ORTLEIB & LLOYD

[2015] FCCA 377

FEDERAL CIRCUIT COURT OF AUSTRALIA

ORTLEIB & LLOYD [2015] FCCA 377

Catchwords:
CHILD SUPPORT – Application of Limitations Act (ACT) – whether enforcement of child support arrears is discretionary – whether an estoppel arises – whether departure orders should be made with respect to past assessments.

Legislation:
ACT Limitation Act 1985
Victorian Limitations Act 1958
Judiciary Act 1903, s.79
Child Support Assessment Act 1989, ss.11, 112, 113A, 117(2), 141
Registration and Collection Act 1988, s.111B
Family Law Act 1975, ss.75(2), 79, 80

Deputy Federal Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55

Child Support Registrar & Meekin [2008] FMCAfam 877

Mathieson & Hamilton [2006] FMCAfam 238
Wreford & Caley [2010] FamCAFC 21
Biggs v Dienes (1975) 2 Fam LR 11,273
Ramsey & Ramsey (1983) FLC 91-301
Tingle v Tingle (1947) 65 WN (NSW 43)
Commonwealth v Verwayen (1990) 170 CLR 394

Applicant: MR ORTLEIB

Respondent: MS LLOYD

File Number: CAC 524 of 2013

Judgment of: Judge Brewster

Hearing date: 18 August 2014

Date of Last Submission: 24 October 2014

Delivered at: Canberra

Delivered on: 27 February 2015

REPRESENTATION

Counsel for the Applicant: Mr Howard

Solicitors for the Applicant: Farrar Gesini Dunn

Counsel for the Respondent: Mr Theakston

Solicitors for the Respondent: Direct brief to Counsel by Respondent

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

CAC 524 of 2013

MR ORTLEIB

Applicant

And

MS LLOYD

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter involves an application by Mr Ortleib to recover arrears of child support.  Normally these are fairly straight forward matters which rarely occupy the time of the court.  This matter however has some unusual features which will become apparent.

2. In this judgment I shall call the applicant the father and the respondent the mother.

Background

1. The parties were married in January 1998 and separated in September 2001.  The marriage was dissolved in January 2003.  There are two children of that marriage [X] who was born on [omitted] 1998 and is therefore aged 16 and [Y] who was born [omitted] 1999 and is therefore aged 15.

2. On separation the mother moved out of the former matrimonial home.  The children remained living predominately with the father.  Consent orders were made in October 2001 providing for the children to live with the father and to spend 48 hours each weekend with the mother. 

3. The arrangements since that time have been as follows:

   (a)Until June 2007 the arrangements provided for in the consent orders applied.

   (b)The parties varied these arrangements in June 2007 such that the father had additional time each second Saturday and the mother in return spent time with the children on Wednesdays.

   (c)From about October 2010 the mother ceased to spend time with the children on Wednesdays.

   (d)From about November 2012 the parties commenced a week about arrangement both during school terms and school holidays.

   (e)In November 2012 [X] commenced to live with the mother full time.  The week about arrangement continued in relation to [Y].

   (f)In January 2013 [Y] commenced living with the mother full time.

4. Final property orders were made by consent in the Family Court in October 2002.  These provided for the former matrimonial home to be transferred to the father and he to pay the mother an amount of $32,000.  A financial statement submitted to the court with the consent orders and signed by both parties stated the value of the home at $105,000 and calculated the equity in the home as about $57,500.  There were no other substantial assets. 

5. The father at no stage sought to recover child support from the mother.  The reason for this is that he has a philosophical objection to the payment of child support.  From his perspective it is a privilege to care for children and the motivation is love not financial gain.  Nevertheless he sought assessments of child support.  This was because of requirements by Centrelink.  The assessments commenced from 1 September 2002 and the last assessment ended on 8 January 2013.   The total was $95,541. 

6. Mr Howard, who acted for the father, annexed to his written submissions a detailed schedule of the various assessments.  On his calculations the assessment commencing 1 December 2008 and all subsequent assessments have errors.  I will discuss this later in this judgment.  For reasons that will become apparent this may become academic.

7. The mother has also applied for assessments of child support.  However she does not share the philosophical views of the father and expects that she will be paid.  The assessments commenced on 11 January 2013 and the last of them up to the date of hearing commenced on 1 July 2014.  The total owing is $16,783. 

8. My understanding is that the father would have been content to, in effect, let sleeping child support assessments lie but brings these proceedings in consequence of the mother’s seeking that he pay child support. 

9. Whilst I do not suggest that the mother was in any way dishonest in her evidence overall I accept the evidence of the father where the parties’ versions differ. 

Discussion

1. A number of legal issues arise consequent on the father’s application these are:

   (a)Whether the Limitation Act (ACT) applies to enforcement of child support liabilities. If so a suit to recover some of the monies that would be payable would be statute barred.

   (b)Whether the father should be held to have been estopped from recovering arrears of child support.

   (c)Whether the court has the discretion as to whether to enforce child support arrears.

   (d)Whether departure orders should be made in favour of the mother.

The limitation issue

1. Section 11 of the ACT Limitation Act 1985 provides that an action on any cause of action (other than certain specified causes of action which are not relevant to this case) “is not maintainable if brought after the end of the limitation period of six years running from the date when the cause of action first accrues to the plaintiff…..”.

2. The ACT Limitation Act can apply to courts exercising federal jurisdiction by reason of section 79 of the Judiciary Act 1903.  That section provides as follows:

   (1)The laws of each State or Territory, including the laws relating to procedure, evidence and the competency of witnesses, shall, except as otherwise provided by the Constitution or by the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

   (2)…….

   (3)This subsection covers a law of a State or Territory that would be applicable to the suit if it did not involve federal jurisdiction, including, for example, a law doing any of the following:

   (a)Limiting the period for bringing the suit to recover the amount;

   ……..

3. Local Limitation Acts do not apply to Commonwealth statutes if the statute in effect is a complete code or covers the field.  In Deputy Federal Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 Mason CJ, Brennan, Deane, Dawson and Gaudron JJ said at paragraph 6 that the test was “whether the relevant provisions of (the Commonwealth Legislation) have effectively covered the field and left no room for direct or indirect intrusion provisions of State Limitation Acts to limit the time in which an action can be brought”.

4. This issue was considered by Hartnett FM (as her Honour then was) in Child Support Registrar & Meekin [2008] FMCAfam 877. Her Honour held that in that case that the Victorian Limitations Act 1958 did not apply for enforcement of child support.  At paragraph 20 her Honour quoted with approval written submissions of counsel to the following effect:

   (T)he Child Support (Registration and Collection) Act 1988…….and the Child Support (Assessment) Act 1989……”Otherwise provide”, for purposes of s79. The comprehensive scheme for the recovery of child support debts is irreconcilable with the Limitations Act, as picked up by s79, or leaves no room for its operation.

5. I agree with her Honour’s decision in that case.

6. Counsel for the mother also seeks to distinguish Meekin on the basis of a difference in the limitation legislation.  He points out the Victorian Limitation Act uses the word “enactment” which has been defined as being limited to Acts passed by the Victorian Parliament.  The ACT Limitation Act is in different terms.

7. However Hartnett FM, whilst she pointed this out in the end decided the case on the “covering the field” point.  I am of the view that the Assessment Act covers the field and does not need the Registration and collection Act to support it in this respect.

8. Counsel for the mother also sought to distinguish Meekin on the basis that that case involved registered child support liabilities and that in this case the assessments were not registered.  The submission as I understand it is that it is only when a liability is registered that a comprehensive scheme covering the field is in place.

9. I do not believe that the happenchance of registration is relevant.  I consider that the Assessment Act covers the field.

10. In addition the  expressio unius rule of statutory construction might at least arguably apply.  As will be seen amendments to sections 111 and 112 of the Assessment Act in 2007 imposed a limitation period of seven years in relation to departure applications.  It would be strange to choose this period if the intention of the Parliament was to leave in place a shorter period for enforcement.

11. However if the lawyers for the father believe that this may be a valid point and that my judgment would be vulnerable on appeal I will if requested strike out his application. He can then register the liabilities and give notice to the Registrar under section 113A of his intention to recover the arrears. He can then re-file his application. I would then proceed to finalise the matter.

12. Otherwise I find that the ACT Limitation Act does not apply in this case.

Does the court have a discretion as the whether or not to enforce arrears of Child Support?

1. In a comprehensive analysis of the law in relation to enforcement of arrears of Child Support Walters FM (as his Honour then was) in Mathieson & Hamilton [2006] FMCAfam 238 at paragraph 230 set out a number of conclusions as to this issue. In particular his Honour said

   The Court has a discretion, not only as to the period in respective of which accumulated arrears of maintenance or Child Support will be enforced, but as to whether they should be enforced at all. 

2. His Honour’s conclusions were quoted with approval by Bryant CJ and Bennett J in Wreford & Caley [2010] FamCAFC 21.

3. Mr Howard however maintains that these authorities are no longer relevant insofar as this aspect is concerned by reason of amendments to the Child Support (Assessment) Act which came into force after the decisions in those cases where handed down. These amendments were to sections 111 and 112. They commenced operation on 1 January 2007 and 22 June 2007 respectively.

4. Insofar as they are relevant to this case the amendments have the following effect.  Firstly they preclude the making of a departure order referrable to a period more than eighteen months prior to an application without leave.  Secondly they absolutely prohibit the making of departure orders in relation to assessments with respect to periods seven years or more prior to the bringing of the application. In other words the sections provide a type of Statute of Limitations with respect to departure orders.

5. In his written submissions Mr Howard said as follows:

   42. It is submitted that the insertion of section 111 and 112 resulted in a fundamental change to the enforcement of Child Support liabilities, these sections overtake any discretions that existed prior to their commencement. 
   43. The court cannot vary an assessment that relates to a period that is more than 7 years prior to the application.  It is submitted that this means that the court cannot determine that amounts payable for those periods cannot be enforced deciding that such amounts cannot be enforced is effectively varying the assessment period for the relevant period.

6. Mr Howard’s submissions could be summarised by saying that whilst the amendments to the legislation do not expressly remove the court’s discretion as to enforcement of arrears of child support they do so by necessary implication.

7. I do not agree.

8. The rule that a court has a discretion as the whether to enforce maintenance orders (and child support is simply a successor to child maintenance orders) is longstanding and goes back to the nineteenth century.  See the discussion of these issues by Samuels JA in Biggs v Dienes (1975) 2 Fam LR 11,273. Whilst there is no doubt that the parliament could abrogate this longstanding rule in my view it would need to do so expressly and not by implication or some sort or “side wind”.

9. I am fortified in this view when I look at section 141 of the Assessment Act. That section sets out the general powers of the court under that Act. Section 111B of the Registration and Collection Act 1988 is in similar terms. The section is modelled on section 80 of the Family Law Act 1975. Section 80 was referred to by the Full Court of the Family Court in Ramsey & Ramsey (1983) FLC 91-301. That decision established that the enforcement of orders made under section 79 of the Family Law Act is discretionary and not mandatory. In reaching that decision the court relied, inter alia, on section 80. The court accepted a submission (at page 91-301) that “since the powers contained in sec. 80 are discretionary powers the usual process operable when those powers are evoked are discretionary not an automatic function”.

10. The sort of problems that could emerge if Mr Howard’s submission were accepted can be found in Tingle v Tingle (1947) 65 WN (NSW 43).  In that case the wife who was the beneficiary of a maintenance order sought to attach her husband for non payment of maintenance.  That is she sought to have him imprisoned.  A part of the period relied upon was when the husband was a prisoner of the Japanese during the Second World War.  He had no capacity to meet the maintenance order during this time.  But if a similar situation were to arise today and a submission made that the court should decline to enforce the arrears the court would have to reject that submission and, if they were outside the seven year period for a departure order, there would be nothing that could be done.

Is the father estopped from enforcing the arrears?

1. An estoppel can arise if a person is lead to assume that another person will not enforce a right and, in reliance on that assumption, the person liable takes steps to his or her detriment which would not have been otherwise taken.

2. The mother relies on the following to establish her case of estoppel.  She says that the father’s decision not to enforce child support meant that she did not challenge the assessments. Had she done so some of them would probably succeeded given that they were based on care arrangements which were no longer current.  Further she did not keep records of her financial situation during this period and so is at a disadvantage were she to challenge them now.  She said that she contributed to major expenses for the children but the evidence is that these did not involve large amounts.  Moreover some of the challenges are now affected by the limitation periods contained in the legislation. 

3. I reject the estoppel contention for the following reasons.

4. The first is that it is not clear as to what the implied arrangement was between the parties. It is reasonable to assume that the father proceeded on the assumption that were there to be a change in the residential arrangements for the children the mother would not claim child support from him just as he had not claimed it from her.  In his affidavit the father maintains that there was an understanding between the parties to this effect.  It is not reasonable to proceed on the basis that the mother was led to assume that child support would never be enforced even if she were to later claim child support from the father.

5. Furthermore estoppel can only operate where it would be unconscionable to enforce a party’s obligations.  Given the limited nature of the orders I am proposing to make I do not believe that those orders are unconscionable.

6. I was referred by counsel for the mother to the High Court decision in Commonwealth v Verwayen (1990) 170 CLR 394. Counsel cited the judgment of Mason CJ at paragraph 36 where his Honour said

   ……A court….may do what is required, but no more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs……which assumption the party estopped has induced into hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness.  A central element of that doctrine it that there must be a proportionality between the remedy and the detriment which is its purpose to avoid.  (my underlining).

7. Whilst Mason CJ was in the minority in Verwayen the passage cited above is consistent with the other judgments.

8. In my view the course I propose to take does achieve the goal of proportionality.

Should there be a departure order?

1. The first thing to be noted is that I am precluded from making a departure order for any period prior to 10 May 2006. 

2. I do not propose to make any departure orders. The first reason is that section 117 requires that an order should only be made if it is just and equitable with regards to the children, the carer entitled to child support and the liable parent. Given the particular circumstance of this case. I do not believe it would be just and equitable to make a departure order which would affect the orders that I propose to make. Furthermore I do not believe that the mother has established grounds for a departure order. These grounds are found in section 117(2) which reads as follows

   Grounds for departure order

   (2) For the purposes of subparagraph(1)(b)(i), the grounds for departure are as follows:

   (a) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:

   (i) the duty of the parent to maintain any other child or another person; or

   (ii) special needs of any other child or another person that the parent has a duty to maintain; or

   (iii) commitments of the - parent parent necessary to enable the parent to support:

   (A)  himself or herself; or

   (B)    any other child or another person that the parent has a duty to maintain; or

   (iv) high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain;

   (aa) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of the responsibility of the parent to maintain a resident child of the parent (see subsection (10));

   (b) that, in the special circumstances of the case, the costs  of maintaining the child are significantly affected:

   (i) because of high costs involved in enabling a parent to spend time with, or communicate with, the child; or

   (ia) because of special needs of the child; or

   (ib) because of high child care costs in relation to the child; or

   (ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;

   (c) 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 the child; or

   (ia)because of the income, property and financial resources of either parent; or

   (ib) because of the earning capacity of either parent; 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.

   High costs involved in enabling parent to care for a child

   (2B) A parent's costs involved in enabling the parent to care for a child can only be high for the purposes of subparagraph(2)(a)(iv) or (2)(b)(i) if the costs that have been or will be incurred, during a child support period, total more than 5% of the amount worked out by:

   (a) dividing the parent’s adjusted taxable income for the period by 365; and

   (b) multiplying the quotient by the number of days in the period.

   (2C) If a parent has at least regular care of a child, then the only costs that can be taken into account for the purposes of subsection(2B) are costs related to travel to enable the parent to spend time with, or communicate with, the child.

   High child care costs

   (3A) The ground for departure mentioned in subparagraph (2)(b)(ib) is taken not to exist unless:

   (a) the costs are incurred by a parent or a non-parent carer; and

   (b) the child is younger than 12 at the start of the child support period.

   (3B) Child care costs for a parent can only be high for the purposes of subparagraph(2)(b)(ib) if, during a child support period, they total more than 5% of the amount worked out by:

   (a) dividing the parent’s adjusted taxable income for the period by 365; and

   (b) multiplying the quotient by the number of days in the period.

   (3C) Child care costs for a non-parent carer can only be high for the purposes of subparagraph(2)(b)(ib) if, during a child support period they total at least 25% of the costs of the child for that period.

1. The mother relies on paragraph (c)(ii). She adduced evidence that the former matrimonial home was in fact worth about $155,000 rather than the $105,000 as stated by the parties in their financial statement. If that is the case then the mother received less than half the equity, not about fifty five percent if one used the stated value. However, even assuming that the parties undervalued the home and that this error would have been discovered if the matter had proceeded to a hearing it is not possible to be confident what the result of a court imposed division would be. The mother contributed the greater share of the monies applied by the parties to the purchase but section 75(2) factors very much favoured the father. It is to be recalled that he had the care of two very young children. In any event it is apparent that the parties did not consider that the settlement should be a factor in the father’s decision to forgo child support.

2. I do not believe that the mother satisfies any of the other grounds, at least to the extent that would justify the making of a departure order.

Conclusion

1. I propose to enforce the arrears of child support to the extent that the father is liable to now pay child support.  That is his liability to pay child support will be offset against the $95,541 assessed to be paid to him.  I assume that the amount to be offset will be such that the errors in the assessments will be irrelevant.

2. I invite the lawyers for the parties to draft orders consistent with this judgment.  If it not proposed to appeal my judgment perhaps the most pragmatic and cost efficient way would be for the parties to enter into a Child Support Agreement to give effect to my decision.  If the matter is to be appealed and if the parties would prefer that I drafted the orders I am prepared to do so.  The court should be notified as to what course is proposed.  Given the delay in producing this judgment it would be presumptuous of me to put any time limit on this. 

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Judge Brewster

Associate:  

Date:  27 February 2015