Mathieson & Hamilton
[2006] FMCAfam 238
•13 June 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MATHIESON & HAMILTON | [2006] FMCAfam 238 |
| FAMILY LAW ─ Departure from administrative assessment ─ effect of earlier property settlement on payment of child support ─ where orders made no mention of child support ─ where orders do not contain a specific component for child support (in any form) ─ where no evidence that orders were intended to deal with child support ─ effect of lump-sum payment received by liable parent after property settlement ─ where lump-sum payment comprised part of liable parent’s income ─ where no evidence that liable parent disclosed the fact that the lump-sum payment was to be received prior to orders for property settlement being made ─ consideration of effect of decision in Paradine (1981) FLC 91-056 ─ whether parties presented evidence regarding the needs of the subject children ─ whether appropriate to rely on formula where evidence of needs of subject children is inadequate ─ consideration of Lee Scale regarding costs of children. CHILD SUPPORT ─ Maintenance ─ whether child support and/or child maintenance "stipendiary" in nature ─ whether child support arrears can be considered to be some form of compensatory payment to a party long after the need for a child to be maintained has passed ─ power of court to retrospectively increase a party's child support obligations ─ power of court to create "instant arrears" ─ whether so-called "12 months rule" still exists ─ discretionary nature of enforcement of accumulated arrears of maintenance or child support ─ discussion of so-called "12 months rule” ─ conclusion that so-called "12 months rule" no longer exists ─ suggested considerations to be taken into account in determining whether to order the payment of accrued arrears of child support or maintenance. |
| Family Law Act 1975 (Cth) Child Support (Assessment) Act 1989 |
| Bassingthwaite v Leane (1993) 16 Fam LR 918 Biggs v Dienes (1975) 2 Fam LR 11,273 Breen (unreported ─ June 1996) Cameron and Helie (2004) FMCAfam 685 Clauson (1995) FLC 92-595 Coon v Cox (1994) FLC 92-464 Dwyer v McGuire (1993) 17 Fam LR 42, (1993) FLC 92-420 Frei & Frei-Souter (unreported ─ March 1996) Gyselman (1992) FLC 920279 at 79,064-5 Hamilton & Nowak (1988) 12 Fam LR 704 Hides & Hatton (1997) 21 Fam LR 855 Kelley (1996) 20 Fam LR 502 Levis & Mavilli (unreported ─ February 1997) Luton v Lessels (2002) 28 Fam LR 398 at 429 Lutzke (1979) 5 Fam LR 553 at 569 Mee v Ferguson (1986) FLC 91,716 Milankov (2002) 28 Fam LR 514 Molier & Van Wyk (1980) 7 Fam LR 18 at 30 Paradine (1981) FLC 91-056 Patrikos (1977) 31 FLR 524 Portillo (1994) FLC 92-484 Reid (1978) FLC 90-529 Ross v McDermott (1998) 23 Fam LR 613 at 623-4 S v C (1997) FLC 92-750 Savery (1990) FLC 92-131 at 77,897 Sloan (1994) 18 Fam LR 249 Spry v Roet (1977) FLC 90-301 Streets (1994) FLC 92-509 Tingle (1947) 65 W.N. (NSW) 43 Truscott (1986) FLC 91-761 Vautin (1998) 23 Fam LR 627 White (1995) FLC 92-648 at 82,558 Wild v Ballard (1997) 22 Fam LR 291 at 310 Woolley v Carney (2005) 33 Fam LR 294 at [32] |
| Applicant: | ROBERT LESLIE MATHIESON |
| Respondent: | vicki maree hamilton |
| File Number: | MLM 10266 of 2004 |
| Judgment of: | Walters FM |
| Hearing date: | 24 November 2005 |
| Date of Last Submission: | 24 November 2005 |
| Delivered at: | Melbourne |
| Delivered on: | 13 June 2006 |
REPRESENTATION
| Counsel for the Applicant: | Ms Scherman |
| Solicitors for the Applicant: | Rowe Lawyers |
| Counsel for the Respondent: | Mr Bacon |
| Solicitors for the Respondent: | Manby & Scott |
ORDERS
Pursuant to section 117 of the Child Support (Assessment) Act 1989, there be a departure from the administrative assessment of child support payable by the husband to the wife for the children Carl and Mary-Ellen as follows:
(a)For the period from 4 July 2002 to 30 June 2003, the annual rate of child support be set at $8,372.00 (being the equivalent of $161.00 per week). This amount is in respect of the child Carl only.
(b)For the period from 1 July 2003 to 31 January 2004, the annual rate of child support be set at $4,992.00 (being the equivalent of $96.00 per week). This amount is in respect of the child Carl only.
(c)For the period from 1 February 2004 to 29 February 2004, the annual rate of child support be set at $17,472.00 (being the equivalent of $336.00 per week). This amount is in respect of the children Carl and Mary-Ellen, and is to be apportioned equally between the children.
(d)For the period from 1 March 2004 to 30 June 2004, the annual rate of child support be set at $8,736.00 (being the equivalent of $168.00 per week). This amount is in respect of the child Mary-Ellen only.
(e)For the period from 1 July 2004 to 31 May 2005, the annual rate of child support be set at $10,400.00 (being the equivalent of $200.00 per week). This amount is in respect of the child Mary-Ellen only.
(f)For the period from 1 June 2005 to 30 June 2005, the annual rate of child support be set at $8,736.00 (being the equivalent of $168.00 per week). This amount is in respect of the child Mary-Ellen only.
(g)For the period from 1 July 2005 to 26 November 2005, the annual rate of child support be set at $9,152.00 (being the equivalent of $176.00 per week). This amount is in respect of the child Mary-Ellen only.
All extant applications of the husband and the wife otherwise be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT melbourne |
MLM 10266 of 2004
| ROBERT LESLIE MATHIESON |
Applicant
And
| Vicki maree hamilton |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings relate to the issue of child support for the parties' children, Carl and Mary-Ellen. Carl was born on 30 June 1986 and is now aged 19. Mary-Ellen was born on 22 January 1988 and is now aged 18.
The parties were married in April 1985. They separated in or about 1997 and were divorced in June 2001. Carl and Mary-Ellen are the only children of the parties' marriage.
The wife commenced living with her present husband, Mr Hamilton, in August 2001. They married in March 2003.
The husband has also re-partnered. His partner is Ms McCallum. The husband and Ms McCallum are not married. It is not clear from the evidence when the husband and Ms McCallum started to live together, but I assume that it was prior to or during 2002.[1] They were certainly living together in 2003, when they commenced renovating the house in which they are presently living.
[1] Ms McCallum said that she "….began working with (the husband) in the 2002/2003 financial year". See paragraph 3 of her affidavit.
Child support was first assessed with effect from 4 January 2000. At that time, Carl was living with the wife on a full-time basis and was having regular contact with the husband. Mary-Ellen was living with the husband. It would appear that Carl had more contact with the husband than Mary-Ellen had with the wife, although the period that Mary-Ellen spent with the wife gradually increased.
Mary-Ellen ceased living with the husband and commenced living with the wife (and Mr Hamilton and Carl) on 31 January 2004. Just over a month later – on 1 March 2004 – Carl commenced employment.
Mary-Ellen commenced employment on 26 November 2005.
Carl turned 18 on 30 June 2004. Mary-Ellen turned 18 on 22 January 2006.
Issues For Determination
It was common ground that, irrespective of the manner in which the proceedings had been commenced or conducted to date, the Court should focus on two relevant periods:
a)1 March 2000 to 3 July 2002; and
b)4 July 2002 to the date of hearing (or, more relevantly, 26 November 2005 ─ being the date upon which Mary-Ellen commenced paid employment).
I shall refer to the period referred to in (a) above as "the Earlier Period" and the period referred to in (b) above as "the Later Period."
The husband seeks departure orders in relation to both the Earlier Period and the Later Period. The wife opposes the husband's application as it relates to the Earlier Period, and seeks that there be no change to the relevant Child Support Assessments for the Earlier Period.
The wife's approach in relation to the Later Period is different. She agrees with the husband that a departure order should be made in relation to the Later Period, but strenuously disagrees with the husband as to the manner in which the relevant assessments should be departed from. In broad terms, the wife seeks that the child support payable by the husband during the Later Period be increased, whilst the husband seeks that it be decreased.
Put another way, both parties concede that special circumstances exist (within the meaning and contemplation of s.117(2) of the Child Support (Assessment) Act 1989) such as to establish a satisfactory ground for departure from the relevant assessments for the Later Period. The parties advance different reasons for the existence of the special circumstances relating to the Later Period, but the existence of a ground for departure (in either direction) is not in dispute.
The husband seeks that the child support payable by him in respect of both the Earlier Period and the Later Period "….be set at that amount of child support (and associated penalties) which (he) has already paid from 1 March 2000 until (the present date)."[2]
[2] See paragraph 2 of the husband's amended application filed 21 September 2005.
In relation to the Later Period, the wife's case is that the Court should make findings regarding the husband's child support income amount for each of the relevant financial years, and that the child support formula should otherwise "run its course". The financial years covering the Later Period are the years ending 30 June 2003, 2004, 2005 and 2006. The wife submitted that the husband's child support income amount should be found to be an amount that is in excess of the income cap under the child support legislation for each of those years. The relevant income caps range from $113,542.00 (relating to child support periods commencing on or after 1 January 2002) to $139,347.00 (relating to child support periods commencing on or after 1 January 2005).
I should add that the precise manner in which the wife proposed that the assessments relating to the Later Period be departed from was less than clear. The wife's counsel (Ms Scherman) provided the Court with a number of schedules, few of which were relevant and none of which appeared to be directly referrable to the orders sought by the wife in her amended response filed 30 September 2005.
General Observations
The proceedings before this Court occupied approximately three days. The material relied upon by both parties was voluminous, and the approach taken by the legal representatives for each of the parties
(Mr Bacon for the husband and Ms Scherman for the wife) did little credit to their clients’ cases. Neither counsel made any serious attempt to put his/her client's case into any sort of perspective, and both seemed grimly determined to chase every single legal rabbit (as it were) down its particular burrow. Had it not been for intervention from the bench, the case would have taken more than twice the time that it did. In my opinion, however, it should have been completed in less than half the time that it actually took.
At the commencement of the hearing, I asked Mr Bacon how long he thought that the matter might take. He responded that it "….should be finished within a day". Given the manner in which the father's case had been prepared and presented to that point, it was clear to the Court (and, in my opinion, it must have been clear to Mr Bacon as well) that such an estimate was obviously inaccurate.
A few moments later, I suggested to Mr Bacon that he had taken "a scattergun approach" to his client's case. His response ─ without a trace of irony or embarrassment ─ was as follows:
Sir, we've listed as many grounds of change of assessment or departure under s.117(2) as I could find. Everything that we could include, we have included.
