, resulting in an $11,955 loss. From [P] he earned $16,320 and received $3,962 in parenting payments.
·
For the financial year ending June 2005, Mr Mabry’s taxable income is $37,641. This comprises $3,914 [P], $58,623 [D] and $6,735 in parenting payments. From this he received allowable deductions of $30,531. These deductions relate to the [omitted] business and comprise $6,362.09 hire/rent of plant and equipment, $3,750 interest and $20,963.63 lease payments[7].

Mr Mabry received a $9,434.51 refund shortly prior to the hearing.
[5] Exhibit C
[6] Exhibit D
[7] Exhibit E
By a series of decisions the Child Support Agency set Mr Mabry’s child support income at $40,000 for the period 17 April 2003 to

30 September 2003: from 1 October 2003 to 31 January 2004 at $40,000: from 1 February 2004 to 30 September 2005 at $55,000. The increase in Mr Mabry’s child support income is based on earning capacity, and by disregarding allowable business expenses. By this I mean expenses allowed by the Australian Taxation Office as claimable deductions.
In order to understand Mr Mabry’s earning capacity and test

Ms Mabry’s assertion after separation he ran the business down, one needs to examine his taxation affairs prior to separation. For the taxation year ended 30 June 2001 Mr Mabry’s taxable income was $59,763 and the following year it was $18,917. During the former year Mr Mabry resigned his salaried position. It appears likely his taxable income comprised a mixture of income from the resigned position, income earned from [AQG] and investment income. The following year’s income probably comprises income earned from [AQG] and investment income. That year the business produced sales worth $51,479.91 subject to $39,484 expenses, including $7,482 depreciation. There is no suggestion during that year Mr Mabry worked at less than full capacity, or that Ms Mabry cavilled with his decision to resign and try his hands at running his own business. She appears to have accepted that at least temporarily this involved a reduction in his income and for this reason the parties borrowed funds from

Mr Mabry’s parents in order to supplement their reduced income.

Ms Mabry’s alternate assertion that [in the finance industry] her husband earned more at least until he sold the business is really not the point. This is because the business represented a joint venture which both parties believed would ultimately provide a secure financial future for their family. I am satisfied the proper course is to accept that for the 2002 taxation year [AQG] was capable of producing earnings no greater than that actually received.
Nor is there evidence in the period leading up to separation that

Mr Mabry shirked available work. With additional contracts, at first blush, it is reasonable to assume the business was capable of earning more in the 2003 taxation year than the preceding year. The issue is really what happened after separation. Mr Mabry says he was working six days a week and could not work harder, a reasonable position it seems to me. However, he purchased equipment so that he could take on seasonal or casual workers. Presumably with contracts in place and available equipment Mr Mabry would have been able to reap the financial rewards available from these contracts if he implemented his business strategy. It seems to me that without an offsider Mr Mabry was unable to produce the full benefits of his contacts. This is even though there is no dispute that at separation Canberra was suffering drought conditions, which meant there was less rather than more [omitted] work available. I say this because his arrangements were secured by contract and the drought merely deprived him of the benefit of additional non contract payments and new clients. With respect to Mr Mabry I am not satisfied that post separation he ran the business to its true capacity. The difficulty I have however is that I did not receive the business contracts and there was no useful cross examination by

Ms Mabry which enables me to make precise findings concerning the extent of lost income. Nor do I have evidence concerning the cost involved in an additional worker. Rather than pluck a figure out of thin air, the proper course seems to me to consider this issue again when examining the businesses expenses, hence its profitability. On balance I am satisfied that during 2003 the business was capable of earning slightly greater gross earnings than reflected in it accounts. Notwithstanding suggestions to the contrary it appears the business was slowly growing. This is apparent from climbing total sales and is reflected in the income the business produced the following financial year. Prior to its sale in the 2004 financial year the business produced gross earnings of $31,273, of which $26,150 related to sales. Applied to an entire year this equates to about $150,000 per annum. Even with a reduction for seasonal or other variations this suggests the business was growing in the sense of its income climbing annually. I do not accept that while he lived in Brisbane Mr Mabry fully attended to his clients needs. He returned to Canberra each second or third week for a few days at a time. This coincided with a seasonal downturn.

Mr Mabry did not deal well with this issue during cross examination and I consider it counterintuitive that one can conduct a business such as this from another state. The effect of this is that I am satisfied that post separation Mr Mabry did not work the business at its true capacity.
The next matter the court must consider is treatment of the businesses expenses and allowed taxation deductions. This is somewhat difficult as the court only received business records generated by Mr Mabry and taxation records reliant on information he provided. He carried the onus of proving his case and his failure to make these documents available has not assisted his cause. Ms Mabry asked questions about some expenses but did not explore the factual basis for most. The business profit and loss statements “detailed statement of financial performance” is part of a bundle of documents Mr Mabry tendered. During cross examination and addresses Ms Mabry focussed on particular entries including depreciation, motor vehicle leases and lease payments. Concerning depreciation Mr Mabry claimed $7,482 (2002), $6285 (2003), $4,233 (2004) and none in 2005. Concerning lease payments he claimed $3,040 (2002), $9,004.65 (2003), $2,583.94 (2004) and none in 2005. Regarding motor vehicle lease he claimed none in 2002, $6,417.08 (2003), $13,771.95 and $20,963 in 2005.
In relation to depreciation there is no evidence Mr Mabry put this amount aside to provide for future replacement of the depreciated items or payout excess lease payments in the event there was a shortfall on sale of the V8 or truck. This means that, although he received a deduction, Mr Mabry did not meet this expense in the relevant tax year. He thus had those monies available to him for his own expenses. When he received his property settlement Mr Mabry received a sum of money which he could have used to retire personal or business debts. For reasons not adequately explained to me he decided against this prudent course. With respect to Mr Mabry’s subsequent predicament he has brought some of the consequences onto himself. I am satisfied depreciation should be disallowed.
Concerning equipment Mr Mabry equipped the business on the basis he would employ someone to assist him during busy periods. I have accepted his assertion he worked to his personal capacity but what is lacking is compelling evidence that he should be able to claim expenses for equipment he did not use. He explained his need for a second person and thus a second [equipment omitted] in early correspondence to the CSA. The sense I gain from Mr Mabry’s evidence is that he equipped the business to enable him to employ another person and thus grow his business but after separation inexplicably decided against doing so. In these circumstances I am not satisfied he should have the full benefit of the expenses claim on car leases or other leases. Unfortunately I do not have the leases or individual lease repayment figures. This makes it impossible to make precise findings concerning lease payments incurred to enable

Mr Mabry to perform his work and those costs referable to a putative employee. It seems likely that as the employee was not intended to work full time, a greater share of the costs relate to Mr Mabry’s work. On this basis, while the business continued to operate I will accept three quarters of the lease and rental repayments as reasonable and necessary expenses.
It appears Mr Mabry may have claimed travel expenses for travel between Brisbane and Canberra. If he did so, this in an unreasonable expense and is a deduction I would not allow. However Ms Mabry did not question this deduction and it would be inappropriate for me to now draw unfavourable conclusions.
The effect of these findings applied to 2003 is Mr Mabry’s income is $30,820.28. This is calculated by adding to $20,680 depreciation of $6285, 75% motor vehicle lease and 75% lease payments. Using the same formula in 2004 the resulting figure is $15,913. However, as I have already indicated I am satisfied Mr Mabry left a viable business in favour of unemployment, at least for the short term. In my opinion his child support obligations required him to manage his affairs so that he had a position to go to that enabled him to make a proper contribution towards his children’s support. I am satisfied that when he sold the business Mr Mabry was capable of earning at least as much as he had the previous year. For child support purposes this means until he started full time employment with [D] he will be assessed on the basis he had a child support income of $30,820.28.
A particularly complex issue arises because of the sale of the business. Although the business sold, Mr Mabry still carries considerable losses and is repaying his parent’s pursuant to their agreement to act as intermediary with Westpac. At Ms Mabry’s suggestion the CSA disregarded Mr Mabry’s allowed deduction for continuing business expenses. She argues that because in the property orders Mr Mabry indemnifies her against the specified businesses liabilities, Mr Mabry cannot artificially reduce his child support liability because he pays these expenses. This includes the monies due to his parents and the various leases and rental agreements identified in the businesses financial statements. While the business continued to operate these expenses, to the extent I have allowed, are legitimate business expenses which Mr Mabry needed to pay in order to maintain the businesses viability. The indemnity did not operate to restrain Mr Mabry from taking these expenses into account when determining his capacity to pay child support or his earning capacity. At that point the expenses are part of the businesses recurrent expenditure. To take into account the businesses income but not those expenses needed to produce its income would be unjust. With the sale of Mr Mabry’s business it seems to me that he sold a business which was growing and likely to continue to produce increasing sales. Having decided against an employee, prudence suggests he sell or attempt to assign those leases on unnecessary equipment or as I earlier found, use his property settlement to pay out a portion of his business debts. With respect to his decision to sell the business it seems to me Mr Mabry sold a viable business and left himself with expensive, and to him unnecessary, equipment and associated debt. He subsequently sold the remaining assets, to whom and for how much I do not know. Whether these funds were all applied to outstanding leases and rental agreements is not clear to me. While I accept Mr Mabry’s parents have generously allowed him to refinance these outstanding liabilities, my difficulty is that I do not know to what extent these amounts are reasonable. It seems to me the just approach is to allow 75% only of the hire/rent and lease expenses on the basis the remaining costs are unreasonable because of Mr Mabry’s failure to take on the employee for whom these expenses were incurred. This means that until 30 June 2005 Mr Mabry will be treated as having a child support income of $44,472.44. This is calculated using $37,641 and adding $1590.53 (disallowed hire/rent) and $5,240.91 (disallowed lease). This works out at $855.23 each week.

This means Mr Mabry has established a ground for departure in the 2004 and 2005 financial years and for the subsequent periods pursued. Concerning future years, because I do not know precisely what amounts will be claimed, I cannot set a precise figure which quantifies the disallowed deduction. My approach, if the other relevant factors justify a departure order, will be to describe a formula which the CSA must apply in determining his child support liability.
I do not accept Mr Mabry’s claim that Ms Mabry had or has an earning capacity greater than that upon which she is assessed. With an intact marriage Ms Mabry relied upon Mr Mabry’s care of the children after hours to enable her to supplement her income from [R]. With [R] she was earning $60,000 per annum, being $45,000 salary and $15,000 motor vehicle expenses. Doing between 6-8 [activities omitted] each week she was able to earn about another $40,000 gross. Without her husband’s support Ms Mabry’s ability to earn this type of income is greatly reduced. She is nowhere nearly as free to pursue demanding employment as she was prior to separation. Added to this is the complicating factor that she had given up full time work prior to separation. I am satisfied Ms Mabry returned to work when she was reasonably able to and that her taxable income reflects her earning capacity. These children appear to need more parental involvement rather than less. All things considered I am satisfied Ms Mabry works to the limit of her capacity. As an alternative argument Mr Mabry says Ms Mabry must have undisclosed income. This is because she claims to pay expenses far in excess of her disclosed income. Examination of Ms Mabry’s financial circumstances demonstrates this to be correct. Although outraged by the suggestion her evidence was exaggerated or misleading concerning her expense I accept that aspects of Ms Mabry’s evidence is unreliable. To an extent the information given to the CSA is more in the nature of a wish list than actual expenses. Even although she has used $37,000 capital to meet day to day living expenses

Ms Mabry has more savings available than the difference between her income and expenses. She attempted to persuade me this could be explained because she used an s.221D arrangement with the ATO which provides her with greater returns. Her returns are in evidence and this does not assist my understanding of her capacity to meet her claimed expenses from her income and capital. On my reckoning, her capital would have been exhausted. However if he wanted to persuade me that Ms Mabry had undisclosed earnings, Mr Mabry needed to do more than demonstrate the respondent’s expenses are exaggerated. To the extent the applicant challenges the respondent’s child support income amount he failed.
Concerning his expenses Mr Mabry sets these out in his financial statement filed 15 July 2005. When he completed this document [A] still resided with him. The only alterations to this document are that presently Mr Mabry is paying $100 per week on the Westpac loan rather than the required $222, since 1 August 2005 he no longer pays $150 per week for [A]’s average weekly expenses and otherwise does not incur modest school fees and other associated costs (about $500 per annum) for [A]’s education. Because I have already taken the Westpac business loan into account in determining his child support income, the effect of this is that presently Mr Mabry’s reasonable and necessary weekly expenses are $938, which gives him $472 each week excess income. However examination of his expenses shows that his expenses are extremely modest and do not offer a reasonable standard of living. For example he claims nothing for household supplies, hair cuts, entertainment and only $75 for food. It is my opinion a more accurate assessment is that presently he has about $400 each week available to pay business and other discretionary expenses. The effect of his evidence concerning [A]’s costs while he resided with him is that these amounted to no more than about $165 per week. Working backwards for the year ended 30 June 2005, this means from $855.23 the applicant was unable to meet his reasonable and necessary expenses. The same situation arose for the period 1 July 2003 until 30 June 2004. During these periods the applicant did not and still does not have property or financial resources greater than those identified in his financial statement.
The effect of the above findings is that I am satisfied that although the children were being educated in a manner agreed by the parties, the applicant (and indeed the respondent) has not been able to afford to support the children’s education at private fee paying schools. That they have actually done so is not the point. This is because both parties have either relied on others (the applicant particularly) or used capital (the respondent). From 2006 Mr Mabry indicated he is able to contribute towards the children’s school fees and agrees he will pay half of the fees for their attendance at [M] College. As the above figures disclose he is in a financial position to do so. The effect of which is that prima facie Ms Mabry establishes a ground for departure for so long as the children continue to attend [M] College or an equivalent private fee paying school but not before hand.
While [A] lived with Mr Mabry he worked in a supermarket two afternoons each week after school, earning between $70 and $75 gross per week. [A] retained these earning for pocket money and discretionary expenses. This child’s modest earnings are not a reason to lessen his parent’s responsibility to provide for his financial support or thus establish a ground for departure.
Child support is essentially income based. These parties only had the assets received from their property settlement. Since then their net asset position has deteriorated. Neither party has sufficient assets or financial resources to amount to a ground for departure.
None of the children has or had income, earning capacity, property or financial resources which amount to special circumstances.

Is it just and equitable to make a departure order?

I have already made findings concerning the applicant’s income, assets and resources and do not repeat them. The amount payable by the operative assessments is more than Mr Mabry is reasonably able to afford. Presently he is up to date but this appears to be for two reasons. Firstly the CSA has seized funds from debtors and secondly his parents have co-operated by extending the Westpac facility. The applicant’s parents have no legal or moral obligation to contribute directly or indirectly to their grandchildren’s support.
I have already touched upon the respondent’s financial circumstances. These are detailed in hr financial statement filed 5 August 2005. Concerning her present income Ms Mabry’s pay slip for the period ending 1 September 2005[8] shows she has weekly net pay of $654.13. This comprises $769.13 gross less $115.00 tax and $69.22 superannuation. From her financial statement one sees that her total income from all sources is $1233, including $169.50 child support and $285 social welfare payments. For child support purposes the later must be disregarded. Even including social welfare her expenses exceed her income by $397 each week. When social welfare is disregarded this climbs to $682. On 29 February 2004 Ms Mabry told the CSA her average weekly expenses (excluding tax) were $1825[9] which equates to $94,900. I accept Mr Mabry’s allegation this statement was exaggerated and on balance I am satisfied her recent financial statement is a more accurate reflection of her average reasonable expenses. Ms Mabry has supported the shortfall by depleting her property settlement payout and at times deferring payment of school fees and other loans.
[8] Exhibit F
[9] Exhibit K
Concerning school fees and associated expenses these are detailed in an attachment to Ms Mabry’s financial statement. Her schedules include standard school clothes, shoes and hair cuts. For this exercise the relevant expenses are school fees, building fund, camps and excursions. Those other identified expenses form part of her legitimate expenditure but in this case do not warrant additional contribution from Mr Mabry as they are met by his standard child support payment.

I have highlighted school fees because Ms Mabry seeks departure based on the children’s education. As is apparent from my earlier findings I am satisfied that although Ms Mabry establishes the children are being educated in the manner expected prior to January 2006 Mr Mabry did not have the capacity to contribute to those expenses. Thus it is only just and equitable that her departure for school fees and associated costs will commence 1 January 2006.
Ms Mabry’s evidence concerning child care costs was confusing and unsupported by any relevant fee statements. In terms of the future the children are at an age where it seems to me the elder children can appropriately and safely care for the younger two for the short period before the mother arrives home from work. I am not satisfied the respondents child care costs should be included in the child support departure orders.
Both parties submit that they would suffer hardship if their application fails or the other party succeeds. If the applicant succeeds the respondent will find he establishes a partial credit which will be offset against his future liability. This means she must support the children with even less income than she presently struggles with. I accept this will cause her hardship. However the administrative assessments have imposed a child support liability greater than was appropriate and has imposed real hardship on the applicant. Notwithstanding the difficulties it will cause Ms Mabry, including that she will have contributed disproportionaly more to the children’s costs I am satisfied it is just and equitable to grant Mr Mabry partial relief. Concerning future school fees and some of the associated expenses it is also just and equitable to depart. Not however for any period prior to 1 January 2006, quite simply because Mr Mabry had no capacity to support the children’s attendance at their schools. Nor did Ms Mabry. Although not obliged to she has used her property settlement to support the children’s attendance at their schools, something no doubt which to their advantage but at a cost to the respondent which the law should not impose.

Is it otherwise proper to make the order?

Both parties have an obligation to maintain their children. The effect of the departure ordered on the applicant’s behalf means the respondent will make a greater contribution to the children’s necessary expenses than he does. The order sought by the respondent would make the gap between the costs met by the parties for their children considerably smaller. Although the applicant has a greater income than the respondent does, this does not mean he must make an overwhelmingly greater contribution. In some cases it will; however this is not one of them. In this very difficult case I am satisfied the applicant’s contribution to the children’s expenses should reflect his earning capacity in the fashion I have quantified. Sadly this imposes hardship on the respondent because I accept she needs every cent from the applicant in order to adequately maintain the children. For future child support years the applicant will equally share the children’s school fees and associated expenses on top of his periodic payments. This results in a proper contribution to their overall costs.
The order may result in an increase in the respondent’s family allowance. I take this into account. This possibility does not detract from the overall justice of the outcome.
With these orders the stay ordered on 6 June 2005 is discharged.
For these reasons I make the orders identified at the start of this judgment.

I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of Ryan FM

Associate: S. Mashman

Date: 13 December 2005