SBT & CMT
[2005] FMCAfam 257
•1 June 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SBT & CMT | [2005] FMCAfam 257 |
| CHILD SUPPORT – Application to vary child support agreement – when parties enter into a child support agreement they establish the context against which future child support applications will be decided – reasonable and necessary expenses – the law distinguishes reasonable debts from those that can be classified as extravagant – where parties simultaneously enter property and child support agreement the court must examine the parties’ circumstances following upon the s.79 orders and not beforehand – where parties discover mother is beneficiary of settlement trust – mother’s beneficial interest is so ephemeral as to be valueless – non disclosure does not amount to ground for departure – child support application dismissed. FAMILY LAW – Children – care arrangements varied to continue alternate weekend residence until Monday morning – application for mid-week overnight residence refused. |
| Family Law Act 1975, ss.60, 65, 68 Child Support (Assessment) Act 1989, s.117(2)(a)(iii)(A), s.117(2)(c)(i) |
| B v B: Family Law Reform Act 1995 (1997) FLC 92-755 Liu & Chen [2003] FMCAfam 322 |
| Applicant: | SBT |
| Respondent: | CMT |
| File Number: | SYM3687 of 2001 |
| Judgment of: | Ryan FM |
| Hearing dates: | 1 & 2 November 2004 and 7 December 2004 |
| Date of Last Submission: | 13 January 2005 |
| Delivered at: | Parramatta |
| Delivered on: | 1 June 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr P. Sansom |
| Solicitors for the Applicant: | Barkus Edwards Doolan |
| Counsel for the Respondent: | Ms M. Clifford |
| Solicitors for the Respondent: | Miller Goddard |
ORDERS
BY CONSENT:
The father shall have residence of the children of the parties Johnnie (not his real name) born in 1993 and Samuel (not his real name) born in 1996 (“the children”) inter alia:
(a)In even numbered years (being 2004, 2006 and continuing in like fashion) from noon on 25 December until 7 pm on Boxing Day and;
(b)In odd numbered years (2005, 2007, and continuing in like fashion) from 10 am 24 December until noon on 25 December.
IT IS FURTHER ORDERED:
That orders (5) and (8) made 21 November 2001 are discharged.
Order 2.1 made 21 November 2001 is varied so that the father’s alternate weekend residence periods shall commence after school Friday and finish at the commencement of school Monday. The father or his nominee shall collect the children from and return them directly to school.
Other than as provided in the above order, the father or his nominee shall collect the children from the mother’s home at the commencement of his residence periods and return them to the same place at the end.
In the event either party seeks to make an application for costs, they shall file and serve written submissions within twenty-one (21) days. Any submissions in reply shall be filed and served within fourteen (14) days and any response within a further seven days. All submissions shall be filed with my associate on facsimile number XX.
Pursuant to section 65DA(2) of the Family Law Act 1975 the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders are set out in Annexure A and these particulars are included in these orders.
All exhibits tendered in these proceedings be returned at the expiration of one calendar month unless an appeal is lodged.
The solicitor who issued any subpoena collects that subpoenaed material and returns it to the owner within seven (7) days.
All outstanding applications are dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT Parramatta |
SYM3687 of 2001
| SBT |
Applicant
And
| CMT |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application to vary a registered child support agreement and to change the father’s residence orders.
On 9 November 2001 the parties executed a binding financial agreement (concerning spouse maintenance) and child support agreement. Later the same month agreed child maintenance, parenting and property orders were made. Simply put the parenting orders provided that the children would continue to live with their mother in Sydney in the former matrimonial home. The father, who was living in Hong Kong, would have regular holiday and alternate weekend residence periods, predominantly taken in Sydney, which arrangements would continue after his anticipated relocation to Sydney. Essentially the child support agreement requires the father to initially pay $2,500 per calendar month for each child, reducing from February 2002 to $1800 per calendar month per child. The agreement also provides for the father to pay all of the children’s tuition fees from Year 5 at either the local Grammar School or the local private College.
Short history
The applicant father was born in 1961 and is 43 years of age.
The respondent mother was born in 1962 and is 42 years of age.
The parties married on 10 December 1988.
Their first child, Johnnie (not his real name) was born in 1993.
Their second child, Samuel (not his real name) was born in 1995.
The parties separated in November 1999. When they separated they were residing in Hong Kong. Some time after separation the mother and children returned to live in Sydney.
On 21 November 2001 the parties entered into a series of orders and agreements in the Family Court of Australia at Sydney. These orders[1] have been registered in this court.
[1] Annexure A Father’s affidavit
Because the father was resident in Hong Kong for tax purposes, the parties were unable to deal with child support pursuant to the Child Support (Assessment) Act 1989. Hence, child maintenance orders made provision for the children’s support whilst the father remained in Hong Kong and a child support agreement was executed, the intention being that this would provide for child support upon his return to Australia. From the time orders were entered into the father travelled to Australia each alternate weekend for contact.
On 27 October 2001 a decree nisi of dissolution of marriage became absolute.
In August 2002 the father returned to Australia to live. Upon his return the father commenced employment as a stockbroker, earning $300,000 gross per annum.
Shortly after the father returned to Australia to live he and Ms FD purchased a property at Roseville as joint tenants. Settlement of the purchase was completed on 1 October 2002 for $1.16 million.
In March 2004, the father’s current employment ceased and he commenced employment with a bank as Funds Manager. At the bank his gross income fell but not below the threshold level included in the child support agreement, which would automatically trigger a reduction in his child support.
On 9 October 2004 the father married FD.
This hearing finished on 2 November 2004. Of the court’s own motion the matter was listed on 7 December 2004 to explore my concerns about the validity of the child support agreement. Simply put, I was concerned the father had registered an agreement executed when the child support legislation did not apply. Although the agreement was accepted by the Child Support Registrar, and the mother did not challenge its acceptance I was concerned that the agreement was nonetheless void. During the hearing the parties agreed to execute a second agreement identical to the first which the father would register with the Child Support Agency. On 5 January 2005 the father’s solicitors provided the court with a fresh agreement executed on 14 December 2004, evidence concerning its acceptance and notices of assessment issued pursuant to registration.[2] By letter dated 13 January 2005[3] the mother’s solicitors confirmed registration and adopted the terms of the father’s solicitor’s letter dated 5 January 2005. Registration was accepted on 4 January 2005. The parties agree the court will consider their circumstances at the time the first agreement was executed. The father’s departure application can thus take effect from 1 August 2004, the date upon which the assessment commences. Any residual concerns I had about the court’s jurisdiction and effect of the agreement are resolved.
[2] Exhibit K
[3] Exhibit L
Because the father’s residence application has the potential to increase his expenses the parenting application will be addressed first. Hence any ramifications can be considered in the child support proceedings.
The evidence
The applicant father relied upon the following:
·His application filed 30 July 2004.
·His affidavit filed 30 July 2004 and his oral testimony.
·His financial statement filed 30 July 2004.
Paraphrased, the father seeks the orders set out below. This summary is taken from the father’s case outline document.
That order 2 made in the Family Court at Sydney on 21 November 2001 be varied to provide that the children Johnnie (born 1993) and Samuel (born 1996) reside with the father:
1.1Each alternate weekend during term from the conclusion of school Friday until the commencement of school Monday (or from Thursday to Tuesday if the children are not to attend school); and
1.2From the conclusion of school Tuesday until the commencement of school Wednesday in each alternate week, and
1.3For one half of each school holiday period (being for the local Grammar school etc) as agreed or in default for the first half in odd numbered years and the second half in even numbered years; and
1.4Unless otherwise agreed for either 2 or 5 hours on a child’s birthday depending whether a school day or not; and
1.5Unless otherwise agreed from 9 to 5 on Father’s Day;
1.6On Christmas Day/Boxing Day each year as agreed and failing agreement from 10 am Christmas Day to 10 am 27 December each year;
1.7By telephone at all reasonable times;
1.8Otherwise as agreed.
2. That orders 4, 5 and 8 made 21 November 2001 be discharged.
3. That the father shall collect and return the children or cause the children to be collected and returned to their school for 1.1 and 1.2 hereof.
4. That otherwise the father shall collect and return .
5. That the child support agreement entered into between the parties and dated 9 November 2001 and registered with the Child Support Agency, be discharged at the date to which it stands paid.
6. That the father pay child support for the children as follows:
6.1The tuition fees payable in respect of the children’s attendance at the local Grammar School or such other private school as the parties may agree in writing;
6.2A sum equivalent to the sum payable pursuant to a statutory assessment having regard to Part 5 of the Child Support (Assessment) Act and that such sum be increased annually by the child support inflation factor (reg 6).
7. The child support payable by the father is to account for 100% of the annual rate of child support payable by the father under any assessment of child support payable by the father to the mother for the period 1.8.2004 until the happening of any child support terminating event in respect of each of the children.
8. Costs.
Prior to the commencement of the hearing, the father sought to reduce his contributions towards the children’s tuition fees by half. During his counsel’s opening remarks, counsel confirmed the father proposed to continue paying both children’s full tuition fees.
In her response filed 5 October 2004 the mother sought the following orders:
1.That the application filed herein on 30 July 2004 be dismissed.
2.That order 2.2 of the orders of the Family Court at Sydney of 21 November 2001 be varied by adding the following:
PROVIDED THAT the children reside with the wife on Christmas Eve/Day as agreed between the parties and failing agreement the children reside with the husband from 9 am Christmas Eve to Noon Christmas Day and with the wife from noon Christmas Day to 6 pm. Boxing Day in odd numbered years and the children reside with the wife from 9 am Christmas Eve to noon Christmas Day and with the husband from noon Christmas Day to 6 pm Boxing Day in even numbered years.
3.That the applicant father pay the respondent mother’s costs of and incidental to this application.
During the hearing the parties reached agreement concerning Christmas arrangements[4]. Subject to this agreement, all other issues remained contentious.
[4] Exhibit J
Parenting application – applicable law
Residence and orders are parenting orders. They arise in proceedings conducted under Part VII of the Family Law Act 1975. Section 60B sets out the objects of Part VII and the principles which underline those objects. They are subject to s.65E in that in determining the outcome the best interests of the child is the paramount consideration. That is the overriding principle. Section 60B is important as it provides the context within which the relevant s.68F(2) factors are to be examined and ultimately weighed. The importance of s.60B factors varies from case to case. Where there are no countervailing factors, the s.60B principles may be decisive.
Section 60B(2)(b) has particular relevance in these proceedings. It provides, in effect, that children have a right of contact, on a regular basis, with both their parents and other people significant to their care, welfare and development. Subparagraph (b) refers to the right of contact on a regular basis. Fundamentally, it emphasises the desirability of contact. “Regular” carries with it a clear understanding that contact should be as frequent as is appropriate and by the various means which are considered to be in the children’s best interests.
In deciding the residence and contact arrangements that will promote the best interests of a particular child, the court must consider the various matters set out in s.68F(2). Its sub-sections comprise a list of matters that must be considered to the extent that each is relevant to the particular case. Paragraph (l) permits the court to take into account “any other fact or circumstance that the court thinks is relevant”. This ensures that the infinite variety of individual children’s circumstances can be addressed. B v B: Family Law Reform Act 1995 (1997) FLC 92-755
Conclusion parenting application
Irrespective of the outcome of his child support application, the father seeks to increase his time with the children. Basically, he wishes to extend alternate weekend residence so that it ends on Monday morning rather than Sunday evening and is keen to have the children overnight one night during the week each second week. Presently, the father works 8 am until 6 pm five days per week. This is a considerable reduction in his working hours while he lived in Hong Kong and with his former employers. The father has no desire to again work at that pace. He believes that his prior work/life balance was unacceptably tipped in favour of work. The father appears to sense that by devoting so much time to his career; he has missed out on too much of his son’s lives. Before it is too late he wishes to enjoy their childhood and become more involved in their care. The mother strongly supports the children’s relationship with their father and agrees that long term, the current contact arrangements are insufficient for the children. Presently, she believes that the arrangements work well and that with the many demands that extra curricular activities place on the children changes to their care arrangements at this time are likely to be unsettling.
The children live busy lives. Both children are actively involved in school life, with their friends and extra curricular activities. Activities both parents agree the children enjoy and should continue. Johnnie is in Year 6 at the local Grammar School. I infer that he continues to perform well academically and is in the top class. During terms 1 and 4 he trains in the swimming squad after school on Mondays and/or Tuesdays. He has tennis training during terms 1 and 4 on Tuesdays and Thursdays after school as well as a tennis lesson on Wednesdays. On Friday afternoons Johnnie plays club tennis. His Friday afternoon tennis competition finishes at 6 pm. Because the father considers this late start interferes with contact, on contact weekends Johnnie misses his Friday afternoon games. The father says that if his weekend includes Sunday nights, he would ensure Johnnie played competition on Fridays because the impact on the shorter contact weekend is less significant than if contact ends on Monday. During terms 2 and 3 Johnnie has rugby training during school hours and after school Thursdays with the competition games played on Saturdays. Commencing 2005 Johnnie anticipates playing school cricket or tennis which requires additional training after school at least one day a week and competition matches on Saturdays. Because Johnnie requires a considerable amount of school and sporting equipment, the mother drives him to and from school. The father will ensure that if he is unable to deliver Johnnie to school on Monday morning, then either FD or the father’s mother will do so.
Samuel is in year 4 at a local Public School and is enrolled to attend a local Grammar School in year 5 at the beginning of 2006. Samuel is performing well academically. Samuel has club rugby training on Thursday evenings and competition games on Saturdays. He has tennis lessons after school Thursdays and plays in a tennis competition on Friday evenings. Samuel enjoys music and on Wednesday morning before school has a flute tutorial and band practice before school Monday morning. The times for these activities will change when he graduates to the intermediate band at which time he will also be required to have private music lessons instead of a flute tutorial. During terms 1 and 2 Samuel does squad swimming at the local Grammar school on Mondays or Tuesday afternoons. Outside of the rugby season Samuel has karate classes two nights a week. Some Mondays both children start swimming training at 7.30 am.
With such demanding schedules, the mother is concerned that the children, particularly Samuel, will struggle with overnights mid-week. Although her preference is that longer weekends not commence until both boys are in high school, she believes that any problems associated with the longer weekend contact are less significant than introducing changes to overnight mid week residence. The impression I gained listening to the mother is that she believes she, the boys and their father are in a busy routine which works well. The parties share similar ambitions for their children and both are keen that they achieve academically to their fullest extent of their ability and for the boys to enjoy rich extra curricular lives. Both children are showing signs that with continued parental support and opportunity they will succeed academically and socially.
The mother has some misgivings about the father’s commitment to residence. She emphasised that he missed Father’s Day and that he rarely has the children for half of the school holidays. By way of explanation, the father said that he preferred to keep the weekend routine and although this meant he celebrated Father’s Day later with the children, he believed not disrupting the weekend routine was the preferred course. Similarly, on the Mother’s Day weekend the children were with the father and the parties agreed to maintain their alternate weekend pattern rather than worry about seemingly unnecessary changes to it. Concerning school holidays, the father agreed that he has not had the school holiday time that the orders provide for and which he knew the mother would facilitate. The reasons for this are simply that his pressure of work meant he could not take the time. School holidays will probably continue to be problematic and notwithstanding his desire for more time with the children, I doubt that the father will regularly take one half of the school holidays with the children. However, he is able to organise his work schedule so that he may have a later start on Monday mornings and take the children to school. If his weekends continue until Monday morning I am satisfied that the father will take the additional time to which he is entitled. Also, that he will ensure both boys play their Friday night tennis games and attend Saturday sports. Whilst the father may need to rely on others to deliver the children to school on Monday morning, this should not occur to often. Provided the children are collected and returned from school by a parent, there is no real impediment in extending weekend residence. They must manage the same quantity of equipment irrespective of coming from or returning to their mother or father’s homes. On balance, the advantages of extending the weekends considerably outweigh any disadvantages. The key advantage is that extending the weekends gives the children and their father an additional opportunity to spend time in each other’s company. Although the children enjoy a good relationship with their father, their relationships will benefit by additional overnight on alternate weekends.