In Pastrikos (1977) 31 FLR 524, Muirhead J said: [3]
May I stress the responsibilities of legal practitioners in acting for clients in this important jurisdiction…The philosophies of the (Family Law Act) are clear and should be borne in mind not only by judges, but by counsel and solicitors. It is true that the adversary system remains in the processes of determining contested issues. But the legal profession act as advisers, they are more than mouthpieces, more than puppets reacting to instructions. In this jurisdiction, the functions of this Court are not often understood by parties in dispute. A bit of sound common sense and dispassionate legal advice will often go a long way in solving the issues confronted by people who have temporarily lost their sense of proportion ….
[3] At page 526 (when speaking of the duties of legal practitioners in cases relating to children).
The above passage was cited with approval by the Full Court in White (1995) FLC 92-648 at 82,558. Although it relates to the obligations of legal practitioners in cases relating to children, I am of the view that its message also applies in cases such as that now before the Court. Unfortunately, neither party’s legal representatives seemed capable of employing "sound common sense", and it is a fair inference from the manner in which the case was conducted before me that the legal advice provided to the parties was something other than "dispassionate".
It is with considerable regret that I feel compelled to record that neither counsel was of more than marginal assistance to the Court in identifying or clarifying the real issues upon which the proceedings were likely to turn. Both doggedly pressed on with their respective cases. And Mr Bacon, at times, did not baulk at arguing the unarguable.
As I have indicated above, the manner in which the proceedings were conducted reflected poorly upon the parties, and upon the competence and professional maturity of their legal advisers.
Additional Background Material
In order to properly understand the case as it was presented to the Court, it is necessary to make reference to some additional background facts or events.
The Husband's Occupation
The husband described himself as an industrial relations consultant. He has over 25 years experience in this occupation.
The husband said that his work involves industrial negotiation, and that he negotiates directly with workers’ organisations in relation to construction projects.
The husband described his work as follows:
I consult to either clients in the construction industry or principal contractors in the construction industry to negotiate (industrial relations) strategies and decide agreements for the building of those projects and thereon, making sure that the agreements hold force.
The husband explained that he has appeared in the Arbitration Commission "quite often".
The husband also said that:
a)his work can be complex (although it is not always complex);
b)industrial strategies and "getting a construction project going" can be complex, although some industrial disputes can be simple in their nature;
c)if bans, damages or the like are involved, then his work is likely to be complex;
d)although a professional qualification is not required to do the work undertaken by the husband, it is nevertheless a "reasonably specialised" area;
e)a person who does his sort of work must "…know about the workplace and the unions and have a good memory"; and
f)very few people in Melbourne do the same work as the husband "although three major employer organisations do the same work, and a lot of major companies have their own industrial relations staff”.
The husband's accountant, Mr Betts, said as follows:
a)At all relevant times until 1 July 2004, the husband conducted his business affairs through a corporate structure.
b)The corporate structure employed by the husband for this purpose was National Constructors Incorporated Pty Ltd (NCIPL).
c)NCIPL's sole role was to act as trustee of the Robert Mathieson Family Trust.
d)The husband and the wife were directors of NCIPL until July 2000, and they were (and still are) shareholders of the company.
e)In July 2000, the wife resigned her various corporate positions in NCIPL and the husband became the sole director and secretary.
f)Until 1 July 2004, the husband carried out his industrial relations work either through NCIPL or as an employee of his clients (depending upon the differing practices of his clients).
g)
When the husband was engaged to carry out work through NCIPL, the income earned was distributed by the
Robert Mathieson Family Trust to the beneficiaries of the trust.
h)Typically, those beneficiaries were the husband, the wife (before the parties separated), the husband's children and the husband's partner (Ms McCallum).
Again, according to Mr Betts, "…on 1 July 2004 (the husband) changed the corporate structure under which he had been operating." Mr Betts continued:[4]
An entity known as G Mac Solutions Pty Ltd, (“G Mac”) was formed. This entity is the trustee for the G Mac Solutions Family Trust. The trustee company has a sole director and one shareholder, namely (Ms McCallum).
(The husband's) role in this new structure is merely that of an employee. This was done to clarify his remuneration under the new structure as he no longer exercises power as a director of G Mac.
[4] See paragraph 10 of his affidavit.
I have no doubt (and I find) that NCIPL and the Robert Mathieson Family Trust were under the sole control of the husband at all relevant times. I find that they comprise his alter ego, and note that Mr Bacon did not suggest otherwise.
Further, I have no doubt (and I find) that there was no valid reason for the husband to restructure his business affairs in 2004 in such a manner as to cause him to become an employee of G Mac. I do not accept the purported justifications for the restructuring of the husband's business affairs provided by the husband and Ms McCallum (and by Mr Betts for that matter). I find that the principal reason why the husband agreed to become an employee of G Mac was to maximise his chances of reducing his child support liability for Mary-Ellen (who had ceased living with him and commenced living with the wife in January 2004).
According to the husband, his business "could not operate without the input of (Ms McCallum)."[5] I do not accept the husband's assertion in that regard. Further, I find that the husband (and Ms McCallum and Mr Betts) has/have exaggerated Ms McCallum's role in the husband's business activities. I have no doubt that the husband could have continued working in exactly the same way as he had been working prior to the establishment of G Mac. He could have employed a secretary, clerk or personal assistant to do the work subsequently undertaken by Ms McCallum ─ for far less than it now "costs" him to channel his business activities through G Mac.
[5] See paragraph 8 (i) of the husband's first affidavit.
I shall return to this subject later in these Reasons.
July 2000 Property Settlement Orders (“the 2000 Orders”)
On 12 July 2000, the parties entered into consent orders in relation to property settlement. The consent orders were made in the Magistrates Court of Victoria at Geelong.
Pursuant to paragraph 1 of the 2000 Orders, the husband was to pay to the wife the sum of $29,500.00 within 30 days. Upon payment of that amount, the wife was to transfer to the husband her interest in the property at 6 Tarcoola Way, Clifton Springs.
Pursuant to paragraph 5 of the 2000 Orders, the husband was to transfer to the wife the sum of $52,832.00 then held by him in a Commonwealth Cash Management Trust Account.
The 2000 Orders also included other provisions. For example, they provided for the withdrawal of the wife from her involvement in NCIPL.
All the provisions of the 2000 Orders were complied with (although the wife's shares in NCIPL were ─ inadvertently ─ not transferred to the husband).
The amount of $52,832.00 held by the husband in his cash management account (which amount was ordered to be paid to the wife pursuant to paragraph 5 of the 2000 Orders) comprised moneys received by the husband in March 2000 as a result of "cashing out" a superannuation fund of which he was then the beneficiary. A perusal of the husband's 2000 income tax return reveals that the husband was obliged to include a significant proportion of the payment that he received from the superannuation fund as assessable income for that tax year. According to the ETP Group Certificate and the husband's 2000 income tax return, the assessable part of the superannuation payout was $49,336.00. It follows that the husband's taxable income for the year ended 30 June 2000 was notionally inflated by the sum of $49,336.00 (being the assessable component of the superannuation payout totalling $52,832.00 received by the husband in March 2000).
In his case outline document, Mr Bacon argued as follows:
In due course, child support was levied upon that increased income (being the husband's taxable income for the year ending 30 June 2000, including the amount of $49,336.00 referred to above) in accordance with the formula in Part V of the Assessment Act.
(The husband) should not have to pay child support on the $52,832.00 he drew down to pay to (the wife).
For her part, Ms Scherman conceded that the amount of $52,832.00 should be notionally deducted from the husband's taxable income for the year ended 30 June 2000 before calculating the quantum of child support payable by the husband pursuant to the formula.
There are a number of comments that I would make in relation to the above scenario:
a)Although Mr Bacon and Ms Scherman both referred to the sum of $52,832.00 as being the amount by which the husband's taxable income for the year ended 30 June 2000 was notionally inflated as a result of the receipt of the superannuation payment in March 2000, the husband's 2000 income tax return (being exhibit W1) reveals that the relevant amount was $49,336.00.
b)The husband's taxable income for the year ended 30 June 2000 was $153,224.00. If $49,336.00 is deducted from that amount, then it is apparent that the husband's taxable income would have been $103,888.00.
c)The income cap for the child support period commencing on or after 1 January 2000 was $103,101.00. It follows that, even after deducting the assessable component of the superannuation payment received by the husband in March 2000, the husband's taxable income for the year ended 30 June 2000 was above the income cap and, as a result, the impact of the formula on the husband's income ─ and hence the husband's assessed child support ─ would have been no different.
In paragraph 5 of his affidavit sworn on 21 September 2005, the husband alleged that the effect of the child support administrative formula being applied to his "inflated" income for the year ended 30 June 2000 was that he "…ended up paying child support on moneys (he) had withdrawn for (the wife's) benefit". That allegation is clearly incorrect as both the "inflated" taxable income figure and the adjusted income figure (reducing the "inflated" figure by $49,336.00) were above the relevant income cap.
During the course of his closing address, Mr Bacon submitted that the 2000 Orders were relevant ─ in some way ─ to the proceedings now before the Court. At the same time, he conceded that the 2000 Orders made no mention of child support (and clearly did not contain a specific component for child support in the form of a lump sum payment, the transfer of property or otherwise). The fact of the matter is that there was no evidence before the Court to the effect that the 2000 Orders dealt with or were intended to deal with child support in any way (apart, perhaps, from the references to educational expenses and medical benefits cover referred to in paragraphs (b) and (c) of the notation on page 5 of the 2000 Orders).
Unfortunately, Mr Bacon's submissions relating to the relevance of the 2000 Orders to the present proceedings were almost incomprehensible. In my opinion, the 2000 Orders have no relevance beyond that to which I have (or will) make reference in these Reasons.
The Transfield Payment
In paragraph 5 of his affidavit, Mr Betts (the husband's accountant) deposed as follows:
At all relevant times until 1 July 2004, (the husband) conducted his business affairs through a corporate structure using the entity (NCIPL). At all times (NCIPL’s) sole role was to act as trustee of the Robert Mathieson Family Trust.
In paragraph 3 of her affidavit, Ms McCallum (the husband's partner) deposed to the following:
I began working with (the husband) in the 2002/2003 financial year. At that stage (the husband) was running his business affairs through a corporate structure using an entity known as (NCIPL).
In relation to the Transfield Payment itself (which I shall discuss below), the husband said: [6]
Essentially the payment was made to me (through NCIPL) for work I had done in the 1999/2000 financial year, but was not actually received by me until 14 July 2000.
[6] See paragraph 10 of the husband's affidavit sworn 21 September 2005.
