P and P - [2000] FMCAfam 38

FEDERAL MAGISTRATES COURT OF AUSTRALIA

P & P

[2000] FMCA fam 38

CHILD SUPPORT DEPARTURE – s117 Child Support (Assessment) Act

Applicant:

J M P

Respondent:

M B P

File No:

ZM03480 of 2000

Delivered on:

21 September 2000

Delivered at:

Melbourne

Hearing Date:

14 September 2000

Judgment of:

Hartnett FM

REPRESENTATION

Counsel for the Applicant:

Mr Sweeney

Counsel for the Respondent:

Mr Edmonds

ORDERS

THAT the administrative assessment for the child support period from 1 July 1999 to 30 November 2001 be departed from.
THAT for the period 1 July 1999 to 30 November 2001 the child support income of the husband be varied to $67,000.00.
AND that an amended assessment be issued.
THAT all material produced subpoena which did not become the subject of exhibits will be returned by the Court to the persons producing it as soon as practicable.
THAT any material produced subpoena which became an exhibit will be returned by the Court at the expiration of the appeal period to the person producing it. Any material produced by a party which became the subject of an exhibit will be returned by the Court to the party at the expiration of the appeal period.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

ZM03480 of 2001

J M P

Applicant

And

M B P

Respondent

REASONS FOR JUDGMENT

Transfer

This matter came before the Federal Magistrates Court on

14 September 2000 by consent, the matter having been transferred by the Family Court of Australia for the purposes of hearing and determining the Form 63 Application of the wife filed on 19 July 2000 together with paragraph 5 of the Form 8A Response of the wife filed on 19 July 2000.

Proceedings

The wife relied upon the following documents:
a)Her Form 63 seeking departure from administrative assessment pursuant to section 117 of the Child Support (Assessment) Act 1989 for the period from 1 July 1999 to 30 September 2000 and further for the period from 1 September 2000 to 30 November 2001, that latter period relating to the most recently issued child support assessment. In effect, the wife sought a departure from administrative assessment for the period commencing 1 July 1999 and concluding 30 November 2001;
b)The wife submitted through her Counsel that she sought to vary her Application such that she sought that the husband pay to the wife in support of the children for the period referred to above the sum of $143.33 per child per week (being a total of $430.00 per week) and that such periodic sum included grounds (b) and (c) in paragraph 4 of her Application;
c)The wife’s Form 17 Financial Statement filed on 19 July 2000;
d)The wife’s Affidavit filed on 19 July 2000 as to paragraphs 33 - 45 inclusive;
e)The wife’s Affidavit filed on 17 August 2000 paragraph 5(h) on page 15 to paragraph 6 inclusive of that Affidavit;
f)Finally, the wife’s Affidavit filed 14 September 2000 annexing the medical report of Professor G W.
The husband relied upon the following documents:
a)The husband’s Form 17 Financial Statement filed on 18 August 2000;
b)The husband’s Affidavit filed 27 July 2000 paragraphs 28 to 37 inclusive.
In opening Counsel for the husband submitted on the husband’s behalf that his client opposed any departure from administrative assessment for the three children of the marriage and opposed the making of any order in the wife’s favour for spousal maintenance.
Counsel for the wife in opening specified the amount sought by the wife by way of spousal maintenance to be in the sum of $150.00 per week.
Both Counsel agreed that the question of child support should be addressed as a primary matter before any consideration as to the sum, if any, to be paid by the husband to the wife by way of spousal maintenance and further, there was agreement that the wife’s income was in the sum of $75.00 per week but that that figure was only income earned by her during the school terms and that she did not derive income during school vacations. That is, any amount received by her by way of pension entitlement was properly disregarded by the parties in determining the income available to the wife.
Numerous documents were tendered in evidence in the running of the matter and each of the parties was cross-examined.
The husband conceded a willingness to pay an amount in addition to any administratively assessed amount in the sum of $20.00 per week by way of medical health insurance cover for the children and the further sum of $35.00 per week by way of all their reasonable educational expenses. Thus the husband in the running of the matter offered to make a payment in the sum of $55.00 per week over and above that payment to be made by him pursuant to the current administrative assessment.

Background

The parties commenced cohabitation on the date of their marriage, namely 18 May 1985. They separated in June 1991 for a period to December 1991 as alleged by the husband and until May 1993 as alleged by the wife. For present purposes nothing turns on that and the parties finally separated under the one roof in April 1995 with the husband leaving the former matrimonial home in December 1997.
The husband was born on 5 November 1959 and is aged 40 years. The wife was born on 2 May 1964 and is aged 36 years. The husband operates his own business and is a graphic designer. The wife is engaged in home duties. The husband trades under the business name of “M P Design”.
The parties have three sons, namely M I P born 10 December 1988 who is aged 11 years; L J P born 9 June 1990 who is aged 10 years and his twin brother B M P born 9 June 1990 who is also aged 10 years. The three children reside with their mother and currently have no or minimal contact with their father. The children reside with their mother in the former matrimonial home known as and situate at 22 B Street E in the State of Victoria and such home is unencumbered. The children do not attend a private school.
The husband is residing at 1/44 M Street W and sharing such accommodation with one of his brothers. He pays minimal rental expense, namely $71.00 per week for this accommodation.

The law

In this matter it was conceded by the husband in cross-examination that on an interim basis at least, the wife was unable to maintain herself adequately and that the case revolved around the husband’s income and earning capacity.
The wife relies on Section 115(c) of the Child Support (Assessment) Act 1989 (hereinafter referred to as “the Act”) and the grounds of that sub-section are made out. Thereafter the wife brings the Application pursuant to Sections 116 & 117 of the Act. Section 117 is the critical provision, see Gyselman (1992) FLC 92-279.
Section 117(1)(b) identifies the 3-step process which the Court must consider:
a)Whether one or more grounds of departure as contained in Section 117(2) 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.

Does a ground for departure exist?

Subsections (a) and (b) of Section 117(2) have no application in this case. If there is a ground made out it must be pursuant to Section 117(2)(c)(i) :
“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: (i) the income, earning capacity, property and financial resources of either parent or the child.”.
The wife seeks to rely on this ground for departure. She alleges that firstly, the husband has considerable surplus income at his disposal to provide for the support of the three children whereas she does not and indeed has a critical shortfall; and secondly, the husband’s statement of his income for child support assessment purposes is significantly understated because of the cash and/or “contra” benefits earned on the one hand and the false and/or exaggerated and/or unnecessary claim of expenses on the other.
Although the wife also argues that the husband has a significant earning capacity she did not approach the case on the basis that the husband had a capacity to provide financial support and that he was not exercising such capacity. As I understand it, her approach was that the husband’s business was operating successfully and indeed that the husband had thought it necessary to travel overseas and purchase new computer equipment with the expectation that his business will continue to flourish. On the other hand, her earning capacity was extremely limited as a result of her health and her care of the parties’ three sons.
The wife gave evidence that the husband had the benefit of a large cash income but provided no corroborative evidence as to her assertions and indeed was not able herself to provide evidence which would support her assertions. On the contrary she knew nothing of the husband’s business operations in the last years, simply that “she did not trust him”. I cannot accept her allegations.
The husband is a graphic designer living in W and paying a rental sum which is extremely low. It would not be unreasonable nor unexpected that the husband’s rental liability will increase between now and November 2001. That is a matter which I take into account.
The husband’s evidence was as follows:
a)That the wife’s Statement of her Financial Circumstances was fair and reasonable and he conceded that the case was about his capacity to pay;
b)That his income as stated in his Statement of Financial Circumstances at $905.00 per week was in the per annum sum of $47,060.00 which was significantly more than his previously assessed amount on a per annum gross income of approximately $40,000.00;
c)That for the period from 1 July 1999 to October 2000 the per annum figure of $47,060.00 would have been the correct figure (and not $40,998.00);
d)That the husband’s income in his Statement of Financial Circumstances was in the sum of $905.00, his expenditure in the sum of $842.00, leaving a $63.00 weekly surplus of income over expenditure;
e)That the taxation amount on $47,060.00 was in the sum of $201.55 and not $253.00 as claimed by him, thereby providing in addition to the $63.00 surplus another $51.45, making a weekly surplus of $114.45 although the Medicare levy of $705.90 per annum had to be included as a liability (leaving $101.00 approximate surplus);
f)That he paid private health insurance in the sum of $22.00;
g)That he paid $24.00 per week by way of superannuation contributions for himself;
h)That his motor vehicle expenses as stated in his 1999-2000 taxation return for private use were in the sum of $3,034.00 or $58.35 per week. His Form 17 indicated these expenses to be in the sum of $70.00 per week which was an overstatement by him of $12.00 per week;
i)That his work involves quite a bit of travel, both interstate and overseas.
When cross-examined about his trip overseas in May 1999 the husband was less than honest about the expenses met by his then girlfriend whom he said had paid for most of their accommodation and most of their meals and entry fees. He referred to her having met their accommodation expenses in London and Ireland although subsequently conceded that he had paid for two nights’ accommodation in London and that his girlfriend had paid for two nights’ accommodation in London and one in Waterford. Although the husband’s evidence was that the girlfriend had paid for most of the meals, the husband’s taxation returns indicated that the husband had claimed for some of those meals and considerable accommodation expenses. Further the husband, when put to him, conceded that he had paid hotel expenses in Paris, London and Sweden for himself and his girlfriend.
The husband’s travel results in two conclusions being capable of being drawn. The first is that (a) the husband had the sum of approximately $10,000.00 to spend on a four week overseas trip, his evidence being that this is what it cost him; and (b) the husband claimed meals, accommodation, phone calls (including internet access) and his airfare as legitimate expenses on his taxation return, thereby decreasing the taxation income available for assessment of child support. He claimed a business expense of $10,308.00.
In the taxation year 1988 to 1989 the husband’s gross income was in the sum of $165,000.00. His expenses with respect to his motor vehicle were $2,922.00. In the taxation year 1999 to 2000 his gross income was in the sum of $115,681.00 and yet the expenses on his motor vehicle had increased to $4,770.00. The husband said that he had travelled to Adelaide, Canberra and Sydney by car thus increasing his expenditure. However it was put to the husband by Counsel for the wife that the increase in the 1999-2000 year was because he had claimed with respect to two motor vehicles. Although the husband denied this, he then went on to concede, and only after documentary evidence to the contrary was produced, that if it was the case, it was a mistake. It appeared from the evidence he had indeed claimed expenses with respect to his Camira motor vehicle.
The situation with his Camira motor vehicle is curious. His girlfriend, whom is no longer his girlfriend, has in her possession his motor vehicle. She lives at Wangaratta and, for the purposes of the road-worthy obtained on the motor vehicle on 8 September 1999, the Camira was garaged in Wangaratta. Although the husband indicated in evidence-in-chief that he intends to sell that motor vehicle he appears to have taken no steps to do so and indeed has continued to leave the car at Wangaratta in his girlfriend’s possession. He paid the sum of $670.00 by way of repairs to the Camira and claimed this amount as a taxation expense. This is despite him not having possession or use of the motor vehicle. He conceded that he could sell both the Golf and the Camira motor vehicles and save $6,000.00 or $7,000.00 per year on claimed expenses. The Golf Volkswagon was recently purchased by him for the sum of $32,900.00 subject to finance. I do not take issue that he requires a suitable vehicle for his work related activities.
In the taxation year ending 30 June 1999 the husband’s printing and stationery expense was $2089.00. In the year ended 30 June 2000 it had increased four-fold to $8,768.00. The husband’s evidence was that he was not doing as much printing in the last financial year as his business direction had moved away from that core business. He indicated that some books and a diary purchased should not have been claimed (as they were) but otherwise could not explain this four-fold increase.
Likewise, in the most recent financial year, the husband’s telephone expense claimed was $5,545.00. The husband indicated that this should have been 90% of his total phone bill and that his personal use is 10%. However, the telephone accounts put to him, being four in total, were claimed in their totality by him. It would appear again that certainly, at least with respect to those telephone accounts, the husband has claimed a personal expense in relation to his telephone usage as a business expense. The total amount claimed by the husband was $2,037.30 being again an overstatement of expenses of some $237.00.
The husband in November of last year celebrated his fortieth birthday. Once again he claimed personal expenditure as business expenditure saying that he had received advice, although from whom he could not recall, that if he invited clients to the function he could claim the costs of the function. His evidence was that he invited half clients and half friends and yet he claimed as a business expense one hundred percent of the expenses being wine, glass and food expenses of approximately $500.00.
The wife was cross-examined as to her $17.00 per week expenditure on the Footscray Football Club yet the husband has membership of the AFL, St Kilda Football Club, and attends cricket and football matches.
The husband does have an ability to manipulate his income and when attending to prepare his taxation returns for the 1999-2000 year which he prepared in March or April 2000 he thereafter did not attempt to invoice jobs until May. In May only three invoices were rendered and then not again until late June when he invoiced in excess of $24,000.00. The husband did not accept that had he invoiced earlier that he would have received a higher income in the 1999-2000 year, but his evidence was that most of the people that he had invoiced in late June have now paid. The husband’s list of debtors has grown from $11,000.00 to $33,000.00 in outstanding fees due to his regulating of his income.
The husband continues to claim depreciation with respect to items no longer in his possession being a claim of perhaps $600.00.
I find on the above evidence that a ground is established.
Having found the above I must then determine whether an order would be just and equitable for the child, the carer and the liable parent pursuant to Section 117(4) of the Act.

Is it just and equitable to make an order?

Having regard to the matters set out in Section 117(4) and in particular the husband’s income and earning capacity and the proper needs of the parties’ three sons as detailed by the wife I consider that it would be just and equitable to make an order for departure from the husband’s child support assessment.

Is it otherwise proper to make an order?

The wife gave evidence which I accept that she receives income for the one day in each week that she is gainfully employed. She is otherwise available to care for the children and because of her medical condition she generally rests each afternoon. She was challenged with respect to her expenditure on food and clothing for the household but I find her evidence clear on those matters and I accept that the expenditure as stated by her is expenditure required for the support of herself and the children. She did not seem extravagant in her expenditure answering that she generally did not purchase brand names but that growing boys required the expenditure as stated. Her expenses were modest.
At various times since December 1997 the wife has had savings, although these savings have in part derived from funds being provided to her such as a distribution from the husband on 21 December 1998 in the sum of $10,120.00. Those savings have been depleted by her in recent times to meet the children’s and her own general living expenses. The wife has a shortfall with respect to her income and expenditure such that her expenses are in the sum of $978.00 per week and her total income is in the sum of $585.00 per week inclusive of her pension and family allowance entitlements.
Each of the parents has the primary duty to maintain their children. The wife has no further capacity or income with which to satisfy her shortfall of income over expenditure. The husband has income in excess of that used to determine his child support obligations in the manner described previously in this judgment.
I find it is otherwise proper to make an order.

Conclusion

The husband’s current assessment for the year commencing 1 July 1999 to 30 September 2000 is in the sum of $9,849.00 per annum or $820.75 per month. The assessment issued to the husband on
12 August 2000 for the period from 1 September 2000 to 30 November 2001 is in the sum of $918.75 per month or $11,025.00 per annum.
The assessment of 1 July 1999 to 30 September 2000 year was based on an income of $40,998.00 The recent assessment concluding on
30 November 2001 is based on an income of $44,936.00.
The assessment of 1 July 1999 to 30 September 2000 was altered when the husband recently provided his taxation returns to the Child Support Agency such that he was required to pay the sum of $214.92 per month extra.

For the reasons set out above I regard the husband’s income to be higher than that stated by virtue of his personal expenditure being included in his business expenditure. This income is surplus to his requirements and required to meet the proper needs of his three sons. This situation has prevailed since 1 July 1999. I deem it appropriate that the husband pay child support in an amount equal to the amount he would be liable to pay if his child support income were $67,000.00 (approximately $348.00 per week)

Spousal maintenance

The matters of evidence addressed in this judgment are also applicable to the wife’s claim for spousal maintenance, as is the concession by the husband that the question is not one of the wife’s inability to support herself by virtue of Section 72(a) and (b) - which criteria she clearly satisfies - but the husband’s ability to pay.
Turning in particular to Section 75(2)(na) I find the husband has now a child support liability which results in his surplus income being spent if not in its entirety, then sufficiently so to render him incapable, in addition, of meeting a spousal maintenance obligation. I am also mindful of his commercially low rental and of the need to allow him some latitude with respect to this expense to avoid further proceedings between the parties.
Accordingly, I dismiss this application.

Order

(1)THAT the administrative assessment for the child support period from 1 July 1999 to 30 November 2001 be departed from.
(2)THAT for the period 1 July 1999 to 30 November 2001 the child support income of the husband be varied to $67,000.00.
(3)AND that an amended assessment be issued.
(4)THAT all material produced subpoena which did not become the subject of exhibits will be returned by the Court to the persons producing it as soon as practicable.
(5)THAT any material produced subpoena which became an exhibit will be returned by the Court at the expiration of the appeal period to the person producing it. Any material produced by a party which became the subject of an exhibit will be returned by the Court to the party at the expiration of the appeal period.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Hartnett FM

Associate:

Date: