S and S (Final)

FEDERAL MAGISTRATES COURT OF AUSTRALIA

S & S (Final)

[2000] FMCA fam 11

CHILD SUPPORT VARIATION – Section 95, 98(1) & 117(2) Child Support (Assessment) Act

Applicant:

B W S

Respondent:

D F S

File No:

CA1008 of 1996

Delivered on:

17 August 2000

Delivered at:

Canberra

Hearing Date:

3 August & 11 August 2000

Judgment of:

Brewster FM

REPRESENTATION

Counsel for the Applicant:

Mr Nicholl

Counsel for the Respondent:

Mr Farrar

ORDERS

That the child support agreement entered into between the parties dated 16 May 1996 be varied to provide that as from 1 July 1999 in lieu of the amounts of $66.67 contained in Part A as the child support to be paid for each child the amount of $65.67 be substituted and the date that payments are to start with respect to this variation be 1 July 1999.
That all material produced sub poena 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 sub poena 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
CANBERRA

CA 1008 of 1996

B W S

Applicant

And

D F S

Respondent

REASONS FOR JUDGMENT

This matter involves a Form 63 application by the husband filed 14 June 2000. In that application he sought Orders that:
a)The child support agreement entered into by the parties on 16 May 1996 be discharged to the extent it stands paid; and
b)He pay child support at the rate of $60.00 per week or $20.00 per child per week.

Factual Matters

The parties were married on 5 November 1983, separated in April 1996 and were divorced on 5 August 1998.
There are three children of the marriage presently aged 12, 9 and 4.
In May 1996, shortly after separation the parties entered into consent property Orders pursuant to Section 79 of the Family Law Act (“FLA”). These Orders were drafted by the wife’s solicitors and sent to the husband under cover of a letter dated 9 May 1996 which indicated that they reflected an agreement reached by the parties. The letter invited the husband to seek legal advice if he wished. The husband says he did not seek such advice. He says that he was distressed by the separation, wanted to eliminate any conflict with the wife and the children and did not understand the nature and effect of signing the Orders.
The Orders appear to be favourable to the wife. She was to receive the former matrimonial home and the parties were to share a taxi plate owned by them. The plate turned out to be of no value as when it was sold the proceeds did not fully cover a loan on it. The home however was valued by the wife at the time at $320,000.00 and was subject to a mortgage of $240,000.00. The mortgage however related to the monies borrowed to buy the plate and, when that plate was sold, was reduced to between $18,000.00 and $20,000.00. Each party kept their respective motor vehicles and any insurance policies on their lives. The husband was to keep his superannuation. I infer that this was of limited value. The husband’s evidence was that the home was acquired through the earnings from the taxi plate so it would appear that the imbalance was not a result of any overwhelming imbalance of contributions.
It appears that the husband did subsequently seek legal advice as on 5 January 1999 his present solicitors wrote to the wife’s solicitors foreshadowing an application to set aside the property orders pursuant to Section 79A. The letter asked if the wife would consider attending mediation. The wife’s solicitors wrote back on 27 January rejecting any re-opening of the issue. No Section 79A application was ever filed and I conclude that the husband has abandoned the idea of making such an application. Irrespective of what, if any, prospects he may have had in early 1999 in succeeding in such an application one would assume that the subsequent delay would in itself probably be fatal to any such prospects now.
On 16 May 1996, shortly after the property orders were signed, the parties entered into a child support agreement. That agreement provided for the husband to pay $66.67 per week for the two oldest children and $66.66 for the youngest child, making a total of $200.00 per week by way of child support and also provided for these payments to be indexed. With indexation the amount payable is now $235.10 per week.
At the time the Agreement was entered into the husband was employed by A Taxi Cabs Co-operative Ltd. He states that his income at the time was $35,000.00 per annum. By July 1999 it had risen to just under $42,500.00 per annum.
At Easter 1998 the husband met his present wife P C. They began to live together in about July of that year and were married on 6 November 1999. Ms C has a four year old daughter who lives with her. She does not receive any child support.
In the early part of 1999 the husband began to make plans to lease a taxi plate and purchase a taxi cab with a view to him and his present wife giving up their existing employment and operating a taxi cab business. The plan was for him and his present wife to conduct this business in partnership. They put this plan into operation in July 1999. Each resigned their employment, the husband as Operations Manager of A Cabs and the wife her position in the Public Service. As mentioned above he was earning just under $42,500.00 per annum at the time. He stated in evidence that he believed his wife was earning in the order of $22,000.00 to $23,000.00 per annum in her job. As it turned out there were unexpected delays in acquiring a cab and the business did not commence until August 1999.
The husband says that he drives the cab for about 60 to 65 hours a week, his wife for 15 to 25 hours a week and a driver is employed on a contract basis to drive addition hours.
The husband gave evidence that in December 1998 he consulted a Mr H, an accountant in Q, presumably to advise as to the viability of the proposed venture. Mr H predicted gross takings of between $9,500.00 and $12,000.00 per month. The husband said that if this had eventuated the business would have been expected to return a profit of about $30,000.00 per annum.
When asked why he and his wife had given up jobs which enabled them to earn about $65,000.00 per annum between them in order to go into a business that would return only about half that income the husband said, in effect, that it was a long term investment and that he expected that at some stage in the future the business would generate more substantial profits. I found it difficult to understand why this should be so. One can readily understand that some businesses will struggle until they become known and attract repeat customers. However the taxi industry does not appear to be in that category. I wondered if there was a system whereby more senior members of the Co-operative got preference with radio hirings but the husband gave evidence that this was not the case. The only explanation he gave as to why the business might grow was that the policies of the coalition government with respect to travel by public servants had impacted severely on the taxi industry in Canberra and he expected that if a Labour government were elected the industry would again prosper.
The response of the wife to this is more cynical but quite understandable. She maintains that the business already returns more income that the husband discloses. I will return to this contention in due course.
In the event the husband says that the business did not, and still does not, generate the gross income predicted by Mr H. . He has produced a table showing that the average monthly gross income of the business from September 1999 to May 2000 was a little over $8,000.00. It should be noted that this is despite the fact that, according to his affidavit, the taxi industry had been in a slump between May 1996 and July 1999 (the period in which Mr H produced his projections) but from May 1999 started to recover. He says that he expects the net profits of the business in the 1999/2000 year to be in the order of $22,000.00.
It appears that the husband continued to pay child support in accordance with the agreement until about November 1999 when he ceased paying entirely. From this time until recently the only monies received by the wife was an amount of $217.21 being a tax refund intercepted by the Child Support Agency. At some time after the return date of his Form 63 he commenced paying $60.00 per week.

The law

Section 95 of the Child Support (Assessment) Act (“CSA”) provides that where the Registrar accepts a child support agreement the provisions of that agreement have effect, for the purposes of Part 5, as if they were an order made by consent by a court under Division 4 of Part 7. This is the part of the Act that deals with departure orders.
Section 98(1) of the Act deals with the Court’s power to vary such agreements. It provides in effect that the Court can vary or discharge such an agreement “in the same manner and in like circumstances” as it can vary or discharge an order made under Division 4 of Part 7.
One would have expected the Act to contain provisions in Division 4 of part 7 setting out what this “manner” is and what the “circumstances” are that would govern variations of agreements. These matters are spelt out in the CSA (in Section 129) insofar as varying orders for non periodic child support are concerned. Curiously however the Act is silent on this point when it comes to varying orders for periodic support or child support agreements. The Full Court of the Family Court however has filled the lacuna in Gilmour (1995) FLC 92-591. In that case the Full Court indicated that:
a)It is not necessary to demonstrate a change in circumstances since the agreement was entered into to justify a variation of the agreement and;
b)The court should simply apply the three stage process set out in Gylselman (1992) FLC 92-279.

Application of the facts to the law

I will now proceed with that three stage process.

Has a ground been made out? – Section 117(2)

Section 117(2) provides as follows
“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 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 have contact with any other child or another person that the parent has a duty to maintain.
b)That, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i)Because of:
(A)    High costs involved in enabling a parent to have contact with the child; or
(B)    Special needs of the child; or
(C)    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 because of:
(i)The income, earning capacity, property and financial resources of either parent or the child; or
(ii)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.”
Subsections (a) and (b) have no application to the case. In his opening Mr Nicholl who appeared for the husband indicated that the husband’s responsibility to support his present wife was part of his case but no attempt was made to adduce any evidence to bring her within the provisions of Section 72 of the FLA. None of the other matters referred to in those two subsections have any relevance to the present case.
If there is a ground made out it must be found in subsection (c). The husband would argue that both the limbs in that subsection are made out, that is he would say that his reduced income is such as to provide a ground and that the property settlement in 1996 would also provide a ground.
It might be thought that subsection (c) can have no operation where the departure application is in respect of a court order or a child support agreement as it seems to only apply if an administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support. In this case of course there has never been an administrative assessment. However the Full Court in Bryant (1996) FLC 92-690 held that the phrase “administrative assessment” could be read as including payments under a child support agreement.
The first matter relied upon which is referred to in subsection (c) (i) is the husband’s income. Two issues arise in this respect. These are:
a)Whether I should accept the husband’s evidence that his income has declined as a result of going into the taxi cab business, and
b)If I do accept that evidence whether, given the circumstances in which the change in income occurred, I should disregard it and instead look to his income earning capacity as indicated by his previous employment.
I will deal with the second of these matters first.
Section 117(2)(c) does not only refer to a party’s income. It also refers to a party’s earning capacity. In this respect it mirrors the provisions of the FLA relating to child maintenance. In a number of cases the Family Court has had regard to this and refused to reduce child support where a liable parent has given up a job to his short term economic disadvantage. Many of these cases are referred to in the Full Court decisions of Scott v Scott (1994) FLC 92-457 and DJM v JLM (1998) FLC 92-816. The second of these cases applied the principles developed by the Court in relation to maintenance under the FLA to child support under the CSA.
The starting point for this discussion is Section 4 of the CSA which sets out the objects of the Act. That section provides that the principal object of the Act is to ensure that children receive a proper level of financial support from their parents and that that the level of support is determined according to the parents’ capacity to provide financial support. In this respect the word “capacity” is significant.
The second matter that needs to be stated is that when the husband embarked on the taxi business he did so in the knowledge that he had a responsibility to provide financial support for his children and that he was a party to a child support agreement which defined the extent of that responsibility. The Californian case of Regnery (1989) 214 Cal. App. 3d 1367 cited with approval by the Full Court in DJM v JLM is apposite in this respect. In that case the court said
“Once persons become parents, their desire for self realisation, self fulfilment, personal job satisfaction and other commendable goals, must be considered in 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 responsibilities: providing for the adequate and reasonable needs of their children.”
In my opinion when a liable parent moves from a higher paid job to a lower paid job and seeks a reduction in child support in consequence the onus will be on that parent to show a basis upon which the court should disregard to his or her earning capacity as demonstrated by the earnings generated by the first job and have regard only to the income received in the second job. Without attempting to be exhaustive the following scenarios might discharge that onus:
a)Where the parent goes from a well paid but insecure position to a lower paid but secure position;
b)Where the higher pay obtained in the former job was a result of dangerous working conditions or excessive hours worked which could not be sustained in the long term;
c)Where the new position had sufficient potential for longer term prosperity such that the ultimate benefits that might accrue to the children in the longer term would justify short term sacrifices.
As I understand it the husband in this case would rely on the third of these scenarios.
In my opinion a parent attempting to come within this scenario would have to satisfy the court that either:
a)There was a high probability that within a reasonable period the income earned in the new position would result in a greater level of child support being paid than was payable on the income earned in the former position and that in all the circumstances a short term reduction in child support is justified; or
b)Notwithstanding that such probability could not be demonstrated the potential longer term benefits were so significant as to justify a period of reduced child support.
An example of the second of these is found in the decision of Wastle v Wooster (Kay J, unreported, 23 July 1996 cited in DJM v JLM at page 85,267.) In that case the father was a professional golfer who had ambitions to be a tournament player but was struggling to establish himself on the circuit. The mother contended that child support should be set at a level referable to the higher income he could earn as a golf club professional. In that case the judge referred to the “glittering prizes” that awaited a successful tournament professional and allowed reduced child support for a two year period to give the father an opportunity to realise his potential.
In my opinion the husband in the present case has satisfied neither of these requirements. Insofar as the first is concerned on his evidence the future of the business is, in my opinion, uncertain. On his evidence the prospects of growth depends upon first the election of a Labour government, secondly the continued re-election of that government and thirdly the adoption by that government of the policies of its predecessors in relation to Public Service usage of cabs. Insofar as the second is concerned there was no cogent evidence that there are potential “glittering prizes” to be obtained from leasing a taxi plate.
However, even if the husband were able to satisfy me that it is appropriate to assess his child support on the basis of the income he claims to earn from the taxi cab business, I am unable to unequivocally accept that his income is as stated by him for the following reasons:
a)There is the potential to take cash from the business and not declare it. The husband conceded in cross examination that when the parties operated a cab during the marriage they “possibly” did not bank all the cash takings. The only method of conclusively determining what the takings are is to keep meter records which will show the fares chargeable. It is possible to keep records in this way but the husband has not done so. The wife’s father, who also operates a taxi in Canberra, gave evidence to the effect that the ratio of cash to overall takings for his cab is significantly higher than that disclosed in the husband’s material. I appreciate that evidence as to the experience with only one other cab needs to be treated with a great deal of caution but nevertheless it does serve to add to my unease as to the husband’s evidence as to the amount of cash his cab earns;
b)I find it difficult to accept that the projections made of the gross earnings expected from the cab could be so wrong. If it were just Mr H who could be blamed for the miscalculation I would not be so troubled but in this case Mr H was not advising a person new to the industry. The husband had owned a taxi plate before and had worked for A cabs for some years;
c)I also find it difficult to accept that the husband and his present wife would give up a combined income of over $60,000.00 per annum to work very long hours for an income expected to be less than half that amount. I could understand this if cogent reasons could be advanced as to why the business would be expected to grow but no such reasons were advanced in this case.

In saying this I do not make a positive finding that the husband has lied to the court and is taking undeclared cash from the business. It is simply that, in my opinion, if he is to place reliance on the income he claims to earn, he carries the onus of establishing to my satisfaction that he really does only earn that income. I am not so satisfied.
The next matter concerns the property of either parent as indicated in subsection (c) (i) which I will deal with along with one of the matters set out in subsection (c) (ii), that is any transfer of property made under the FLA.
I have already dealt with the property division effected by the parties in 1996. It might be argued that this is irrelevant as the husband at the time he entered into the child support agreement did so in the knowledge that the wife was to receive the bulk of the parties’ property. If this case concerned orders for maintenance under the FLA this might be a decisive consideration as the main criteria for varying such orders is a change in circumstances since the orders were made. However as mentioned earlier it is not necessary to demonstrate a change in circumstances in order to establish a ground for varying a child support agreement.
The position at present is that the husband has no significant property whereas the wife has a home the equity in which she estimates to be $290,000.00. If the husband were paying child support in accordance with the administrative formula I would not be inclined to regard such a disparity in property as justifying a departure from the formula. However the child support agreement provides for payments in excess of the amount that would be payable if the husband had continued in his employment and continued to earn in the order of $42,500.00 per annum. I calculate that the child support that would be payable on this income would be $197.00 per week as opposed to the $235.10 per week under the agreement.
If I were satisfied that the husband were earning more than this amount from his taxi business I would not find the ground established. However I am not so satisfied. A number of the matters that led me to doubt that he was earning a combined total of $22,000.00 per annum, or even the projected $30,000.00 per annum, do not have the same cogency when we are talking of an income of over $40,000.00 per annum.
In order to vary the parties’ child support agreement on this basis I would have to be satisfied that it results in an unjust and inequitable level of child support. I am conscious of the fact that, as submitted by Mr Farrar on behalf of the wife, this raises the bar to a height that is not easily jumped. I am conscious also of the provisions of Section 4(3) concerning consent arrangements and of the fact that the husband consented to pay the level of child support set out in the agreement. However having regard to the disparity in the parties’ asset position I do not regard it as either just or equitable that the husband should continue to pay child support in excess of the amount fixed by the legislature as to amount payable in normal circumstances. In all the circumstances, in my opinion, to require him to do so would result in an unjust and inequitable level of child support.
Accordingly I find that a ground is established.

Is it just and equitable to make an order?

Section 117(4) of the CSA provides as follows:
“In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
a)The nature of the duty of a parent to maintain a child (as stated in section 3); and
b)The proper needs of the child; and
c)The income, earning capacity, property and financial resources of the child; and
d)The income, earning capacity, property and financial resources of each parent who is a party to the proceeding; and
e)The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)Himself or herself; or
(ii)Any other child or another person that the person has a duty to maintain; and
f)The direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
g)Any hardship that would be caused:
(i)To:
(A)    The child; or
(B)    The carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii)To:
(A)    The liable parent; or
(B)    Any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.”
Having regard to the matters set out in this section, and in particular the property of each parent, I consider that it would be just and equitable to vary the child support agreement to the extent of reducing the amount payable to the amount that would be payable under the formula if the husband had continued in his previous position.

Is it otherwise proper to make an order?

Section 117(5) of the CSA provides as follows:
“In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
a)The nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
b)The effect that the making of the order would have on:
(i)Any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)The rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.”
The wife is entitled to a part pension. The CSA makes it clear that it is each of the parents, and not the State, that has the primary responsibility for the support of children. However, having regard to the fact that only a comparatively modest reduction of $38.00 per week in child support is contemplated and that the proposed order simply reflects the application of the formula to the husband’s previous income, I am satisfied that this section does not preclude the making of an order of the type contemplated.

Conclusion

For the reasons set out above I regard it as appropriate to vary the child support agreement such that it will provide that the husband pay child support in an amount equal to the amount that he would be liable to pay if his income were $42,500.00 per annum. As indicated above I calculate this to be $197.00 per week or $65.67 per child. The order will operate from 1 July 1999 which is approximately when the husband gave up his former employment. I am conscious of the fact that, given that child support is to be assessed as if he did not give up that employment, this is somewhat arbitrary but in all the circumstances I regard this as an appropriate balance between the parties’ competing interests. The provision for indexation will remain, and indeed will operate to increase the amount from 1 July 2000, and in this respect will take account of the salary increases that would have been expected had the husband remained in his previous employment.
The orders I make are as follows:
(1)That the child support agreement entered into between the parties dated 16 May 1996 be varied to provide that as from 1 July 1999 in lieu of the amounts of $66.67 contained in Part A as the child support to be paid for each child the amount of $65.67 be substituted and the date that payments are to start with respect to this variation be 1 July 1999.
(2)That all material produced sub poena which did not become the subject of exhibits will be returned by the Court to the persons producing it as soon as practicable.
(3)That any material produced sub poena 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-eight (48) paragraphs are a true copy of the reasons for judgment of Brewster FM

Associate:

Date:

[2000] FMCAfam 11

21 December 2000