As I have recorded above, it is clear beyond argument that, at all relevant times, NCIPL and its associated trust comprised the husband's alter ego.
The background to the Transfield Payment is as follows:
a)The 2000 Orders were made on 12 July 2000. For all practical purposes, the making of the orders terminated the financial relationship between the parties (save in relation to child support). Generally speaking, property settlement orders ─ made, as they are, under s.79 of the Family Law Act ─ can and should be regarded as a "once and for all proposition". In other words, once an order has been made pursuant to the provisions of s.79, the Court no longer has power to make a further property settlement order (unless, for example, s.79A is found to be applicable). [7]
b)Two days later, on 14 July 2000, a total of $68,400.00 (“the Transfield Payment”) was deposited into a newly opened cheque account with the Commonwealth Bank in the name of NCIPL as trustee for the Robert Mathieson Family Trust.
c)Clearly, the Transfield Payment was received by NCIPL during the 2001 tax year.
d)It is apparent from annexure MB3 to the affidavit of Mr Betts that the deposit of $68,400.00 comprised two payments, each of $34,200.00, from Transfield Obayshi Joint Venture ("Transfield").
e)Each of the payments of $34,200.00 from Transfield was in respect of invoices previously issued to Transfield by NCIPL. The invoices themselves were not presented to the Court, but two "payment references" prepared by Transfield were annexed to Mr Betts' affidavit. The first is dated 7 July 2000 and the second is dated 12 July 2000. The two "payment references" refer to a total of five invoices dated between 23 March 2000 and 28 June 2000, all relating to work done by NCIPL during the first half of the calendar year 2000.
f)According to the husband's case outline, "… (the Transfield Payment) served to increase (the husband's) taxable income by $68,400.00 in the 2000/2001 year. In due course, that increased income had child support levied upon it in much the same way as what occurred (in relation to the superannuation payout discussed above)".
[7] See Hickey (2003) 30 Fam LR 355 at 371 and the cases mentioned therein.
The husband's case outline also contains the following submission:
(The wife) was represented by lawyers in the dealings which led to the making of (the 2000 Orders). Under those orders, she received certain property and part of the quid pro quo was that (the husband) received (the wife's) share of any debts owing to NCIPL.
It is therefore inappropriate that (the husband) also pay child support on property/income for which he has already accounted to (the wife).
In paragraph 8(ii) of his affidavit sworn 13 May 2005, the husband explained his concerns regarding the Transfield Payment in this way:
The upshot of (the receipt of the Transfield Payment by the husband) is that the income that (was used by the Child Support Agency in its calculation of the husband's income) over-estimates my correct income for child support purposes by about $64,000.00.
In essence, the $64,000.00 which has been included in those figures is an example of further "double dipping" by the agency. That is, the $64,000.00 was already taken into account between (the wife) and me as a result of the property settlement. That amount should not also be counted again for child support purposes by levying child support upon it.
I reject the husband's submission in relation to the relevance and significance of the Transfield Payment. In particular, I do not accept that any "double dipping" has occurred. There are a number of reasons for my view in this regard:
a)The Transfield Payment represented income earned by the husband (or by NCIPL on his behalf).
b)The invoices, the payment of which comprised the Transfield Payment, were all issued during the second half of the 2000 financial year for work done during that same period, but the Transfield Payment was received at the beginning of the 2001 financial year.
c)The husband conceded that there was no reason why the moneys comprising the Transfield Payment could not have been deposited into NCIPL's bank account, or otherwise paid to NCIPL, before the end of the 2000 tax year.
d)The Transfield Payment was not made until the husband indicated to Transfield that it could be made (in other words, that he was ready to receive it).
e)There was no evidence, and Mr Bacon belatedly conceded that there was no evidence, that either the wife or her solicitors was/were aware of the amounts owed by Transfield in respect of the outstanding invoices, the payment of which subsequently formed the Transfield Payment. In other words, there was no evidence that the wife was aware of the amount owed by Transfield in respect of the invoices at the time of the making of the 2000 Orders.
f)The effect of the wife's evidence ─ which I accept ─ is that, at the time that the property settlement was negotiated, and at the time that the 2000 Orders were made, the wife assumed that NCIPL was nothing more than an empty shell.
g)Mr Bacon endeavoured to argue that the letters comprising annexures RM1 and RM2 to the husband's affidavit sworn 21 September 2005 indicated ─ in some way ─ that the outstanding invoices (the payment of which formed the subject of the Transfield Payment) were disclosed to the wife or to her legal advisers. It is clear that they do no such thing. Nowhere in the correspondence was the wife put on notice that the husband (or NCIPL) was owed, or was soon to receive, an amount of $68,400.00, or any other amount.
h)Mr Bacon conceded that neither of the parties treated NCIPL (or the husband's business generally) as having an agreed value, and there was certainly no evidence that the Court that made the 2000 Orders by consent was aware of any particular value being placed upon the company (or the husband's business) as an asset or item of property.
i)Mr Bacon eventually conceded that there was no evidence that the Transfield Payment was any different from the regular cash flow of any person running his or her own business.
j)Mr Bacon conceded that there was no evidence of any agreement between the parties to the effect that moneys to be received by the wife by way of property settlement were to be treated as child support in lump sum or any other form.
k)Indeed, Mr Bacon eventually conceded that there was no evidence that the "full matrimonial asset pool" seemingly taken into account by the Court that made the 2000 Orders actually included the debt comprising the outstanding invoices that were paid by Transfield on 12 July 2000.
l)In any event, the husband conceded that he paid income tax on the basis of his cash receipts. It follows that the Transfield Payment was properly treated as income in the hands of the husband (or NCIPL on his behalf) in the 2001 financial year.
In my opinion, Mr Bacon's submission to the effect that the Transfield Payment "… should be exempt from child support because it has been taken into account in the property settlement" is clearly and obviously unsustainable. It is of concern to the Court that the husband's counsel insisted upon pressing his submission in relation to this subject when ─ quite apart from the conceptual unsoundness of the argument ─ there was simply no evidence to support the necessary factual matrix which could have enabled such a case to be mounted, or given it form or substance. Indeed, Mr Bacon saw fit to rely upon a single sentence from Kay J's decision in Sloan (1994) 18 Fam LR 249 in support of his argument to the effect that the Transfield Payment should be "exempt" (as it were) from child support. That sentence appears at page 253 of the report and is as follows:
The legislation makes it clear that the Court can take into account the way the parties have divided their assets as a factor in determining the appropriate level of child support.
The fact of the matter is, however, that his Honour in Sloan was dealing with a case in which the parties had entered into consent orders which included the following[8]:
That the wife forego any claim to maintenance for herself or the children of the marriage for a period of 10 years from the date of separation for the purposes of the Family Law Act. The amount attributable to such maintenance is $48,000.00.
[8] 18 Fam LR 249 at 250.
The consent orders in Sloan also included the following[9]:
For the purpose of these consent orders, the husband the wife agree that the value of the matrimonial home is $120,000.00, that the husband's interest therein is valued at $48,000.00..
[9] 18 Fam LR 249 at 250.
The paragraph in Sloan in which the sentence relied upon by Mr Bacon appears is as follows:
You cannot contract out of child support. The Act is clear about that, the authorities are clear about it. The Legislation makes it clear that the Court can take into account the way the parties have divided their assets as a factor in determining the appropriate level of child support. In this case, the wife received from the husband an admitted $48,000.00. It is difficult to know what element is appropriate for spousal support and what element is appropriate for child support. I suspect, given that the wife is in full-time employment, that the spousal support element is likely to be fairly negligible but I do not have the full details of that exercise.
It is quite clear from the above that the decision in Sloan does not support Mr Bacon's argument. There is no evidence before the Court that the wife in the present case received anything from the husband over and above her agreed entitlement on the basis of property settlement alone. And there was certainly no acknowledgment (within the 2000 Orders or elsewhere) that any part of the property to be retained by the wife was to be treated as child support.
The Law
The process involved in the consideration of an application for departure from an administrative assessment of child support was explained by the Full Court in Gyselman (1992) FLC 92-279 at 79,064-5, under the heading “Division 4 – Orders for Departure from Administrative Assessment in Special Circumstances”. The Full Court said (inter alia):
Section 117 is the critical provision.
The structure of that section is that s.117(1)(b) identifies concisely the matters about which the Court must be satisfied and those components are then expanded in subsections (2) to (9). Section 117(1)(b) identifies a clear three-step process:
Whether one or more grounds of departure in s.117(2) is established.
Whether it is ‘just and equitable’ within the meaning of s.117(4) to make a particular order.
Whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order.
It is clear from the careful way in which s.117 has been structured that the Court must address each of those three separate issues...
… Each of those grounds (in s.117(2)) is prefaced by the words, "in the special circumstances of the case". Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something which 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. (It has been held) that "special circumstances" were "facts peculiar to the particular case which set it apart from other cases". The approach to the interpretation and application of the particular grounds in s.117(2) must be guided by that qualification.
It is clear from the decision in Gyselman that the Court is not obliged to "slavishly go through" each of the considerations in s.117(4). Nor is it necessary to adopt such an approach in relation to the matters referred to in s.117(5). In essence, the Court is obliged to adopt "a practical and flexible approach" to the consideration of the matters referred to in ss.117(4) and (5). [10]
[10] See Ross v McDermott (1998) 23 Fam LR 613 at 623-4.
The Earlier Period (1 March 2000 to 3 July 2002)
During the course of the proceedings, Ms Scherman handed up a schedule headed, "Actual Child Support Assessments For Child Support Periods from 1 March 2000 to 3 July 2002". Mr Bacon conceded that the schedule is accurate.
The schedule is as follows:
| Child | Date of Assessment | Child Support Income Amount | Exempted Income | Child |
| 1 March 2000 to | 4 August 2003 | $103,103.00 | $10,482.00 | Carl |
| 21 February 2001 to | 4 August 2003 | $103,103.00 | $20,311.00 | Carl |
| 4 April 2001 to | 20 November 2001 | $108,732.00 | $21,6700.00 | Carl |
As indicated earlier in these Reasons, the husband seeks departure orders relating to all assessments relevant to the Earlier Period. He also seeks to depart from the assessments relating to the Later Period (as does the wife). The wife opposes the husband's application as it relates to the Earlier Period.
It is not apparent from the husband's amended application filed 21 September 2005, and supporting material, that the husband has ever applied to the Child Support Agency for a change of assessment in relation to the assessments falling within the Earlier Period. Kay J summarised the relevant process as follows:[11]
The Assessment Act provides a regime by which child support liabilities are established by the application administratively by the Child Support Registrar of a formula provided in the legislation. A party dissatisfied with the child support as calculated by application of the formula may apply for a determination to vary the rate of child support payable. Part 6A of the Assessment Act contains the procedures which are normally undertaken to seek a departure from administrative assessment by an application made to the Child Support Registrar. A party dissatisfied with that determination may lodge an objection and, once that objection has been dealt with, an application may then be made to a Court exercising jurisdiction under the Assessment Act to have a departure order made under the provisions of Division 4 of Part 7 of the Assessment Act.
