MURDOCK & MURDOCK
[2010] FMCAfam 462
•13 May 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MURDOCK & MURDOCK | [2010] FMCAfam 462 |
| CHILD SUPPORT – Child Support Agreement set aside – payment of private school fees and private health insurance – special circumstances – just and equitable – otherwise proper – reduced incomes of parents – father’s greater income earning capacity. |
| Child Support (Assessment) Act 1989 (Cth) ss.3, 4, 117, 123, 124, 125, 136 |
| McGuiness v Cowie (2002) FLC 98-018 Savery and Savery (1990) FLC 92-131 Gyselman and Gyselman (1992) FLC 92-279 Gilmour and Gilmour (1995) FLC 92-591 Liesert v Nutsch (1996) FLC 92-665 Bryant and Bryant (1996) FLC 92-690 |
| Applicant: | MS MURDOCK |
| Respondent: | MR MURDOCK |
| File Number: | HBC369 of 2007 |
| Judgment of: | Roberts FM |
| Hearing dates: | 22 & 23 February 2010 |
| Date of Last Submission: | 23 February 2010 |
| Delivered at: | Launceston |
| Delivered on: | 13 May 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Bowman |
| Solicitors for the Applicant: | Hobart Community Legal Service |
| Counsel for the Respondent: | Mrs A Burrows-Cheng |
| Solicitors for the Respondent: | Murdoch Clarke |
ORDERS
That pursuant to section 124 of the Child Support (Assessment) Act 1989 MR MURDOCK (“the father”) is to provide child support for [X] born [in] 1996 and [Y] born [in] 1999 (“the children”) by payment of:
(a)From the start of the 2010 school year, all compulsory school fees while the children continue to attend [S] School or such other school(s) that the father and MS MURDOCK (“the mother”) may agree upon from time to time.
(b)All private health insurance premiums payable to Medibank Private in order to keep them insured at their current level until such time as they are no longer the subject of child support assessments pursuant to the Child Support (Assessment) Act 1989.
That pursuant to section 125 of the Child Support (Assessment) Act 1989 the annual rate of child support payable by the father for the children is not to be reduced by Order No. 1 hereof.
IT IS NOTED that publication of this judgment under the pseudonym Murdock & Murdock is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT HOBART |
HBC 369 of 2007
| MS MURDOCK |
Applicant
And
| MR MURDOCK |
Respondent
REASONS FOR JUDGMENT
Background
The applicant is MS MURDOCK (“the mother”) and the respondent is MR MURDOCK (“the father”). The court is asked to decide what should be the proper level of child support to be provided for two children aged 13 and 10 years, who spend equal time with each of their parents.
The parties were married in 1994, but separated in March 2006 and were divorced in May 2007.
The parties entered into a Child Support Agreement on 27 April 2006 (“the Agreement”).
The Agreement provided that the father was to pay private school fees and private health insurance premiums for the children. It attributed an annual value of $3,200 to those private school fees and health insurance premiums, but did not state how any payments in excess of $3,200 should be treated.
The Agreement was registered with the Child Support Agency (“CSA”) and the CSA determined that the payment by the father of child support for the children in a form other than periodic amounts (i.e. private school fees and private health insurance premiums) was not to reduce periodic child support. It appears that the father interpreted the Agreement as providing that if he paid any amounts in excess of $3,200 per annum, he was entitled to reduce his periodic child support payments by half of any such excess paid by him. The mother clearly disagreed with his interpretation of the agreement.
The Agreement was set aside by consent on 23 April 2009.
Applications
The mother’s originating Application filed in December 2008 sought a variation of the Agreement and a payment of what the mother considered to be “arrears” of child support. She filed an Amended Application in April 2009 seeking orders that:
·the Agreement be set aside;
·the father pay periodic child support in accordance with the formula provided for by the Child Support (Assessment) Act 1989 (“the Act”);
·the father pay all private school fees, health insurance premiums and 50% of the cost of school clothing, school books and medical gap fees; and
·the father pay a lump sum payment to her of approximately $2,500 “being arrears of child support”.
The father’s Response filed in March 2009 sought that the Agreement continue to apply and that he pay periodic child support as assessed by the CSA.
As stated above, the Agreement was set aside by consent in April 2009. Consequently the parties had both changed their positions by the time of the hearing in February 2010.
It appeared to me that the mother was seeking Orders that would:
·fix the father’s child support income in the vicinity of $150,000 per annum or greater; and
·require him to pay all the children’s school fees and health insurance premiums, without any reduction of the amounts to be paid to her.
The father’s position at the hearing was that:
·he should pay child support in accordance with assessments by the CSA;
·he should only pay school fees and health insurance premiums up to a maximum of $3,200; and
·if those school fees and health insurance subscriptions exceed $3,200, then the parties should be liable to pay any such excess on an equal basis.
The delay in the proceedings
As can be seen from what is set out above the mother filed her initial Application in December 2008. The delays in having the matter concluded have resulted from a number of factors, including:
(a)the parties were pursuing remedies within the CSA; and
(b)this is a Hobart matter and Federal Magistrate Baker is disqualified from hearing it.
Clearly, the mother is not happy with the outcome of her dealings with the CSA, so she wants this Court to determine the matter. While this has a definite flavour of “forum shopping” on her part, I consider that I have jurisdiction because other applications were also before the Court.[1] Consequently, I will deal with the matter.
[1] In this regard, see McGuiness v Cowie (2002) FLC 98-018
Relevant law
Section 136 of the Child Support (Assessment) Act 1989 (“the Act”) provides for the setting aside of Child Support Agreements. Sub-section (4) provides that if a court sets aside an agreement and is satisfied of the matters referred to in Section 117(1)(b),[2] a court may make a departure order. Further, sub-section (5) provides that even if the court is not satisfied about the matters referred to in Section 117(1)(b) and the payee has or will receive benefits pursuant to the agreement set aside, the court may still make an order that departs from administrative assessment where it is just and equitable to do so.
[2] That a ground for departure exists, it is just and equitable to make an order and that it is otherwise proper to do so.
Section 117 of the Act empowers courts to make orders for departure from administrative assessment in special circumstances. In Savery and Savery,[3] Kay J said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases.”
[3] (1990) FLC 92-131
In Gyselman and Gyselman,[4] the Full Court of the Family Court said the following in relation to the phrase “special circumstances”:
Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.[5]
[4] (1992) FLC 92-279
[5] At page 79,065
The approach that the court must adopt in relation to periodic child support under section 117 has been well settled by decisions of the Full Court of the Family Court of Australia.[6] A three-stage process is required and the Court must be satisfied:
a)that in the special circumstances of the case, one or more of the grounds for departure in sub-section 117(2) is established;
b)that it is “just and equitable” within the meaning of sub-section 117(4) to make a particular order; and
c)that it is “otherwise proper” within the meaning of sub-section 117(5) to make a particular order.
[6] See Gilmour and Gilmour (1995) FLC 92-591, Liesert v Nutsch (1996) FLC 92-665 and Bryant and Bryant (1996) FLC 92-690.
Section 117(2) of the Act sets out the various grounds for departure.
As both parties are seeking orders relating to the payment of school fees and private health insurance (even though they do not agree about whether those payments should be capped at $3,200), they are clearly seeking orders under section 123 of the Act for “child support otherwise than in the form of periodic amounts paid to the carer entitled to child support”.[7] Consequently, section 124 is applicable and any such order must also be “just and equitable”, and “otherwise proper”.[8] Further, if “the court makes an order under section 124, the court must state in the order whether the annual rate of child support payable by the liable parent under any relevant administrative assessment is to be reduced”.[9]
[7] Sub-section 123(1)(a)
[8] Sub-section 124(1)
[9] Sub-section 125(1)
The court can only decide that the annual rate of child support payable is not to be reduced if it is satisfied that “in the special circumstances of the case”, it would be “just and equitable” and “otherwise proper”.[10]
[10] Sub-section 125(2)
Relevant evidence
Where I make any statement of fact in these Reasons, it should be regarded as a finding of fact unless a contrary intention is clear from the context.
The parties each relied upon a number of affidavits. However, I consider that much of their evidence was not particularly relevant to the questions that I have to determine because:
·much of their evidence related to the issue of setting aside the agreement, and that had been done by consent prior to the hearing in February; and
·I gained the distinct impression that neither party has properly come to terms with their marriage breakdown, and much of their evidence was coloured by that. It is quite clear that residual animosity still exists between them.
At the time that the parties entered into the Agreement, the father was an employee of an [omitted] company (“the old [omitted] company”) and was earning a reasonably high income. That company was taken over by another company (“the new [omitted] company”) and some time after that take-over the father resigned and formed his own business. That has resulted in him receiving a reduced income.
For the purposes of CSA procedures the father estimated his reduced income to be $70,000 per annum. The mother lodged an objection to that estimate, and on 7 September 2009 her objection was upheld in part. His income for CSA purposes was assessed to be $75,038 per annum for the period 18 June 2009 to 28 February 2010.
The father’s decision to resign from a well paid job and form his own business has resulted in him being assessed to pay less child support and that has angered the mother.
The father says that his decision to resign was brought about by a number of factors which included:
·different policies were being implemented by the new [omitted] company and he did not agree with some of those;
·some long serving employees were made redundant;
·he was told that he “would need to eventually sign a new restrictive employment contract”; and
·being self employed would give him more flexibility as a parent who was sharing the care of his children.
Evidence was given by a manager from the new [omitted] company (“the current manager”) and by a former manager of the old [omitted] company. Although their evidence differed on some points, I do not find those differences to be inconsistent with the evidence given by the father. That is simply because the father’s main dealings were with the former manager of the old [omitted] company and not with the manager of the new [omitted] company.
I accept that the father may have been concerned about the possibility that he may be may be made redundant, but I am satisfied that his concerns were misplaced. The father’s employment with the new [omitted] company was not under threat and he was unlikely to have been made redundant. This is quite simply because he was the company’s top earner in his field. However, because the father did not discuss his concerns with the current manager, he may not have been aware that his employment was not under threat.
It is the father’s evidence that his new business is improving all the time and that his liability for child support will increase as a result.
I also accept his evidence in that regard.
I also note that the mother has reduced her income by enrolling in a University course part time.
Her initial evidence in an affidavit filed in December 2008 was that she was working [in the hospitality industry] between 6 and 20 hours per week while undertaking her studies towards an [omitted] Degree. She said that at that time she was likely to major in [omitted]. However, by the time that she gave her oral evidence at the hearing, she had changed her mind about her career options, in that she wished to major in [omitted] and possibly complete a Doctorate in that discipline. She accepted that it was possible that she would not be employed as a [omitted] for up to 10 years. I must conclude from that evidence that continuing her education is more for her own future benefit than for any financial benefit to the children. In this regard, the children could both be over the age of 18 years by the time that their mother is employed as a [omitted].
In my view, both parties have a greater earning capacity within the meaning of sub-section 117(7B) of the Act.
However it is important to note that prior to the parties voluntarily reducing their incomes, the mother had a significantly lower income earning potential ([in the hospitality or retail industries]) than that of the father. Further, even after they both reduced their incomes, the father has maintained a higher income and, given that his business is improving, the differential between their incomes is only likely to increase. Having said that, it is very difficult to estimate what the father is likely to earn from his new business.
Similarly, it is also very difficult to estimate what the father could have earned if he had remained with the new [omitted] company. This is simply because his income was based upon commissions and was, in part, reliant upon the retention of major clients. In this regard, I accept that prior to leaving that employment one major client company was the subject of a take-over and the new [omitted] company lost that account (through no apparent fault of the father’s).
However, it is clear that the father’s gross income before tax in past years has been approximately twice his assessed annual income of $75,038.
On the other hand, the mother would be unlikely to earn much more than $35,000 per annum even if she was working full time.
Are there special circumstances and grounds for departure?
I have little difficulty in answering this question in the affirmative. This is because:
·the parties clearly agreed that their children should be educated at a private school;
·they also agreed that the children should be covered by private health insurance: and
·both parties have reduced their income earning potential, at least in the short term, which affects the assessment by the CSA.
Section 117(2)(b)(ii) provides that it is ground for departure if “the costs of maintaining the child are significantly affected because the child is being cared for, educated or trained in the manner that was expected by his or her parents”. That is clearly applicable in relation to these two children because:
·the fact that the children are covered by private health insurance is surely an aspect of their care; and
·these children are being educated or trained in a manner that was expected by their parents.
Section 117(2)(c)(ib) provides that it is ground for departure if “administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided … because of the earning capacity of either parent”. That is also applicable in relation to these two children because, for different reasons, both parents are currently not exercising their full capacities to earn income.
What is just and equitable?
It is clear that the father concedes that he should be responsible for the payment of a greater share of the cost of the children's education and health insurance, because;
·by his interpretation, the Agreement provided that he should pay the first $3,200 of those costs each year (and half of anything over that sum); and
·he is still prepared to do so.
On the other hand, the mother believes that he should be totally responsible for all of those costs (and more).
Section 3 of the Act provides that parents have the primary duty to maintain their children. Consequently, the fact that the mother is now in a relationship with a man who earns in excess of $100,000 per annum does not detract from the duty of the father and the mother to properly maintain the children.
Further, objects of the Act are to ensure that children receive a proper level of financial support from their parents,[11] and that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support.[12]
[11] Sub-section 4(1)
[12] Sub-section 4(2)(a)
In this matter it is quite clear that the parties do not have like capacities to provide financial support for their children. The father’s capacity is greater and he clearly acknowledges that by his acceptance that he must not only pay assessed child support but he should also pay the first $3,200 per year towards the children's education and health insurance.
There are a number of options available to the court. They include:
·making a departure order increasing the father’s child support income; and
·requiring the father to pay the children’s school fees and health insurance (with or without a reduction in periodic child support payable to the mother).
The disparity in the income earning potential of the parties makes me conclude that, while there should not be a departure from CSA assessment, the father should be totally responsible for the payment of school fees and health insurance, without any reduction in the child support otherwise payable by him. In this regard, I note that:
·although it is not easily quantified with any degree of accuracy in either case, it is clear that the father’s voluntary reduction in income has been greater than the mother’s voluntary reduction in income; and
·the children are not attending some of the more expensive private schools in Hobart, because they are being educated in the Catholic education system.[13]
[13] I calculate from Annexure “D” to the father’s affidavit filed 31 March 2009 that their total fees would have been $3,798 in that year.
I do not believe that the father should be responsible for any payment to the mother for what she sees as “arrears”. In relation to that, I also note that the father stated:[14]
[14] At paragraph 16 of his affidavit filed 11 February 2010
Expenses the applicant is referring to do not even come close to what I am owed.
In short, it is my view that it is just and equitable if:
·father pays child support as assessed by the CSA without any reduction; and
·for the father to pay the children’s school fees and health insurance.
Is it otherwise proper?
In my view, the orders that I will make will have no effect on any entitlement to an income tested pension, allowance or benefit. Consequently, they are otherwise proper within the terms of Section 117(5).
Comment
As can be seen from paragraph 8 above, the mother also wants the father to be responsible for paying “50% of the cost of school clothing, school books and medical gap fees” with her being responsible for the payment of the other half. In my view, it is not appropriate to make such an order under the Child Support (Assessment) Act 1989. However, as two parents who share responsibility for their children, it seems clear that;
·the parties should share responsibility for such costs; but
·they need to work out a viable method of communicating and agreeing about them before they are incurred.
In relation to the latter, it is my opinion that it was inappropriate for the mother to direct an orthodontist to forward an account to the father without first getting his agreement to that course of action. While I accept that the father would have paid his share, the mother’s action simply exacerbated the tensions that already existed between them.
I mention that only as an example and I do not mean to single out the mother as being solely responsible for the parties’ poor relationship. A reference to the email traffic attached to the parties’ affidavits shows me that both parties could treat the other with more respect and courtesy. They still have more than eight years left in their relationship as responsible but separated parents.
In my opinion, the parties would be well served if they each completed a course of post-separation counselling. However, it is clearly not appropriate for me to order that in relation to a matter under the Child Support (Assessment) Act 1989.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
Date:
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