Presently, Samuel is moving through a phase where he needs his mother’s encouragement to go for residence weekends. With encouragement Samuel always attends. Once there he enjoys himself. It is likely that this is transitory and is not a reason to refuse additional time.
Mid week is more difficult. There is not a single evening during the school week where both children are free. On balance mid week overnight residence for children with so many demands on their time is potentially too disruptive. The only afternoons where both boys are in the same place is Mondays during terms 1 and 4 for swimming squad training. On Tuesdays during terms 2 and 3 the boys have different activities that start almost immediately after school. The mother usually arrives at the Grammar school before 3.30 pm. If she is unable to do so Johnnie waits for her in the library in the company of other boys supervised by a teacher. It seems to me for the children to be able to continue all their activities they need to be sure they will be collected and receive help managing their equipment. I have carefully considered the father’s assertion that he will generally be able to collect the children from school and return them the following morning. Notwithstanding his desire to do so I consider he will not be as reliable as hoped. He had little idea of their after school routines and was unsure what time school starts. To a reasonable extent the father’s inclination and availability for mid week contact can be measured against his involvement in the children’s schooling and out of school activities to date. In the years since his return from Hong Kong he has not attended one parent and teacher night. There is no evidence he has attended sports days, school or sports social days or met the children’s teachers out of hours. No doubt the father intended to coach Johnnie’s 7A soccer team in 2000 when he offered to. In spite of his desire and offer to do so, he did not manage to organise his commitments to enable this. In the end the mother stepped in and coached the team. Since 2001 he has only once had the children for half of their school holidays. On the other occasions he did not have them for the full half period because he was unable to arrange his work commitments. If the father’s employers are as flexible as he claims I would have expected greater involvement at least since March 2004. Its absence is revealing and suggests that while the father has some flexibility in his working hours, this is not as substantial as claimed.
The father says he wishes to involve himself in the children’s homework. The children bring their homework to his home on weekends but Samuel often does not complete his. The father’s evidence is that he asks Samuel if he has completed his homework and accepts his son’s reply. There is no sense of the father involving himself in the boy’s homework by sitting with them or checking by reference to their homework schedule that the work to be done is actually completed. Not all children are sufficiently well motivated concerning homework that this somewhat laissez faire approach works. On balance I am not persuaded the father will ensure both children’s homework. This finding is relevant to both alternate weekend and mid week residence. While the children, particularly Samuel, may catch up if an additional night passes without sufficient attention to homework, I doubt catching up for two nights in each fortnight is manageable. Two other factors particularly persuade me against his mid week residence proposal. Firstly, I have real misgivings that the father will be at school on time mid week, either in the afternoons or in the mornings. Secondly, I accept the mother’s claim mid week residence overly complicates the children’s lives. Managing additional time mid week is likely to be too taxing for the foreseeable future and detract from their capacity to continue to achieve as well as they are capable of.
If I considered that introducing mid week overnight residence would materially enhance the children’s relationship with their father, FD and their paternal relatives notwithstanding these concerns, the father’s application may well have succeeded. However, because the children will have an extra night on weekends the advantages of mid week residence in a relationships sense are materially reduced. Granting the father’s application would not undermine the children’s relationship with their mother and has the advantage of allowing the father and children to have more time in each other’s company, something all would enjoy. If refused it is unlikely to cause any happiness to the children and their lives would continue to work as well as at present. On balance I am satisfied the disadvantages outweigh the advantages. I take into account when Samuel starts high school there is a possibility this issue may again arise. If it does I hope the parties will attend mediation and resolve the issue without further litigation. However, notwithstanding the possibility of future litigation the children’s best interests require the father’s mid week residence application to fail.
I was surprised the mother opposed discharging orders 5 and 8. Although I understand she needs to be confident the father will ensure the children travel safely and are collected by a responsible adult, the father’s variation is merely to enable FD to help him when with transport when he is unavailable. FD is an important part of the father’s life and hence also the children’s. There is no evidence she drives recklessly. In maintaining her opposition to the proposed changes the mother’s generally sound judgment failed her. I accept the father will responsibly exercise his parental authority and ensure that only appropriate people help him with the children’s care and transport.
Other than alternate weekends, there are no advantages which justify changes to order 4. As the father will duplicate the children’s possessions there is no need for them to go home first before starting weekend with their father. On other occasions the existing changeover arrangements which work well shall continue.
These orders I am satisfied are in the children’s best interests.
The child support agreement
The relevant provisions of the child support agreement are as follows:
4.1.The liable parent pay or cause to be paid direct to the carer or as the carer may from time to time direct in writing, child support for each of the children in the sum of $2,500 per calendar month (subject to fluctuations in the Consumer Price Index as defined in clause 4.4 of this agreement), the first payment to be made within one calendar month of the date of commencement of this agreement, and the final payment to be made upon the happening of the first of the following events:
4.1.1The liable parent’s total annual gross income before tax including any cash bonuses or cash profit share from his employment falling below $130,000;
4.1.2The happening of a child support terminating event as defined by section 12 of the Act; or
4.1.3The February 2002 payment has been made (in the event that this agreement operative at that date.
4.2The liable parent pay or cause to be paid direct to the carer or as the carer may from time to time direct in writing, child support for each of the children in the sum of $1,800 per child per calendar month (subject to fluctuations in the Consumer Price Index as defined in clause 4.4 of this agreement), the first payment to be made within one calendar month of the happening of the event referred to in clause 4.1.3 and the final payment to be made upon the happening of the first of the following events.
4.2.1Once the January payment has been made in the year Samuel commences Year 7;
4.2.2Upon the happening of a child support terminating event as defined by Section 12 of the Act; or
4.2.3Upon the liable parent’s total annual gross income before tax including any cash bonuses or cash profit share from his employment falling below the following amounts in the following fiscal years:
(a) 2002: $130,000
(b) 2003: $130,000
(c) 2004: $145,000
(d) 2005: $145,000
(e) 2006: $165,000
(f) 2007: $165,000
(g) 2008: $150,000
(h) 2009: $150,000
(i) 2010: $150,000
(j) 2011: $150,000
(k) 2012: $130,000
(l) 2013: $130,000
4.3The liable parent pay or cause to be paid direct to the carer or as the carer may from time to time direct in writing child support for each of the children in the sum of $1,450 per child per calendar month commencing in the first month that Samuel commences Year 7 and the final payment to be made upon the happening of the first of the following events:
4.3.1The liable parent’s total annual gross income before tax including any cash bonuses or cash profit share from his employment falling below the following amounts in the following fiscal years:
(a) 2002: $130,000
(b) 2003: $130,000
(c) 2004: $145,000
(d) 2005: $145,000
(e) 2006: $165,000
(f) 2007: $165,000
(g) 2008: $150,000
(h) 2009: $150,000
(i)2010: $150,000
(j)2011: $150,000
(k)2012: $130,000
(l) 2013: $130,000; or
4.3.2 Upon the happening of a child support terminating event as defined by section 12 of the Act.
4.4The child support payable by the liable parent pursuant to clause 4.1 – 4.3 respectively and the total annual gross income levels referred to in clauses 4.1 – 4.3 inclusive is to be varied on the review date each year commencing on 1 July 2002 to such sum as shall be determined by multiplying the child support being paid or the liable parent’s gross annual income as the case may be on the review date by the fraction N/B where “B” is the Consumer Price Index for Sydney (All Groups) published by the Australian Bureau of Statistics (“CPI”) in respect of the quarter year ended on the day 12 months prior to the review date, namely 30 June and “N” is the CPI in respect of the quarter year ending on the day immediately preceding the review date.
4.5The liable parent pay or cause to be paid to the children’s school all regular tuition fees incurred by the carer in respect of each of the children from commencement of Year 5 at either the local private college or the local Grammar School or such other school as the parties may agree upon in writing and while so ever the children attend such schools, within twenty-one days of receipt of such fee notices by the liable parent.
Relevant law – child support application
The obligation to pay child support is created by the provisions of the Child Support (Assessment) Act 1989. Section 3 contains the obligation that parents maintain their children. The objects of the Act are found in section 4. Each of the objects needs to be borne in mind when deciding an application under the Act. Section 4(3) of the Act recognises the desirability of parents reaching agreement for the financial support of their children. When interpreting the Act, the s.4(3) requires “the Act should be construed, to the greatest extent consistent with the attainment of its objects:
(a) To permit parents to make private arrangements for the financial support of their children; and
(b) To limit interferences with the privacy of persons.”
Sections 114 and 121 identifies additional particular objects of Divisions 4 and 5 of Part 7 include ensuring:
(a) That children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents, and
(b) That parents share equitably in the support of their children.
Thus, the Act includes provisions that provide a scheme for the implementation of consent arrangements. Part 6, Division 3 contains the provisions that relate to applications to the Child Support Registrar for acceptance of a Child Support Agreement executed in accordance with the terms of Divisions 1 and 2 of the Part. The Registrar must make a decision to accept or refuse to accept the agreement (section 92). Once accepted, the liability to pay child support arises where child support was not already payable pursuant to an administrative assessment. Provisions contained in the Child Support Agreement for periodic payments 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 (section 95(2)).
An application to vary a child support agreement must be determined in accordance with the provisions of s.117 of the Act. In Gilmour and Gilmour (1995) FLC 92-591 the Full Court considered the principles applicable to a variation or discharge of a previous departure order made under the Child Support (Assessment) Act1989. The court was asked to consider, whether or not, by virtue of s.100 of the Child Support (Assessment) Act1989, s.66N(2) of the Family Law Act 1975 was imported into the Child Support (Assessment) Act 1989 and therefore required an applicant seeking to change a departure order to demonstrate that there had been a change in circumstances. The Full Court held, “Whatever might be the purpose or effect of s.100 of the Assessment Act, we do not consider that it can operate to apply the principles of provisions of the Family Law Act 1975 into a division of the Assessment Act in which those principles have not been given express legislative statement in circumstances where such principles are given express legislative statement in the immediately succeeding division”. The very existence of a threshold requirement in Division 5 of Part 7 (section 129(3)) compared to its absence under Division 4 demonstrated an express legislative intention to impose a threshold requirement in Division 5, but not Division 4. In other words, the Full Court concluded that it was not a precondition to a successful application under the Child Support (Assessment) Act 1989 to establish that there had been a change in circumstances.
In Liu & Chen [2003] FMCAfam 322 Chief Federal Magistrate Bryant (as she then was) concluded, “Conversely, it seems to me a change in circumstances alone would not necessarily therefore be sufficient to provide a ground on which an agreement may be varied or discharged”. As Gilmour makes clear the approach to such an application is that set out in Gyselman and Gyselman (1992) FLC 92-279. The Full Court in Gyselman set out a three step process that courts must follow in determining an application for a departure order under s.117. The first step whether one or more of the grounds in s. 117 are established. If so, the next step is whether it is just and equitable within the meaning of s.117(4) to make a particular order. The final consideration is whether it is otherwise proper within the meaning of s.117(5) to make a particular order.
Later Full Court decisions have confirmed the approach in Gilmour. It is further discussed in Liesert v Nutsch (1996) FLC 92-665, Bryant (1996) FLC 92-690 and Wild v Ballard (1997) FLC 92-771. Each of these cases concerned variation of a child support agreement. In the understatement of the century, in Bryant the Full Court said, “While s.117(2) might well have been more clearly drafted, nevertheless we are satisfied that the expression “The provisions of this Act relating to the administrative assessment of child support” in the subsection must include not only an administrative assessment made by the registrar of the Child Support Agency under Part 5 of the Assessment Act, but also the periodic payment provisions in a child support agreement which has been accepted by the registrar under Part 6 of the Assessment Act, and also any order of a court made under Part 7 for departure from an administrative assessment”. Further on, “It must, however, be recognised that once an order has been made departing from an administrative assessment, before there can be a variation of (or “departure” from) that existing order, it must be established to the court’s satisfaction, that since the making of the existing order circumstances have arisen as a result of which the financial capacity of either party is now significantly reduced s.117(2)(a), or the costs of maintaining the child have been affected s.117(2)(b) or the existing order now results in an unjust and inequitable determination of child support s.117(2)(c). There is nothing in Gilmour to suggest to the contrary”. As their Honours explained if it were otherwise, “There would be nothing to stop a party who did not accept the terms of a departure order from immediately approaching the court to have the matter re-heard, or to stop a party who thought better of the agreement, which he or she had made, immediately seeking to vary the agreement”.
In Wild v Ballard the Full Court stated, after referring to Bryant’s case, “The requirements of s.117 as explained in Bryant obliged His Honour, when dealing with the husband’s application, for the reduction in his obligation to pay periodic child support, to determine firstly whether by reason of a change of circumstance, a ground for departure existed, and then required His Honour to determine whether it would be just and equitable and otherwise proper to make an order departing from the existing assessment”.
Has the applicant father shown a ground for departure?
The father’s application is based upon s.117(2)(a)(iii)(A) and in the alternative s.117(2)(c)(i). The father claims that in the special circumstances of the case, his fall in income is sufficient to establish a threshold ground for departure. In essence his reduction in income does not enable him to meet his increased necessary expenses. “A significant change in income” may be sufficient to show a special circumstance. Savery & Savery (1990) FLC 92-131. In the context of the Child Support Assessment Act’s mechanism to correlate child support liability with income, the change in income must be such that it would produce an “unjust and inequitable determination of the level of financial support to be provided.” Ross v McDermott (1998) FLC 98-003. The focus of the alternate ground is on the mother’s property, particularly her interests in private family companies, N Pty Ltd and W Enterprises Pty Ltd. In each instance the court is required to consider both parties circumstances.
The children’s income and assets
At the time of the agreement neither child earned any income or had any assets. This situation is unchanged.
Situation when the child support agreement entered into in 2001
In order to determine whether the father has established a ground for departure it is necessary to examine the parties’ circumstances at the time the first child support agreement was made. Both parties’ financial circumstances are outlined in their application for consent orders[5] filed in the Family Court of Australia at Sydney. Because the parties’ child support agreement formed part of the overall resolution of all separation matters, disclosure for the purposes of the property orders and binding financial agreement is also disclosure for the purposes of the child support agreement. A claim for spouse maintenance or child support heard at the same time as an application for property adjustment adds an extra step to the s.79 process. The sequence of determining the applications is important and a property application must be determined before the other claims are considered. This is to ensure that the terms of any order made in the property claim are considered in spouse maintenance and child support applications. In the Marriage of Clauson (1995) FLC 92-595. When the parties executed the agreements and consent orders, both were represented by experienced family lawyers. I infer that the property settlement included consideration of the ramifications of inter alia the child support agreement and vice versa. Thus, the child support agreement is predicated upon the s.79 orders. Hence, the court must examine the parties’ circumstances following upon the s.79 orders and not beforehand.
[5] Exhibit H
The parties agreed the effect of the s.79 orders and binding financial agreement is as follows:
| ASSETS | Father receives $ | Mother receives $ | |
| 1 | The Wahroonga home | 510,000 | |
| 2 | Wife’s motor vehicle | 33,800 | |
| 3 | Husband’s SAAB motor vehicle | 25,100 | |
| 4 | Husband’s sports motor vehicle | 35,000 | |
| 5 | Furniture and contents of Wahroonga | 10,000 | |
| 6 | Macquarie Share Options (net) | 214,946 | |
| 7 | Husband’s cash management account | 27,842 | |
| 8 | Mortgage offset account | 22,695 | |
| 9 | Husband’s NRMA shares (2,458 shares @ $2.67) | 2,458 | |
| 10 | Wife’s NRMA shares (874 shares @ $2.67) | 1,935 | |
| 11 | Wife’s computer | 2,000 | |
| 12 | Husband’s payment to wife under financial agreement & order 15.2 | 21,306 | |
| TOTAL [$907,092] | 305,346 | 601,736 | |
| LIABILITIES | |||
| 1 | Wahroonga mortgage | 77,673 | 95,642 |
| 2 | Husband’s anticipated tax liability | 37,669 | |
| 3 | Husband’s payment to wife under financial agreement | 21,306 | |
| TOTAL [$232,290] | 136,648 | 95,642 | |
| NET ASSETS | |||
| Assets | 305,346 | 601,736 | |
| LESS liabilities | 136,648 | 95,642 | |
| TOTAL [$674,792] | 168,698 | 506,094 | |
| RESOURCES | |||
| 1 | Wife’s superannuation (preserved) | 10,391 | |
| 2 | Husband’s superannuation CBA (preserved) & Macquarie Bank | 27,921 | |
| TOTAL [$38,312] | 27,921 | 10,391 | |
| NET ASSETS & RESOURCES | |||
| Net assets | 168,698 | 506,094 | |
| PLUS resources | 27,921 | 10,391 | |
| TOTAL [$713, 104] | 196,619 | 516,485 |
In percentage terms the mother received 75% of the net assets and the father the remaining 25%. Relevantly, concerning the assets, liabilities and financial resources the agreement notes, “The figures referred to in the schedule have been calculated as at 30 July 2001. Since then there have been some minor changes, but the net asset position has not significantly changed”. There is no similar caveat concerning the parties’ incomes. Thus I infer income disclosure is accurate as at the date the parties execute the agreement.
The father’s circumstances
In the consent orders application the father deposes that his gross weekly income is $3,870 or $201,240 per annum. This information is accurate as at 9 November 2001. In these proceedings the father says at the time he entered into the child support agreement he was earning $397,800 per annum. His income[6] was as follows:
· Base annual income $201,300.
· Bonus in 2001/2002 financial year $84,800.
· Housing allowance per month $8,475.
· Annual travel allowance $10,000.
[6] Assuming $1 Australian dollar equals $HK4.13
Generally, there is no guarantee that bonuses will be paid. Whilst employment contracts make provision for bonuses, payment is commonly subject to specified performance criteria, either personal or as part of the employers overall performance. Bonuses are usually paid retrospectively after performance is measured against relevant performance criteria. The father’s description “bonus 2001/2002” suggests payment of the bonus occurred at the end of the 2001/2002 financial year, in mid-2002. Therefore, although the father claims his gross income and benefits was approximately $397,800 when he entered the agreement, his annual income, housing allowance and travel allowances were the only income he could be sure he would receive for the 2001/2002 year when he entered the agreement. Excluding the 2001/2002 bonus, his income and allowances as at November 2001 were $313,000. Whilst resident in Hong Kong his tax rate was 15 per cent. It appears that only his annual income and housing allowance were taxable, which at 15 per cent is $45,450. $313,000 minus $45,450 is $267,550. This is $66,310 more than disclosed in the application for consent orders. Although I do not agree the father’s income as at November 2001 includes 2001/2002 bonuses paid mid 2002 if as the father contends they are factored in, his non disclosure to the court is even greater. Including all income and bonuses his annual income non disclosure climbs to $196,000. Although he did not disclose it in his consent application, it appears the mother was aware that the father received a travel allowance as she knew he was offsetting some of the costs of the contact in Australia against work travel allowance and expenses. As she lived with him in Hong Kong it is also likely she was aware the father received a monthly housing allowance. In these proceedings the mother made no complaint about his failure to disclose either allowances when the consent orders were entered. As a consequence I infer although not disclosed, she knew of it. Later in these reasons the court must consider the relevance, if any, of his non disclosure to the court.
As I have already found, as well as his income, the father had net assets and resources worth $196,619.
Upon the father’s return to Australia he commenced employment as a stockbroker, earning $300,000 gross per annum. In March 2004 the father’s employment ended and he commenced employment as a Funds Manager. There is no suggestion the father relinquished his employment. His present salary is $223,415 per annum (after superannuation contributions). His employers contribute $211.57 each week towards his superannuation which makes his gross weekly income $4,572. Excluding superannuation his gross weekly income is $4,360.41. Performance bonuses are provided under an employee share scheme buy back arrangement[7]. The performance hurdle is a total shareholder return of 15% per annum compounded annually from the date of issue. The father may sell a portion of his shares if and when the Bank meets the performance hurdles on the relevant anniversaries of the issue date. On sale he must repay the loan with interest. His bonus accrues only if there are any excess sale proceeds. To date the father has not received any bonus via the share offer. Excluding any future share bonus the father estimates his total net income after tax is $129,300. The father explains, “Since my return to Australia, I have struggled financially to meet my obligations pursuant to the child support agreement, as a result in the significant decrease in my available income and the increase in my housing costs and mortgage payments”. Notwithstanding these difficulties, the father’s asset position has improved. When retrenched, he received a $150,000 pre-tax pay out on which he will pay approximately $20,000 tax. From the pay out he gave FD $96,706 towards wedding costs, holidays and other living expenses. To a considerable extent those monies remain available.
[7] Exhibit B
The father and FD purchased their Roseville home for $1.16 million. They jointly borrowed $944,000 in order to complete its purchase. The father paid stamp duty of $47,000, $2-3,000 in legal expenses and $116,000 deposit. Since its purchase, the father and FD have paid half of the mortgage repayments each. In his financial statement the father’s assets comprise his half interest in Roseville worth $625,000, cash at bank $3,897 plus $33,000 received on the sale of his Fiat sports car and shares worth $91,246.62. After completing his financial statement the father sold his entire Hamilton Johnnie Bruce share portfolio for $48,819. As a consequence his share portfolio comprises 25,000 Village Life shares worth $46,516.25 and J P Morgan shares worth $9,712. He has a 2002 Lexus worth $50,000 and household contents worth $10,000. The father’s superannuation is held in three funds, with a gross value of $48,635. Excluding superannuation his total assets are worth $778,185.25. Including superannuation, which ensures a direct comparison to his position outlined in the consent application, the total figure is $826,820.25. In addition he has funds retained by FD from the $96,706 remaining from his payout. Because FD did not give evidence I cannot precisely determine how much remains. I infer that her evidence may not have assisted the father in this regard and find the majority of the funds remain available for the father’s disposition. The father’s liabilities comprise his half share of the mortgage secured against Roseville, being $497,323, $20,000 tax due on 30 September 2004, credit card debt of $4,700 and Esanda hire purchase lease of $48,040. Thus his total liabilities are $570,063.
Overall the father’s net assets have increased by approximately $39,424. This figure is the difference between $208,122 (calculated deducting $570,063 from $778,185) and $168,698 (the father’s assets when the agreement was executed). When assets and resources are considered his overall position has improved by approximately $88,059.20. In reality in both instances his improvement is even greater as the monies retained by FD must be added.
The father’s commitments are detailed in his financial statement. He completed his financial statement, in particular household expenses, with FD’s assistance. A financial statement distinguishes between average weekly expenses and personal expenses. Average weekly expenses for his entire household total $2,678. Of this, the father attributes $599 to himself, $1,021 to FD and $1,058 for the children. Because FD is financially independent her expenses will not be taken into account. Excluding $235 per week paid to the local Grammar School, the father claims average weekly expenses for the children of $823. Concerning personal expenditure his weekly expenses are $1,836 tax, $916.62 mortgage, insurances $73.25, motor vehicle lease payments $212.26 (even if he and FD need a second car something less than a Lexus may be more affordable), credit card $300, $892.62 child support and minor expenses which bring his total weekly personal expenses to $3,338.13. On this basis, including school fees the father’s total weekly expenses are approximately $5,230.00.
To take into account actual average weekly expenses as well as $300 per week credit card expenses is double counting. Included in the father’s average weekly expenses are restaurant meals, clothing, holidays, books and periodicals, items commonly included in credit cards. Without further clarification of matters already taken into account as average weekly expenses, I am not satisfied that I should also include as personal expenses his weekly credit card payments. Subject to later findings, his actual expenses thus fall to about $4,930.00.
The mother’s counsel examined the father’s lifestyle for signs that although he claims he is unable to meet necessary expenses, overall his lifestyle remains comfortable. During cross-examination he revealed he paid $45,000 for FD’s engagement ring and $5000 for her wedding ring. Since returning from Hong Kong he has taken the children for holidays to the Whitsunday’s, for one week to Port Douglas and skiing at Thredbo. Most Friday nights, he and the children take their evening meal in a restaurant. He sends his wife flowers and they enjoy eating in restaurants two or three evenings each week, which he usually pays for. In the circumstances of this case a reasonable portion of his weekly living costs and expenses are neither necessary nor reasonable.
One of the contentious issues is whether the court would allow $916 per week mortgage payments as either reasonable or necessary expenses. Such mortgages may be considered a necessary expense. However, the law distinguishes reasonable mortgage debts from those that can be classified as extravagant. In Mee & Ferguson (1986) FLC 91-716 the Full Court held the trial judge was in error treating a husband’s mortgage repayments as a “non negotiable deduction” from his salary taken into account before the husband’s capacity to pay maintenance was considered. The court held it was not appropriate for the husband to enter into additional liabilities and then treat that as a basis for reducing his maintenance payments for his own children. Although Mee & Ferguson concerns child maintenance similar considerations apply in child support cases. An important factual difference in Mee & Ferguson is that the husband’s new wife owned a home in which they resided. The court did not accept the home was unsuitable “and the change did not have any compelling basis, and it made a very serious inroad into the husband’s weekly net earnings.” I accept following his return to Australia the father was entitled to acquire a home. However, was it necessary or reasonable to pay $1.16 million when doing so meant borrowing nearly $1 million? In my view it was not when this is used as a basis for reducing child support. It was open to the father to acquire a less pleasing home, that nonetheless met his families accommodation needs without assuming additional liabilities to the extent Roseville requires. Like most financial issues the issue is one of priorities. When the father purchased Roseville he needed to factor in his child support obligations, reduced income and increased taxation in order to determine how much he could reasonably borrow toward his home. When he jointly borrowed approximately $1 million he knew the trigger for reduced child support was either that his gross income had reduced to $130,000 or a child support terminating event occurred. Hence he was aware that acquiring liability for a $1 million housing loan, unless it coincided with an agreed trigger to reduce his child support liability, was not a basis for reducing child support. In these circumstances his accommodation expenses are extravagant and do not amount to special circumstances. With $116,000 deposit and $50,000 towards acquisition costs the father may well have acquired a modest, yet adequate home for half of the amount paid for Roseville. For example, at Wahroonga the mother’s home, which meets her and the children’s accommodation needs is valued at $710,000. While he may not have been able to afford directly comparable housing this shows more appropriate options are available. In these circumstances as a working guide the father reasonably needed about $400 for his average weekly housing costs. On this basis (not including my findings in paragraph 51) the father’s weekly expenses fall to approximately $4,414.00.
Excluding the findings in paragraph 51, the father’s remaining reasonable expenses exceed his income by about $54 a week. When paragraph 51 is taken into account the father is able to meet his reasonable and necessary expenses from his income. When a further compromise is made as a consequence of my findings concerning his Lexus the father is even better able to meet his reasonable and necessary expenses. This includes paying child support and school fees at the current rate.
The father’s re-partnering may impose on him some duties to maintain his new spouse, however these are limited. Kay J in In the Marriage of Humphries (1993) 17 Fam LR 120 states that, “The husband's legal duty to maintain his [second wife] is governed by the provisions of s 72 of the Family Law Act. He is only liable to maintain her to the extent that he is reasonably able to do so, and only to the extent that she is unable to support herself adequately.”[8] FD has a senior position at an investments firm where her employment contract[9] shows she earns $240,000 per annum. FD drives a BMW and has $130,000 in savings, including the remainder of the father’s lump sum pre-wedding payment. Combined with her financial stake in their home and her contributions to its outgoings I am satisfied she has the ability to support herself.
[8] In the Marriage of Humphries (1993) 17 Fam LR 120 at 124
[9] Exhibit G
The mother’s circumstances
When the mother entered into the child support agreement she earned $295 per week working part time as a teacher. By virtue of the s.79 orders and spouse maintenance agreement, the mother received net assets and resources worth $516,485. The most significant asset was the family home at Wahroonga worth $510,000.
During this hearing the mother discovered that she may have an interest in her parent’s family companies: N Pty Limited and W Enterprises Pty Limited. If she presently has an interest, her interest existed when the parties executed the first child support agreement. The mother makes no mention of any such interest in the application for consent orders. The father accepts that the mother was unaware of any such interest. Consequently he does not claim relief based on s.136 fraud. The mother’s parents and company accountant are the company’s directors. By Deed of Settlement dated 20th October 1964[10] E C, as settlor, established the “CMS Settlement Trust” which appointed the mother’s parents trustees of a discretionary trust for the maintenance benefit education or advancement of CMS (the mother). By deed dated 20th July 2001 the mother’s parents retired as trustees and K I Pty Ltd was appointed new trustee. Similar settlement trusts were established for each of the mother’s two siblings. The three settlement trusts each own 10 fully paid $1 ordinary shares in N Pty Ltd. There are no other shareholders. The trusts have similar shareholdings in W Pty Ltd. The mother’s parents each own 1 fully paid A class share and her father owns an additional 14 fully paid D class shares in W Pty Ltd. There have been no changes to W Pty Ltd’s shareholding since incorporation other than additional D class shares issued to the mother’s father. As at 30 June 2003 his D class shares issued capital is $6.4 million. W Pty Ltd has never paid dividends to the CMS trust. N Pty Ltd has never paid dividends to its shareholders.
[10] Exhibit D
W Pty Ltd was incorporated on 21 April 1969. It appears that since its incorporation the company has traded shares and acquired land. The land is acreage on the NSW north coast upon which the mother’s parents have a holiday home. Presently, there appears to be $13.5 million shareholders funds in W Pty Ltd. The mother has a loan account with W Pty Ltd of $94,248 which shows in its accounts as an asset. The mother denies receiving monies from the company, although she has received monies advanced by her parents from time to time. There has been no change in the mother’s loan account since 30th June 2000.
N Pty Ltd was incorporated in 1964. This company’s primary business is investment in rural property. As at the end of June 2003 N Pty Ltd had total assets of $5.4 million, liabilities of $3.9 million leaving net assets of $1.4 million. Total shareholders equity was $1.4 million. N Pty Ltd’s records show that the mother has a loan account of $211,010.35 as at 30 June 2003. There has been no change to the mother’s loan account since 30 June 2000.
The company and trusts have operated without the mother’s knowledge or input. By this I mean the mother knew her parents owned property and shares, but she did not know that she had any involvement in their corporate affairs or the existence or the settlement trust. Although the company’s minutes indicate that on occasion the mother attended meetings, conducted at her parent’s home, the mother knows nothing of this and denies participation. I accept her denials on this issue, the operation of her loan accounts and knowledge of the trust. It appears the mother’s parents have used fairly standard estate planning trusts for the management of their financial interests. For perfectly understandable reasons they have never considered it necessary to disclose to the mother the company’s and trusts existence.
The provisions of the Deed of Settlement constituting the CMS Trust define the interests in the corpus of its beneficiaries. Under the Deed of Settlement no interest in corpus has vested. The Trust Fund is vested in the trustee, impressed with such trusts created by or pursuant to the Deed of Settlement. There is no hiatus or gap as to any outstanding beneficial interest in the Trust Fund. The assets comprising the Trust Fund are not impressed with trusts which give rise to equitable interests therein which are so extensive as to leave the trustee with no more than bare legal title. The trustee is the owner of these assets, but as subjected to the equitable obligations imposed by the Deed of Settlement. At its highest a beneficiary enjoys rights to due administration of the trusts of the Deed of Settlement. It follows the mother’s interests in the settlement trust that carries her name is of such an ephemeral nature as to be valueless.
I have already found the mother knew nothing about the settlement trust or her involvement in her parent’s financial affairs, including her loan accounts. Thus the court needs to consider whether the mother has received the approximately $300,000 reflected in her loan accounts or whether these entries are mere fiction. It seems most likely that over the years the mother’s parents have advanced money for her benefit using loan accounts. Her siblings also have loan accounts in debit in both companies. There is no reason to conclude the mother’s parents have fraudulently identified funds in her loan account, creating a liability which she could demand they now honour. On balance I am satisfied the effect of the mother’s non disclosure is that she failed to disclose about a $300,000 liability. Having regard to the company’s assets and the mother’s parent’s failure to mention the loan accounts repayment is unlikely for many years, if at all. The discovery of the mother’s interests is a surprise to both parties. In the circumstances of this case her non disclosure at the time she entered the child support agreement is of no moment.
The mother’s income and assets have improved since November 2001. Her circumstances are identified in her financial statement. The mother earns $396 working two days a week teaching, one day with the Department of Education and one day at a local private school. Calculated weekly, she receives dividends of $14 and interest of $3 and $35 from home tutoring. She receives government benefits of $141 per week that must be disregarded[11]. A keen amateur painter, the mother recently sold a painting for $1,600, which netted $1,200 after expenses. The mother anticipates $60 per week on average from painting sales. The mother’s employers pay $28 per week to her superannuation. Excluding child support, superannuation contribution and her parenting payment, the mother receives $508 per week. When child support is added her total average weekly income is $1,400.
[11] Section 117(b)(i)
The mother’s total average weekly expenses are $1,362, $431 of which relates to her expenses and the remaining $931 for the children. Her weekly personal expenditure is $38 tax, $125 Gateway Credit Union (mortgage), $12 rates, health and home insurances $53, $163 loan repayment to her father and other minor expenses the sum of which is $411. Altogether her personal and average weekly expenses are $1,773. A portion of the mother’s personal expenses, two thirds of those concerning the home and insurances are properly applied to the children’s expenses. Subject only to the $163 paid to her father, the mother’s evidence of her own costs and those incurred supporting the children were not the subject of serious challenge. Although tested during cross-examination the father’s counsel did not really cavil with her evidence on this issue.
The mother has assets worth $768,037, comprising her home at $710,000, a 2001 Honda car worth $23,000, shares worth $17,405 and cash at bank of $7,339. She estimates her household contents are worth $10,000 and superannuation is $14,709. The mother owes $50,976 on her mortgage. In her financial statement the mother says she owes her father $42,610 and has credit card debts of $3,828. Using these figures her total liabilities are $97,414 and her net asset and resources total $685,332. However on 29 June 2004 the mother repaid her father $50,000, borrowed when she refinanced the joint mortgage and transferred title in the home into her name. These monies from her father were deposited into a mortgage offset account to reduce mortgage interest. On Centrelink advice she withdrew the $50,000 from the mortgage offset account and paid it into the mortgage. Altogether, on 24 September 2002 she transferred $70,000 from her offset account into the mortgage account, reducing the mortgage balance from $88,249 to $10,249. The effect of these transactions appears to be that the mother has repaid the loan advanced by her father. This makes it difficult to understand why she continues to make weekly payments to him. The probable explanation is that although instructions were taken for the document it was not updated to include this information. Deducting the $42,610 identified in her financial statement as owing to her father, the mother’s net asset and resources are valued $642,722.
When the loan repayment is disregarded the mother’s net expenses are $1610. Overall, her weekly expenses exceed her income by $210. In total the mother’s expenditure on the children is about $1057.50. This figure comprises $931 plus $126.50 (two thirds of her rates, insurances and mortgage repayments).
The mother has a partner with whom she does not live. Her partner stays overnight at her home on average once a week. He runs a consultancy business, drives a Mercedes Benz and has a share in a glider. The mother’s financial circumstances are not intermingled with her partners and he has no obligation to contribute towards the children’s, or her support. The mother does not rely on him for support nor offer him financial assistance. Even if he is wealthy, her partner’s financial circumstances are irrelevant.
The section 117(2)(a)(iii)(A) claim
Turning now to the father’s s.117(2)(a)(iii)(A) claim of special circumstances. The Full Court in Gyselman discussed the words ‘in the special circumstances” and said; “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 the 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 section 117(2) must be guided by that qualification”.
Both parties agreed in 2001 that their particular circumstances warranted departure from the formula contained in the Child Support Assessment Act. The relevant circumstance appears to have been the father’s considerable income and their expectations for the children’s education. Inferentially the inequity that would result from the simple application of the child support income based formula. Then, as now, the father’s income is comfortably in excess of the payer’s income cap under the child support legislation. The agreement itself identifies those matters which the parties agreed would amount to special circumstances within the meaning of the Child Support (Assessment) Act 1989. Namely defined reduction in income or s.12 child support terminating event. Including clauses 4.1 to 4.4 inclusive in the agreement enabled both parties to order their future financial affairs by reference to known criteria. Hence the mother could plan the limits of expenditure on the children. Also her return to full time work with both decisions based on the children’s financial needs balanced with her availability to care for them. The father could plan his future in terms of future child support liability aware that the agreement does not provide for increases to his child support if the mother’s financial circumstances deteriorate. Or that any increase in his income or improvement to his overall asset position would have amounted to special circumstances giving rise to increased child support.
This is a detailed agreement which comprehensively addresses future child support contingencies. By this I do not mean to imply that the agreement ousts the courts s.117 jurisdiction. Merely that this agreement clearly delineates the manner in which the parties intended the agreement to operate including how a court would approach an application to change the consequential child support liability. This agreement operates precisely as the parties intended it to operate. In order to succeed under this ground the father needs to demonstrate his, the children’s or the mother’s circumstances have changed in the manner provided in the agreement or in an unforeseeable manner. The father’s reduced income was foreseeable. During 2004 and 2005 the agreement provided that his total annual gross income before tax (including any cash bonuses or cash profit share from his employment) must fall below $145,000 to obtain a reduction. The father’s gross income has fallen from $313,000 to $223,415. Compared to his financial disclosure to the court his income has increased by about $20,000. However as the mother probably knew his income included allowances, nothing turns on his non disclosure to the court. The father claims his higher taxation liability payable in Australia is relevant to his reduced income. I do not agree. This is because the agreement uses Australian dollars and refers to annual gross income and not annual taxable income. Although the father’s annual after tax income has fallen below $145,000 this does not cross the threshold for reduction and the fall in income per se does not amount to special circumstances.
Next I must consider his increased expenses. Aspects of the father’s expenses have increased significantly since his return to Australia. These appear to primarily comprise increased taxation and housing costs. Possibly also his expenses for the children. I say possibly as at the time the agreement was entered the father incurred significant contact costs, flying between Hong Kong and Sydney. I do not know whether his total expenses have increased. In some cases such an omission would be fatal. The father, who has previously worked in Australia in the financial sector, knew that upon his return to Australia his taxation liability would increase. Similarly, because he was returning to Australia, his country of origin of his own volition, the prospect that long term accommodation allowances would form part of a new salary package was remote. Both increased taxation and accommodation costs were foreseeable when the agreement was executed. This is because the parties planned for the father’s return in the reasonably proximate future. However he structured his expenses, the fundamental effect of the agreement as it operates in 2004 and 2005 is the father would meet his entire reasonable and necessary expenses from a gross annual income of $145,000 or more without child support being reduced. He has incurred extravagant expenses and his lifestyle shows few signs that he is unable to maintain a reasonable standard of living notwithstanding his reduced income. True it is that this has involved using capital resources, but to a reasonable extent these resources have accrued since the agreement was entered. While he no longer has substantial capital resources, excluding his home that he can use to supplement income in order to meet expenses, his expenses are only reasonable and necessary if they can be met from gross annual income of $145,000 after he has paid tax and child support.
I have already made reference to his extravagant housing costs, car expenses and lifestyle expenses. I do not accept that the father needs to spend about $800 each week for the children’s expenses when on average they are with him one night a week. Compared to the mother’s expenses this amount is clearly extravagant. It is not necessary for the court to examine the father’s expenses line by line in order to quantify reasonable and necessary expenses. He set these parameters when he executed the child support agreement. At the lower end of the scale the father appears to have decided that about $1,000 per week for his own expenses is the minimum of what is reasonable and necessary. Compared to his usual lifestyle living on this amount will be difficult, however this is as he knew the agreement could operate. All of the circumstances that have occurred since the father’s return from Hong Kong were anticipated when the agreement was entered. Nothing that has occurred since, in so far as his overall financial affairs are concerned amount to special circumstances. In every respect examined from the father’s perspective the agreement is operating exactly as he intended. No doubt at the lower end of the income range before the agreed threshold is reached for reduction, his available income after he pays child support makes meeting his reasonable and necessary expenses difficult. Indeed at the lower end of the range his current child support is on the generous side, more so once Samuel attends Grammar school, but this is the outcome of a considered, fully informed bargain, the consequences of which were fully considered.
However the agreement does not provide for an increase in the father’s contact with the children. By virtue of my orders weekend residence will extend by one night each fortnight. His expenses are unlikely to increase by other than a small amount, even from a lower reasonable base. More relevantly, I am far from satisfied the father will exercise all of the holiday residence to which he is entitled. He has not done so thus far. Although he reliably exercises weekend residence, he has been unable to routinely exercise half school holiday residence. When unable to take time from work as a block period, he has extended weekends during school holidays to include overnight Sundays. This shows that calculating child expenses by reference to days when his residence may occur can give false results. Such an approach can only produce just results if the court is confident residence/contact will always occur as ordered. In spite of his good intentions to exercise all of the residence to which he is entitled, I am not persuaded the father will do so. Thus the changed residence arrangements do not amount to special circumstances.
Thus to the extent the father’s application is based on s.117(2)(a)(iii)(A) it fails.
The father’s alternate section.117(2)(c)(i) claim
Turning to the father’s alternate s.117(2)(c)(i) claim, this focuses on the mother’s financial position. In an Order 25A.02 schedule the father’s solicitor explains his claim thus “The respondent mother’s income, earning capacity, property and financial resources (including the property transferred to her or amounts paid to her as a consequence of the property settlement between the parties).” Concerning the mother’s property transferred by virtue of the s.70 orders and spouse maintenance agreement, the child support agreement is predicated upon these arrangements. For the reasons already outlined the child support agreement must be considered in consequence of these arrangements not before hand. The nature of the mother’s assets has not changed since 2001. The most significant change is capital appreciation to her home achieved through upward movements in the property market, not capital expenditure on her part. She has managed to reduce her mortgage liability, partly because of the money advanced by her parents and through fiscal responsibility on her part. She has not indulged in extravagance and has managed her expenditure by reference to her income. Her modest improvement in her overall net worth, particularly because it is significantly reflected in the equity in her home is insufficient to establish special circumstances.
During closing addresses the father’s counsel focussed upon the mother’s beneficial interest in the CMS settlement trust and her loan accounts. I have already found her interest in the settlement trust to be effectively valueless. Similarly her loan accounts represent monies advanced for her benefit until 2000 that she may have to repay years from now. Voluntary payments by her parents through corporate entities they control are neither assets nor financial resources vis a vis the mother. The mother’s parents have no liability to support the parties’ children or their daughter. Merely because they have assisted her in the past does not equate to an obligation to do so in the future. Discovery of these interests does not amount to special circumstances.
Nor does the mother’s increased income or earning capacity. Her increased income is only modest. Questioned about her plans to return to work full time the mother agreed she wishes to eventually do so. However she emphasised the parties agreed the children would benefit from her full time care, anticipating she would return to work full time when both children are in high school. Clearly the children benefit from their mother’s availability. How else could they enjoy so many diverse activities and simultaneously achieve so well at school, music and sports? Apart from their innate abilities, the children probably do so well because the mother’s presence enables their lives to run smoothly. They are not required to carry heavy bags on public transport and she drives them to and from venues and school. During school holidays they need not attend vacation centres. Her efforts thus far have given the children an excellent start. However, given their ages if necessity demanded it the mother is able to return to work. Her teaching qualifications are current and she has relevant, recent work experience. As a teacher one could reasonably expect she would relatively easily obtain full time work. However reading the child support agreement as a whole, it appears the parties accepted that whether the mother remained at home caring for the children full time, returned to work as a teacher part or full time, would not influence the father’s child support. Something unforseen would need to occur vis a vis the mother’s income or earning capacity in order to amount to special circumstances. For example her paintings sell for vastly more than at present. Or she received a significant inheritance that produced increased wealth. If the parties intended the mother’s teaching income to form a ground for departure this should have been identified in the agreement. It is not at all uncommon for agreements to provide a sliding scale for child support predicated upon the carer parent’s capacity to resume full time employment. I infer the reason this agreement does not include such a provision is the parties accepted that as far as they could see, the father’s income would always greatly exceed the mother’s. Thus irrespective of whether she worked in the paid workforce or cared for the children full time only if his income fell below the threshold would his child support fall.
Whether examined individually or globally the mother’s changed circumstances do not amount to a ground for departure.
Is it just and equitable or otherwise proper to make a departure order?
Because the father has not established a ground for departure I am not required to consider ss.117(4) or (5). However for abundant caution, if I am wrong in deciding against special circumstances I would not find on the facts before me that it is just and equitable to order a departure. The mother incurs reasonable and necessary expenses for the children totalling $1057.50. Her income is insufficient to enable her to pay her own expenses and provide for the children’s. As well as the children’s school fees and expenses he directly incurs the father pays $892.62 child support. It is immediately apparent the father meets the overwhelming majority of the children’s expenses. Even if one focuses on his contribution to the children’s expenses while in their mother’s care, his contribution vastly exceeds hers.
Section 4(2) provides “that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support”. I will not restate ss.114(a) and (b), these too are particularly relevant. Sitting on appeal concerning a departure application, in Woolley and Carney 2005 FamCA 396 (unreported) Kay J referred in particular to s.114(b) and held “There may well be circumstances in which it is appropriate that one parent meet all, or almost all, of the proper needs of the child if they have the capacity to meet those needs and the other parent does not. There may well be cases such as Savery (1990) FLC 92-131; 13 Fam LR 812 where justice is simply met by adjusting one or more of the child support formula elements. But when such a course is adopted it must be done with an eye to ensuring the objects of the legislation re met, in particular the equitable sharing of responsibility for the support of the child if that can be achieved.” In the context of a child support agreement this introduces notions of equality and proportionality. These parties’ circumstances are not equal. The father has considerably greater income than the mother. Thus the court needs to consider their contributions proportionally and in the context of the child support agreement. Notwithstanding the current assessment, issued by virtue of the agreement’s registration, requires the father to meet a greater share of the children’s expenses than the mother his share is not inequitable. This is because the father accepted when the agreement was made that notwithstanding the mother’s property and future capacity for paid employment as a teacher he should meet a greater share of the children’s expenses. Adopting the approach encapsulated in the child support agreement his share is not disproportionate to the parties’ total financial circumstances.
When parties enter into a child support agreement they establish the context against which future child support applications will be decided. Thus one sees cases where a liable parent enters into an agreement where compliance will be difficult and that person’s share of the children’s expenses appears disproportionate or inequitable. The father could have set additional limits to his child support liability or the duration of the agreement but did not do so. Notwithstanding changed circumstances the agreement continues to operate as intended.
The child support application will be dismissed.
For these reasons I make the orders identified at the start of this judgment.
I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of Ryan FM
Associate: S. Mashman
Date: 1 June 2005
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