S & D - [2005] FMCAfam 446

FEDERAL MAGISTRATES COURT OF AUSTRALIA

S & D

[2005] FMCAfam 446

CHILD SUPPORT – Departure application – income earning capacity – property and financial resources – complex financial affairs of respondent – lack of clear evidence as to respondent’s financial position or business dealings.

FAMILY LAW – Children’s issues – counselling to facilitate relationship of father with child – orders for child inclusive counselling.

Child Support (Assessment) Act 1989 (Cth), ss.116, 117(2)(c)

Cottle & Cottle [2005] FMCAfam 185
DJM v JML (1998) FLC ¶92-816
Gyselman & Gyselman (1992) FLC ¶92-279

Applicant:

Respondent:

File Number:

MLM 7077 of 2004

Judgment of:

Riethmuller FM

Hearing dates:

15 & 24 March 2005

Date of Last Submission:

14 April 2005

Delivered at:

Melbourne

Delivered on:

15 September 2005

REPRESENTATION

Counsel for the Applicant:

Mr Mawson

Solicitors for the Applicant:

Gavan J Black

Counsel for the Respondent:

Ms Colla

Solicitors for the Respondent:

Secombs

ORDERS

There be a departure from administrative assessment of child support for NJD payable by the respondent to the applicant as follows:
(a)from 4 January 2005 to 4 January 2008 the periodic rate of child support payable by the respondent be set at $80.00 per week; and
(b)then such rate to be adjusted on that date each year in accordance with any change in the Consumer Price Index for the preceding year.
Both parties forthwith do all things necessary to facilitate, attend and participate in confidential counselling at “Relationships Australia”, such counselling to include N.
The parties do comply with all reasonable directions as to attendance upon the Counsellor as and when required by the Counsellor for a period of 6 months from the date of this order.
That the husband forthwith provide to Relationships Australia a copy of the Family Report dated 3 March 2005 and a copy of these orders.
Both parties do share equally in the cost of the said counselling.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 7077 of 2004

Applicant

And

Respondent

REASONS FOR JUDGMENT

This is an application with respect to the child support payable for NJD. N lives with the applicant. There were also some limited children’s issues that were not able to be settled, which are dealt with at the end of this judgment.
The applicant seeks a departure from the current child support assessment based upon the income earning capacity, property and financial resources of the respondent to set the periodic child support rate at $250.00 per week from 27 July 2004.
The respondent also seeks a departure from the child support assessment, based upon his duty to maintain another child or person, and the income earning capacity, property and financial resources of the parties.
The respondent seeks departures from a number of child support assessment periods. In the respondent’s application he sought to have the parties’ child support income amounts set at various rates (from $32,855.00 to $35,000.00 per annum for him, and $75,000.00 to $78,500.00 per annum for the applicant).
At the hearing the parties sought the following orders:
a)the applicant sought orders that the respondent pay child support for the child at $200.00 per week from 27 July 2004; and
b)the respondent sought orders that the child support assessment be set at $50.00 per week from 27 July 2004.
The applications cover four separate periods of child support assessment by the Child Support Agency as follows:
a)Period 1: 1 March 2004 to 3 January 2005;
b)Period 2: 4 January 2005 to 31 March 2005;
c)Period 3: 1 April 2005 to 31 May 2005; and
d)Period 4: 1 June 2005 to 30 June 2006.

Period 1

During the first period the child support assessment amount was $467.00 per month. This was based upon an income on the part of the applicant of $72,000.00 per annum and an income on the part of the respondent of $61,000.00 per annum. These income amounts were set by a Senior Case Officer in a decision of 17 March 2004.
In that decision the Senior Case Officer recounted that the applicant was an accountant with a salary of approximately $72,000.00 per annum and that the respondent was a self employed builder who showed a taxable income of $35,536.00 for the 2002/2003 year. On that occasion the Senior Case Officer considered a profit and loss statement for the company operated by the respondent for the year ended 30 June 2003, which showed a deterioration in profits, but an increase in retained earnings of more than 10%.
The Senior Case Officer also considered a recent purchase of a Toyota Hilux and concluded that the transactions she observed showed a reasonable degree of confidence in business opportunities and in ongoing income. This lead her to conclude that the applicant had established a ground with respect to the income and earning capacity of the respondent.
The Senior Case Officer then concluded that there was no significant disparity in the normal earning capacity of the parents. Having regard to this and the Lee expenditure tables in the Child Support Handbook she set the child support assessment at $150.00 per week.
This decision was the subject of an objection by the respondent. The objection was allowed in part. The Objections Officer concluded that the respondent received a taxable income from his company of $35,000.00 per annum and that as a director he was entitled to a 50% share of the profits from the company (presumably the reference was meant to be as a shareholder).
On this basis the Objections Officer concluded that the respondent had an income earning capacity and financial resources equivalent to approximately $67,041.00 per annum. The Objections Officer then noted that there had been a decrease in income as show in a BAS statement for March 2004 compared to the previous year and on this basis reduced the child support income amount for the respondent to $61,000.00. It is not apparent from the terms of the decision how the figure of $61,000.00 was struck.
As a result the Objections Officer set the respondent’s income at $61,000.00 per annum. The Objections Officer also set the applicant’s income at $72,000.00 per annum, although is not clear how that figure was struck.

Periods 2 and 3

On 4 January 2005 there was an alteration to the rate of assessment struck using the nominated income amounts, as a result of the respondent having two relevant dependants (twins) which affected the child support assessment. His exempted income amount was increased ,thereby reducing the monthly assessed rate to $261.75.

Period 4

For the period 1 June 2005 to 30 June 2006 a formula assessment has been implemented by the Child Support Agency based upon the 2003/2004 taxable income figures for each of the parents. As a result the respondent’s income amount was set at $32,885.00 and the applicant’s income amount was set at $66,130.00.
This resulted in an annual rate of child support of $260.00.