[11] See Woolley & Carney (2005) 33 Fam LR 294 at [32].
The fact that the husband has (apparently) never made a relevant application under Part 6A of the Assessment Act does not mean that the Court is powerless to deal with his application to depart from the assessments relating to the Earlier Period. Section 115(c) provides that the Court has power to deal with an application for a departure order if (in the circumstances of the present case):
a)the wife or the husband is a party to an application pending in a court having jurisdiction under the Assessment Act; and
b)the court is satisfied that it would be in the interest of the wife and the husband for the court to consider, at the same time as it hears the application that is properly before it, whether the relevant departure order should be made.
It is clear that the husband did comply with the requirements of Part 6A of the Assessment Act in relation to the assessments covering the Later Period. To that extent, the husband and the wife are both parties to a valid application pending before this Court, and I am satisfied that it is in the best interests of all relevant parties to deal with the husband's application as it relates to the Earlier Period at the same time as I deal with his application as it relates to the Later Period. In any event, it was not suggested (on behalf of the wife) that this Court lacked power to deal with the husband's application as it relates to the Earlier Period.
I turn now to consider whether one or more of the grounds of departure in s.117(2) has been established in relation to the assessments falling within the Earlier Period.
Earlier Period ─ Grounds For Departure
It is difficult to identify from the husband's material the precise grounds upon which he relies in support of his departure application (as it relates to the three assessments within the Earlier Period). To the extent that the husband might rely upon the effect of the superannuation payout that he received in March 2000, and to the extent that he might rely upon the Transfield Payment and the effect of the 2000 Orders, I have already dealt with those subjects earlier in these Reasons.
The receipt of the superannuation payout had no discernible impact on the quantum of child support payable by the husband.
Similarly, it has not been shown that the receipt of the Transfield Payment, some two days after the 2000 Orders were made, had any untoward impact on the child support payable by the husband. The Transfield Payment properly formed part of the husband's income (or the income of an entity controlled by the husband) in the financial year in which it was received. It is not to the point that the payment might have reflected work done in the previous financial year. In any event, I have found that the husband could have arranged to receive payment in respect of the relevant invoices (or some of them) earlier than the date upon which they were actually paid. If the husband did not wish to receive the payments in respect of the outstanding invoices, then that was a matter for him. I have already found that the wife was not aware of the outstanding invoices, and I do not accept that either she or her solicitors ought to have been aware of them. In every sense, this is simply an example of the husband being hoist with his own petard.
It would appear that the husband also argues that the fact that
Mary-Ellen was living with him during the Earlier Period amounts to a ground for departure. In relation to this possible ground, I make the following observations:
a)It does not appear that the husband raised this issue with the Child Support Agency during the Earlier Period. If, in fact, Mary-Ellen's residence with him was ignored, then the husband's failure to raise the issue with the Child Support Agency remains completely unexplained.
b)The husband's exempted income amounts recorded in the assessments relating to the Earlier Period reveal that it is likely that Mary-Ellen's residence with him was taken into account by the Child Support Agency ─ at least from 21 February 2001.
c)There was no evidence before this Court that the presence of Mary-Ellen in the husband's household rendered unjust and inequitable the quantum of child support which the husband was obliged to pay for Carl. Indeed, there was no evidence presented to the Court regarding the overall cost to the husband of providing financial support for Mary-Ellen during the Earlier Period.
In paragraph 22 of his affidavit sworn 21 September 2005, the husband refers to what he describes as "a letter sent to (him) by the agency dated 1 March 2000". He asserts that the "letter" shows that for the period 4 January 2000 to 3 April 2001 he was given no allowance for Mary-Ellen living with him. The document which the husband describes as a "letter" is in fact a child support assessment relating to the period 4 January 2000 to 3 April 2001. The assessment (which is annexure RM5 to the husband's affidavit) is dated 1 March 2000 and records that the husband is obliged to pay child support at the rate of $1,389.33 per month for Carl (who was then living with the wife). The assessment ignores the fact that Mary-Ellen was living with the husband, and under the heading "Dependent Children" ─ as it relates to the husband ─ is recorded "none".
The next annexure to the husband's affidavit sworn 21 September 2005, however, comprises a transaction statement from the Child Support Agency relating to the period 4 January 2000 to 14 September 2005. The transaction statement is annexure RM6 to the husband's affidavit. It reveals that, notwithstanding the assessment dated 1 March 2000, the husband was not required to pay child support at the rate of $1,389.33 per month during the relevant period (although unexplained adjustments were made in November 2001, some seven months after the completion of the period the subject of the assessment dated 1 March 2000).
On the basis of the material now before the Court (including the oral evidence presented by or on behalf of the parties), there is simply no evidence that could cause this Court to conclude that Mary-Ellen's residence with the husband amounts to a ground for departure under s.117(2) of the Assessment Act.
Earlier Period ─ Conclusion
In his amended application filed 21 September 2005, the husband indicated that the only ground upon which the departure order was sought is that contained in s.117(2)(c) of the Assessment Act. The reliance upon that provision was emphasised by Mr Bacon during the course of his opening address. Mr Bacon said that the husband's application is based on s.117(2)(c)(i) and (ii) of the Assessment Act, and submitted that a departure order should be made in the special circumstances of the case.
The grounds for departure described in s.117(2)(c)(i) and (ii) are as follows:
… 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:
(i)because of the income, earning capacity, property and financial resources of either parent or the child; or
(ii)because of any payments, and any transfer or settlement of property made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child…
The expression "special circumstances" has been held to mean "facts peculiar to the particular case which set it apart from other cases".[12] The use of the expression is "…intended to emphasise that the facts of the case must establish something which is special, or out of the ordinary".[13]
[12] See Savery (1990) FLC 92-131 at 77, 897.
[13] See Gyselman at 79,065.
In my opinion, there are no "special circumstances" which apply to the Earlier Period, or to the overall factual matrix upon which the assessments covering the Earlier Period were based. The husband has not demonstrated that the assessments reflect "an unjust and inequitable determination of the level of financial support" to be provided by the husband for Carl. The only fact that might come close to a "special circumstance" is the possibility that the Child Support Agency overlooked the fact that Mary-Ellen was in the sole daily care of the husband during the period from 1 March 2000 to 20 February 2001. For the reasons which I have set out above, however, I am not prepared to infer that any of the relevant assessments were unjust and inequitable. The history of the matter reveals that the husband has had a number of opportunities to require and participate in a review of the relevant assessments during the Earlier Period. He might or might not have done so. If he did, then he has seen fit not to provide the Court with the reasons provided by the Child Support Registrar for the decision not to vary any of the relevant assessments during the Earlier Period.
The husband's application as it relates to the Earlier Period will be dismissed.
The Later Period
As I have already recorded, both parties have conceded that a ground for departure exists for the whole of the Later Period. That being the case, it follows that the Court must determine whether it would be just and equitable as regards the relevant children, the wife and the husband, and otherwise proper, to make an appropriate departure order.
It also follows that there is no need for the Court to dwell upon the Notice of Decision (dated 24 November 2004) and the Notice of Decision on Objection (dated 29 March 2005) which preceded the husband's application for a departure order filed on 21 September 2005.
I turn now, therefore, to consider whether it would be just and equitable as regards the relevant children, the wife and the husband to make the orders sought by the parties, or other orders. Before doing so, I remind myself that the husband and the wife have the primary duty to maintain their children, and that that duty -
a)is not of lower priority than their duty to maintain any other person (including any other child);
b)has priority over all the parties' commitments (other than those commitments which are necessary to enable the parties to support themselves and any other person that they have a duty to maintain); and
c)is not affected by any duty that some other person may have to maintain the children, or any entitlement of the child (or any other person) to an income tested pension, allowance or benefit.[14]
[14] See s.3 of the Assessment Act.
The Proper Needs of The Children
Carl lived with the wife at all relevant times. The period that is relevant to the present application, however, is from 4 July 2002 to 1 March 2004 (when Carl commenced paid employment).
The period that is relevant for Mary-Ellen is from 4 July 2002 to 26 November 2005 (being the date upon which she also commenced paid employment). Mary-Ellen lived with the husband from 4 July 2002 to 31 January 2004. She lived with the wife from 1 February 2004 to the date that she commenced paid employment.
Doing the best that I can with the material that has been provided to me, and taking into account the muddled, scattergun nature of the cases presented, I have decided to break the Later Period into four parts, and to consider what might be appropriate, just and equitable orders in relation to child support for each of those parts. The components of the Later Period that I shall consider are the financial years ending 30 June 2003, 2004 and 2005, and the period from the commencement of the 2006 financial year (1 July 2005) to 26 November 2005. These periods will have to be broken down further when regard is had to Mary-Ellen's change of residence and the commencement of Carl's paid employment in early 2004.
The husband provided no evidence of the overall cost of maintaining either child in any of the affidavit material that he relied upon.
The only evidence provided by the wife as to the overall cost of maintaining the children is a brief comment in the wife's affidavit.[15] In part N of her financial statement, the wife estimates her average weekly expenses as they relate to Mary-Ellen at $195.00. The wife does not provide any evidence as to the overall cost of maintaining Carl.
[15] In paragraph E (ii) on page 11 of her affidavit.
During the course of her evidence-in-chief, the wife said that she failed to include certain items relating to Mary-Ellen's income in her financial statement. She said that Mary-Ellen was receiving a small “youth maintenance allowance”. In addition, and as deposed to in the wife's affidavit, Mary-Ellen had been working half a day per week in a fruit shop since approximately June 2005, earning $40.00 per week. According to the wife, Mary-Ellen's "income" during that period amounted to something in the order of $100.00 per week, from which she contributed some moneys towards her own support.
Unfortunately, the evidence provided by both parties was not sufficient for me to make any firm findings as to the proper needs of the children.
Mr Bacon submitted that ─ in some way ─ the wife was "caught" by what he described as "the rule in Paradine".
In Paradine (1981) FLC 91-056 the Full Court (by majority) said: [16]
[16]At page 76, 455.
In my view, the wife failed to establish the overall financial needs of the child …
In the absence of evidence of even the most general nature, giving some estimate of the needs of the subject child, apart from educational expenses, I do not consider that it was open to (the trial judge) to extrapolate the expenses of the child from the wife's statement of financial circumstances which sets out the joint expenses of the wife and the two children of the marriage for the year ended 30 June 1979.
