McPhail and Bradley and Anor

[2018] FCCA 1561

FEDERAL CIRCUIT COURT OF AUSTRALIA

McPHAIL & BRADLEY & ANOR [2018] FCCA 1561

Catchwords:
CHILD SUPPORT – Application to set aside binding child support agreement – applicant father not establishing exceptional circumstances arising after the agreement – mother seeking extensive order to compel future compliance – parties to be further heard as to form of final orders.

Legislation:

Child Support (Assessment) Act 1989, s.136

Cases cited:

Masters & Cheyne [2016] FamCA FC 255

Applicant: MR MCPHAIL

First Respondent: MS BRADLEY

Second Respondent: CHILD SUPPORT AGENCY

File Number: MLC 5784 of 2014

Judgment of: Judge Burchardt

Hearing date: 18 April 2018

Date of Last Submission: 18 April 2018

Delivered at: Dandenong

Delivered on: 26 June 2018

REPRESENTATION

The Applicant: In person

Counsel for the Respondent: Ms Johnston

Solicitors for the Respondent:	Robinson Gill
Child Support Agency: Ms Johnston	Ms Lewis as amicus curiae

ORDERS

1. The matter be adjourned to this Court for directions before Judge Burchardt on 6 August 2018 at 10.00 am.

2. The Applicant pay the Respondent arrears of child support in the sum of $8361.10.

3. The Applicant pay the Respondent’s costs fixed in the sum of $14,314.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

MLC 5784 of 2014

MR MCPHAIL

Applicant

And

MS BRADLEY

First Respondent

And

CHILD SUPPORT AGENCY

Second Respondent

REASONS FOR JUDGMENT

Introductory

1. In this matter the applicant father seeks orders which would have the effect of setting aside a Binding Child Support Agreement (“BCSA”) dated 28 May 2015.  The respondent mother seeks to enforce arrears of Child Support allegedly owing and to obtain orders which would have the effect of causing the applicant to pay to her a lump sum to meet the father’s Child Support obligations until the youngest child of the relationship turns 18.

2. In my opinion, for the reasons that follow, the application to set aside the BCSA should be dismissed, the applicant should be ordered to pay the arrears of Child Support presently owing, but it is inappropriate to make the ancillary orders that the respondent mother seeks.

Agreed or Uncontroversial Matters

1. The father was born on 1969 (father’s version) or 1965 (mother’s version).  The mother was born on 1972.  She is originally from (country omitted).  The parties met in 1994 and started cohabitation shortly thereafter.  They married on 2006 and separated in late August 2012.  Their two children are [X], born 2000, and [Y], born 2002.

2. As earlier indicated, the parties entered into the BCSA dated 28 May 2015.  On the same day, the parties entered into final property orders.  The father was to pay (and has paid) the mother $25,000, the sum of $19,500 was released from a trust account to the mother and a superannuation split of $29,000 was made favourable to the mother also.  The mother has deposed, at paragraph 11 of her affidavit sworn

   
   

   1 August 2017 as to the division of the property pool, and the father has not sought to challenge the figures to which she has deposed.   It is apparent that the husband was able to retain his Superannuation Fund A in the sum of $309,000 and Superannuation Fund B in the sum of $225,000.  A very substantial proportion of the moneys retained by the husband related to Total and Permanent Disability (“TPD”) claims made against his superannuation funds arising from a brain haemorrhage he had suffered in 2012.

3. The husband is presently employed as a student, and the wife is employed as a (occupation omitted).  She has completed a course in (course omitted) which extends the scope of her (employment omitted) but may not necessarily lead to a higher wage. 

The Parties’ Affidavit Material

1. The father’s initiating application was accompanied by an affidavit sworn on 20 June 2017.  In large part the affidavit details matters already set out above.  I note that the father worked as an (occupation omitted) until his brain haemorrhage on 2012.  He annexed as M-1 documents detailing his disability history and the effects it has on him.  I note that the father deposed that the children live with the mother 66 per cent of the time and with him for the remaining 34 per cent of the time.

2. Having deposed to the execution of the BCSA, and his liability to pay the respondent $445.26 per month per child, he deposed to not having understood the terms of the agreement at the time it was executed. He deposed to not understanding that taxation implications of withdrawing moneys from his superannuation account. He complained of the quality of legal representation he received at the time. He further deposed to a relatively recent purchase of a unit in Suburb A for approximately $390,000. He went on to detail that his application was made pursuant to section 136 of the Child Support (Assessment) Act1989, and deposed at paragraph 46:

   “I seek an order that, should the court decline to make the order requested in paragraph 42, the BCSA be set aside on the grounds of my mental incapacity at the time I entered the BCSA.”

3. There is no order requested in paragraph 42.  I infer that this is a typographical error and that he was referring to paragraph 45 which is the paragraph in which he seeks that the agreement be terminated.

4. I note that part of annexure M-1 is a letter from Dr M dated 17 January 2017, which relevantly asserts:

   “In my medical opinion he currently has the cognitive capacity to make medical, financial and legal decisions but requires additional time to process these decisions.”

5. Annexure M-3 is a further letter from Dr M dated 18 May 2015.  It is apparent that the letter relevantly states:

   “Since his initial event, Mr McPhail has complained of nonspecific malaise, nausea related to movement, poor balance and gait unsteadiness, is easily fatigued, has depressed mood and anxiety and increased susceptibility to emotional stress.  He consults a clinical psychologist, Dr J for psychological support.  He has commenced a supervised graduated exercise program but has been advised by his neurosurgeon to avoid strenuous exercise due to the risk of another haemorrhage.  He requires ongoing monitoring by the Hospital Neurosurgery Unit, and is planned to have repeat imaging of his brain in September 2015 to monitor for recurrent malformations. 

   Mr McPhail is able to independently perform activities of daily living and is able to drive a car.  He has reported to me that he has begun studying towards a certificate in (course omitted).  In my opinion, it is unlikely that Mr McPhail will make a full recovery or regain his capacity to work in his previous occupation as an (occupation omitted).  It seems unlikely that he will regain the same earning capacity for the foreseeable future.”

6. The wife’s responding affidavit filed on 1 August 2017, once again, largely sets out matters already detailed above.  She deposed, in relation to the children, at paragraph 8:

   “… The spend time arrangements over the last two years have been ad hoc and infrequent.  As a result, the children are in my care almost all of the time and their reliance upon me for financial support has increased.”

7. The wife went on to detail the prior proceedings which culminated in May 2015, noted what the wife had received and detailed the alleged failure on the father’s part to pay the $2,200 per child per year required by clause 4.1 of the BCSA in respect of school expenses.

8. The wife otherwise largely took issue with the husband’s affidavit. 

   
   

   I note that she asserted that the children spend at least 85 per cent of the time with her and not with the husband.  She also deposed that, contrary to his assertions, the husband had been well aware of the tax implications of withdrawing moneys from his superannuation account when the agreement was entered into in 2015.  Indeed, annexure D

   
   

   to her affidavit would seem to support this proposition.

9. The wife’s affidavit sworn 13 February 2018 deposes to arrears of Child Support in the sum of $8,733 per month.  All of these alleged underpayments arise from the vexed issue of the costs of the children’s schooling.  The wife also deposed to moving to less expensive accommodation as a result of financial pressure.

10. The husband’s final affidavit, clearly prepared by himself, complained in detail about the calculation of the children’s school expenses.  He also deposed to deducting from the monthly Child Support payments an amount contributed towards [X]’s application for Australian Citizenship.  The amount concerned in dispute is $116.13.

11. Otherwise, the affidavit is in truth largely repetitious of earlier material.  He repeats his complaint that he did not understand the BCSA at the time he executed it.  He also referred to his difficulties in obtaining legal representation for this proceeding.

The Evidence Given and the Submissions Made at Court

1. The husband made an opening. He referred the Court to section 136 of the Child Support (Assessment) Act 1989. He referred to section 136(2)(d) and referred to the requirement that there be exceptional circumstances. He said that the wife was aware of his trauma at the time. He tendered, as exhibit A1, a letter from Mr C, Neurosurgery Registrar to Dr M dated 13 March 2018. I note that the letter relevantly states:

   “…. Given the radiological appearance is unchanged now for four years following his recent angiogram and the last angiogram demonstrated no evidence of residual or recurrence, they advise that Mr McPhail may be discharged from the Neurosurgery/neurovascular Clinic.”

   And then:

   “In addition, Mr McPhail discussed that he feels that he has not returned to his previous level of cognition and thinking prior to his episode.  As such, he would greatly appreciate it if he could be afforded extra consideration with regard to any significant decision making, as he is of the opinion that this takes longer than it did for him in the past.”

2. The husband said he could not prove coercion in 2015.  He was fatigued when he signed the BCSA.  He was not privy to the discourse between barristers and believed that the respondent wife’s financial situation had been improved by her new qualification.

3. Once sworn, Mr McPhail adopted his affidavits as true and correct.

4. Under cross-examination, the husband maintained that he had paid what he said was up-to-date.  It rapidly emerged that his interpretation of the extant orders was that he was required to pay up to $2,200 per annum per child for educational expenses rather than that fixed sum.  He had paid half of what he regarded as the actual costs.  He also pays monthly $910.25 but in December 2017 paid $794.12.  The gap was the half of [X]’s citizenship costs as earlier indicated.

5. The husband conceded that final property orders were made on the same day as the BCSA.  He was not seeking to set those property orders aside.  They were put into place.  His disability payment was received after separation.  He can draw on them but the access takes up to a month.  He used $390,000 to buy property.  He still has about $87,000 in the account.  His main drawings are for Child Support as he has no mortgage.

The Evidence of the Wife

1. Ms Bradley was called.  She has completed a qualification in (occupation omitted) which extends the scope of her working (employment omitted).  It does not necessarily lead to a higher wage and does not allow her to work as a (occupation omitted).  She works solely in (employment omitted).

2. Mr McPhail did not, so far as my notes reveal, put any questions to the witness.

Final Submissions – Counsel for the Wife

1. Counsel submitted the Court had power to make orders to secure the future payment of Child Support. A caveat against the husband’s property is sought. The $40,000 sought was only in the event of default within the meaning of the current arrears. Counsel referred to Rule 25B.13(e) of the Federal Circuit Court Rules 2001 and sections 95(2) and (3) of the Child Support (Assessment) Act 1989.  Counsel submitted that the agreement is an order of this Court if it is registered and accepted by the Court.  Ms Bradley’s affidavit of 1 August 2017 showed that both these matters were satisfied (I accept that this is so).

2. In effect, therefore, the terms of the BCSA are orders of the Court.  The husband has acknowledged the arrears.  Counsel pointed to the terms of the order in relation to schooling expenses.  While it was acknowledged that the husband had paid for [X]’s citizenship, the wife pays for everything else.  Counsel submitted there was no evidence of the husband’s intellectual capacity at the time of agreement.  Annexure M-3 is dated 20 June 2017.  Final property orders were made the same day as the BCSA.  It was an all-encompassing deal and the husband was represented at the time.

Submissions by Counsel for the Child Support Registrar

1. The Child Support Registrar kindly agreed to offer submissions as amicus curiae at the Court’s request. Counsel submitted that section 136(d) was the only relevant provision. This was a high bar. Exceptional circumstances must arise since the agreement has occurred and hardship would be required to be shown. The Registrar was neutral as to what constituted exceptional circumstances.

Submissions by the Husband

1. The husband pointed out that he will be paying Child Support until the 22^nd of November 2018.  He submitted that he should not pay after that until December.  In 2019 he will be paying only for [Y] as [X] would have ceased.  He referred again to the $116.13 paid for [X]’s citizenship.  He pointed out that there is already a caveat on his superannuation.

The Law

1. Counsel for the wife has prepared a helpful set of written submissions which were largely the source of her brief oral address.  I have, of course, read them carefully and have due regard to them.  For present purposes, it is sufficient to set out the law which, so far as curial observation is concerned is, in my respectful view, disclosed in the case of Masters & Cheyne [2016] FamCA FC 255. That was a case in which a Full Court of the Family Court expressly considered the operation of section 136 of the Assessment Act. At [39]-[40], Murphy J said:

   “While the terms of neither type of agreement can be varied (ss80CA; 80F(1)), and while fraud, undue influence, duress, unconscionable or similar conduct can found the setting aside of either section 136(2)(a)(b)(c), binding child support agreements cannot be set aside by reference to a Court concluding that the child support provided within them is not “proper or adequate”; nor can they be set aside because of a significant change of circumstances;  nor because of idiosyncratic notions of “fairness” or “unfairness”. 

   The statutory Object permitting parties to make private agreements and to “limit interference with their privacy” is given particular force by reason of the necessity to show “exceptional circumstances” before a court will intervene in them and the additional requirement to prove “hardship” if the parties are held to their agreement.”

2. Justice Aldridge said, at [118]-[119]:

   “Thus the circumstances in which a binding child support agreement may be terminated are limited indeed.  This is consistent with Parliament’s intention in introducing s 136(2)(d).  The Explanatory Memorandum for the Families, Community Services and Indigenous Affairs Legislation Amendment (Child Support Reform Consolidation and Other Measures) Bill 2007, which introduced the section, states that “is not intended that binding agreements should be set aside lightly”. 

   I consider that the express and detailed terms of those sections constitute a complete code dealing with the validity and termination of these agreements and that great care should be taken before importing considerations derived from other sections of the Act into cases dealing with binding child support agreements.”

3. Aldridge J continued at [121]-[122], relevantly:

   “Therefore a person entering into a binding child support agreement is at a considerable risk of continuing to be bound by the agreement notwithstanding that there has been a significant, but not exceptional, change in circumstances.

   The parties may, of course, wish to take that risk.  Such agreements may be made in the context of other financial arrangements between the parties and may be an integral part of an overall settlement.”

4. I would interpolate and say that that is clearly the case here.  The financial orders made on the same day as the BCSA are quite obviously intended to interrelate with them.

5. Section 136 of the Child Support (Assessment) Act 1989 relevantly says (Subsection (1) being satisfied as it clearly is here):

   “(2) If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:

   (d) in the case of a binding child support agreement – that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.”

6. It will be noted that I have not referred to subsections (2)(a) or (b).  There is no suggestion of fraud or failure to disclose material information (subsection (a)).  There is likewise no suggestion that a party to the agreement exerted undue influence or duress or engaged in unconscionable or other conduct to an extent that it would be unjust not to set aside the agreement (subsection (b)).  Indeed, Mr McPhail made it plain that he was not suggesting coercion and there is nothing in the materials, bearing in mind that both parties were legally represented in any event, that suggests unconscionable conduct or undue influence.

7. Here it is plain, as the Child Support Registrar submitted, that this is a high bar.  The Court is being asked to consider whether there are exceptional circumstances that have arisen since the agreement was made.  The fact is that, while extremely regrettable, and solely a matter of sympathy rather than criticism, the husband’s health difficulties long pre-date the agreement in 2015.  Indeed, it is noteworthy that the medical reports from 2015 and 2017 are in very similar terms.  Exhibit A1 suggests that Mr McPhail’s symptoms have been unchanged for the last four years.

8. The highest that the husband’s case rises is, really, to the effect that he was fatigued, not thinking as quickly as he should have and that his legal representation may have been inadequate.  It is plain that he has not made that case out on the evidence.  He was legally represented when he executed the BCSA.  He has been able to prepare quite sophisticated affidavit material for this proceeding, and I would interpolate and say that his oral submissions were thoughtfully composed and put.  It may well be that he requires time to consider things in a degree greater than people not afflicted with his difficulty, but there is nothing to suggest that he is not now, and was not in 2015, well able to understand the purport of what he was doing.  Indeed, it is noteworthy that the husband does not seek the discharge or revisiting of the property orders that were so favourable to him.

9. Put shortly, there is nothing in the husband’s case that suggests that there are any exceptional circumstances that have arisen since the BCSA was entered into.  In fact, looked at as a whole, the financial arrangements entered into in 2015 were beneficial to him and suggest that the father well knew this at the time.

10. The next question, which does not, of course, arise because I find that there are no exceptional circumstances, is whether the husband would suffer hardship if an order was not made.  Here, the husband lives in a wholly unencumbered residential property.  He has some $70,000 or $80,000 in his superannuation readily accessible to him.  I do not think that he will suffer hardship in being required to stick to the bargain that he made.

What Orders Should be Made

1. The husband’s dispute with the wife is in a large part about the meaning of clause 4.1 of the BCSA.  His position is that he should pay half the actual amounts of school expenses, but it is clear, beyond any question, that the amount of $2,200 for each child was fixed as the operative amount.  Accordingly, he is in default as asserted.  Likewise, his deduction of the $116.13 in December 2017 as a payment towards [X]’s citizenship is not one open to him under the agreement.  Accordingly, he must pay the $8,361.10 in default.

2. The respondent wife has sought various ancillary orders to compel, in effect, the payment of the Child Support obligations until both of the children turn 18.  I am not sure that I am aware, at this stage, of exactly the extent to which the husband has been compliant with his obligations to date.  In the circumstances, I wish to hear further from the parties as to the final form of orders to be made.  I will give the parties an opportunity to study these reasons for judgment and hear from them further.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Date: 26 June 2018