QCA & QRJ
[2004] FMCAfam 642
•19 November 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| QCA & QRJ | [2004] FMCAfam 642 |
| CHILD SUPPORT – Departure orders – concessions made as to manner in which trial is to proceed – review of husband’s income during various child support periods – whether husband made full and frank disclosure of his financial position – husband’s earning capacity – reference to tests of earning capacity – lump sum (capitalised) future child support. |
Child Support (Assessment) Act 1989
Child Support (Registration and Collection) Act1988
Luton v Lessels (2001) FLC 98-015
Gyselman (1992) FLC 92-279
Hides v. Hatton (1997) FLC 92-759
Ross & McDermott (1998) 23 FamLR 613
Hallinan v. Witynski (1999) FLC 98-009
Chang v Su (2002) FLC 93-117
Mezzacappa (1987) FLC 91-853
Black & Kellner (1992) FLC 92-287
Weir (1993) FLC 92-338
Oriolo v Oriolo (1985) FLC 91-653
Briese (1986) FLC 91-715
Giunti (1986) FLC 91-759
Kannis (2002) FamCA 1150 (reported in (2003) FLC 93-135
Hardman (2003) FamCA 1057 (unreported)
Rayson (2003) FamCA 1384 (unreported)
DJM & JLM (1998) FLC 92-816
Scott v Stauder (unreported judgment delivered 20 November 1996
Barrell Insurances Pty Ltd v Pennant Hills Restaurants Limited (1981) 34 ALR 162,
Todorovic v Waller (1981) 37 ALR 481
Racine v Hemmett (1982) 8 FamLR 716
| Applicant: | QCA |
| Respondent: | QRJ |
| File No: | DGM 1255 of 2002 |
| Delivered on: | 19 November 2004 |
| Delivered at: | Melbourne |
| Hearing date: | 27 May 2003 (Dandenong) |
| Judgment of: | Walters FM |
REPRESENTATION
| Counsel for the Applicant: | In person |
| Solicitors for the Applicant: | Unrepresented |
| Counsel for the Respondent: | Mr P. Cronin |
| Solicitors for the Respondent: | Victoria Legal Aid |
ORDERS
The parties will be heard as to the orders they consider are appropriate to give effect to these Reasons.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DANDENONG |
DGM 1255 of 2002
| QCA |
Applicant
And
| QRJ |
Respondent
REASONS FOR JUDGMENT
Introduction
The proceedings presently before the Court relate to child support for the parties’ daughter, S, who is 15 years. They also relate to (past) child support for S’s sister, K, who is now 19.
The parties were married in 1981 and separated in October 1999. They have three children — B (born in February 1982), K (born in December 1984) and S (who was born on 28 February 1989).
S has lived with the wife since the parties separated. K also lived with the wife for almost all relevant periods. She did not live with her from 10 May 2001 to 29 January 2002. K turned 18 on 25 December 2002.
The wife is not engaged in paid employment. She is a full time home-maker and parent.
The wife has not re-partnered.
The husband describes his occupation as “job seeker”. He lives with his de-facto partner, Ms L and her three sons. The husband and Ms L jointly own the property in which they reside.
Agreement Has Been Reached in Relation to Some Matters
At the conclusion of the trial, the parties reached agreement as to certain matters (“the Agreement”). The Agreement was reduced to writing and signed by the husband and Mr Cronin (Counsel for the wife).
The Agreement is in the following terms:
1. Both parties accept that this is a case for the making of an order capitalising child support for the periods —
(a) 24 October 1999 to 31 July 2003; and
(b) 1 August 2003 to 30 November 2007.
2. The court is to determine the appropriate amounts in (a) and (b) above.
3. The order be one in which the “arrears” be paid to the wife but the future capitalised sum be held by the Child Support Agency (“CSA”) and paid to the mother periodically.
4. Each party will address the court on what the appropriate amounts in 1(a) and 1(b) are, having regard to the evidence from yesterday.
5. The husband understands that the wife intends to make an application for costs.
6. There is agreement that if S leaves school before 30 November 2007, the husband will seek a payment of the unused capitalised sum, and he will be repaid that amount.
7. In making an order for a capitalised sum, the husband understands that the wife will seek a default order of the type set out in her application.
8. Upon the making of an order for capitalised child support, each party agrees not to make any further applications for child support.
Some of the matters referred to in the Agreement require explanation:
a)The husband was first assessed to pay child support in October 1999.
b)S will turn 18 on 28 February 2007, but will not complete her secondary schooling until 30 November 2007 or thereabouts. The parties have agreed that child support (in the form envisaged in the Agreement) is to continue until what is effectively S’s last school day in Year 12.
c)There has been a long history of disputes between the parties relating to the issue of child support. For example, Senior Case Officers provided written decisions dealing with various objections on 21 June 2000, 11 September 2000, 21 March 2001 and 12 April 2002.
d)The wife asserts that the “arrears” are substantial. In a letter dated 26 March 2003 from the CSA to the wife, the arrears were quantified at $11,573.65.[1]
e)The document evidencing the Agreement was handed to the court on 27 May 2003. The trial took place on the previous day (26 May 2003).
f)The “default order” referred to in the wife’s application (filed 23 April 2003)[2] is in the following terms:
i)To give effect to (the order for the lump sum payment), if the husband has not made the payment within 30 days, the husband transfer to the wife on trust for sale his interest in (the real property that he owns jointly with Ms L).
ii)If the husband fails to comply with (i) above, the Registrar of the Federal Magistrates Court of Australia at Melbourne be delegated… to sign all documents necessary to give effect to (i) above.
iii)Until further order, the husband be restrained from disposing of or otherwise further encumbering his interest in (the property owned jointly with Ms L), otherwise than in accordance with these orders.
[1] See Annexure RJQ1 , to the wife’s affidavit sworn 7 April 2003.
[2] See paragraph 7 of the Agreement.
The Law
The Commonwealth’s legislative scheme for assessment and enforcement of child support liabilities is contained in the Child Support (Assessment) Act 1989 (which I shall call “the Assessment Act”) and the Child Support (Registration and Collection) Act1988. Certain aspects of this scheme were considered by the High Court in Luton v Lessels (2001) FLC 98-015. In that case, Gaudron and Hayne JJ said (at page 95,659):
The Assessment Act records that the ‘parents of a child have the primary duty to maintain the child’. This duty is said, by the Assessment Act, (a) to be not of lower priority than the duty of the parent to maintain any other child or another person: (b) to have priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself and any other child or another person the parent has a duty to maintain: (c) to be not affected by the duty of any other person to maintain the child or any entitlement the child or another person may have to an income tested pension, allowance or benefit. …The principal object of the Assessment Act is said to be ‘to ensure that children receive a proper level of financial support from their parents’.
Part 5 of the Assessment Act (ss 35-79) provides for the administrative assessment of child support. “Child support” is defined as “financial support under [the Assessment] Act, including financial support under [the] Act by way of lump sum payment or by way of transfer or settlement of property”. An administrative assessment of child support requires the application of one or more of several statutory formulae that is, or are, apposite in the particular circumstances. Section 79 of the Assessment Act provides that ‘an amount of child support due and payable by a liable parent to a carer entitled to child support is a debt due and payable by the liable parent to the carer’…
Where there has been an administrative assessment, both the liable parent and the carer may lodge with the Registrar an objection against the assessment. A person aggrieved by a decision on the objection may, pursuant to section 110 of the Assessment Act, appeal to a court having jurisdiction under that Act.
In the same case, Gleeson CJ said (at page 95,653):
The objects of the Assessment Act are set out in section 4. The principal object is to ensure that children receive a proper level of financial support from their parents. To that end, the Act provides for a level of support to be determined in accordance with legislatively fixed standards, and permits carers of children to have the level readily determined without the need to resort to court proceedings.
…It may be observed that, although the legislation is enacted in furtherance of a clearly defined public policy, it creates a distinctly personal liability. The natural and moral obligation of the parent to support a child becomes, by force of the legislation, a legal obligation reflected in a debt, calculated in accordance with the Assessment Act, owing by a parent to a carer of the child.
Gaudron and Hayne JJ continued (at page 95,663):
Part 7 of the Assessment Act (ss 99–146) deals with the jurisdiction of courts under the Act. In particular, provision is made for applications to a court for a declaration about the applicability of the administrative assessment provisions. Provision is made for what are called “appeals” against incorrect administrative assessments and for orders for departure from administrative assessment. (The reference to “appeal”, although similarly used in other contexts, may mislead. The proceeding which is so described is the first application of judicial power; it is an exercise of original, not appellate jurisdiction.) An order by a court for departure from an administrative assessment may be made on the grounds on which the registrar may make a departure determination…
The process involved in the consideration of an application for departure from an administrative assessment of child support was explained by the Full Court in Gyselman (1992) FLC 92-279 at 79,064-5, under the heading “Division 4 – Orders for Departure from Administrative Assessment in Special Circumstances”. The Full Court said (inter alia):
Section 117 is the critical provision.
The structure of that section is that s.117(1)(b) identifies concisely the matters about which the Court must be satisfied and those components are then expanded in subsections (2) to (9). Section 117(1)(b) identifies a clear three-step process:
1. Whether one or more grounds of departure in s.117(2) is established.
2. Whether it is ‘just and equitable’ within the meaning of s.117(4) to make a particular order.
3. Whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order.
It is clear from the careful way in which s.117 has been structured that the Court must address each of those three separate issues...
…Each of those grounds (in s.117(2)) is prefaced by the words, "in the special circumstances of the case". 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. (It has been held) that "special circumstances" were "facts peculiar to the particular case which set it apart from other cases". The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
In Hides v. Hatton (1997) FLC 92-759, the Full Court said (at 84,352):
It was also made clear in Gyselman that when the Court is considering whether it is just and equitable within the meaning of s.117(4) to make a particular order, the Court is required to undertake the task of considering the matters set out in paragraphs (a) to (g) of that sub-section, and in this regard the Full Court said as follows (at 79,078):
‘However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).’
The Full Court also made it clear in its decision in Gyselman that similar considerations apply to the Court’s determination as to whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order (see at 79,080), and furthermore and very relevantly for present purposes the Full Court emphasised the importance of trial Judges providing adequate reasons for judgment in order to ensure a proper exercise of the discretion under s.117 (see at 79,080).
In the same vein, a differently constituted Full Court in Ross & McDermott (1998) 23 FamLR 613 at 623-4 (paragraph 39) said:
... a practical and flexible approach should be adopted to the task of considering these s 117(4) and (5) matters, that is an approach similar to that which this court has long adopted to the ‘s 68F(2) matters’… in child-related proceedings under the Family Law Act 1975 (Cth), and to the ‘s 79(4) matters’ and ‘s 75(2) matters’ in property settlement proceedings under that Act. Accordingly, we consider it is unnecessary to make any reference to those s 117(4) and (5) matters which have no real relevance in the circumstances of the particular case. We also consider that it would be permissible to group together and consider as a whole, those relevant matters which by their nature lend themselves to such an approach in the circumstances of the particular case, and in the case of those matters which are required to be considered under more than one subsection of s 117, to examine such matters only once, although they may need to be taken into account under more than one subsection.
In Hallinan v. Witynski (1999) FLC 98-009, the Full Court said:
... (The) reasons for answering the two questions posed by s.117(1)(b)(ii) need not be elaborate, but the task of considering, at least broadly, the matters referred to in s.117(4) and 117(5), respectively, and then making a finding as to satisfaction or otherwise in relation to the relevant matter, must be undertaken as a necessary part of the exercise of discretion imposed on the Court by s.117(1).
Approach to Parties’ Applications
Notwithstanding the legal principles set out above, and the clear direction to apply the three step process described in Gysleman, the effect of the Agreement is that the parties can be taken to have conceded that:
a)relevant grounds for departure (pursuant to s.117(2) of the Assessment Act) have been established;
b)it is “just and equitable” to make orders capitalising the husband’s child support liability for the periods referred to in paragraph 1 of the Agreement; and
c)it is “otherwise proper” to make the orders for capitalised child support.
The only issue for the court to determine is the appropriate quantum of capitalised child support for each of the two periods — namely 24 October 1999 to 31 July 2003 and 1 August 2003 to 30 September 2007.
The husband conceded that “the case is about (his) income – wholly and solely about his ability to pay”. In other words, it is appropriate that the court should focus on the husband’s income (and earning capacity) for the whole of the period since October 1999 in order to determine an appropriate level of child support.
Both parties agreed that the Court need not give consideration to matters such as the children’s proper needs, the children’s income, earning capacity, property and financial resources and the wife’s income, earning capacity, property and financial resources. It was agreed that the case — from the husband’s point of view — is entirely “income driven”, as it were.
Having regard to the various concessions made by the parties in this case, I propose to determine the appropriate base figures for each relevant period, and then calculate the appropriate child support amounts.
Child Support Periods
In order to endeavour to approach the exercise that the court has been requested to perform in a logical manner, I have decided to deal with periods that are broader than the relevant child support periods.
There are 10 child support periods that are the subject of assessments in this case — although I recognise that the husband has pointed out that the periods have allegedly changed from time to time. The 10 periods are as follows:
(1)from 28 October 1999 to 31 December 1999;
(2)from 1 January 2000 to 21 February 2000;
(3)from 22 February 2000 to 27 January 2001;
(4)from 28 January 2001 to 28 February 2001;
(5)from 1 March 2001 to 9 May 2001;
(6)from 10 May 2001 to 29 January 2002;
(7)from 30 January 2002 to 17 March 2002;
(8)from 18 March 2002 to 27 April 2002;
(9)from 28 April 2002 to 24 December 2002; and
(10)from 25 December 2002 to 27 July 2003.
I shall also deal with the period following 27 July 2003.
Annexed to these Reasons is a schedule setting out details of the 10 periods referred to above (“Table A”). Table A records the date upon which the assessment was issued (if it is possible to identify such a date), the period of the assessment, the number of children the subject of the assessment, the monthly amount of the assessment, the husband’s and the wife’s child support income amounts and, finally, the manner in which the assessment was set. In that regard “A” indicates that the assessment was fixed administratively, and “D” indicates that the assessment was set by departure following a decision by a Senior Case Officer.
In relation to the number of children the subject of the various assessments, it is appropriate to note that B turned 18 on 22 February 2000 (being the commencement date of assessment #3) and K turned 18 on 25 December 2002 (being the commencement date of assessment #10).
The Husband’s Material was Difficult to Understand
At the commencement of the hearing, I commented that the husband’s material was almost impossible to follow. It contained an over abundance of detail, and it demonstrated that the husband had “lost sight of the wood for the trees” (as it were). I said to the parties that I did not propose to allow either of them to rely on any filed affidavit material, and that the matter was to proceed by way of oral evidence only. I told both parties that they could refer the Court to individual documents annexed to their affidavits or otherwise tendered during the course of the proceedings. Neither party had any discomfort with this approach.
Although I pressed the husband — at the commencement of the hearing — to identify the precise orders that he was seeking, the effect of the Agreement is that the precise orders originally sought by him are now irrelevant.
The husband did seek to rely upon one of his affidavits sworn on 13 May 2003 (being the affidavit sworn in response to an order made by Federal Magistrate Phipps on 6 March 2003). Attached to the affidavit (which is numbered 35 on the Court file) are two schedules. The first is entitled “Child Support Comparison — Payments v Assessments v Estimation”. The second schedule is entitled “Recap of all Child Support Assessments”.
I do not propose to deal with the second schedule referred to above (being the “Recap of all Child Support Assessments”), because much of the information contained in it is now of historical interest only.
The Husband’s Taxable Income
The first of the schedules reveals that the husband asserts that his “taxable yearly income” was as follows:
a)For the period 28 October 1999 to 30 June 2000: $28,117.00 per annum.
b)For the period 1 July 2000 to 30 June 2001: $45,903.00 per annum.
c)For the period 1 July 2001 to 31 May 2002: $35,543.00 per annum.
d)For the period 1 June 2002 to the date of the trial (26 May 2003): $ NIL per annum.
The husband’s income tax assessments for the years ending 30 June 1999, 2000 and 2001 were tendered in evidence. They reveal that the husband’s taxable income for those years was as follows:
a)1999: $28.117.00
b)2000: $45,903.00
c)2001: $35,543.00
During the course of cross examination, the husband acknowledged that his taxable income for the 1999 year resulted from “an income split” between the wife and himself. Both were partners in a business that they then operated. The husband later conceded that, for the period from October 1999 until 30 June 2000, he was the only person deriving income from the business. It was for that reason that his taxable income was significantly higher in the 2000 year than it was in the 1999 year.
2000 Financial Year
The husband also conceded that his taxable income for the year ending 30 June 2000 was $45,903.00 (in accordance with his income tax assessment) and that he derived the benefit of that income.
Although Mr Cronin cross examined the husband about allowances in the financial records of the business (known as “Pride Store Maintenance”) for items such as depreciation, and in relation to the apportionment within the financial records between “personal” and “business” expenses, I am satisfied that the amount of $45,903.00 is a fair reflection of the husband’s annual income for the year ending 30 June 2000.
I am aware that the husband conceded that he travelled overseas (to Europe) for a period of approximately seven weeks commencing 6 December 1999. I am also aware that the cost of the overseas holiday was approximately $4,000.00 or $5,000.00. I accept the husband’s evidence, however, that the period immediately after the break down of the marriage was difficult and stressful for him, and that he felt that he needed a break from his work in order to better concentrate on the business after his return.
Given that the husband conceded that his income for the 2000 financial year was $45,903.00, and that it is not in issue that the exercise upon which this Court must embark (in the circumstances of this case) is “income driven”, it is irrelevant on what the husband may have spent his income at that time. The only relevant question is whether it was appropriate for the husband to take leave from the business for a period of seven weeks. In my opinion, and having regard to the fact that the marriage had broken down only a short time before the holiday took place, it was.
2001 Financial Year
When the husband was asked about the fall in his taxable income between the 2000 and 2001 tax years, he said that his income in the 2001 year was “only for nine months”. The husband said that, in March 2001, “ … the people that employed Pride Store Maintenance … got somebody else, or they ran out of money”.
Pride Store Maintenance was the business carried on by the husband and the wife in partnership prior to the date of separation, and by the husband alone thereafter. Pride Store Maintenance was a general maintenance and repair business run by the husband. He serviced a number of stores and other businesses.
Once again, Mr Cronin cross examined the husband regarding certain expenses of the business during the 2001 financial year. Relevantly:
a)The gross earnings of the business fell from approximately $130,000.00 in 2000 to approximately $107,000.00 in 2001 — due to the fact that the husband lost one of his major customers in the last three months of the 2001 financial year.
b)One of the expenses for the 2001 year was depreciation, totalling $13,707.00. The husband could not explain the figure, and said that it was sourced in his accountant.
c)The expenses of the business also included bank interest of $1,339.00. The husband originally said that the interest related to “a business loan”, but later conceded that it related to moneys borrowed to pay out the wife pursuant to an order of the Family Court of Australia.
d)The expenses included motor vehicle expenses of $7,118.00. The husband said that “very little” of this amount related to his personal use of the vehicle.
e)The expenses included a payment of $3,000.00 for voluntary superannuation for the husband.
f)The expenses included telephone expenses of $1,702.00. The husband said that “by far the majority” of this expense would have been for business purposes.
In my opinion, the husband’s taxable income figure of $35,543.00 is not a fair reflection of his actual income for the 2001 financial year. Although I accept that there was a serious downturn in the business during the last three months of the financial year, I find that certain of the expenses referred to in the financial records of the business are exaggerated or inappropriate. When I have regard to the following —
a)the fact that the husband did not work at all for seven weeks during the 2000 financial year (and still managed to earn a taxable income of $45,903.00 during that year);
b)the failure of the husband to explain the significant allowance for depreciation;
c)the payment of $3,000.00 in respect of the husband’s superannuation; and
d)the other matters referred to in paragraph 40 above,
I am of the opinion that a fair allowance for the husband’s actual income during the 2001 financial year would be approximately $45,000.00.
2002 Financial Year
According to the husband, he continued to operate Pride Store Maintenance for approximately twelve months after its income reduced dramatically in or about March 2000. He ceased trading, however, on 31 March 2002.
During cross examination, the husband was asked why he shut the business down. He replied: “I was advised to by CSA”.
The cross examination continued:
Mr Cronin:When you say “advised to”, what do you mean?
Husband:I rang the Change of Assessment Team and this was early 2002 and asked how I can get someone to listen to me of my change of circumstances. … And they really couldn’t do anything for me at all while I had a trading business, but I told them I wasn’t trading anywhere near the figures that they were basing my assessments on. They said it in almost as many words but as long as you have that business name you have a potential income of whatever the figure was for that particular period …
Mr Cronin:So the purpose of the exercise was to avoid the Child Support Agency making incorrect assessments?
Husband:To assist, yes.
Later in the trial, the husband said:
There was a statement made that I closed the business because I did not want to work any more. I totally and utterly reject that. I kept the business open a year after there was a substantial decline in that. I tried to sit there and make it go. I was, in fact, trading all that year before I closed it but nowhere near the capacity because 95% of my sales was to one customer. So the only reason that I shut the actual business was through advice of the Child Support Change of Assessment Team was that they could do absolutely nothing while I maintained an operating business in changing my income. That was straight advice and I asked several times.
They never said it in that many words but I knew exactly what they meant and that was the reasoning why I could never go with an estimate form or changes because I had an operating business and I was very willing and I am still willing to reinstate my business if I can … At the end of the day I had to put my emotional attachment (to the business) to one side, because I was told that if I kept it (the business), I was unable to change my assessed income amount. That is the only reason I changed it. …
I do not accept that the Child Support Agency advised the husband to close the business and I find that the husband took that step because he did not agree with the Agency’s assessment of his earning capacity at that time. In essence, the husband took steps to place his financial affairs beyond the reach of the Child Support Agency, and to make it as difficult as possible for the Agency to assess him for child support and, ultimately, collect that child support. Relevantly:
a)In August 2001, (in other words, approximately seven months before he “closed” Pride Store Maintenance), the husband became a director and shareholder in Insurance and Commercial Building Maintenance Pty Ltd (“ICBM”). The husband and a friend had become involved in the company to “explore other avenues of income”.
b)The husband resigned as a director of ICBM, and disposed of his shares in the company, at the same time as he closed down Pride Store Maintenance.
c)The husband transferred his directorship, and his shares in the company, to Ms L.
d)The husband later conceded that Ms L holds the shares in ICBM on trust for him.
e)The husband said that he hopes to get the business of ICBM up and running (as it were) after the current proceedings have been completed.
f)The husband admitted that he made no mention of his involvement in ICBM in any of the documents that he initially relied upon in the proceedings.
g)Although the husband initially registered with Centrelink and commenced receiving unemployment benefits (or, more accurately, a Newstart allowance), he voluntarily cancelled his Centrelink benefits in September 2002. He told Centrelink at the time that he “ … no longer needed the money”.
h)The husband told Centrelink that he no longer needed the relevant benefits at a time when, according to the husband’s principal argument in the case, he had no income whatsoever.
i)The husband then conceded that it was not the case that he had no income since September 2002:
Mr Cronin:Are you saying … that you had no money, no income at all coming into your pocket since September last year?
Husband:Not from gainful employment … there is bits and pieces but only very small.
Mr Cronin:Where do these bits and pieces come from?
Husband:Friends, generally.
Mr Cronin:Friends?
Husband:Yes.
Mr Cronin:For jobs you do for them?
Husband:Yes, friends, and friends of friends, and friends of friends of friends of friends.
Mr Cronin:Yes, and they all pay cash, presumably?
Husband:Or top up the car or whatever.
j)The husband was asked about certain purchases made on his credit card since the beginning of 2002. He acknowledged that he had bought wine from a national buying scheme. In one month he spent approximately $445.00 for this purpose, and in another month he spent $210.00. He was also asked where the money came from to enable him to meet his credit card payments — if he had no income whatsoever:
Mr Cronin:What I want to know is how do you repay the Bankcard?
Husband:Cash.
Mr Cronin:But you haven’t been employed for a year?
Husband:I understand.
Mr Cronin:Where does this money come from?
Husband:From small jobs, from selling tools, equipment.
Mr Cronin:November last year you paid $1,380.00 off your Bankcard?
Husband:Yes.
Mr Cronin:October last year (2002) you paid $247.00 off your Bankcard. September last year you paid $150.00 off your Bankcard. May last year you paid $1,169.00 off your Bankcard. These are all after the business was closed down?
Husband:Yes.
Mr Cronin:Where did this money come from?
Husband:Depends on what I sold … over the years I have accumulated a lot of junk. Well, sorry, no, not junk. It’s just I’ve accumulated a lot of gear which I’ve sold off in one way or another.
Mr Cronin:Why didn’t you pay some of the child support obligations with some of the junk money?
Husband:The main reason — I didn’t believe that the child support obligation was correct …
Mr Cronin:On 25 October 2002 there’s an entry … on your Bankcard Ryobi Australia Pty Ltd, Rowville, $1,434.70?
Husband:Yes.
Mr Cronin:What was that for?
Husband:That was for a compressor I think which I subsequently had to sell.
Mr Cronin:Why did you buy a compressor in October 2002?
Husband:It was to do with ICBM …
Mr Cronin:… there are regular payments on the Bankcard, aren’t there?
Husband:Yes, I live completely off my credit card.
Mr Cronin:But if you live off your credit card, you’ve got to pay it off?
Husband:Yes.
Mr Cronin:Are you saying … that the only way you have paid off these credit cards is by selling junk?
Husband:Not junk but it’s good stuff but only to a particular group of people.
k)In the same period that the husband alleged that he had no income, he sold the house in which he then resided and purchased another residential property in Wantirna. The Wantirna property was bought jointly with Ms L. The husband contributed approximately 50% of the purchase price of $355,000.00. Ms L contributed the other 50%.
l)The husband said that he initially contributed approximately $170,000.00 towards the purchase price of the Wantirna property. He and Ms L jointly borrowed $200,000.00 to complete the purchase (and to cover incidentals such as stamp duty). Ms L later sold her previous home in Knoxfield North and used the net proceeds of sale of that home to reduce the joint borrowing of the husband and herself. The net proceeds of sale of the property owned by Ms L were approximately $140,000.00. As a consequence, the amount owing by the husband and Ms L was reduced from approximately $200,000.00 to approximately $60,000.00. Since that time, the amount owing in respect of the loan has been reduced to approximately $50,000.00.
m)The husband said that Ms L meets the payments in respect of the mortgage — because he has already contributed his half of the purchase price of the Wantirna property.
n)In his financial statement sworn 13 August 2002, the husband deposed to the fact that his “salary or wages before tax” then amounted to $185.00 per week. He was unable to explain, however, how that figure was arrived at.
o)In the same financial statement, the husband said that the only other occupant of the home in which he was residing (being the Wantirna property) was “H. Dams” — a “friend”, earning $600.00 per week. The husband conceded that the name “H. Dams” was fictitious, that he was then living with Ms L and that Ms L’s details did not appear anywhere in the financial statement — because he “ … wanted to keep her out of all this garbage”.
Mr Cronin cross examined the husband at length regarding his payment of the hire purchase instalments in respect of his motor vehicle. These instalments amount to approximately $1,200.00 per month. The husband explained that he has met the payments from the income that he has generated from cash jobs that he has done for friends (and others), and from buying and selling items on his own behalf or for others. He also said that his mother has met the shortfall between the amount that the husband could afford to pay in respect of the hire purchase instalments and the full amount. The husband said that his mother pays anything between “nothing and the full amount” of the monthly instalment.
The husband’s mother gave evidence during the course of the proceedings, and corroborated the husband’s evidence to the effect that she has assisted him to meet the instalments in respect of the motor vehicle. I accept the evidence of the husband, and of his mother, in this regard.
The Husband’s Credibility
The husband was not an impressive witness. At times he was open and frank with the Court. At other times, he remained wary and guarded. He was non-responsive on a number of occasions, and Mr Cronin was obliged to press him to make appropriate concessions.
I find that the husband is an intelligent and capable man. I find that he has not been open and frank regarding the overall financial benefits that he has received since mid-2001, and that the financial information that he has presented to the Court (both orally, and in his financial statement) is something less than the whole truth.
Although the husband endeavoured to assure the Court that he understands (and has always understood) his obligations in relation to child support, I do not accept his assurances in this regard. If that was the case, then (for example) why did the husband not ensure that some moneys were retained from the sale of his previous home to meet a reasonable level of child support for the foreseeable future. After all, Ms L did not have sufficient moneys to pay for her half share in the Wantirna property, and remains liable (according to the husband) for a mortgage in respect of which approximately $50,000.00 is owing. Further, the husband’s decision to refuse to accept Newstart payments is incomprehensible — particularly when regard is had to the fact that he injured his left hand (and later injured his right hand) a few weeks before deciding to forego his Centrelink benefits.
The Husband has not made Full and Frank Disclosure
The duty to make full and frank disclosure of one’s financial position has been set out in a number of cases determined by the Full Court over the years. Those cases were most recently summarised in the decision of Chang v Su (2002) FLC 93-117. For example, where the court cannot be satisfied as to the extent of a party’s property, it can be less cautious than might otherwise be the case when making relevant orders (see Mezzacappa (1987) FLC 91-853, Black & Kellner (1992) FLC 92-287 and Weir (1993) FLC 92-338). Full and frank disclosure is required as a matter of principle in proceedings between spouses or former spouses under the Family Law Act or the Child Support legislation (see, for example, Oriolo v Oriolo (1985) FLC 91-653, Briese (1986) FLC 91-715 and Giunti (1986) FLC 91-759).
That a judge (or federal magistrate) is entitled to take a “robust view” in relation to findings regarding a parties’ financial position (including a party’s capacity to meet any proposed order) — where that party has failed to make full and frank disclosure of his/her financial position — is clear from the authorities referred to above, and from the decision in Chang v Su at paragraphs 71 and 72 (at p.89, 198).
In November 2002, the High Court dismissed an application by the husband in Chang v Su seeking special leave to appeal from the Full Court’s decision. In the course of argument, Callinan J observed:
It does not matter what the principle might be seen to be, a Court has to do the best it can. It does the best it can, having regard to the evidence that is adduced, and if the parties are not frank then naturally there is going to be a measure of imprecision about any findings that the Court can make.
In Kannis (2002) FamCA 1150 (reported in (2003) FLC 93-135 — but not as to this issue) — the Full Court said:[3]
(It was submitted that) the cases discussed above were authority for the proposition that where there was a finding of deliberate non-disclosure the Court could act more robustly in making findings adverse to the party who had actively misled it. We do not see that the principle should be so confined.
Whether the non-disclosure is wilful or accidental is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute. Where the Court is satisfied that the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances, it may be appropriate to err on the side of generosity to the party who might otherwise be seem to be disadvantaged by the lack of complete candour. This is the course the trial judge adopted. It was a course clearly open to him and one that does not merit appellate interference.
[3] At paragraphs 50 and 51.
Although the cases referred to in the passages cited above deal with issues such as property settlement or costs, there can be no doubt that the obligation to make full and frank disclosure extends to child support proceedings. Indeed, it would be extraordinary if it did not.[4]
[4] See Hardman (2003) FamCA 1057; Rayson (2003) FamCA 1384.
In Hardman (2003) FamCA 1057 (unreported), Coleman J said:
The relevant issue before the learned Federal Magistrate was the financial resources of the appellant, from whatever sources those derived. As decisions of the Full Court of this Court in cases, commencing with Oriolo v Oriolo (1985) FLC 91-653 make clear, where a litigant does not make a full and frank disclosure of his or her financial position, that litigant cannot benefit or rely upon the inability of the opposing party by reason of that failure to disclose to suggest a particular capacity or the existence, identity or location and nature of particular assets or resources. A moment's reflection would reveal why that must be so. Any other course would not only encourage litigants to fail to make a full and frank disclosure, but provide a positive incentive for concealment in that regard.
In Rayson (2003) FamCA 1384 (unreported) Kay J said:
The key findings of the (Chief Federal Magistrate) which are not really challenged before me, is (sic) that it is difficult to pin the husband down as to what is his real earning capacity. This is so because there are years of operating a business without keeping accurate books of account. There is some minor evidence at least of lifestyle inconsistent with supposed inability to make payments. But at the same time I do not think it is an openly elastic exercise of saying 'well, I am not satisfied where the end is so I can be as generous as I like.' It is true that the court can be less than duly cautious where there is not full and frank disclosure (see Weir (1993) FLC 92-338). There is no finding here by the (Chief Federal Magistrate) of lack of full and frank disclosure. There is a finding of being less than cooperative or fully cooperative in the process of producing documents but it does not seem to me, given that the material that the (Chief Federal Magistrate) had and that I have, that takes the matter very far indeed.
Kay J also observed that, in his opinion, certain findings made by the Chief Federal Magistrate were not available on the evidence. Nevertheless, the learned Judge "found himself doing what (the Chief Federal Magistrate) was doing, just guessing", and summarised the process as being "not a very exact science".
In this case, and in contradistinction to the position in Rayson, I have made a finding that the husband has not made full and frank disclosure.
The Husband’s Income has been Understated
Having regard to the evidence to which I have referred, and to the other evidence in the case, I find that the husband’s overall income has been understated in respect of the periods since 1 July 2001. I accept, however, that the husband’s business (Pride Store Maintenance) suffered a significant downturn after March 2001. I am of the view, however, that the husband was quite capable of continuing to run the business and derive an income from it.
The Husband’s Income Earning Capacity
In relation to the husband’s recent work history, it is important to understand that the court must focus on his earning capacity, as much as on his actual (or asserted) income from time to time.
The concept of “earning capacity” was discussed at length in DJM & JLM (1998) FLC 92-816, where the Full Court said (at page 85,272):
Child support and child maintenance orders are governed by legislation which emphasises and prioritises the obligation of parents to support their children and seeks to ensure that the level of financial support is to be measured according to the parents’ “capacity to provide financial support”.
Property adjustment orders have far less focus and are arrived at on the basis of what is “appropriate” after weighing up many competing factors. Spousal maintenance is governed by a test of what is proper and having regard to the reasonable ability of the liable spouse to meet the needs of the other.
In our view, there can be different answers to the same question about earning capacity — depending upon which head of power is sought to be exercised.
A judge might reasonably say that a parent should be working longer hours or in more lucrative employment to meet child support obligations. A spouse is only required to support the other spouse to the extent that he or she is reasonably able to do so. This requirement does not impute the same degree of compulsion about it that the child support and child maintenance tests express …
The Full Court (at para 17.37 of DJM v JLM) indicated that it was “most attracted” by the following tests of earning capacity, as “at least the minimum tests to be applied”. The tests derive from decisions of the Californian Court of Appeal in decisions referred to on page 85,271 of DJM v JLM:
Earning capacity is composed of (1) the ability to work, including such factors as age, occupation, skills, education, health, background, work experience and qualifications; (2) the willingness to work exemplified through good faith efforts, due diligence and meaningful attempts to secure employment; and (3) an opportunity to work which means an employer who is willing to hire…
When the ability to work or the opportunity to work is lacking, earning capacity is absent … When the payor is unwilling to pay and the other two factors are present, the court may apply the earnings capacity standard to deter the shirking of one’s family obligations… A parent’s motivation for reducing available income is irrelevant when the ability and opportunity to adequately and reasonably provide for the child are present.
Once persons become parents, their desires for self-realisation, self-fulfilment, personal job satisfaction and other commendable goals must be considered in the context of their responsibilities to provide for their children’s reasonable needs. If they decide they wish to lead a simpler life, change professions or start a business, they may do so, but only when they satisfy their primary responsibly: providing for the adequate and reasonable needs of their children.
Finally, in Scott v Stauder (unreported judgment delivered 20 November 1996), Kay J said that the passage from Scott referred to above —
… reads effectively that in some circumstances an under employed parent may be held to have an earning capacity or financial resources sufficient to justify an order that he or she contribute to the support of his children and that being under employed and without adequate income is not, of itself, necessarily an answer by a parent to an application for child maintenance.
Both Scott and Scott v Stauder predated the decision in DJM v JLM, and I note that Kay J was a member of the Full Court in the later case. It follows that the tests to which the Full Court was “most attracted” in DJM v JLM (see paragraph 64 above) are of more relevance, and are likely to provide a court of first instance with clearer guidance, than the discussion of the subject contained in Scott and Scott v Stauder.
I am satisfied on the basis of the evidence before me that the husband has had the ability to work in an occupation or occupations involving tasks similar to those that he carried out whilst running Pride Store Maintenance. The husband during his evidence said that “the only thing I really know about is motor cars and maybe building maintenance”. Notwithstanding that statement, it appears that the husband has not made any significant efforts to obtain or maintain employment in either of those fields. Further, I have been presented with no credible evidence which might suggest that he does not have (or has not had) an opportunity to work in those areas. I recognise that the husband may wish to remain self employed, but his personal preference in that regard is incidental and subordinate to the obligation that the law places upon him to maintain his children. For reasons which have much to do with the husband’s belief that he has been unfairly treated by the Child Support Agency, the husband has — in effect — taken his foot off the pedal (to use a colloquialism).
Priorities
The nature of the duty of a parent to maintain a child is described in s.3 of the Assessment Act. This is an important provision in the context of this case. The husband’s duty to maintain his children must have priority over all commitments of the husband — other than commitments necessary to enable him to support himself (and any other child or person that he may have a duty to maintain).
The evidence before me reveals that the husband has not always given priority to his duty to maintain his children. He has been able to find funds to meet various expenses, and has even managed to purchase luxuries such as wine from time to time.
Husband’s Income – July 2001 to December 2004
Doing the best that I can with the information available to me, and recognising that I am entitled to act robustly in making relevant findings where there has been a failure to make full and frank disclosure of one’s financial position, I conclude that a fair estimate for the husband’s income for the period from 1 July 2001 to 31 December 2004 is something between $25,000.00 and $30,000.00 per annum, on average. It would be intellectually dishonest of me to choose either of those figures, and hence I select the mid point — being $27,500.00 per annum.
I find, therefore, that for the purpose of the calculations associated with giving effect to the Agreement, the husband’s notional income for the period from 1 July 2001 to 31 December 2004 was an average of $27,500.00 per annum.
Husband’s Income After 31 December 2004
The husband’s evidence was to the effect that he believed that he could earn a more substantial income after the proceedings had been completed. By fixing the husband’s notional income at $27,500.00 per annum to 31 December 2004, I have allowed the husband what I consider to be a reasonable time to re-establish his priorities, and to regain what ever focus may be necessary to enable him to work in such a way as to maximise his earning capacity.
On the basis of the evidence before me, I find that a fair allowance for the husband’s earning capacity from 31 December 2004 to 30 November 2007 is $45,000.00 per annum. This figure is similar to the amount that the husband was earning some 5 years ago.
Calculation to Give Affect to the Agreement
Also attached to these Reasons is a second table, headed “Table B”. The calculations in Table B reflect the findings that I have made in these Reasons, together with relevant calculations to reflect the structure of the child support scheme.
I make the following observations in relation to Table B:
a)I have endeavoured to retain the overall structure of the assessments to which I have referred in Table A. Thus, the periods for which the calculations are made reflect, where possible, matching periods in Table A. Where assessment periods in Table A have spanned the end of the financial year and the commencement of the next, however, I have broken the relevant assessment period into two. Thus, the assessment periods referred to in rows C and D of Table B equate to the assessment period referred to in row 3 of Table A. Similarly, rows G and H of Table B relate to row 6 of Table A and rows K and L of Table B relate to row 9 of Table A.
b)Rows O, P and Q of Table B are intended to bring the husband’s liability “up to date”.
c)The column headed “Number of Days” is self explanatory.
d)The husband’s child support income amount for each row reflects the findings set out in these Reasons.
e)The amounts appearing in the “Exempted Income Amount” column reflect the figures appearing in the relevant assessments, and in the Child Support Agency’s on-line Law and Policy Guide. I am satisfied that these figures properly reflect the provisions of the legislation. Even if they do not, however, they are adequate approximations for the Court’s purpose to give effect to the Agreement.
f)The “exempted income amount” to be used for an assessment is determined by the start date of the relevant child support period. The child support periods and relevant exempt income amounts are:
· 28 October 1999 to 27 January 2001: $10,219.00
· 28 January 2001 to 27 April 2002: $11,271.00
· 28 April 2002 to 27 July 2003: $11,740.00
· 28 July 2003 to 27 October 2004: $12,315.00
· 28 October 2004 to 27 January 2006: $12,950.00
g)The “Adjusted Income Amount” column reflects the difference between the husband’s child support income amount and the exempted income amount for each period.
h)The column headed “Number of Children” records the number of children who were under 18 at the relevant time (and residing with the wife). I have no evidence to suggest that B did not reside with the wife until he turned 18 on 22 February 2000. Similarly, there is no evidence before me that K did not continue to reside with the wife until she turned 18 on 25 December 2002 — except for the period from 10 May 2001 to 29 January 2002.
i)The child support percentages are in accordance with the legislation.
The remainder of the table represents mathematical calculations, and is self explanatory.
To the extent that any of the figures contained in Table B may not be wholly accurate, I am of the view that they amount to an appropriate approximation for the purposes of these Reasons and the orders that I propose to make. Nevertheless, if either party identifies a significant error in the table, then I am prepared to review the figures.
It follows from Table B, that the total amount of child support payable by the husband for the period 28 October 1999 to 27 July 2003 is $23,119.34.
According to Mr Cronin[5], the husband has paid the following amounts in respect of child support:
a)For the period 28 October 1999 to 31 December 1999 — $1,055.50.
b)For calendar year 2000 — $6,183.48.
c)For calendar year 2001 — $2,452.97.
d)For calendar year 2002 — $4,899.31.
e)For the period 1 January 2003 to the date of the trial (27 May 2003) — $300.00.
[5] See exhibit W2.
The total of the figures referred to in the previous paragraph is $14,891.26. The husband did not take issue with these figures.
I find, therefore, that the amount that the husband must pay to the wife in respect of the period 28 October 1999 to 27 July 2003 is $8,228.08 (being $23,119.34 less $14,891.26).
Capitalised (Future) Child Support
Paragraph 1(b) of the Agreement requires me to calculate the amount of capitalised (lump sum) child support payable by the husband for the period from 28 July 2003 to 30 November 2007.
Given the period that has elapsed between the completion of the trial and the delivery of these Reasons, I have decided to approach this matter by dividing the relevant period into two. The first sub-period is from 28 July 2003 to 31 December 2004. The second sub-period is from 1 January 2005 to 30 November 2007.
In my opinion, it is appropriate that I deal with the first sub-period in the same manner as I dealt with the assessment periods covered in paragraph 1(a) of the Agreement. I have done the relevant calculation in rows O, P and Q of Table B.
It follows that the amount payable by the husband in respect of child support for the period 28 July 2003 to 31 December 2004 is $3,888.64.
The period from 1 January 2005 to 30 November 2007 totals 1,064 days or approximately 2.9 years.
In my opinion, the 3% discount scale should be employed to calculate the present value of a relevant weekly sum until 30 November 2007[6]. According to the CCH Australian Family Law Child Support Handbook, the 3% “multiplier” relevant to a period of two years is 100.58. The 3% “multiplier” relevant to a three year period is 148.66. The difference between the two multipliers is 48.08 — 90% of which is 43.27.
[6] See Barrell Insurances Pty Ltd v Pennant Hills Restaurants Limited (1981) 34 ALR 162, Todorovic v Waller (1981) 37 ALR 481 and Racine v Hemmett (1982) 8 FamLR 716.
If 43.27 is added to 100.58 (being the 3% “multiplier” for a two year period), then it is possible to determine an appropriate “multiplier” for a period of 2.9 years. The total of 100.58 and 43.27 is 143.85.
I intend to use 143.85 as the appropriate “multiplier” for a period of 2.9 years.
On the basis of the findings that I have made in these Reasons, the husband’s child support obligation for the period commencing 1 January 2005 would be as follows:
Husband’s child support income amount
$ 45,000.00
Exempted income amount (on 2004 figures)
(12,950.00)
Adjusted income amount
32,050.00
Child support percentage
18%
Annual rate
5,769.00
Weekly rate
110.94
If, as is my view, an appropriate quantum of child support payable by the husband (as at 1 January 2005) is $110.94 per week, then the present value of that periodic sum for 2.9 years (being the period from 1 January 2005 to 30 November 2007) is $15,959.05[7], which I shall round down to $15,950.00.
[7] Being $110.94 per week multiplied by the 3% “multiplier” for 2.9 years (143.85).
Subject to the other considerations that I must take into account, I propose to order that the husband pay lump sum child support relating to the period 1 January 2005 to 30 November 2007 fixed in the sum of $15,950.00, and that such lump sum is to count for 100% of the child support that would otherwise have been payable by the husband under any relevant child support assessments during that period.
Having regard to the concessions made by the parties during the course of the proceedings (and the orders sought by them as reflected in the Agreement), I am satisfied that it would be just and equitable with regard to S, the wife and the husband to make the lump sum order set out above.
The Court is also required to consider whether it would be “otherwise proper” to make a order for a lump sum payment. I take into account the fact that it is the parents of S themselves who have the primary duty to maintain her. In all the circumstances of the case (and, particularly, when regard is had to the manner in which the case was conducted, and the concessions that were made), I am satisfied that the order that I propose is “otherwise proper”.
Section 125 of the Assessment Act directs the Court to state in the (lump sum substitution) order whether the child support ordered to be provided by the husband is to be credited against his liability under any administrative assessment that may apply to the period (or a part of the period) for which the order has effect. As foreshadowed earlier, my (and the parties’) intention is that the lump sum is to represent the whole of the husband’s child support liability to the wife for S for the period from 1 January 2005 to 30 November 2007. It follows that the lump sum is to account for 100% of the annual rate of child support payable under all relevant assessments for the period from 1 January 2005 to 30 November 2007.
Summary
In summary, the amounts payable by the husband to give effect to the Agreement are as follows:
a)Net amount payable to the wife in respect of the period referred to in paragraph 1(a) — being 24 (but, say, 28[8]) October 1999 to 27 July 2003 — $8,228.08.
b)Amount payable to the wife in respect of the additional period (28 July 2003 to 31 December 2004) — $3,888.64.
c)Lump sum payment in respect of the period 1 January 2005 to 30 November 2007 — $15,950.00.
[8] Being the date of commencement of the first assessment.
The total of the above figures is $28,066.72.
Arrears
Having regard to the fact that the trial was concluded some months ago, and the fact that I have made orders which may have the effect of varying the quantum of child support payable pursuant to a variety of assessments, I cannot fix the amount of arrears payable in respect of the period 28 July 2003 to 31 December 2004 (being the periods covered in rows O, P and Q of Table B).
Clearly, I have calculated the arrears payable by the husband in respect of the period referred to in paragraph 1(a) of the Agreement. That figure is $8,228.08. It is likely, however, that the husband will have paid some child support after 28 July 2003 and up to the date of the handing down of these Reasons. He should be given credit for such payments (which will reduce the amount of $3,888.64 that I have determined is payable for this period).
Obviously, the husband will have made no payments in respect of the period for which the capitalised lump sum applies — as that period has yet to commence.
Orders
I shall now hear from the parties as to the orders that they consider are appropriate to give effect to these Reasons.
I, Barbara Mendleson, certify that the preceding one hundred and one (101) paragraphs are a true copy of the reasons for judgment of Walters FM
Deputy Associate:
Date: 17 November 2004
ANNEXURES