In other words, Mr Bacon was suggesting that the wife's application (or perhaps both parties' competing applications) should be dismissed because the wife had failed to present evidence in relation to an essential component of her case. But in making such a suggestion, Mr Bacon clearly overlooked the mutual concession to the effect that a ground for departure had been (or could be deemed to have been) established in relation to the Later Period. That being the case, the Court cannot simply dismiss either or both applications without first considering the matters set out in ss.117(4) and (5) of the Assessment Act.
It is arguable that the Court could ignore the actual cost of maintaining the children and focus, instead, upon other considerations (such as the overall financial circumstances of each of the parties). The Court might then be able to substitute components of the Child Support formula, such as the parties' respective child support income amounts, and then let the formula “run its course”.
The most appropriate course of action, however, is that mandated by the Full Court in Gyselman, where it said:[17]
… if, but only if, a departure ground has been established, in the exercise under s.117(4) the parties are to call evidence about the "proper needs of the child”, and … it is not sufficient or appropriate to rely upon the formula level to perform that task …
[17] At Fam LR 241.
As Lindenmayer J observed in Dwyer v McGuire (1993) FLC 92-420, s.117(9) provides that the matters set out in s.117(4) are not exclusive and, as a result, evidence of published research of acknowledged experts in a particular field of speciality (such as the costs of maintaining the children) is admissible.
The effect of cases such as Mee v Ferguson (1986) FLC 91-716, Coon v Cox (1994) FLC 92-464 and Streets (1994) FLC 92-509 is that the Court can take into account the Lee and Lovering Scales published by the Australian Institute of Family Studies. Generally speaking, the Lee Scale is to be preferred, as it represents a more accurate guide to the costs of maintaining children. More recent research has been carried out as to the costs of children (see, for example, the discussion in CCH Family Law and Practice Commentary at paragraph 29-410), but I prefer to rely upon the Lee Scale because it was referred to during the course of the proceedings (and a copy of it was provided to the Court by Ms Scherman). Further, Ms Scherman made it clear that she wished to rely upon the Lee Scale. For his part, Mr Bacon made no attempt to assist the Court in relation to this subject, and was content to simply "take the point".
At all relevant times (that is, from 4 July 2002) both children were at least fourteen years of age. There was no evidence before me to support a conclusion that the overall costs of maintaining Carl were significantly different to the overall costs of maintaining Mary-Ellen.
I am conscious that the wife's own estimate of her average weekly expenses as they related to Mary-Ellen was $195.00. During the course of her oral evidence, however, she indicated that there are other expenses which have not been included in the financial statement (and which may have been met by the relatively modest youth allowance received by Mary-Ellen, together with Mary-Ellen's own income).
Doing the best that I can with the only evidence that is available to me (namely, the wife's financial statement and her short comments in examination-in-chief), and bearing in mind that the wife was not cross-examined in relation to this subject (and that the husband gave no evidence as to the overall costs of maintaining Mary-Ellen when she lived with him), I conclude that the overall costs of maintaining Mary-Ellen (and hence the overall costs of maintaining Carl) were likely to be something between $195.00 per week and the appropriate amount for a child aged 14 or above as recorded in the Lee Scale. Recognising that the costs of maintaining children have increased over the years, I find that the following weekly figures reflect a fair allowance for the costs incurred by the residence parent in maintaining Carl and Mary-Ellen, and represent their proper needs whilst they are or were with them.
·Year Ending 30 June 2003 - $230.00 per week
·Year Ending 30 June 2004 - $240.00 per week
·Year Ending 30 June 2005 - $250.00 per week[18]
·Year Ending 30 June 2006 - $260.00 per week.[19]
[18] But see paragraph 106 below.
[19] But see paragraph 106 below.
The above figures have as their genesis the average weekly expenses (as they relate to Mary-Ellen) contained in the wife's financial statement, averaged against the appropriate figure from the Lee Scale for the relevant period. They are, however, simply approximations.
I accept that the above figures do not recognise or make allowance for the general costs incurred by the non-residence parent whilst the children (or either of them) are or were with him/her. Nor do the figures make allowance for other costs incurred by one or other of the parties, such as school fees. The fact of the matter is, however, that I was provided with no evidence (and certainly no clear evidence) in relation to these subjects. In the circumstances of the present case, I am not prepared to hazard a guess as to these expenses. Both parties fought this case out grimly, and to the bitter end. The husband, in particular, seemed determined to take every point that he (or, perhaps more accurately, his legal advisers) considered might conceivably have some relevance to the proceedings. As appears from these Reasons, what the parties considered relevant and what was ultimately of assistance to the Court were frequently two different things.
It follows from the above that, in my opinion, a fair allowance for the total, overall costs incurred by the residence parent in maintaining Carl and Mary-Ellen (which represents the children's proper needs on an average weekly basis) is as set out in the table contained in paragraph 101 above.[20]
[20] But see paragraph 106 below.
The Financial Position of Carl and Mary-Ellen
The Court was presented with very little evidence regarding the income, earning capacity, property and financial resources of the children. Indeed, there was no evidence relating to Carl's financial position prior to the date upon which he commenced paid employment. The wife's evidence was that Mary-Ellen was earning approximately $40.00 per week from a part-time job which commenced in approximately June 2005. I do not know when her youth allowance commenced, but I propose to ignore it in any event as an income-tested pension, allowance or benefit.
On the basis of the very limited material available to me, I find that neither child's income, earning capacity, property or financial resources amount to relevant considerations in the context of this case ─ save that I propose to take into account the fact that Mary-Ellen was earning $40.00 per week from (say) 1 June 2005. It follows that the total, overall costs incurred by the residence parent (who was then the wife) in maintaining Mary-Ellen (and which represents Mary-Ellen's proper needs on an average weekly basis) can be reduced by $40.00 per week with effect from 1 June 2005. In other words, those costs amounted to $210.00 per week from 1 June 2005 to 30 June 2005 and $220.00 per week from 1 July 2005 to the date upon which Mary-Ellen commenced paid employment (being 26 November 2005).
The Wife's Financial Position
Pursuant to the 2000 Orders, the wife received approximately $80,000.00. She also retained a motor vehicle, furniture and chattels. According to her affidavit, she also retained debts totalling approximately $8,000.00.
The wife met her present husband, Mr Hamilton, in approximately December 2000 and they were married in March 2003.
In paragraph E(iii) of her affidavit, the wife said:
Prior to my marriage to (the husband), I worked full-time as a secretary. I stopped working when Carl was born. (The husband) and I both agreed that I should devote myself full-time to the care of Carl and any other children that we should have, home duties and otherwise assist (the husband) with his business. When Carl was 11 years old I wanted to obtain part-time work. At that time I did not feel the need to return to work on a full-time basis as (the husband) was a high earner, typically earning about $120,000.00 per year and the family was very comfortable.
I accept the wife's evidence as described in the previous paragraph. The wife was an impressive and, in my opinion, obviously honest witness. I accept that she was open and frank in relation to her financial position. I was far less impressed by the husband as a witness and, where the evidence of the parties is in dispute, I prefer the evidence of the wife.
In mid 1999, the wife commenced working in a golf shop in Geelong. She worked on Saturdays. Over time, she increased her hours, and in early 2003 she became a permanent part-time employee. She then worked a minimum of 20 hours per week.
The wife described her present employment as follows: [21]
Currently I am a permanent part-time sales assistant at Drummond Golf. Drummond Golf has a second professional golf shop in Curlewis and often I am required to do some of my hours there. I get extra hours during busy periods or when other staff are on holiday or need time off. I am always the first person asked to take up the extra hours. On occasion I have been given up to 48 hours of work a week … I am paid $13.00 per hour. Since working at Drummond Golf I obtained a Retail Three Certificate. I have not looked for another job as I am very happy. I have developed a good knowledge of golf products and enjoy selling them and advising customers about them. I am 47 years of age and the only recent work experience I have is in a golf shop.
[21] See paragraph E(iii) on page 12 of the wife's affidavit.
According to the wife's financial statement, she earns approximately $312.00 per week from her employment with Drummond Golf. That reflects 24 hours of work per week (at $13.00 per hour). Having regard to the wife's evidence to the effect that she works as many extra hours as she can, I find that a fairer estimate of her gross weekly income from Drummond Golf is likely to be approximately $390.00 per week (which reflects 30 hours at $13.00 per hour). Such an estimate is consistent with the wife's gross earnings from her employment as reflected in her 2004 income tax return.[22]
[22] See exhibit H2.
The wife and her present husband jointly own the house in which they live (and which they share with Carl and Mary-Ellen). It would appear that the house is worth approximately $240,000.00, of which the wife's share is $120,000.00
The wife and her present husband purchased a property in Queensland in late 2002. The property was rented out on a seasonal basis, but overall the wife and her present husband "...were paying out more in outgoings than (they) were receiving in rent".[23]
[23] See paragraph (c) on page 13 of the wife's affidavit.
The Queensland property was sold in April 2005.
The wife and her present husband hold approximately $130,000.00 in interest bearing accounts. The wife's share (being one half) is approximately $65,000.00.
The wife owns her own car and has a share in another car. She and her husband owe approximately $20,000.00 in respect of debts secured against their home (the wife's share being approximately $10,000.00).
It would appear that the wife owes approximately $2,500.00 on her credit card. She has superannuation entitlements worth approximately $9,500.00.
The wife was cross-examined at some length by Mr Bacon. Much of the cross-examination was irrelevant, and did little to assist the husband's case.
Mr Bacon seemed to suggest (during his cross-examination of the wife) that she had been less than diligent in pursuing the collection of child support arrears. I reject any such suggestion, and I find that the wife acted reasonably and appropriately in endeavouring to ensure that the arrears were collected.
Mr Bacon also seemed to suggest that the wife should have called evidence from her present husband regarding his financial position. I also reject that suggestion. Mr Hamilton has no obligation to support the husband's children, and if the husband wished to obtain details of Mr Hamilton's financial position, then he could have issued a subpoena to him. The husband did not do so.
I am satisfied that the wife has provided a fair and reasonably accurate overview of her financial position. I can see no reason to draw any adverse inference (of any nature) from the wife's failure to call her present husband.
Unfortunately, the submissions made by Mr Bacon in relation to this subject (like his submissions in relation to the wife's alleged lack of diligence in endeavouring to enforce the payment of the arrears of child support, and other matters) were simply a further reflection of the disjointed, aimless approach to the proceedings adopted by the husband. The lack of focus in the husband's case meant that the proceedings before this Court were unnecessarily and inappropriately prolonged.
I accept that the wife and her present husband made a capital gain of approximately $80,000.00 as a result of the sale of the Queensland property. The wife's share was approximately $40,000.00. I shall take that matter into account later in these Reasons.