The law

The considerations relevant when determining whether to depart from an administrative assessment are set out in section 117 of the Child Support (Assessment) Act (1989) (‘the Act’). The approach is set out in Gyselman & Gyselman (1992) FLC ¶92-279. In Gyselman the Full Court of the Family Court said (at 79,078):
As we have already indicated, the exercise under s 117 involves three steps. The first, which we have already examined, is whether one or more of the grounds in sub-section (2) has been made out. The legislation then requires the Court to consider whether any proposed order is ‘just and equitable’ and ‘otherwise proper’.
Earlier, at page 79,065 the Court said:
Whilst it is not possible to define with precision the meaning of that term [‘special circumstance’], as a generality it is intended to emphasize 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. ... In Savery's case (1990) FLC ¶ 92-131 (p 77,897), Kay J ... said that ``special circumstances'' were ``facts peculiar to the particular case which set it apart from other cases''.
It is clear that each of the three steps must be addressed by the court, namely:
a)whether one or more of the grounds of departure in section 117 is established; and if so:
b)whether it is ‘just and equitable’ within the meaning of section 117(4) to make a particular order; and
c)whether it is ‘otherwise proper’ within the meaning of section 117(5) to make a particular order.
The grounds of departure relied upon in this case are said to fall within s.117(2)(c)(i) which provides:
(2)For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of either parent or the child; or
I am mindful of the comments of the Full Court in DJM v JML (1998) FLC ¶92-816, particularly that:
17.40 ... 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 parent's “capacity to provide financial support”.
17.41 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 having regard to the reasonable ability of the liable spouse to meet the needs of the other.
17.42 In our view there can be different answers to the same question about earning capacity depending on which head of power is sought to be exercised.
17.43 A judge [or federal magistrate] 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. Thus a parent may be required or expected to work long hours or at more than one job if the parent has the capacity and opportunity to do so, and if the children need greater support than they would receive if the parent was only to work shorter hours. At the same time it might not be reasonable to expect an estranged spouse to avail himself or herself of such opportunities so as to provide maintenance for the other spouse. In the latter case it is a question of what is reasonable in the circumstances.

Income earning capacity and financial resources of the applicant

The applicant was cross examined at some length with respect to a number of rental properties her and other family members own. These rental properties are negatively geared.
I am not satisfied that this venture creates any profit for the applicant at present, rather it generates a loss. I am satisfied that this loss should not be taken into account when determining the applicant’s capacity to provide financial support for the child.
Pursuant to the provisions of the Act the negative gearing losses which are deducted from the taxable income amount on the applicant’s tax return are added back prior to calculation of her child support income amount: see section 38A(1).
The applicant is now on a remuneration package of $74,909.00 per annum pursuant to an agreement of 12 November 2004 (a copy of which was tendered as Exhibit ‘2’).
The applicant did receive a bonus of $2,000.00 in September 2004. The amount of the bonus in future years is determined by the company incentive scheme and it does not appear that it is capable of being ascertained with any certainty. It does appear that she is likely to receive a modest bonus each year.
It is likely that she will receive some incentive scheme bonuses, but also that she will have some small tax deductions for items and expenditure incurred to enable her to carry on her employment (as distinct from the deductions as a result of the negative gearing losses). I find that it is appropriate to treat the applicant as having an income of approximately $75,000.00 per annum.

