N and N
[2001] FMCAfam 109
•23 August 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| N & N | [2001] FMCA fam 109 |
| CHILD SUPPORT – Lump sum payment – Husband’s earning capacity not exercised – Departure from administrative assessment – Child Support (Assessment) Act 1989 s 117, 123 and 124. |
| Applicant: | L N |
| Respondent: | G A N |
| File No: | ZE 278 of 2001 |
| Delivered on: | 23 August 2001 |
| Delivered at: | Dandenong |
| Hearing Dates: | 9 & 11 May 2001 |
| Judgment of: | Bryant CFM |
REPRESENTATION
| Counsel for the Applicant: | Mr Wood |
| Solicitors for the Applicant: | Ryan Carlisle Thomas 41 Robinson Street, |
| Counsel for the Respondent: | Mr O’Loughlin |
| Solicitors for the Respondent: | Access Law 291 Sydney Road, Brunswick 3056 |
ORDERS
THAT pursuant to s 117 of the Child Support (Assessment) Act 1989 there be departure from administrative assessment for the period
18 May 2001 to the 31 December 2003 for the children E N N born on 9 March 1986 and B A N born on 6 January 1984 and for the said period the Husband’s liability for child support be fixed at $8,500.00 per annum.THAT the Husband pay the assessment for the said period by way of lump sum payment to the Wife of $22,605.00.
THAT the payment in paragraph (2) hereof is to count for 100% of the annual rate of child support payable by the Husband for the period
18 May 2001 to 31 May 2003 and thereafter the Husband’s liability be fixed in accordance with the administrative provisions of the Child Support (Assessment) Act 1989.THAT the Husband pay to the Wife or the Child Support Agency arrears of child support owing as of 18 May 2001.
THAT the sums due pursuant to Orders (2) and (4) hereof, be deducted from the monies due by the Wife to the Husband pursuant to Orders made on 11 May 2001 in the Federal Magistrates Court of Australia.
THAT the Wife’s application for departure from child support filed on
4 May 2001 be otherwise dismissed and the matter be removed from the Pending Cases List.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DANDENONG |
ZE 278 of 2001
| L N |
Applicant
And
| G A N |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerned an application for parenting orders, settlement of property and a departure from administrative assessment of child support. The parenting issues were settled by the parties prior to the commencement of proceedings. The property aspects of the case settled during the hearing, leaving only the child support issues for determination. Orders by consent have been made in relation to the property settlement and parenting issues.
Applications
The wife relied upon an amended application filed on 4 May 2001. The relevant parts of that application are as follows:
(1)That the husband pay to the wife arrears of child support standing in the sum of $2,584.
(2)That pursuant to s 123 of the Child Support (Assessment) Act 1989, the husband pay to the wife the sum of $25,500 by way of capitalised child support for the two children of the marriage from 8 May 2001 to 31 December 2003.
(3)That the payment pursuant to paragraphs (5) and (6) hereof totalling $28,084 be deducted from the amount due to the husband pursuant to paragraph 4 hereof.
The orders sought require some explanation. The reference to paragraph 4 is a reference to an amount that the wife was to pay the husband in consideration of his transfer to her of his interest in the former matrimonial home at 4 W Court, E H. Pursuant to the orders agreed upon by the parties, the wife was to pay the husband the sum of $55,000 on or before 9 July 2001 and the husband was to transfer his right, title and interest in the former matrimonial home to the wife. The lump sum payment of $25,500 was calculated on the basis that the husband’s child support be fixed at $792.45 per month for the two children and capitalised for the period 8 May 2001 to 31 December 2003.
The husband opposed this application. He did not formally file a response to the wife’s amended application containing the application in relation to child support, but he indicated through his counsel that the orders sought by the wife were opposed and in particular, that the current assessment for child support should stand and that there should be no capitalisation of child support.
Background
The husband was born on 29 November 1954 and is 46. The wife was born on 30 May 1959 and is nearly 42.
The parties were married on 17 January 1981 and separated under the one roof on 25 June 2000. On 26 September 2000, the wife commenced proceedings seeking orders for sole use and occupation of the former matrimonial home and property settlement, and on
24 October 2000 an order was made granting the wife sole use and occupation. The husband vacated the home on 31 October 2000.
There are two children of the marriage, E N N born 9 March 1986 and B A N born 6 January 1994. Pursuant to parenting orders agreed to by the parties, the children will live with the wife and she will have the sole responsibility for their day-to-day care, welfare and development. The husband’s contact with the children is to be by agreement and otherwise reserved.
The agreement reached in relation to property settlement provides for the wife to pay to the husband the sum of $55,000 on or before 9 July 2001. Contemporaneously with the payment, the husband will transfer to the wife his right, title and interest in the former matrimonial home at 4 W Court, E H. The wife will indemnify the husband in relation to the mortgage. The husband is to receive the benefit of 600 Telstra shares worth approximately $4,000 and to retain AMP shares in his name with a value of approximately $22,000. The wife is to receive the benefit of two (2) AMP endowment policies will she will hold on trust for the children respectively.
Each of the parties will retain their cars and the chattels currently in their possession.
Evidence relied upon by the wife at the commencement of the proceedings indicated that the property had a value of $215,000 and it was common ground that there was a mortgage of $15,000.
The husband had superannuation entitlements of $39,620 and the wife had superannuation entitlements of $13,316.
The child E attends St. J’s Regional College in D and is in Year 10. B attends St. M’s Primary School in D and is in Grade 2. Both children are apparently progressing well at school.
It is common ground that the husband had not had any contact with the children after separation. The wife described this being due to the children refusing to have contact with the husband. She said that throughout the marriage the husband had a very poor relationship with E and that their final separation was precipitated by an argument between E and the husband where the Police were required to intervene.
The husband described the lack of contact since separation as being the fault of the wife. Whilst acknowledging that E was old enough to decide for herself whether or not she wanted to have contact, he expressed the view that the wife was preventing him from having contact with B.
However, the parties agreed to the parenting orders to which I have referred and the question of contact was not agitated before me.
History of child support assessments and payments since separation
(a) Following separation the husband was assessed as having a child support liability of $903.66 per calendar month;
(a)On 2 November 2000 he was assessed as having a liability of $1,534.83 per calendar month;
(b)The husband then made an application to the Child Support Agency for reassessment of child support and his liability was reduced to $388.08 per calendar month.
The wife received three (3) payments of child support since separation:
b)$1,298 on 5 December 2000 which was deducted from the husband’s income tax rebate;
c)$70 on 19 December 2000; and
d)$150 on 5 March 2001.
Arrears of child support totalled $2,584 and there was no dispute by the husband that this sum was in arrears.
Affidavits relied upon
The wife relied upon an affidavit filed on 5 May 2001 and an affidavit of P P filed 5 May 2001. Ms P was not required for cross-examination but the gravamen of her evidence was that in a conversation with the husband which took place on 14 April 2001 he had boasted that he was enjoying life and socialising a lot and that he had not paid a cent of maintenance for his children. Ms P alleged that he said, “Why should I pay for something I don’t see.”
The wife also relied upon a financial statement filed 5 May 2001.
Both the husband and wife gave evidence and were cross-examined.
The evidence
The wife is in full-time employment as a tax officer with the Australian Tax Office where she has been employed since July 2000. Her normal salary is $35,500 per annum. She is currently in an acting position in a supervisory role and while she holds that position, her salary is $41,964 per annum. Her current position is not permanent and she will eventually return to her previous position with its reduced salary.
Private school fees are being paid for the children although they are of a relatively modest amount. E’s fees are $1,600 per annum and fees for B are $1,146 per annum. Both children have attended their current schools since separation. E attended a public school but when she completed her primary education, she commenced her schooling at St. J’s. The parties agreed that B would attend a Catholic school in D for his primary school because he was being bullied at his previous school. When the parties were together, they paid the school fees from their joint funds.
The husband’s evidence was that he was not deliberately avoiding his child support obligations, but that he had spoken to the Child Support Agency on many occasions and advised them of his financial position. He told them that he was not working and couldn’t pay the child support assessment.
The husband’s case
The husband’s case was that at the time of the hearing he was not in full-time employment and had been out of work from November 2000. He said that he was a qualified welder and had been in employment during the marriage but had been retrenched on four occasions. He indicated that he would obtain employment in the future and that his tax returns distort his true earning position, as redundancy packages have been included in his taxable income which have “artificially inflated my annual income.” He estimated that his future earnings would most probably be around $30–35,000 based on an ordinary working week. He said that he did not wish to work the long hours he was working during the marriage and would not be able to do so if he was to have contact with the children at weekends. The husband produced some copy tax returns, although they clearly did not enable an appropriate picture of the husband’s income to be portrayed for the years leading up to separation. The notices of assessment produced by the husband were for the year ended 30 June 1994, the year ended 30 June 1997 and the year ended 30 June 2000.
For the year ended 30 June 1994 the husband’s taxable income was $35,597. For the year ended 30 June 1997 the husband’s taxable income was $44,626 and for the year ended 30 June 2000 the husband’s taxable income was $78,698.
The first child support assessment following separation was for the period from 13 September 2000 to 12 December 2001. The child support income used to calculate the husband’s liability of $903.67 per month was an income of $50,645 which was the husband’s 99/2000 provisional taxable income plus any supplementary amounts.
The first assessment was issued on 12 October 2000. On
20 November 2000 a second assessment was issued for the same period, namely 13 September 2000 to 12 December 2001. The husband’s monthly child support payment was $1,534.83. The child support income amount used to calculate the child support payable was $78,698. That figure corresponds with the amount in the husband’s Notice of Tax Assessment for the same year. During the 99/2000 year, the husband was retrenched from his employment and received a retrenchment package. It appears that a portion of that sum, which the husband said was approximately $14,000, was included in his taxable income for that year.
The husband then apparently applied for a re-assessment of his child support liability on the basis that he was now unemployed. On
20 November a further assessment was made, this time for the period 3 November 2000 to 12 December 2001. The husband’s child support payable was $386.08 per month and was based on a child support income amount of $27,640 which was the husband’s estimate of his taxable income.
The husband has qualifications as a first-class boilermaker/welder. He specialises in titanium which provides jobs in the aircraft industry. Up until the year 2000 the husband conceded that although he had a number of different positions, he had gone from job to job without any real break due to unemployment or difficulties obtaining any other employment. This had been the case for the past 20 years. During the three to four weeks that he might have between jobs, he looked round for the next best possible job to move on to. On most of the occasions when the husband left employment, he received a retrenchment package.
In January 1998 he commenced working at Newpulse earning approximately $45,000 gross per annum. In August 1999 he was retrenched. After August 1999 he began work for a temporary work agency called “W O T”. During the 99/2000 financial year, the husband earned approximately $60,000 from his work with the agency. He complained that this involved long hours of 60–80 hours per week.
The husband said that in the calendar year 2000 he was out of work for five months and he had not worked at all since Nov/Dec 2000. He had not made any applications for a Newstart job allowance and had been living on his retrenchment payment and what other amounts he had in the bank. The husband said that he did not have any of his retrenchment payment left. He said that he was offered a job earning $550 per week at about the end of 2000, but he wanted to have a break after 20 years as he had had no annual leave or long service leave and therefore had not worked, or actively sought work, since that time.
He said that he now intended to look for and obtain work. He said he had told the Child Support Agency that he was having time off and taking a break and that he would let them know when he was going back to work. These comments were presumably made in response to a request as to when he might be expected to pay the arrears and to commence paying child support which it is common ground he had not been paying despite the existence of the assessments.
The husband conceded that a range of positions would be available to him as a result of his qualifications. He conceded that the “break” he had decided to take had started in November 2000 and he claimed that it had finished as of the week prior to the hearing. He was offered a position on a salary of $550 a week in late November/early December 2000 but rejected it and decided he would wait for a better opportunity. The husband also considers he could continue to work for the agency, albeit at a lower hourly rate. In August/September 1999, they agreed on an hourly rate of $26.00 but the position was not taken by the husband.
The husband claimed that the level of his income prior to the cessation of work in November 2000 was due to considerable overtime which he did not intend to do in the future and that his future earnings would probably be approximately $30-35,000 per annum.
Analysis of the husband’s previous income
The husband’s earnings for the previous years were as follows:
a)The Notice of Assessment for year ended 30 June 1997 shows a taxable income of $44,626;
b)The husband conceded that in the 97/98 financial year, he earned approximately $48,000;
c)The husband conceded that in the 98/99 financial year, he earned approximately $48,000;
d)The Notice of Assessment for year ended 30 June 2000 indicated the husband had a taxable income of $78,698. A portion of this was the husband’s retrenchment package, but the husband conceded that his income from earnings during this period were approximately $60,000;
e)In his evidence the husband said that he could get a job and that the average gross wage he might expect to earn would be between $550 and $700 per week.
Findings
I find that the husband is a qualified first-class boiler maker/welder with all tickets. He has extensive experience and worked consistently, albeit with several retrenchments, from the commencement of the marriage until separation.
For most of that period the husband was on wages but in 1999 he was working with an agency “W O T”.
The husband received a retrenchment payment in the year 99/2000. It is not clear from the evidence how precisely that money has been expended, save that the husband has been able to travel and support himself without employment since November 2000. Other than the child support payments referred to, he has not made any payments of child support for the children. The only significant payment received by the wife came from a tax refund intercepted by the Child Support Agency.
Despite the existence of assessments of child support and the capacity to pay the arrears and the ongoing payments, the husband has deliberately determined not to make payments of child support to the wife for the benefit of their two children and she has had the responsibility of their total support, subject to the amounts received referred to, since separation. The husband has deliberately chosen not to seek employment between November 2000 and the hearing of this matter.
No departure from the administrative assessments is sought by the wife in the period prior to the date of the hearing. I find that as a result of the Husband’s qualifications, the opportunities available to him and his past work record, he has the capacity to earn $45,000 per annum. This is commensurate with the sums he was earning in the 97/98/99 financial years and less than the amount that he earned for the year 30 June 2000. I accept that during that period he was working for an agency and part of the extra income would have been used to meet some business expenses.
In considering the husband’s earning capacity, I take into account his primary obligation to provide for the support of the children. (DJM v JLM (1998) FLC 92-816.) At the moment, the children are being totally supported by the wife.
The Law
The basis for the exercise of jurisdiction to deal with a Departure application is to be found in Section 115 of the Child Support (Assessment) Act 1989 (“the Act”), Section 115 says as follows:
“This Division applies to an administrative assessment of child support in relation to a child in the following cases:
(a)Where the child support is for a period up to and including the period ending on 30 June 1992 and the carer entitled to child support or the liable parent wants a court having jurisdiction under this Act to make an order having the effect that the provisions of this Act will be departed from in relation to the child in the special circumstances of the case; or
(b)Where the child support is for a period beginning on or after 1 July 1992 and the Registrar has either made or refused to make a determination under Part 6A in relation to the child; or
(c)Where the child support is for a period beginning on or after 1 July 1992 and:
(i)The carer entitled to child support or the liable parent is party to an application pending in a court having jurisdiction under this Act; and
(ii)The court is satisfied that it would be in the interest of the carer and the parent for the court to consider, at the same time as it hears that application, whether an order should be made having the effect that the provisions of this Act relating to administrative assessment of child support will be departed from in relation to the child in the special circumstances of the case; or
(d)Where the child support is for a period beginning on or after:
(i)If a day has been prescribed under paragraph 5(2)(b) of the Child Support Legislation Amendment Act 1998 as the 1998-99 commencing day – that day; or
(ii)If no such day has been prescribed – 1 July 1999 and the administrative assessment was made under subsection 66(1).
In this case the provisions of Section 115 (c) (ii) apply.
The Wife sought that pursuant to Section 123 of the Act, Husband pay to her a lump sum of $25,500 for the period 8 May 2001 to
31 December 2003. On a monthly basis this sum equates to $792.49. As the Husband has a current assessment for $386.08 per month, if the Wife’s application is to be successful, departure is required from the 8 May 2001 to the 31 December 2003.
Departure application
The wife relied upon the provisions of Section 117 of the Act, and in particular Section 117(2)(b) (11) and Section 117(2) (c)(1). Section 117 (2) (b) (11) says as follows:
“… that, in the special circumstances of the case, 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.”
Section 117 (2) (c) (1) provides:
“… that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, earning capacity, property and financial resources of either parent or the child.”
In terms of an application for departure, I have identified the provisions which are relied upon. The Court must address each of the separate issues as part of a clear three-step process, as stated by the Full Court in the marriage of Gylsman in 15 FLR 219, namely:
a)Whether one or more grounds of departure in section 117 is established; and if so
b)Whether it is just and equitable within the meaning of section 117(4) to make a particular order;
c)Whether it is otherwise proper within the meaning of section 117(5) to make a particular order.
It is clear from the careful way in which section 117 has been structured that the Court must address each of those separate issues. Dealing first with the issue of special circumstances, in Gylsman’s case it is mentioned, when considering the meaning of the term "special circumstances" that:
“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.”
The Husband’s counsel submitted that there were no “special circumstances” in this case and the wife’s case for departure from administrative assessment must fail.
The existing assessment is a result of the husband’s self assessment. It takes no account of his actual income earning capacity which I have found him to have, and it allows for him “holidaying” for part of the year. It does not reflect his primary obligation to support his children, and it would not be just and equitable for an assessment to be based upon that income. I find that as a result of the husband’s earning capacity, there are special circumstances by reason of which the administrative assessment presently in place (which is based upon an annual income of $27,000) should be departed from.
I am also satisfied that the Wife is educating the children in a manner that was expected by the parties.
I am satisfied that the Husband has an earning capacity of approximately $45,000 per annum. However the wife has an income in excess of the disregard amount. I consider it reasonable to take into account the Wife’s income when she is not doing higher duties. That amount is $35,000. The disregarded income amount is $ 33,717.
The application of the formula produces the following:
$45,000 – (($35,000 – $33,717)/2) = $44,358 (adjusted income amount)
The Husband’s liability for child support is calculated as follows:
($44,358 – $11271) x 27% = $8933.49 per annum or $172 per week.
The wife’s evidence that the children’s proper needs were $425 per week was not seriously challenged. The Husband has no other person to support and no liabilities. The husband gave no detail regarding his day-to-day expenses. The only financial statement filed by him was filed on 14 October 2000. He did not set out his weekly expenses. He will receive a payment from the wife for his interest in the former matrimonial home of $ 55,000 He has superannuation available to him, some shares, and his motor vehicle. I am satisfied that having regard to these matters the husband should pay the weekly sum of $165
($8,580 per annum ). He can afford this sum and having regard to the matters in Section 117 (4) of the Act, it is just and equitable.I am also satisfied that pursuant to Section 117(5) it is otherwise proper to make the order.
Lump sum payment pursuant to section 123 and section 124
The wife seeks an order that the child support so arrived at should be capitalised until 2003 and paid in a lump sum. She proposes that sum be deducted from the amount payable by her to the husband as a consequence of the property orders.
Having dealt with the departure application, it is now proper for me to consider the application under s123 of the Act to provide for child support as a lump sum.
s123(1) of the Act provides that:
“(1)Application may be made to a Court having jurisdiction under this Act for an order that a liable parent provide child support otherwise than in the form of periodic amounts paid to the carer entitled to child support.”
Before a Court can make an order for substituted support, the court is required by s124(1)(b) to be satisfied that so to would be:
“(i)Just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(i)Otherwise proper to make an order … otherwise than in the form of periodic amounts …”
The Court is required to have regard to the matters contained in s124(2) and in determining whether it is “just and equitable” or “otherwise proper” the Court must have regard to the matters contained in subsections 117(4), (5), (6), (7) and (8) of the Act. The Court is not limited to by those factors alone (see s124(5)), which suggests the Court has a wide discretion in determining the application.
In BOLTON and BOLTON (1992) FLC 92-309, BENDEICH and BENDEICH (1993) FLC 92-355, and STONE and STONE (unreported Full Court decision of April 1994), the application of lump sum concepts in child support cases was discussed. In BOLTON, Cohen J found that the husband would probably take steps to avoid his obligations if a periodic order were made so he granted a lump sum order. In BENDEICH, Mushin J was not satisfied the husband would default nor was he satisfied that the financial position of the parties in the future was predictable. He declined to make an order.
As was observed by Ellis, Lindenmayer and Kay JJ in PRPIC and PRPIC (1995) FLC 92-574 at 81,688:
“Capitalisation orders may well be appropriate where there are difficulties in enforcement or where it is proper to sever the financial link between the parties. However, as a general rule, given that payments of child support depend upon circumstances prevailing from time to time which circumstances cannot be predicted with any significant degree of certainty, it seems to us that the provision of child support by way of a lump sum should not be considered to be a readily available alternative but one that is only exercised when there are circumstances that make it appropriate to do so. We would endorse the observations of Mushin J in BENDEICH where his Honour said:
‘The rationale underlying the general approach of the Court was that the longer a lump sum order operates the greater the change of change in circumstances necessitating a variation of that order, thereby making the order unjust. Those changed circumstances might be in relation to the liable parent, custodial parent or the children. Incomes may increase or decrease and children may change their living arrangements from one parent to another’.”
It is clear that the court has the power to make an order beyond the year of assessment. Dwyer v McGuire (1993) FLC 92-420.
Submissions
The wife submitted through counsel that given the husband’s attitude since separation to the payment of child support, that there could be no confidence that if required to pay child support on periodic basis, he would engage in employment and meet his child support liabilities. It was submitted that the period from November 2000 to the date of the hearing was a good indication of the husband’s attitude to the payment of child support and the reliability that could be expected from him.
In addition, it was submitted that this is an important period in E’s schooling and that the time period in which the lump sum payment is sought is a period which would enable E to complete her secondary schooling and is a period in which it is crucial that child support be paid. It was submitted that this was the one opportunity that the wife had to be certain of obtaining child support, as once she had paid the husband, then that opportunity might be lost.
It was submitted on behalf of the husband that the husband was not asset-rich, that he would have to work, that he intended to get some employment and at the present assessment should not be departed from because it was a reasonable basis upon which child support should be paid.
Having regard to the Husband’s attitude to the payment of child support, and his unwillingness to work to his full capacity since separation, I have no confidence that he would willingly place himself in a position where he was paying regular child support, or earning an income commensurate with his real capacity. As this is a crucial time in the education of E, I am satisfied that in this case the only way that the wife can be certain of receiving child support is by payment of a lump sum which she can set-off against what she is required to pay to the husband., and that this is a case in which it is appropriate to do so.
I am satisfied that in terms of s124(1)(b) it is just and equitable and otherwise proper, and in doing so I have regard to the matters in s117(4), (5), (6), (7) and (8) of the Act. The lump sum payable will be $22,605 which represents approximately 2.63 years.
Accordingly, the Orders that I make are as follows:
(1)THAT pursuant to s 117 of the Child Support (Assessment) Act 1989 there be departure from administrative assessment for the period 18 May 2001 to 31 December 2003 for the children E N N born on 9 March 1986 and B A N born on 6 January 1984 and for the said period the Husband’s liability for child support be fixed at $8,500.00 per annum.
(2)THAT the Husband pay the assessment for the said period by way of lump sum payment to the Wife of $22,605.00.
(3)THAT the payment in paragraph (2) hereof is to count for 100% of the annual rate of child support payable by the Husband for the period 18 May 2001 to 31 May 2003 and thereafter the Husband’s liability be fixed in accordance with the administrative provisions of the Child Support (Assessment) Act 1989.
(4)THAT the Husband pay to the Wife or the Child Support Agency arrears of child support owing as of 18 May 2001.
(5)THAT the sums due pursuant to Orders (2) and (4) hereof, be deducted from the monies due by the Wife to the Husband pursuant to Orders made on 11 May 2001 in the Federal Magistrates Court of Australia.
(6)THAT the Wife’s application for departure from child support filed on 4 May 2001 be otherwise dismissed and the matter be removed from the Pending Cases List.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate:
Dated:
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