The Husband's Financial Position
In paragraph 6 of his affidavit sworn on 13 May 2005, the husband said:
Although the offending change of assessment decision spans a number of assessment periods (the relevant decision covered the period from 1 July 2002 to 21 January 2006) my circumstances have stayed more or less constant throughout. Consequently, I propose in this affidavit to speak generally about the circumstances of my case without specific reference to particular child support periods. Where necessary, I shall distinguish events which relate particularly to one specific period. On the whole, though, the comments I make … relate equally to all periods.
The husband was cross-examined at considerable length regarding his income and financial position generally. Similarly, Ms McCallum and Mr Betts were also cross-examined. Ms Scherman prepared a detailed schedule purporting to reflect the husband's "income for child support purposes". The fact of the matter is, however, that much of both parties' material (as it related to the husband's financial position) was very difficult to follow. It contained an over-abundance of detail, and it clearly demonstrated that both parties had "lost sight of the wood for the trees".
A great deal of time was spent on Ms McCallum's role within the company G Mac. In my opinion, it is clear beyond argument that the interposition of G Mac is no more than a device employed by the husband to minimise his income tax and/or his child support obligations. To suggest that Ms McCallum controls the husband's professional activities is the financial equivalent of the tail wagging the dog. In my opinion, there is absolutely no reason why the husband could not have continued conducting his business in precisely the same manner as he had been doing prior to the formation of G Mac, and simply employed a secretary, bookkeeper or personal assistant to assist him if he felt that the need was there. I have no doubt (and I find) that the husband, Ms McCallum and Mr Betts have all exaggerated Ms McCallum's role in relation to the husband's income earning activities. I find that he could comfortably carry on his business without the intervention of G Mac, and earn a similar income to that which he had been earning prior to the artificial insertion of a "middle man" such as G Mac.
The financial year immediately prior to the Later Period was the financial year ending 30 June 2002. According to the relevant notice of assessment issued by the Australian Taxation Office, the husband's taxable income for that year was $115,515.00. That figure included income earned by the husband directly, together with income earned through the trust controlled by him (and subsequently distributed to him). In the same year, the husband contributed $6,000.00 to his superannuation scheme. Leaving aside other adjustments that could be made to the figures comprising the income and expenditure of the husband and the trust controlled by him, I am satisfied that the husband's gross income for that year should be treated as being not less than $120,000.00. That figure is not inconsistent with the husband's income in the previous four years (even allowing for adjustments and restructuring in the 2000 and 2001 tax years).
During the year ended 30 June 2003 (being the first financial year of the Later Period), the trust controlled by the husband received "consulting fees" totalling $188,811.00. After allowing for expenses, including superannuation contributions (for the husband) of $33,358.00, its income amounted to $128,491.00.
In 2003, the husband's personal income was $50,000.00 ─ all of which was paid to him by way of a distribution from the trust which he controlled. A distribution of $44,000.00 was made to Ms McCallum.
To the extent that the amount distributed to Ms McCallum reflects an allowance for the work that she carried out during that year, I am satisfied that that allowance was excessive. For example, I find that the husband did the bulk of the work required for the preparation of the BAS statements. Doing the best that I can with the evidence available to me, however, I find that a reasonable allowance for Ms McCallum's input during the 2003 financial year would have been $20,000.00.
Again, having regard to the profit derived by the trust controlled by the husband in that year, being $128,491.00, and adding back the husband's superannuation contributions of $33,358.00 ─ but allowing a payment of (say) $20,000.00 to Ms McCallum ─ I am satisfied that a reasonable allowance for the husband's gross income during that year (2003) is approximately $140,000.00.
The husband's taxable income for 2004 was $32,082.00. In the same year, the trust controlled by the husband received "consulting fees" of approximately $91,000.00. After allowing for a number of deductions, the trust earned a profit of approximately $57,000.00. One of the deductions was interest on a loan (or line of credit) taken out by the husband to pay a personal taxation bill from a previous year.
Ms Scherman argued that a number of deductions should be modified or disallowed (the effect of which is be to increase the notional income that would have been available to the husband). There is much merit in Ms Scherman’s submissions in that regard. (I note, as well, that exhibit W3 comprises a loan application form dating from December 2002; it is apparent from the form that the husband had represented to the lending institution that his annual income was $69,264.00.)
I also note that, in the 2004 year, approximately $21,000.00 was distributed to Ms McCallum. I accept that such a distribution was an appropriate reflection of the work that she had done during that year.
Doing the best that I can with the material available to me, I find that the husband's notional income for the year 2004 was approximately $50,000.00, comprising the trust's net profit with adjustments to take account of the interest paid in respect of the loan taken out by the husband to pay his personal taxation bill, a more modest allowance for depreciation, a more modest allowance for accounting fees (taking into account that some of the accounting fees during 2004 reflected work done by Mr Betts or his employees regarding the husband's dealings with the Child Support Agency) and deducting approximately $21,000.00 to reflect the work done by Ms McCallum.
The work done by the husband during the 2005 financial year is partially reflected in the tax invoices issued by G Mac and comprising exhibit W8. G Mac was paid at least $112,000.00 (excluding GST) in respect of work done by the husband. At least $5,000.00 in "mileage expenses" was charged over and above that figure.
During the course of her cross-examination, Ms McCallum said that the husband (through G Mac) had two clients, and that invoices were forwarded to them monthly. On that basis, there should have been a total of 24 invoices in each financial year. But exhibit W8 comprised only 16 invoices. It is fair to assume, therefore, that the gross charges for the husband's work during 2005 would have been approximately 50 per cent higher than the total charges reflected in the 16 invoices that were produced in exhibit W8. In other words, a fair estimate of the total charges relating to the husband's work would be something in the order of $168,000.00. If $22,000.00 were to be deducted from this figure as a reasonable allowance for the work done by Ms McCallum, and a further $20,000.00 deducted in respect of administration and other expenses associated with the running of the husband's business[24], then it appears that a reasonable allowance for income attributable to the husband for the 2005 financial year is approximately $125,000.00.
[24] Which allowance I find is reasonable in all the circumstances.
I have no evidence whatsoever regarding the husband's income for the 2006 financial year. In the circumstances, I propose to treat his income as being the same as his (notional) income in the 2005 financial year. In other words, I find that he is likely to earn something in the order of $125,000.00 (if the interposition of G Mac is ignored).
Summary ─ Husband's Income
In summary, I find that the husband's (notional) gross income for each of the financial years during the Later Period was (or is likely to be) as follows:
2003: $140,000.00
2004: $50,000.00
2005: $125,000.00
2006: $125,000.00
Husband's Assets And Liabilities
The husband's financial statement indicates that he has no assets (apart from his interest in NCIPL and a motor vehicle worth approximately $20,000.00). During the course of his evidence, however, the husband said that a proposed sale of the house in which he and Ms McCallum live had not proceeded. As a result, the house (which is worth approximately $260,000.00) remains in his name.
The husband records liabilities of approximately $57,000.00, including income tax liabilities of just over $7,000.00 and a loan from the Commonwealth Bank of $49,000.00.
The husband has superannuation entitlements worth approximately $60,000.00.
The husband's evidence relating to the proposed or attempted transfer of his present home to Ms McCallum was incomprehensible. Although the arrangement was described as a “sale” in the husband's financial statement, the husband said that he would not have received the agreed consideration (being $260,000.00) even if the “sale” had gone through.
The husband also conceded that he transferred a motor vehicle to Ms McCallum. The motor vehicle was worth $5000, but the husband received no payment for it.
Commitments of the Parties to Enable Them to Support Themselves and Others
I do not propose to deal with this factor in any detail for the following reasons:
a)Given the ages of the parties, their respective backgrounds and lifestyles, it seems to me that both parties' living expenses (that is, their living expenses for themselves) should be fairly similar. I accept, of course, that the husband, because of his income, may be able to afford items or expenditures that the wife cannot reasonably afford.
b)Carl and Mary-Ellen now live with the wife. Both are self-supporting and neither party is obliged to support them.
Quantum of Child Support for Carl and Mary-Ellen
It was not in dispute that, in the special circumstances of the case now before me, adherence to the provisions of the relevant child support assessments (for the Later Period) would result in an unjust and inequitable determination of the level of financial support to be provided by the parties for the children ─ because of the overall respective financial positions of the parties.
I have already concluded that a fair allowance for the costs incurred by the residence parent in maintaining each of Carl and Mary-Ellen (which allowance represents their proper needs) is in accordance with the schedule in paragraph 101 above.[25] When I take into account the matters set out in s.117(4) of the Assessment Act ─ which factors have been discussed above ─ I conclude that it would be just and equitable for the husband to bear the following percentages of those costs for each of the relevant financial years. As a corollary, I have also concluded that it would be just and equitable for the wife to bear the remaining costs.
[25] But see the comments in paragraph 106.
| Year Ending 30 June | Husband | Wife |
| 2003 | 85% | 15% |
| 2004 | 70% | 30% |
| 2005 | 80% | 20% |
| 2006 | 80% | 20% |
The percentages appearing in the table set out in the preceding paragraph reflect my findings regarding the husband’s (notional) gross income for each of the relevant financial years[26], together with my opinion to the effect that a reasonable allowance for the wife’s (notional) gross income for the financial years ending 30 June 2003 and 2004 would be approximately $20,000.00, and for the financial years ending 30 June 2005 and 2006 would be approximately $25,000.00. The percentages also reflect broadly based adjustments to take into account other aspects of the parties’ respective financial positions, including the fact that the wife (and her present husband) made a capital gain of approximately $80,000.00 as a result of the sale of the property that they had owned in Queensland ─ the wife’s share being approximately $40,000.00.[27]
[26] See paragraph 141 above.
[27] See paragraph 125 above.
I find that the attribution of percentage contributions referred to in the table set out in paragraph 149 above does not impose on either party that which might be regarded as “an inequitable share in the support of the (children)”.[28] To that extent, I confirm that I have metaphorically stood back and considered whether the percentages might be regarded as being unfair or unjust as they relate to one party or the other. I find that they are neither unfair nor unjust.
[28] See Woolley v Carney 2005 33 FAMLR 294 at 304.
In order to ascertain the precise effect of the findings that I have made in this matter, it is necessary to consider the position in relation to Carl and Mary-Ellen separately for a variety of relevant periods.
Child Support for Carl during the Later Period
In relation to the first part of the Later Period (being 4 July 2002 to 30 June 2003), I find that the husband should pay child support to the wife at the rate of $195.50 per week (being 85% of Carl’s proper needs – which I have found to be $230.00 per week).
In relation to the second part (being 1 July 2003 to 29 February 2004), I find that the husband should pay child support to the wife for Carl at the rate of $168.00 per week (being 70% of Carl’s proper needs – which I have found to be $240.00 per week).
Child Support for Mary-Ellen during the Later Period
In relation to child support for Mary-Ellen, it is important to recall that Mary-Ellen ceased living with the husband on 31 January 2004 and commenced living with the wife. It is appropriate, therefore, that the wife pay child support to the husband up to 31 January 2004, and that the husband pay child support to the wife (for Mary-Ellen) after that date (in other words, from 1 February 2004). It is also important to bear in mind that Mary-Ellen started earning $40.00 per week from approximately 1 June 2005, and that what might otherwise have been regarded as her proper needs on an average weekly basis thereafter can be reduced by $40.00 per week.[29]
[29] See paragraph 106 above.
The Full Court was clearly of the view that the “rule” applied with equal force to arrears of spousal maintenance and arrears of child maintenance.
Spry v Roet and Reid were both cited, with approval, by Lindenmayer J in Lutzke (1979) 5 Fam LR 553 at 569.
The same cases were cited with approval by the Full Court in Molier v Van Wyk (1980) 7 Fam LR 18 at 30.
By 1986, however, the tide had begun to turn (as it were). In Truscott (1986) FLC 91-761, the Full Court said:[42]
Although the recognition accorded it in the past varied from State to State …, the “ 12 months rule” is a useful practice approach in maintenance enforcement proceedings which has been expounded on in a number of reported cases over the years, both here and in England… However, it is not a “rule” in any strict sense and must give way to the circumstances of each case when those circumstances warrant it.
[42] At page 75, 567.
In Truscott, the Full Court observed that the wife had “… always pressed and pursued her rights under the (maintenance) order” and considered that the payment of the arrears of maintenance should be ordered. In other words, it declined to apply the “12 months rule”.
The application of the “12 months rule” was again discussed (this time, at length) by Mullane J in Hamilton v Nowak (1988) 12 Fam LR 704[43]. After discussing the above cases (and others), his Honour exercised his discretion to enforce the relevant arrears. In other words, his Honour declined to apply the “12 months rule”. His Honour’s reasons for so doing included the following:
a)The husband’s reasons for having ceased the payment of maintenance were inadequate.
b)The husband’s conduct was such that the court could conclude that the frustration of the relevant maintenance order was “his main motivation” for concealing his precise whereabouts from the wife for a period of in excess of two years.
c)The wife and the children “… (had) been living throughout the period of the arrears in circumstances of serious need. The wife (had) maintained the children alone and had to refinance the mortgage alone on their home…”
d)The husband was in no doubt throughout the relevant period that the wife was seeking payment of all arrears.
e)The wife had made all reasonable efforts to collect the arrears throughout the relevant period.
f)The husband had not been open and frank in relation to his financial position.
[43] At 712.
In two unreported decisions, being Frei v Frei-Souter (March 1996) and Breen (June 1996), Chisholm J described the “12 months rule” as being “of some antiquity”. His Honour continued:
I shall refer to it as a rule although … it would perhaps be more accurately described as a guideline or principle governing the exercise of a discretion.
After describing the “rule”, Chisholm J said:
… the authorities indicate that in deciding how to exercise discretion, the courts should consider all the circumstances. The following are usually of significance:
whether the person entitled to the benefit of the order has taken timely enforcement action;
the apparent ability of the person liable to make payments over the relevant period; and
the financial position of the parties.
On the facts then before the court, his Honour concluded that Breen was a case in which the “12 month rule” should be applied.
In Levis v Mavilli (unreported – February 1997) Frederico J referred to the “rule” as “the so-called ‘12 month rule’.” By that time, the child support legislative scheme had come into effect but (it appears) the Family Court had not yet given consideration to the relevance or applicability of the “12 months rule” under that scheme.
In S v C (1997) FLC 92-750, Kay J discussed his Honour’s own earlier decision in Portillo (1994) FLC 92-484, and concluded that:
… in a situation where a liable parent receives no notice of the (child support) liability in circumstances where it is reasonable that he or she makes no further enquiries, and at the date of hearing there is no capacity to meet the arrears accumulated in respect of an assessment of which no notice had ever been given, then it is appropriate to depart from an administrative assessment of Child Support.
Clearly, there was no reference to the “12 months rule” in S v C, and the issue for the Court to determine was (in essence) whether a ground for departure had been demonstrated. As to the requirement under section 117(4) of the Assessment Act that any proposed departure be just and equitable, Kay J observed that the financial needs of the mother and the child had been met during the relevant period “… from some source or another”. Further, his Honour found that the father did not have the means to meet the arrears that had accrued.
The retrospective operation of departure orders, and the relevance of the “12 months rule”, were considered by the Full Court in Hides v Hatton (1997) 21 Fam LR 855. Although the “12 months rule” was not directly referred to by the trial judge in his judgment, the Full Court thought it likely that a submission made during the trial – referring to the “rule” – may have influenced the Court’s reasoning.
The Full Court said:[44]
In our opinion, the law prior to the Assessment Act … in relation to the payment of maintenance arrears owed for a period greater than 12 months, or in relation to the making of orders which would have effect retrospectively beyond 12 months, has no application in relation to the making of departure orders under the Assessment Act. Under that Act there would seem to be no time limitation on the making of an assessment (or, at least, an amended assessment) by the agency for a past year: nor on an application for a review by a Child Support review officer of an assessment (be it original or amended) for a past year; nor on an application to, and determination by, a court for an order departing from an administrative assessment for a past year. Furthermore, Section 141(1)(h) would seem expressly to empower the making of a departure order which has retrospective effect, and this power has been recognised by the Full Court in Bassingthwaite v Leane (1993) 16 Fam LR 918…
We would accept that in determining whether under Section 117(4) it is just and equitable to the parties and the child concerned to make a particular order, or under Section 117(5) otherwise proper to make that order, the Court can have regard to the impact on the payer or the payee of the making of a departure order setting liability for a past period and thus immediately creating the burden of arrears for the payer or of a credit for the payee (the court being able, under Section 117(9), to have regard to matters beyond those specified in Sections 117(4) and (5)). These may also be matters which could be addressed under Section 117(2)(c) when considering whether a ground for departure exists in a particular case.
[44] At page 864
It is clear from the Full Court’s decision in Hides v Hatton that the “12 months rule” has no application to the making of departure orders under the Assessment Act. The Full Court did not directly consider whether the “rule” had application to enforcement proceedings under the Assessment Act.
In Stevens v Savage (March 1998 – unreported), Kay J expressed the view that “… current jurisprudential thinking … is that the 12 month rule is a moribund rule, and at best a discretionary rule in any event”. His Honour continued:
There is certainly under the child support legislation little evidence that the 12 month rule is alive and well and, indeed, this order… is the first that I have seen of the 12 month rule in many a long time (sic).
The “rule” was referred to by Renaud J in Kerry v Williams (April 1998 – unreported), in relation to an appeal from a decision made in a State Magistrates Court, pursuant to which a father was ordered to pay arrears of child maintenance. The arrears had arisen pursuant to Orders made in the State Magistrates Court – which orders had been registered with the Child Support Agency for collection.
After referring to and describing the “rule”, her Honour said:
I do not know the criteria in accordance with which the agency determines whether, and if so over what period, to recover arrears of maintenance, whether, for example, it has the same discretion as the Court whether to apply “the 12 months rule”. The legislature has seen fit to charge the agency with the responsibility for making those decisions, thus substituting the agency for the Court in certain circumstances … It therefore seems to me that the appropriate course is to leave it to the agency to pursue, in accordance with its normal practice, the recovery of the appropriate amount of the arrears.
With the greatest of respect to her Honour, I have discomfort with the suggestion that the Child Support Agency has been “substituted” for the Court in certain circumstances. At the end of the day, it is for the Court to make appropriate orders by which arrears of child support (or child maintenance) are enforced.
Still, it is clear from her Honour’s decision that the “12 months rule” was not applied.
Coleman J gave consideration to the “12 months rule” in Abdilla v Darmo (unreported – August 2000). In that case, his Honour was dealing with an appeal against Orders made by a Registrar in relation to, inter alia, arrears of child maintenance. After finding that each party had “a convenient memory” and expressing discomfort with the credibility of both, his Honour recorded that the husband had the capacity to pay the arrears of child maintenance whilst they were accruing. He chose not to pay the child maintenance for his own reasons. His Honour continued:
He took the law into his own hands. He now comes before the Court and seeks to rely on what is described as the wife’s delay in pursuing the arrears of child maintenance. I always find that a curious submission because, as is graphically demonstrated here, the effect on a payer of child maintenance of not having to discharge his or her obligations, quite apart from the imposition that places upon the law-abiding tax paying citizens of this country, is that the custodial parent of such child or children and the children themselves subsidise that parent.
In this case, that subsidy undoubtedly aided the non-paying parent to acquire a portfolio of real estate. He now seeks to hide behind the so called 12 months rule. It would in my view be offensive to anything remotely resembling justice were I to accede to that proposition.
Not surprisingly, his Honour decided not to exercise his discretion in favour of any form of application of the “rule”.
In Cameron v Helie (2004) FMCAfam 685, Scarlett FM referred to Spry v Roet, Reid, Lutzke, and Kelly (all discussed above) before deciding – in the exercise of his Honour’s discretion – not to enforce arrears of child maintenance.
Scarlett FM was clearly influenced by the fact that the mother had made no effort to enforce the maintenance order for the child (which had been made in June 1988) until early or mid 2002 – by which time the child concerned had left school and was an adult. His Honour regarded the mother as “… seeking some form of compensation for the fact that she had to bring up her son without the support of (his father), even though she had the generous support of her own mother”.[45]
[45] See paragraph 97.
His Honour was also influenced by the father’s “relatively modest financial circumstances”.[46]
[46] See paragraph 104.
There can be no doubt that the enforcement of arrears pursuant to a (child or spousal) maintenance order is discretionary. Scarlett FM did no more than exercise his discretion in the particular factual circumstances of the case then before him. Relevantly, there was no reference to the “12 months rule” in His Honour’s judgment.
The “rule” was discussed by Faulks J (now Faulks DCJ) in Paris v Dixon (unreported – July 2000). In a case “… in which there were more burrows down which to chase rabbits than there were in Australia before the advent of myxomatosis”[47] ─ which is a description that fits comfortably with the nature of the case conducted before me ─ his Honour emphasised that the “12 months rule” is not a rule as such. It is “a rule of practice”.
[47] See paragraph 53
After stressing the discretionary nature of enforcement under the Family Law Act, his Honour continued:
If I were to find that the 12 months rule did not apply, then it would still be necessary for me to consider whether I should make a principled discretionary decision to enforce or not to enforce the payment of the arrears.
His Honour ultimately found that the “12 months rule” did not apply in the particular factual circumstances of the case before him.
I conclude, on the basis of the authorities discussed above, that the “12 months rule” (if it ever was a rule) is – like the thylacine – extinct. That is not to say that there are not those who are convinced that they have caught a glimpse of it from time to time. In my opinion, it could, at most, be accorded the status of a cryptid ─ which, according to Wikipedia[48] is an animal presumed extinct, or a hypothetical species of animal known only from anecdotal or other evidence insufficient to prove its existence with certainty.
[48] >
I recognise, of course, that Mr Bacon did not purport to base his argument on the existence or otherwise of the “12 months rule”. Nevertheless, the discretionary nature of the Court’s powers of enforcement means that the broader aspects of Mr Bacon’s propositions cannot be regarded as having the status of settled law. For example, in Dwyer v McGuire (1993) 17 Fam LR 42[49], Lindenmayer J recognised that the effect of ordering significant departures from administrative assessments in respect of past child support periods will be “… to create a substantial amount of instant arrears of child support payable by (the liable parent)”. That his Honour was quite prepared to make just such an order, however, is clear.
[49] At page 62.
The power of the Court to make orders which have the effect of creating “instant arrears” of child support was also recognised (and utilised) by Kay J in Woolley v Carney (2005) 33 Fam LR 294. [50].
[50] I would add that Kirby J also accepted that courts with jurisdiction under the Assessment Act have power to make orders for child support with retrospective effect. See Luton v Lessels (2002) 28 Fam LR 398 at 429.
In a slightly different context, the Full Court dealt with the creation of a retrospective liability (this time, for spousal maintenance) – which liability had the effect of creating arrears as of the date of the order – in Milankov (2002) 28 Fam LR 514. All members of the Full Court in Milankov were of the view that the Court had power to create such a retrospective liability and that, in the circumstances of the case, it was appropriate to exercise that power. Their Honours were unmoved by the fact that the husband may have been unable to meet the orders at the time they were made. Their attitude in that regard was due to the consideration that their Honours had given to the evidence before the trial judge to the effect that, for various reasons, the husband had been able to obtain significant financial advantages at the wife’s expense. Such a circumstance made the trial judge’s determination just and equitable.
Kay J said[51]:
In my view, the power clearly exists to make a retrospective maintenance order. Whether it is appropriate to make an order will depend upon the facts presented. The making of any such order is a matter of discretion for the trial judge and will not interfered with by an appellate court absent some demonstrable appealable error.
[51] Page 533
His Honour continued:[52]
… (the trial judge) found that at the time the maintenance obligation arose … the husband had the capacity to pay and the wife had the need. In those circumstances, the fact that the husband chose not to pay but to spend his money elsewhere did not, in (the trial judge’s) view relieve him from the potential of an order been made at a later time, even though at that later time he may no longer have the means and ability to meet the order. I see no error in (the trial judge’s) approach.
[52] At page 533
For all that Mr Bacon raised (and pressed) the various arguments dealt with above, the fact of the matter is that the evidence did not exist to support them. For example, there was no evidence that the husband “arranged his financial affairs on the basis of his known obligations”, and is therefore likely to suffer financial or other detriment if he is ordered to pay child support in the manner mandated by the orders to be made as a result of these Reasons. The husband was not unaware of his obligations, and did not misunderstand them – he simply did not meet them.
As for the suggestion that child support arrears should be ignored because the wife might no longer have any current need for them, or because a relevant child is now self supporting or over the age of 18 years, I find the reasoning in cases such as Milankov, Hamilton v Nowak and Abdilla v Darmo compelling. As Coleman J said in Abdilla v Darmo, it would be “offensive to anything remotely resembling justice” were I to determine that departure orders should not be made in the circumstances of this case. I recognise that I am not presently dealing with the enforcement proceedings (which have been adjourned pending my decision in this matter), but the fact remains that it would be neither just nor equitable to effectively discharge all arrears (by whatever form of order might be considered appropriate) simply because the payer of child support has managed to avoid or delay the making of payments for which he or she is clearly liable for an extended period of time. Irrespective of whether the payee might have been able to support the children by some other means, it is inevitably the case that the liable parent in such circumstances will have enjoyed a better standard of living, will have accumulated more assets or will have found himself or herself in less straightened financial circumstances than if the required child support had been paid. The exact opposite applies to the payee. The advantages that the liable parent enjoys in such circumstances, and the disadvantages which the residence parent suffers, can – and frequently do – last a lifetime. As the Full Court said in Clauson (1995) FLC 92-595[53] ─
… it should not be forgotten that the payment of Child Support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on an independent lifestyle which the obligation to care for children usually entails.
[53] At page 81,911
In my opinion, the suggestion that the payment of lump sum arrears of child support could be regarded as some form of “compensation” to the residence parent long after the need for the child to be financially supported has passed, and the concept that maintenance or child support “…is intended to be a stipendiary nature to enable the party entitled to receive it to meet the ordinary, regular outgoings necessary for his or her support (or that of the child or children to whom the order relates)”[54] do not sit comfortably with modern jurisprudential thought regarding the comparative obligations and duties of residence and non-residence parents, and the advantages and disadvantages (in the broadest sense) that adhere to such roles.
[54] See Lutzke at page 569
In the exceptional circumstances of some cases, it might be appropriate to wholly discharge arrears that have accumulated without the knowledge or implied acquiescence of the liable parent, and with the direct or indirect connivance of the residence parent. Similarly, in exceptional cases it might be possible for a liable parent to demonstrate that he or she has changed his or her financial circumstances to his or her detriment, whilst at the same acting in good faith, due to the actions (or unexplained inaction) of the residence parent. Other circumstances can be envisioned, but they will always be exceptional. The Court should not lightly relieve a liable parent from his or her demonstrated obligation to support his or her children. But if the facts support such a conclusion or result, then there can be no doubt that the Court has power to make the appropriate orders.
It also follows from the above discussion, and from the findings that I have made, that I reject any suggestion of the wife being estopped from either pressing for a retrospective increase in child support, or seeking to collect arrears. I find that the wife took reasonable steps to cause the husband’s obligation to be enforced. It is not to the husband’s credit that he instructed his solicitor to submit that the wife did not do enough, and that she had effectively “sat on her hands”. There was no evidence to support that suggestion.
Summary - Enforcement of Arrears
In my opinion, it is possible to distil the following principles, considerations or factors relating to the enforcement of arrears of maintenance or child support:
a)The "12 months rule" is extinct. It was, in any event, never more than a discretionary guideline or rule of practice, and the 12 months period was an arbitrary one.
b)The Court has a discretion, not only as to the period in respect of which accumulated arrears of maintenance or child support will be enforced, but as to whether they should be enforced at all.
c)The Court is not prevented from enforcing arrears of maintenance or child support simply because the time for payment of the same has long since passed, or because (in the case of child maintenance or child support) the relevant child has long since left school, commenced paid employment or otherwise ceased to require such child maintenance or child support.
d)In considering whether to enforce arrears (and, if so, for what period), the Court's discretion is unfettered, but the following considerations (at least) might be considered to be of relevance:
i)whether the party who was obliged to pay the maintenance or child support ("the Payer”) knew or ought to have known of his/her obligation to pay maintenance or child support;
ii)whether the party entitled to maintenance or child support ("the Payee”) pressed or pursued – directly or indirectly – his/her rights to the same, and whether the Payee did so in a timely fashion;
iii)whether, by words or conduct, the Payee led or permitted the Payer to form a reasonable view that the Payer’s obligation to pay maintenance or child support would not be enforced, and whether (and in what way) the Payer was thereby induced – whilst acting in good faith – to change his/her financial position;
iv)whether, by words or conduct, the Payer led or permitted the Payee to form a reasonable view that the Payer’s obligation to pay maintenance or child support would be met, and whether (and in what way) the Payee was thereby induced – whilst acting in good faith – to change his/her financial position;
v)whether the Payer had (other) appropriate or adequate reasons for failing or refusing to pay;
vi)the financial circumstances of the Payer, the Payee and the children during the period of the non-payment, and at the time that the enforcement of the arrears is sought (including the Payer’s ability to pay at all relevant times);
vii)whether the Payer has made a full and frank disclosure of his/her financial position at all relevant times; and
viii)whether the Payee has made full and frank disclosure of his/her financial position at all relevant times.
e)The Court should be very cautious not to encourage a Payer to metaphorically sit back and ignore his/her liability for maintenance or child support, and to continue to ignore such liability "… hoping for the best."
Orders
In order to give effect to the findings that I have made in these Reasons, and to the off-setting arrangement that I have described in paragraphs 162 and 163 above, I propose to make the following orders:
a)Pursuant to s.117 of the Child Support (Assessment) Act 1989, there be a departure from the administrative assessment of child support payable by the husband to the wife for the children Carl and Mary-Ellen as follows:
i)For the period from 4 July 2002 to 30 June 2003, the annual rate of child support be set at $8,372.00 (being the equivalent of $161.00 per week). This amount is in respect of the child Carl only.
ii)For the period from 1 July 2003 to 31 January 2004, the annual rate of child support be set at $4,992.00 (being the equivalent of $96.00 per week). This amount is in respect of the child Carl only.
iii)For the period from 1 February 2004 to 29 February 2004, the annual rate of child support be set at $17,472.00 (being the equivalent of $336.00 per week). This amount is in respect of the children Carl and Mary-Ellen, and is to be apportioned equally between the children.
iv)For the period from 1 March 2004 to 30 June 2004, the annual rate of child support be set at $8,736.00 (being the equivalent of $168.00 per week). This amount is in respect of the child Mary-Ellen only.
v)For the period from 1 July 2004 to 31 May 2005, the annual rate of child support be set at $10,400.00 (being the equivalent of $200.00 per week). This amount is in respect of the child Mary-Ellen only.
vi)For the period from 1 June 2005 to 30 June 2005, the annual rate of child support be set at $8,736.00 (being the equivalent of $168.00 per week). This amount is in respect of the child Mary-Ellen only.
vii)For the period from 1 July 2005 to 26 November 2005, the annual rate of child support be set at $9,152.00 (being the equivalent of $176.00 per week). This amount is in respect of the child Mary-Ellen only.
b)All extant applications of the husband and the wife otherwise be dismissed.
It is clear from the above that the Child Support Registrar’s enforcement summons (filed 7 December 2004) remains to be determined.
I shall now hear from the legal representatives for the parties in relation to any further or other orders that might be necessary to give effect to these Reasons, or that might otherwise flow from them.
I certify that the preceding Two Hundred and Thirty-Three (233) paragraphs are a true copy of the reasons for judgment of Walters FM
Associate: Suzette De La Motte
Date: 13 June 2006
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