Income, earning capacity, property and financial resources of the respondent

The financial position of the respondent is much more difficult to ascertain. There is no question that the respondent is a builder and has been involved with a relatively complex corporate structure. In evidence the respondent said that the accountancy fees for running the corporate structure were around $8,000.00 to $10,000.00 per annum. In his affidavit material he sets out some of the details relating to this structure which involves a number of difficult legal entities.
In 2001 he and his wife established a company, BB Pty Ltd, of which he and his wife are equal shareholders. He says that this company has not made a profit, however is completing its final project and it is hoped that it will generate a profit of $30,000.00 to $40,000.00 as a result of this project. He says that this company made a loss of $151,000.00 in the 2003/2004 financial year. He says that he and his wife were required to borrow against their home and superannuation fund, and also to borrow funds from his father, in order to stave off creditors.
In 2003 the respondent established a new construction company, MC Pty Ltd. He and his wife are shareholders of that company, holding one half of the shares. A separate business partner, Mr S owns the other half of the shares. MC Pty Ltd is the trustee company for MC Unit Trust. MC Pty Ltd has three directors: the respondent, his wife and Mr S.
MC Unit Trust has two units, one of which is held by MSA Pty Ltd, a company operated by the respondent and his wife, and the other held by SI Pty Ltd, a company operated by Mr S. At paragraph 10 of his affidavit the respondent explained that income generated by himself and his wife through MC Pty Ltd as trustee for the MC Unit Trust is paid to them via distributions to MSA Pty Ltd.
He said in his affidavit that MC Pty Ltd grossed a net profit of $80,648.00 in the 2003/2004 financial year which was distributed via the company and trust structure through MSA Pty Ltd such that he and his wife received $39,014.00 split equally between them. In the 2003/2004 year he also received some money from BB Pty Ltd.
The financial affairs of the respondent appeared even more complex during the course of his cross examination by Counsel for the applicant. The respondent said that he expected BB Pty Ltd to generate $30,000.00 to $40,000.00 on the basis that he had a contract for building work whereby he was to receive 10% of the contract cost as profit, and he valued the contract at $300,000.00. The documents relating to this do not appear to have been produced.
The documents produced with respect to MC Pty Ltd for 2003/2004 showed a net profit of $80,000.00 and work in progress of $429,659.00. There appear to have been a number of projects, including eight units at B Street, and jobs at M and A Court.
It also appears that the applicant worked as a casual factory hand for wages between July 2004 and October 2004 earning around $20.00 per hour (totalling $7,125.00) when other work was not in progress. He appeared unable to explain the work in progress figure set out above.
It also appears that MC Pty Ltd has made a loan to MD Unit Trust of $437,000.00. The respondent explained that the B Street property was being developed by MD Unit Trust and described this as following a precedent set by Docklands. It appears that what he was attempting to explain was that he and his partner were attempting to set up an arrangement to ensure that there was no building contract between the building company and the end purchaser, through the process of inserting a unit trust between the two, presumably to protect the builder from defect claims by the ultimate purchaser.
He explained in evidence that MD Unit Trust was set up to benefit Mr S and a company of the respondent’s wife. There did not appear to be any documents available for MD Unit Trust at the time of cross examination.
It also appeared that MSA Pty Ltd had advanced MC Pty Ltd $273,000.00. The respondent explained that that money was then advanced by MC Unit Trust to MD Unit Trust.
The accounts also showed that after this advance MSA Pty Ltd continued to have an interest bearing account with a credit of $73,845.00. This was explained by the respondent on the basis that it was in fact a superannuation account and that it was in the accounts prepared by the accountant in error.
The respondent was also cross examined about his ANZ Equity Manager Account, which appears to have been an account in his own name. During the period 8 June 2004 to December 2004 $146,184.00 was deposited into this account. He accepted that this was a personal and not a business account.
The respondent was cross examined with respect to his visa card statements which showed, over an 18 month period, payments of over $75,597.79. It was his personal visa card, however he said that he used it for some business transactions to take advantage of Frequent Flyer points and that he was able to produce a folder of receipts showing the business transaction items.
Other large sums of money have moved between the entities, for example on the MC Unit Trust accounts there is an entry for funds loaned to the trust of $77,000.00 together with the profit distribution of $39,000.00. Those accounts also showed opening balances for the beneficiary of $157,000.00. Part of the $70,000.00 said to be superannuation was explained as having been routed through the respondent’s personal entities and given to MC Pty Ltd to pay off creditors and then later replaced.
Later in the cross examination the respondent admitted that whilst he described hobbies and entertainment on his financial statement as costing around $20.00 a week his credit card statements alone showed that he had purchased around $2,352.00 worth of alcohol in a calendar year.
The respondent’s wife is said to be the bookkeeper for the entities, duties which she appears to have been able to fulfil even during her pregnancy confinement and early months after having twins, without the assistance of a bookkeeper. She was not called to explain the finances or structures. It is difficult to conclude that the bookkeeping in this case is a substantial contribution to the business undertaking.
Following the hearing of evidence in the matter the parties provided further documentary material and written submissions by agreement. The documentary material was an affidavit (with a large bundle of material annexed) from the respondent in support of written submissions of his Counsel.
The respondent’s Counsel’s submissions did not clarify the business structure. In the schedule to the submissions the financial structure of the respondent is listed by reference to MC Pty Ltd being the trustee company for MC Unit Trust with shareholders of 220% to the respondent 220% to the applicant and 50% to Mr S. The evidence of the respondent however is that the shareholding would be 22.5% to him, 22.5% to the applicant and 50% to Mr S. The MC Unit Trust is said to have unit holders of MSA Pty Ltd and Robert S Pty Ltd. MSA Pty Ltd is the trustee of the D Family Trust (a discretionary trust of which the respondent and wife are both appointors and beneficiaries, and to date have received equal distributions from the trust).

The bundle of documents included MC Unit Trust’s financial statement showing a trading income of $1.42 million, and a gross profit from trading of $223,669.00. One of the deductions from the trading income was “closing work in progress” of $429,659.00. The net profit of the business after expenses was said to be $80,648.00. Those expenses included interest of $106,961.00. Other smaller amounts of interest and bank fees and other items in the expenses of the company. From this some $39,014.00 was distributed to each of MSA Pty Ltd and SI Pty Ltd.
In an affidavit filed after the evidence the respondent said that MC Pty Ltd showed credits in beneficiary accounts in favour of MSA Pty Ltd of $273,808.00 which constituted the following:
a)Initial loans to MC Pty Ltd of $157,500.00, made up in part of $20,000.00 received from TD Pty Ltd (his father’s company) on the basis of a loan from his father’s company without any documents. The first mention of this is in his responding affidavit filed after his cross examination.
b)An amount of $77,295.00 being funds loaned to the trust was said to be sourced from mortgages he and his wife had personally, and further borrowings from TD Pty Ltd through his father. Again there were no documents with respect to the loan from his father.
c)A final figure of $39,014.00 was said to be the profit distribution for the 2003/2004 year.
The trust has $50,000.00 in a short term deposit account as a result of the Statutory Home Owners Warranty Insurance Scheme, which would presumably become available once the warranty period expires. However there is no evidence as to this.
In the non current assets (receivables) column of the balance sheet MC Pty Ltd lists as a non current asset a loan to MD Unit Trust of $437,153.00. This is explained by the respondent as follows:
13. As to item 8 of the MC Pty Ltd financials, the Non Current Asset, loan receivable from MD Unit Trust in the sum of $437,153.00, I refer to and confirm the matters set out in bundle documents 8 in the dossier. This figure in the books relates to a book transaction only. No moneys were exchanged between the two entities. The paper transaction relates to the acquisition of a development site at B Road, WB. The development project started on or about February 2004, and will finish on or about December 2005. The paper transaction will be fully reversed at settlement of the sale of the development units. The funds to acquire the units for development purposes were accessed via a financer.
It appears that the position of MC Pty Ltd as the trustee of MC Unit Trust is that ultimately its assets equal its liabilities, however it has liabilities to MSA Pty Ltd and SI Pty Ltd of $537,117.00.
As to the cross examination about his expenses the respondent in his later written material says:
31. As to alcohol expenditure, I say that I accept that about $40.00 per week is spent on alcohol for J and me. This expenditure is included under the “food” category in the sum of $170.00 (made up of $85.00 + $85.00) in my Form 13 Financial Statement sworn 9 March 2005.
32. As to holiday expenditure, I say that J and I do not go on holidays regularly. Over the course of 18 months we have undertaken one modest holiday and an urgent trip to S. The first was to GC for one week in December 2003, which cost us about $1,800.00, that sum being all inclusive of expenses, accommodation and meals. Using frequent flyer points paid for the flights. The break was a modest one and a small treat. It is not normal for us to plan and go on holidays. We allowed ourselves this break at the time as we were planning to have children and appreciated that a brief holiday would probably not really be affordable or practicable after the arrival of a young baby. J and I do not anticipate going on any holidays for the next three years, as a minimum.
33. Further, in respect of the urgent trip J and I went to S in 2004 for five days. The trip cost a total of just over $900.00 and was undertaken so J could visit her 82-year-old Grandmother who had a health scare. The plan was to let J’s grandmother see J pregnant with our twins and to say our last good-byes to J’s elderly grandmother. The costs on the credit card are inclusive of my mother-in-law’s costs, which were reimbursed to me at a later date, including the cost of the taxes attaching to the flights. Frequent flyer points were used to pay for the three flights.
34. As to Credit Card Spending and the alleged quantum of payments, I refer to and confirm the contents of the colour coded “visa card” statements in the dossier of documents. The statements (being the source documents which I called for during cross examination) are colour coded to reflect different types of purchases, (yellow refers to business expenditure, green refers to re-imbursed medical expenses and pink refers to baby expenses, noting that J and I received a baby bonus of $6,000.00 total for the twins). The wife’s counsel focused on payments, but purchases should be focussed upon as the visa card is used to make purchases for business items, which in turn are refunded by either BB Pty Ltd or MC Pty Ltd at a later date when funds are available in the accounts of the relevant business which occurs when there is either a re-imbursement of the cost from a private client who pays BB Pty Ltd, or when there is a progress draw down from the financier (which is contingent on stage completion) or on settlement of the developed properties for MC Pty Ltd. The dates of the purchases on the visa card reflect the actual date of the given purchase. The payments referred to in the visa card statements may have resulted from a business reimbursement relating to a purchase outside of the 12-month period identified. Also, the payments on the visa are not a true indication of personal expenses or income as particular expenses could have been reimbursed by one of the businesses within that month. Those funds would have been used to pay/clear the personal credit card. The business expense could have occurred many months earlier.
35. The table below sets out credit card spending, identifying payments, purchases, reimbursed business expenses as well as reimbursed medical expenses. Actual family expenses from January 2004 to December 2004 (that is prior to the birth of the twins) comes to about $32,881.00. This expenditure is only for J and me and does not include my mother in law. Payments or purchases overall do not total the alleged $80,000.00.
Despite all of this information it remains entirely unclear as to what the overall change of asset position of the respondent (or the various entities) actually is, throughout the periods. In Paragraph 39 of his response affidavit he sets out that his mortgage balance has moved from $50,000.00 on 22 February 2001 to $249,757.00 by 31 March 2005. He says there are loans owing to his father of $85,686.00 and some $70,000.00 had to be repaid to his superannuation fund. On this basis (even if one ignores the superannuation sum) the increase of indebtedness of the respondent through his mortgages and his indebtedness to his father would exceed the beneficiary loan amounts of MSA Pty Ltd through MC Pty Ltd as trustee for the trust.
Counsel for the applicant, in his written submissions, points to the level of expenditure on the respondent’s visa card. Even if one accepts the reimbursed expense amounts set out by the respondent in his material he nonetheless has had credit card expenses for the six months from July 2003 to December 2003 of $26,935.00 (after deductions for reimbursed expenses) and for the eleven months from January 2004 to December 2004 of $32,881.48 (around $35,870.00 per annum). This is inconsistent with the form 17 financial statement which shows far lesser living expenses than those demonstrated by the credit card account alone.
The overall financial position of the respondent as set out in his financial statement is that he has a one half interest in his home with his current wife which he values at $185,000.00, and mortgage debts with respect to that property of $192,000.00. I do not accept that this accurately reflects his financial position.
As I set out in Cottle & Cottle [2005] FMCAfam 185:
32.In this context I am mindful of the comments of the Family Court on issues relating to disclosure:
(a)In Stein and Stein (1986) FLC ¶91-779 Evatt CJ and Nygh J said:
Failure to disclose information may lead the Court to draw adverse inferences against the person who does not discharge the obligation to disclose the information, if there is material on which such an inference can be based. But we would be reluctant to find that a Judge who exercised discretion on the basis of material put to him by the parties had erred by not insisting on the production of additional financial information when neither party had sought such information.
An example of a case in the latter category referred to by Evatt CJ and Nygh J is Efthimiadis and Efthimiadis (1993) FLC ¶92-361.
(b)In Giunti and Giunti (1986) FLC ¶91-759 the court made the point that:
It is obviously desirable as a general principle that the Court should first of all identify the pool of assets available and evaluate it. If each party complies with his or her obligation to make a full and substantive disclosure of their financial affairs: see Briese and Briese (1986) FLC ¶91-713, affirmed by the Full Court in Oriolo and Oriolo (1985) FLC ¶91-653, there is no problem although there may be disputes as to valuation.
However if, as here, one party fails to fulfil that obligation, is it open to that party then to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require? It would be simple, if that were the case, to evade the jurisdiction of this Court, not by outright refusal which would attract sanctions, but by obfuscation and evasion.
(c) In Briese and Briese (1986) FLC ¶91-713 Smithers J said
The Regulations and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure but as providing avenues towards disclosure. The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard, delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding.
(d)In Gilmour and Gilmour (1995) FLC ¶92-591 Ellis, Finn and Maxwell JJ applied these principles to child support, saying:
In any application for a departure order under the Assessment Act (including an order that would have the effect of decreasing the amount payable under an earlier departure order) the applicant, of course, carries the usual onus of making out his or her application to the court. Further, there can also be no doubt, in our view, that a party to proceedings under the Assessment Act has the same duty to make a full disclosure of his or her financial affairs as does a party to financial proceedings under the Family Law Act, and that where in such proceedings the court is satisfied that there has been a deliberate non-disclosure by one party, it is open to the court to make findings in favour of the other party (see Weir particularly at page 79,593).
33.Similar comments are made in a variety of cases that have been reported: see, for example, Tate v Tate (2000) FLC ¶93-047 . Oriolo and Oriolo (1985) FLC ¶91-653; Suiker and Suiker (1993) FLC ¶92-436; Black and Kellner (1992) FLC ¶92-287; Weir and Weir (1993) FLC ¶92-338; and Chang v Su (2002) FLC ¶93-117.
I am not satisfied that the respondent has made clear his financial circumstances. If there was only the respondent’s application before me I would dismiss it on the basis that a ground was not proved.
It is incumbent upon me, however, to form some view (if I am able to do so on the evidence) as to the income and earning capacity of the respondent in the circumstances of this case as it is necessary for the determination of the applicant’s case for a departure from the child support assessment.
Counsel for the applicant referred to the cases on non disclosure and made a number of specific submissions with respect to the respondent’s financial circumstances that were drawn from the evidence given. Those submissions are as follows:
9.…
(v) The Husband’s evidence was that he drew a salary of $32,864.00 from the corporate entities and otherwise split the with his current wife in respect of distributions of some $44,343.00. [sic]
(vi) This is inconsistent with the accounts of MC Unit Trust which show profit being left in but it is even more inconsistent with the level of personal expenditure as disclosed by the Husband’s visa card. In the 12 month period from 2 January 2004 to January 2005, on purely personal expenditure, the Husband repaid to his visa card $75,597.79. The Husband failed to offer any or any proper explanation as to how he was able to meet that level of repayment to visa card based on his disclosed income.
(vii) The Husband’s attempt to explain the utilisation of $70,000.00 from the Superannuation Fund can only be valid to the extent that it was paid into one or other of the entities. The Husband’s evidence was that this money was utilised to meet creditors of BB. It therefore could not have been loaned to MC Unit Trust and it certainly could not be utilised to meet the $75,000.00 payment to visa card,
(viii) The Husband’s sworn Statement of Financial Circumstances is a totally misleading document and does not in any way reflect the level of expenditure set out in the visa card statements.
10. It is submitted the Husband has a clear and apparent capacity to move significant amounts of money between various entities and various accounts. The Husband is involved in ongoing business projects and is involved in two Unit Trusts and a Family Trust as part of the corporate structure. His true income is a matter of conjecture and it is submitted that the Court ought be particularly robust in assessing the Husband’s capacity to pay child support.
11. If one accepts the validity of the accounts the Husband has been able to pay $75,000.00 into his visa card, whilst at the same time, leaving $39,014.00 of profit distribution in the MC Unit Trust. For that period it is reasonable to assess that the Husband has an income which is not less than $115,000.00 and possibly more.
12. It is no answer for the Husband to say the accounts were prepared by his accountants. If there was any ambiguity or confusion in the accounts then the Husband was in a position to file an Affidavit by and call evidence from the accountant to explain the accounts. This was not done and Your Honour is entitled to draw the conclusion, based on the accounts of the various entities, that the husband has access to significantly more money than his taxable income would indicate.
13. This summary was prepared without the benefit of the material now sought to be filed on behalf of the Husband which material was delivered in the afternoon of 11 April. The Affidavit of the Husband goes beyond what was intended to be points raised, in effect, in re-examination. Most of the material in the Affidavit is material which ought to have been contained in the Husband’s Affidavit or evidence-in-chief.
14. Notwithstanding that the Husband has had a great deal of time to reconstruct his argument in support of his case, it is submitted that there is a total failure to address the real issues relevant to a proper analysis of the Husband’s financial capacity. In particular paragraphs 11 and 18 of the Husband’s “new evidence in chief” the money which could not otherwise be explained is now suggested to be sourced from unsecured loans from his father and/or TD Pty. Ltd. as loans effectively repayable on demand.
15. This is yet a further and dramatic illustration of the Husband’s failure to make full and frank disclosure. On 9 March 2005 the Husband swore a Statement of Financial Circumstances which was filed on 15 March. Part K of that document relates to liabilities and there is absolutely no mention of any loans either from the Husband’s father or from TD Pty. Ltd.
16. The Husband’s re-analysis of the credit card statements fails to take into account the actual payments made to Visa, on the bundle of statements tendered, amounting to $75,597.79. The Husband’s analysis is largely unintelligible in that there is nothing to support his contention as to the split between business and personal expenditure. In any event, the use of the credit card reinforces the Husband’s capacity to manipulate payments between personal and business accounts without any or any proper reconciliation.
It is notable that the respondent’s original affidavit was little more than one page long and that his responding affidavit (filed later by agreement) ran to 21 pages of material.
Counsel for the respondent made lengthy submissions with respect to his income in the following terms:
As to the husband:
The husband’s income is much lower than that of the wife and is modest.
The husband does not live in a home, but rather a two-bedroom unit.
The husband’s income needs to support five people. The wife’s income needs to support two people.
In contrast to the wife, the husband does not have access to income paid at fixed, reliable intervals. His case and evidence is that he is in financial difficulty. He has needed to borrow from his father, to access his superannuation funds and to eat into the equity in his and his wife’s unit in order to fund business expenses and in order to live.
Unlike the wife, the husband is not able to make all credit card payments as and when they fall due.
The husband’s expenditure and life style is not excessive as evidenced by his visa card statements and the summary the husband provides in respect of the same.
The husband enjoys only a modest life style and has not been able to make any progress on the mortgage repayments in respect of his unit, in contrast to the wife, who purchased her home in W in July 2002 for $460,000.00 with a $380,000.00 mortgage. The wife said in cross-examination that she makes mortgage payments as and when they fall due.
(B) any other child or another person that the parent has a duty to maintain; or
The husband is legally obliged to support N’s twin sisters and his Stepmother, JD.
The husband appreciates that he is also legally obliged to support N. There is no priority in law between the husband’s dependants.
No criticism if made of the husband and the way in which he has conducted himself during proceedings. His conduct is reflective of a sensible and mature approach to child support and the tenets of applicable legislation.
The husband’s expenses far exceed his weekly income as referred to in his Form 13. The husband’s expenses claimed in respect of expenses for his wife being the “other adult” referred to in his Form 13 and the twins are modest and not excessive. The expense figures do not indicate a child support income or earning capacity commensurate with that asserted by the wife or one resulting in a higher figure than $50.00 per week child support for N.
To be successful, the wife would need to demonstrate that the husband has an income or earning capacity of in about $102,000.00 (not allowing for s.38A Child Support (Assessment) Act 1989 (Cth) provisions.
(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;
Neither party relies upon this ground
(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
Neither party relies upon this ground.
(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;
The Court is referred to paragraph 28 of the husband’s affidavit sworn 9 March 2005. The wife abandoned her claim calling for the husband to pay half of N’s school fees on 15 March 2005. Accordingly, neither party relies upon this ground.
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income earning capacity, property and financial resources of either parent or the child; or
As indicated above, the wife relies upon this ground, indicating via her counsel during her cross examination that her case is not a “needs” based case but rather a case about the husband’s earnings and his child support “earning capacity”.
As to the wife’s income: -
The wife enjoys a high standard of living commensurate with her salary as a senior accountant and manager with A.
The wife is paid superannuation as part of her salary package.
The wile has opted to pay for and receive the benefits of her own health insurance.
The husband refers to exhibit 2 being the wife’s salary details, to annexure CD3 of his affidavit sworn 9 March 2005 setting out the wife’s salary details as and from 1 September 2003 in the sum of $80,000.00 (including $7,273.00 superannuation) and the wife’s 30 June 2003 taxation return. Annexure CD3 indicates:-
“As you are aware, both the annual salary and incentive reviews for colleagues on Total Fixed Remuneration (TFR) now take place in September each year”.
It is submitted that the wife’s income is likely to increase in each year. The wife has been promoted and has had annual increases with A since starting work there. It would be appropriate for the Court to make orders directing the wife to advise the child support agency on or before 1 October in each year of any changes to her salary, to ensure that the child support assessments are in line with her up to date salary.
The wife’s child support income needs to include:-
a. the bonuses she receives in addition to her income and
b. the rental losses in respect of the three investment units she has a 20% interest in – refer to s38A of the Child Support (Assessment) Act 1989 (Cth).
The wife has made plans for her financial future and has taken steps to bring them to fruition by investing in three residential units, having a 20% share therein.
As to the husband’s income:-
The wife has not established that the husband has a child support income or earning capacity high enough to secure the periodic payment sought by her. To do so the wife would have to establish that the husband has a child support income of about $102,000.00 per annum (not accounting for the wife’s projected rental losses).
The starting point for the husband’s child support income is his taxation returns.
The husband’s income is modest and in the order of $32,885.00 per annum for 30 June 2004 and 30 June 2003.
His prior income has been at about the same level as set out in affidavit material.
His future income is asserted by him to be modest also.
The husband has deposed to what he could earn as salaried employee being $28,000.00 - $55,000.00 (refer to paragraph 7 of the husband affidavit sworn 9 March 2005 together with annexure CD1 therein).
The wife’s case is premised on the husband’s earning capacity.
In cross-examination, the husband was asked questions about the taxation returns for 30 June 2004 in respect of MC Pty Ltd and the D Family Trust.
The husband’s financial structure is summarised in Schedule A herein.
The husband has explained the large sum transactions and allegations put to him in respect of his spending in his second affidavit. That affidavit also addresses questions asked by the Court in the running of the case.
The wife makes no criticism of the husband undertaking his own business enterprises. The wife makes no criticism of the husbands work ethic.
Further, the husband properly sought supplementary work when he did not have work commitments with BB Pty Ltd an MC Pty Ltd.
The husband is not able to and is not expected by the wife to work two jobs.
The Court should not require the husband to work two jobs given his current work commitments and his obligations as a husband and father.
The wife suggested that the husband earns more money than what he asserts given the nature of his financial structures.
In response to the above allegation, the husband’s evidence is that:-
He has at all times acted in accordance with financial and legal advice in respect of the development and improvement of his businesses in BB Pty Ltd and MC Pty Ltd;
The structure is a tax effective structure;
The structure was not put in place to avoid child support obligations or to hide assets;
The husband asserts that his income is as set out in his returns and affidavit material, on the basis that the income splitting with arm’s length partners is not discretionary or negotiable. Business income is properly split between the husband and his wife, J, given:-
(a) her role in the business;
(b)the financial investment J has made in the business
(c) the financial investment J has made in the home-unit which provides capital for the business
The husband says that the large sum transactions are explained by him in his supplementary affidavit and do not indicate a greater income or earning capacity as set out in his taxation returns or which warrant a figure higher than $50.00 per week for N’s support.
The husband says that he is experiencing financial hardship as evidenced by he and J having to:-
• borrow money from his father (and family)
• access superannuation funds;
• call on equity in the home-unit
• accept a mail out offer to increase his credit card limit
Advances have been used to pay business creditors and to fund living expenses
The husband has significant liabilities. He must in the short term, make good the superannuation advance by 30 June 2005, ensure that business creditors are paid and repay his father’s loans.
The husband’s obligations to repay his father’s loans should be respected by the Court as past (smaller) loans have been made between father and son and repaid. The sums involved in the current loans are large amounts of money, which suggest more so that the same must be repaid. No criticism should be made of a lack of loan documents given the relationship of trust between father and son, and the evidence which the wife gave in cross examination about her having to allegedly repay a car loan provided to her by her father. That alleged loan is also not documented. Whilst the sum involved in respect of the car loan may be less, the theme in the father/daughter transaction is mirrored in that between father and son.
The Court is referred to Schedule A herein. The husband is able to split income derived from MC Pty Ltd via the MC Unit Trust. Half of the profit goes to MS Pty Ltd and that company, as trustee for the D Family Trust is legally able to split income between the husband and his wife, J.
This process should not impact adversely on the assessment of the husband’s earnings or his earning capacity. The wife properly did not challenge the husband’s income splitting with the arm’s length partner of MC Pty Ltd who is not a party to proceedings.
It is not proper or appropriate for the Court to interfere with the income splitting between the husband and his wife. The wife properly does not challenge the husband’s income splitting with J. It is proper and appropriate for J to receive income originally sourced from MC Pty Ltd as J has a genuine and important role in that business. Further J has contributed capital to the venture as deposed by the husband in answer to a question from the Court in cross-examination. J is not a party to proceedings and should not be directly or indirectly affected by an order of the Court, which is against her interests. J does not have a legal obligation to support N.
As a further indicator of a very modest income and modest earning capacity, the husband has not had the benefit of being paid superannuation contributions by BB Pty Ltd or MC Pty Ltd. There is no deduction on the books for superannuation. There have not been the funds to achieve such payments, for the husband or his wife, J. The wife has the benefit of employer contributions to superannuation.
Further, while the wife has made mortgage payments in respect of her own home and investment properties, the husband has not had the money to progress mortgage payments on the unit at Spotswood. He has not enhanced his capital financial position. The same indicates a modest income and/or earning capacity.
There is no evidence before the Court that the wife is experiencing financial hardship.
The order sought by the husband will not cause hardship upon the wife or more importantly upon N.
The husband and his family are ready and willing to have N participate in their family life and to that extent the husband is willing to support N financially during contact visits, providing food, shelter and entertainment for him within the husband means. In addition, the husband is willing to have N remain a beneficiary on the family’s health cover (for as long as it is able to be maintained by him for the family at large).
The husband’s case is that $50.00 per week is not commensurate with his taxable income or his child support income. The proposed periodic sum allows for the husband to have an ascribed child support income of about $60,000.00 per annum (less if the wife’s rental deductions are taken into account) on the basis that the wife’s income is in the order of about $80,000.00 per annum.
The husband’s case is that he will not be able to support himself and those whom he has an obligation to support if he is ordered to pay more than $50.00 per week child support.
The husband’s income in his current business is modest, however, the husband is not criticised by the wife for not doing all that he can to improve the profitability of the business. The husband has done all things reasonable and proper in the business to progress it.
The husband is not likely to earn sufficient funds in the financial year ending 30 June 2003 (or that ending 30 June 2006) to meet the order sought by the wife or arrears sought by her.
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act1975 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 the child; or
Neither party relies upon this ground.

Interestingly, Counsel for the respondent does not seek to make submissions explaining the respondent’s current financial position nor his access to income earnings or financial resources. There are no references to the actual figures in the financial documents but rather generalised submissions.
The respondent now says that with respect to the project in B Road, all eight units have been sold and settlement can occur once a certificate of occupancy issues. At present interest on borrowings is said to be being capitalised. The respondent does not attempt to set out what the financial position will be once settlement occurs with respect to these units, nor what work continues to be work in progress beyond this particular item.
The respondent in his later material says that his current wife works 35 to 38 hours per week cleaning the building projects, landscaping, assisting with a selection of purchases of fittings and following the birth of the twins was restricted to administration, booking keeping and reporting work done at night when the children are asleep taking around 20 to 25 hours per week. He says it would cost $30.00 to $35.00 per hour to employ someone to do this work. Why the respondent’s current wife was not called as a witness remains unexplained, in circumstances where she ought to have a good working knowledge of the financial circumstances of these businesses if she is carrying out 20 to 25 hours work per week on booking and administration.
Having regard to the evidence before the court, the manner in which it has come before the court, the evidence of the respondent during evidence in chief and cross examination, and his demeanour in the witness box, I have concluded that I am not able to rely upon the evidence he has given in this matter.
The real issue is whether or not there is a sufficient evidentiary foundation to draw an inference as to his income and earning capacity or other resources, in the manner suggested by Counsel for the applicant. It is clear that the failure to make comprehensive disclosure, of itself, does not create evidence of a particular income and earning capacity. The failure to make full and frank disclosure or provide evidence properly explaining financial affairs allows the court to accept what evidence there may be with more confidence than would otherwise have been the case.
At a minimum the credit card expenses over the course of 2004 would require an income of around $55,000.00 to $60,000.00 per annum to service. There was retained profit distributions in the entities of at least $39,000.00. The complex business structure incurs accounting fees of $8,000.00 to $10,000.00, for a structure for which the respondent says results in little income, and an erosion of his asset position. Whilst the respondent’s current wife probably does participate in the business ventures it appears to me that it is likely to be relatively minor. If her involvement in the accounting side of the business were not minor she would have been an important witness for the respondent (unless her evidence was likely to show that the respondent was in a strong financial position).
Doing the best that I can on the material available and the form in which it was presented I find that the respondent has an income earning capacity or access to financial resources that would be equivalent to earning an income of around $70,000.00 to $75,000.00 per year, at least since January 2005. I am satisfied this is a special circumstance from 4 January 2005, but not before that time having regard to the previous assessments.
In order to determine what would be a ‘just and equitable’ child support assessment rate I must consider the relevant factors under section 117(4), or at least the substantial ones in this case. Section 117(4) provides:
(4)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.
I have regard to the nature of the duty of the parties to maintain this child and the duty of the respondent towards his other children. Whilst there are different assessments for the time from 4 January 2005 onwards it appears that the parties’ circumstances are largely the same since that time. It is therefore appropriate to consider those periods together.
The applicant sets out that the week to week expenses for the child are around $362.00, although this includes the sum of $144.00 for school expenses, (including private school fees) which are not pursued on this application. Some of the other expenses appear to me to be high, such as $35.00 for clothing and shoes and $34.00 for fares and car parking. I am mindful however that at least some educational expenses would be incurred even if the child were attending a state school.
In addition the applicant makes repayments on a housing loan, and would have to incur rent if she did not own her home in order to house her and the child.
I also have regard to the costs of children’s surveys, although somewhat out of date, by Lee, Levering, and Saunders et al. Having regard to all of these factors I find that reasonable costs incurred in caring for the child in this case are around $220.00 per week.
The respondent has young twins and a wife who is being supported at least in part by him. The respondent estimates his weekly recurrent expenses of $500.00 per week for his household at item N of his financial statement. I noted that the house loan appears inextricably linked to the business, but that at least part of it is a personal expense. The house loan and insurance require payments of around $232.00 per week.
Neither party has other dependants.
I am not satisfied that any hardship would be caused by the orders I propose to make in this case. I have regard to the financial position of the parties as set out above.
In the circumstances I find that child support at the rate of $80.00 per week is a ‘just and equitable’ contribution by the respondent to the costs of caring for the child in this case from the time the respondent’s twins were born. I also find that this amount is ‘otherwise proper’.
I find it is ‘just and equitable’ to continue this order for the next three years linked to inflation.
I find that for the reasons above the orders would be ‘otherwise proper’ within the meaning of s.117.

Children’s issues

The children’s issues were largely resolved save for the question of counselling for the parents and child. It is suggested that orders in the terms drafted by Counsel be made with counselling to take place at Relationships Australia who imposes a small fee. In this respect the respondent seeks orders as follows:
4.That the husband and wife forthwith do all things necessary to facilitate, attend and participate in confidential counselling at “Relationships Australia”, such counselling to include N, the parties following the reasonable administrative and professional requirements of the counsellor.
5.That the husband forthwith provide to Relationships Australia a copy of the Family Report dated 3 March 2005 and a copy of these orders.
In this matter the Family Report writer recounted that:
14. N presented as a polite and intelligent child, who was confident in expressing his viewpoint. N described a positive relationship with his mother. He also conveyed a strong bond with his maternal uncles and believed that they provided him with the father figure roles in his life. N is in Year 7 at W Grammar School, and from his Grade 6 results, N presents as a high achiever and a very capable student.
15. N portrayed his past relationship with his father with despondency. He shared that his last memories were that he felt uncomfortable in his father’s home, particularly with J, his father’s new wife and her mother residing in the family home. He described their activities during contact visits including him visiting his father’s building sites, which he stated he did not mind. However, it appears that the lack of ongoing contact has caused N to substitute other father figures into his life. It has also left him feeling dispassionate in regards to resuming their relationship.
16. N stated that if he had to resume contact, he would only choose to spend small amounts of time, especially as his last memories of his relationship were not overly positive. N also expressed a level of anxiety in being reacquainted with his father, given the period of his absence. Despite these issues N was agreeable to engaging with his father in counselling in an attempt to re-establish their relationship.
CONCLUSION
17. Ms. S and Mr. D present as parents with very different perceptions about the problems with contact. The mother’s perception was that the father was solely to blame for his lack of commitment to contact. She was very wary about the father reinitiating contact, believing it would cause her son emotional distress, and impact on his school performance. The mother was intransigent in her conviction, believing that N should be granted permission to change his name, and only have contact when he was ready, possibly as a young adult. Ms S did not acknowledge herself as having a role in encouraging contact. This was indicated by her deflecting all the blame on her former husband and being loath to accept responsibility for assisting N in attending counselling, stating her concern that she not be inconvenienced.
18.Mr D appeared to lack insight into his layback attitude to contact, and is now suffering the impact of his absence. He did convey his concerns that the mother had thwarted his attempts to initiate contact, believing that her motive was to increase child support. He appeared willing to accept responsibility for his past transgressions, and was willing engage in counselling to regain his son’s trust.
If N is to have any prospect of a relationship with his father it appears clear that it would require orders for counselling assistance to both parties and the child. I find that orders in terms that facilitate this are in N’s best interests.
I have carefully considered who should pay the fees of Relationships Australia. Those fees are based upon the financial circumstances of each party. Both have some capacity to meet the fees and both require counselling assistance, regardless of how the situation developed. Ensuring that the counsellor is not being paid by only one parent removes the possibility of any apprehension of bias by the parents.
I therefore find that the parents should share equally in this expense.

I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of Riethmuller FM

Associate:

Date: