Segler v Child Support Registrar (No.2)
[2011] FMCA 96
•25 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SEGLER v CHILD SUPPORT REGISTRAR (No.2) | [2011] FMCA 96 |
| BANKRUPTCY – Child support arrears – application for release from liability to pay pre-sequestration child support arrears. |
| Bankruptcy Act 1966 (Cth), ss.5(1), 153(2A) Child Support (Assessment) Act 1989 (Cth) Family Law Act 1975 (Cth), s.4(1) |
| Segler v Child Support Registrar (2009) 223 FLR 191; [2009] FMCA 41 Re Reilly; Ex parte Debtor (1979) 36 FLR 268 Re Stewart; Ex parte Stewart (1995) 60 FCR 68 Seymour v Australian Broadcasting Commission (1979) 19 NSWLR 219 |
| JD Heydon, Cross on Evidence (7th Edn) (LexisNexis Butterworths: Chatswood, 2004) |
| Applicant: | MARTIN LEE SEGLER |
| Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | PEG 230 of 2007 |
| Judgment of: | Lucev FM |
| Hearing date: | 25 May 2009 |
| Date of Last Submission: | 25 May 2009 |
| Delivered at: | Perth |
| Delivered on: | 25 February 2011 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Ms S. Oliver |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
That the application be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 230 of 2007
| MARTIN LEE SEGLER |
Applicant
And
| CHILD SUPPORT REGISTRAR |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, Mr Segler, is a legal practitioner and discharged bankrupt who seeks an order of this Court releasing him from liability to pay arrears of child support.
The application
The application, originally made on 19 November 2007, for release from liability to pay arrears of child support is made under s.153(2A) of the Bankruptcy Act 1966 (Cth):[1]
a)to release Mr Segler from his liability to pay arrears of child support and late payment penalties[2] as accrued at the date of his sequestration, in the sum of $29,053.56; and
b)to release Mr Segler from liability to pay arrears of child support and related penalties, as accrued between the date of his sequestration and the date of his discharge from bankruptcy, in the further sum of $64,471.62; and
c)for orders that the respondent, the Child Support Registrar[3] be restrained from enforcing child support liability and LPPs, assessed in the sum of $162,806.27, until final judgment in this matter is delivered. [4]
[1] “Bankruptcy Act”.
[2] “LPPs”.
[3] “CS Registrar”.
[4] Amended Application filed 26 February 2008.
The amount of arrears that had accrued prior to the date of sequestration is not in dispute.
On 25 July 2005, after Mr Segler’s release from bankruptcy, the CS Registrar remitted the LPPs that had accrued prior to the date of sequestration.
Objection to application
The CS Registrar opposes the application. The CS Registrar says that the power under s.153(2A) of the Bankruptcy Act is discretionary, and in exercising that discretion to dismiss the application the Court should have regard to:
a)the fact that there is no evidence that the interests of the children, the custodial parent and the greater public would be better served if the Court made an order for discharge;
b)the fact that there is no evidence that Mr Segler is currently unable to support himself and his new family, and no objective evidence that Mr Segler is currently unable to discharge the arrears of maintenance; and
c)the fact that Mr Segler is not liable to pay ongoing child support, and there is no objective evidence that Mr Segler is currently unable to discharge the arrears of maintenance.[5]
[5] Notice stating grounds of opposition to application filed 1 February 2008.
Judgment on jurisdiction
There were two preliminary issues that arose in this matter, which were dealt with in an earlier judgment of this Court.[6] Those issues were:
a)whether the discharge of a child support debt is a matter within the jurisdiction of this Court, and if the Court has jurisdiction, to what extent it can order discharge of a child support debt; and
b)if the Court has jurisdiction, whether, in determining whether or not to discharge a child support debt following bankruptcy, the Court must consider:
i)Mr Segler’s income, expenses, liabilities and assets during the period of bankruptcy only; or
ii)Mr Segler’s income, expenses, liabilities and assets at the present day.
[6] Segler v Child Support Registrar (2009) 223 FLR 191; [2009] FMCA 41 (“Segler (No. 1)”).
In Segler (No. 1) the Court ultimately concluded, and made declarations to the effect, that:
(1)(a) it has jurisdiction to discharge the applicant’s child support debt; and
(b) any discharge of the applicant’s child support debt is limited to debts provable in bankruptcy up until the date of sequestration.
(2)in relation to the determination of whether or not to discharge the applicant’s child support debt the Court is entitled to consider the applicant’s income, expenses, liabilities and assets, and the applicant’s conduct prior to the date of the applicant’s bankruptcy, during the period of the applicant’s bankruptcy, and since the applicant’s discharge from bankruptcy.[7]
[7] Segler (No. 1) FLR at 212 per Lucev FM; FMCA at paras.100-102 per Lucev FM.
The basis for considering the discharge of the child support arrears was outlined in Segler (No. 1) as follows:
97. In order to determine whether Mr Segler has the ability to discharge the arrears the Court considers that it is self-evident that Mr Segler’s current ability to discharge the arrears must be considered…Therefore, the position adopted by the CS Registrar is evidently correct, but for reasons which follow, not complete.
98. The Court considers that it is necessary, when exercising its discretion and in assessing the interests of the custodial parent and the children as well as the public interest, to have regard to Mr Segler’s financial position, not only during the period of bankruptcy (the position he contends for), but also prior to his bankruptcy, when the child support debts in question actually accrued. Further, having regard to the importance of compliance with the intent of child support legislation, there must be a public interest consideration related to compliance involved in the exercise of the discretion as to whether a child support debt is discharged, and, therefore an examination of the conduct of an applicant for discharge of a child support debt is warranted, such conduct to include conduct before, during and after bankruptcy.[8]
[8] Segler (No.1) FLR at 211 per Lucev FM; FMCA at paras.97-98 per Lucev FM.
In Segler (No. 1) the Court referred to Re Reilly; Ex parte Debtor[9] as follows:
It has been said by the authorities more than once that unless the court is satisfied that a man in receipt of income derived from his earnings or otherwise will be able to provide support for himself and his dependants to live on, or is satisfied that he is likely to inherit or otherwise succeed to property, it ought not to impose unduly burdensome conditions so that he cannot improve his position in life and remove all incentive for exertion on his part.[10]
[9] (1979) 36 FLR 268 (“Reilly”).
[10] Reilly at 279-280 per Lockhart J, cited in Segler (No. 1) FLR at 210 per Lucev FM; FMCA at para.90 per Lucev FM.
This Court therefore has jurisdiction in relation to discharge of child support arrears accrued prior to the date of sequestration. The amount in question, allowing for the remission of the LPPs is $26,022.97.
Issue
The issue in these proceedings is therefore whether Mr Segler should have his pre-sequestration child support arrears discharged.
Legislative provisions
Section 153(2A) of the Bankruptcy Act provides as follows:
(2A) The Court may order that the discharge of a bankrupt from bankruptcy shall operate to release the bankrupt, to such extent and subject to such conditions as the Court thinks fit, from liability to pay arrears due under a maintenance agreement or maintenance order.
Section 5(1) of the Bankruptcy Act defines “maintenance agreement” as follows:
"maintenance agreement" means:
(a) a maintenance agreement (within the meaning of the Family Law Act 1975 ) that has been registered in, or approved by, a court in Australia or an external Territory; or
(b) any other agreement with respect to the maintenance of a person that has been registered in, or approved by, a court in Australia or an external Territory;
but does not include a financial agreement, or Part VIIIAB financial agreement, within the meaning of the Family Law Act 1975.
For the purposes of the definition in paragraph (a) the definition of “maintenance agreement” in s.4(1) of the Family Law Act 1975 (Cth)[11] is as follows:
"maintenance agreement" means an agreement in writing made, whether before or after the commencement of this Act and whether within or outside Australia, between the parties to a marriage, being an agreement that makes provision with respect to financial matters, whether or not there are other parties to the agreement and whether or not it also makes provision with respect to other matters, and includes such an agreement that varies an earlier maintenance agreement.
[11] “FL Act”.
Factors for consideration
In deciding whether to exercise its discretion to discharge Mr Segler’s pre-sequestration child support debt, the Court may take into account the following:
a)(i) the income, expenses, liabilities and assets of Mr Segler; and
(ii)the conduct of Mr Segler,
prior to the date of bankruptcy, during the period of bankruptcy, and after the discharge from bankruptcy;[12]
b)Mr Segler’s ability to provide support for himself and his dependants;[13]
c)whether or not Mr Segler is likely to inherit or otherwise succeed to property;[14]
d)whether the child support arrears impose an unduly burdensome condition so that Mr Segler cannot improve his position in life and removes all incentive for exertion on his part;[15]
e)the interests of the custodial parent and the children;[16]
f)the public interest;[17]
g)the importance of compliance with the intent of child support legislation;[18]
h)the ability of Mr Segler to discharge the child support arrears;[19] and
i)the conduct of the bankrupt relevant to the child support arrears.[20]
[12] Segler (No. 1) FLR at 211 per Lucev FM; FMCA at para.97-98 per Lucev FM.
[13] Reilly at 279-280 per Lockhart J.
[14] Reilly at 280 per Lockhart J.
[15] Re Stewart; Ex parte Stewart (1995) 60 FCR 68 at 79 per Cooper J (“Stewart”); Reilly at 279-280 per Lockhart J.
[16] Stewart at 78 per Cooper J.
[17] Stewart at 79 per Cooper J.
[18] Segler (No.1) FLR at 210-211 per Lucev FM; FMCA at paras.90-98 per Lucev FM.
[19] Stewart at 79 per Cooper J.
[20] Segler (No.1) FLR at 210 per Lucev FM; FMCA at para.90 per Lucev FM, citing Reilly at 278 per Lockhart J.
The Court may also take into account the financial circumstances of the current Mrs Segler,[21] including the following:
a)the value of any house in which Mr and Mrs Segler live, and the amount of any outstanding mortgage;
b)the value of Mrs Segler’s car;
c)whether children of any new family Mr Segler has with Mrs Segler have any special needs, and whether any additional expense is associated therewith; and
d)the net income of Mr Segler and Mrs Segler, and whether it is enough to pay child support liability.[22]
Facts
[21] “Mrs Segler”.
[22] Stewart at 79-80 per Cooper J.
Evidence
Mr Segler relied on the affidavits of:
a)himself, sworn:
i)6 May 2008;[23] and
ii)22 May 2009;[24]
b)Mrs Segler sworn 22 May 2009;[25] and
c)Alicia Scurria sworn 21 May 2009.[26]
[23] “Mr Segler’s 6 May 2008 Affidavit”.
[24] “Mr Segler’s 22 May 2009 Affidavit”.
[25] “Mrs Segler’s Affidavit”.
[26] “Ms Scurria’s Affidavit”.
The CS Registrar relied upon the affidavits of:
a)Reginald Keith Parnell sworn:
i)11 March 2008;[27]
ii)5 May 2008;[28] and
iii)15 May 2008;[29]
b)Jeannie Dimov sworn 15 May 2009;[30] and
c)Teresa Chew Ping Ling sworn 19 May 2009.[31]
[27] “Mr Parnell’s 11 March 2008 Affidavit”.
[28] “Mr Parnell’s 5 May 2008 Affidavit”.
[29] “Mr Parnell’s 15 May 2008 Affidavit”.
[30] “Ms Dimov’s Affidavit”.
[31] “Ms Ling’s Affidavit”.
At hearing, Mr Segler did not:
a)object to any parts of; or
b)cross-examine any of the deponents of,
affidavits filed by the CS Registrar.[32] The Court is therefore obliged to accept the evidence led on behalf of the CS Registrar, unless it is inherently incredible or unbelievable, which it was not.[33]
[32] Transcript, page 49.
[33] JD Heydon, Cross on Evidence (7th Edn) (LexisNexis Butterworths: Chatswood, 2004) at para.17460; Seymour v Australian Broadcasting Commission (1979) 19 NSWLR 219 at 236 per Mahoney J.
There were no objections to any parts of the affidavits filed in support of Mr Segler’s application. Both Mr Segler and Mrs Segler were cross-examined,[34] and Mrs Segler gave further evidence-in-chief orally.[35] Ms Scurria was not cross-examined.
Child Support Agreement[36] and prior proceedings in Family Court of Western Australia[37]
[34] Transcript, pages 4-26 and 34-46 respectively.
[35] Transcript, pages 27-34.
[36] “CS Agreement”.
[37] “Family Court of WA”.
Relevant background facts are set out in Segler (No. 1) as follows:
[CS] Agreement
5. A child support debt arose from a [CS] Agreement made between Mr Segler and Ms Karen Sandra Carey-Hazell on 9 August 1991 in relation to their two children born 26 July 1988. Ms Carey-Hazell is not a party to these proceedings.
6. The CS Agreement was lodged with the Family Court of [WA] on 15 August 1991.
Bankruptcy history
7. A sequestration order was made against Mr Segler on 19 September 2001. At that time Mr Segler had unpaid child support arrears of $26,022.97 and late payment penalties of $3,478.19.
8. Mr Segler was discharged from bankruptcy on 20 September 2004.
9. Mr Segler was not discharged from his child support debt of $26,022.97, but his late payment penalties were remitted.
Prior Proceedings in the Family Court of WA
10. On 10 April 1996 Mr Segler applied to the Family Court of WA concerning the child support for which he was then liable. In a judgment handed down by the Family Court of WA on 29 January 1997 Mr Segler’s application to vary the CS Agreement to discharge child support arrears was dismissed.
11. On 18 June 1996 Ms Carey-Hazell filed an enforcement application in the Family Court of WA seeking to recover child support arrears accrued to 30 September 1995. On 9 August 1996 Mr Segler lodged an application against the Child Support Registrar with the Family Court of WA seeking a stay of a collection order. On 10 September 1996 the Family Court of WA refused to grant Mr Segler a stay and dismissed Ms Carey-Hazell’s application for enforcement.
12. Mr Segler commenced proceedings in the Family Court of WA against Ms Carey-Hazell in November 2004, seemingly to discharge at least part of his child support debt. The application was argued, and a draft judgment issued from the Family Court of WA, as a consequence of which Mr Segler gave notice of his intention to file a notice of discontinuance of the application.
13. On 2 September 2005 the CS Registrar commenced enforcement proceedings against Mr Segler in the Family Court of WA in relation to an alleged child support debt of $104,189.79 as at 18 August 2005. Orders issued by consent in relation to the CS Registrar’s enforcement proceedings in the following terms:
2. There be a declaration of the debt in the amount of $122,818.21 as at 3 March 2006.
3. Until further order of the Court, Mr Segler pay to the Registrar the amount of $1,000 per month commencing on 10 March 2006, being a contribution to his child support arrears;
4. Mr Segler is to provide to the Registrar documentary evidence of his income and expenses every 2 months commencing on 8 May 2006 and ongoing;
5. The matter be adjourned generally;…
14. The CS Registrar states that Mr Segler has not complied with these orders except for making one payment of $1,000. The CS Registrar has not elected to commence contravention proceedings.
15. Mr Segler lodged an application in the Family Court of WA against Ms Carey-Hazell on 25 November 2005 seeking to amend the CS Agreement and discharge the child support debt. Mr Segler’s application was dismissed on 14 February 2006.[38]
[38] Segler (No. 1) FLR at 193-194 per Lucev FM; FMCA at paras.5-15 per Lucev FM (footnotes omitted).
The CS Agreement is a “maintenance agreement” for the purposes of s.5(1) of the Bankruptcy Act, because it is an agreement in writing, between parties to a marriage, with respect to financial matters, and is registered under the provisions of the FL Act.[39]
Mr Segler’s financial circumstances and conduct
[39] Bankruptcy Act, s.5(1), definition of “maintenance agreement”, para.(a), FL Act, s.4(1), definition of “maintenance agreement”.
Before bankruptcy
Mr Segler was diagnosed with multiple sclerosis in 1995. The multiple sclerosis substantially reduced the number of hours that he could work thereby limiting his income. It was during the subsequent period, working as a consultant, that Mr Segler claims his child support liability fell into arrears and that child support payments under the CS Agreement were no longer commensurate with his income.[40]
[40] Mr Segler’s 22 May 2009 Affidavit, para.12.
Mr Segler was declared bankrupt on 19 September 2001. At the time of sequestration, Mr Segler owed $29,501.16 in child support arrears and LPPs. Remission of the LPPs reduced the amount owed at that date to $26,022.97.[41]
[41] See para.10 above.
Mr Segler’s taxable income prior to his bankruptcy was as follows:[42]
[42] See Ms Ling’s Affidavit, Annexures TL1, TL2, TL3 and TL4 in relation to the years 1997-2000, and Mr Segler’s 6 May 2008 Affidavit, Annexure MLS4 for the 2001 year.
Financial Year ending 30 June Business Income Business Expenses Taxable Income 1997 $117,100 $102,317 $32,783 (including $18,000 distribution from trust) 1998 $145,728 $43,588 $102,140 1999 $105,811 $6,824 $98,987 2000 $94,580 $20,585 $73,995 2001 $52,000 $300 $51,700
1997
In the financial year ending 30 June 1997, Mr Segler’s total business income was $117,100 and he claimed a total of $102,317 in expenses comprising:
a)$11,740 in lease expenses;
b)$10,116 in motor vehicle expenses; and
c)$80,461 for all other expenses.
The amount of $80,461 in all other expenses was attributed by Mr Segler in cross-examination to expenses associated with his home office in Parry Street, Claremont.[43]
[43] Transcript, page 6; Ms Ling’s Affidavit, Annexure TL1.
Mr Segler received an $18,000 distribution from Conseil Pty Ltd as trustee for the Conseil Family Trust. Mr Segler and the two children from his relationship to Ms Carey-Hazell were beneficiaries of the Trust. Mr Segler was the only beneficiary to receive a distribution from the Trust in that year.[44]
[44] Transcript, page 7.
There is evidence from Mr Parnell that prior to the judgment handed down on 29 January 1997 in the Family Court of WA, Mr Segler had sold an asset and applied the money to a proportion of the outstanding child support arrears.[45]
1998
[45] Mr Parnell’s 5 May 2008 Affidavit, para.22.
In the financial year ending 30 June 1998, Mr Segler’s total business income was $145,728 and he claimed a total of $43,588 in expenses comprising:
a)$8,220 in lease expenses;
b)$5,564 in motor vehicle expenses; and
c)$29,804 for all other expenses.
The amount of $29,804 in all other expenses was attributed by Mr Segler in cross-examination to expenses associated with his home office in 2A Parry Street, Claremont.[46] When asked by the Court, Mr Segler said that no portion of the home office expenses claimed was disallowed by the Australian Tax Office.[47]
[46] Transcript, page 8; Ms Ling’s Affidavit, Annexure TL2.
[47] Transcript, page 9.
Mr Segler received an inheritance of approximately $200,000 from his mother’s estate in December 1997. Mr Segler says that the inheritance money was taken by the Child Support Agency[48] to pay child support arrears, thereby significantly reducing those arrears.[49]
1999
[48] “CS Agency”.
[49] Transcript, page 16; Mr Segler’s 22 May 2009 Affidavit, para.14.
In the financial year ending 30 June 1999, Mr Segler’s total business income was $105,811 and he claimed a total of $6,824 in expenses comprising:
a)$1,020 in rent expenses;
b)$3,104 in motor vehicle expenses; and
c)$2,700 for all other expenses.
The amount of $2,700 in all other expenses was attributed by Mr Segler to telephone expenses and professional indemnity insurance.[50]
[50] Transcript, page 9; Ms Ling’s Affidavit, Annexure TL3.
At this time Mr Segler’s Parry Street, Claremont home had been sold by mortgagee sale. Mr Segler had moved to Alfred Road, North Fremantle, and was living with his new wife, Mrs Segler.[51]
2000
[51] Transcript, page 9.
In the financial year ending 30 June 2000, Mr Segler’s total business income was $94,580 and he claimed a total of $20,585 in expenses comprising:
a)$11,633 in motor vehicle expenses; and
b)$8,952 for all other expenses.
The amount of $8,592 in all other expenses was attributed by Mr Segler to professional indemnity insurance and telephone expenses.[52]
2001
[52] Transcript, page 10; Ms Ling’s Affidavit, Annexure TL4.
Mr Segler earned $52,000 per year in the financial year ending 30 June 2001 working for Shane Brennan, Barristers and Solicitors. Deductions were for work-related expenses such as telephones, dry-cleaning, office equipment, as well as accounting fees.[53]
[53] Mr Segler’s 6 May 2008 Affidavit, Annexure MLS4.
During bankruptcy
Mr Segler became a bankrupt on 19 September 2001 and was discharged from bankruptcy on 20 September 2004.
Mr Segler’s taxable income during bankruptcy was as follows:
Financial Year ending 30 June Personal
IncomeDeductions Taxable Income 2002 $52,000 $2,080 $49,920 2003 $52,000 $2,358 $49,642 2004 $52,000 $0 $52,000
2002, 2003 and 2004
Mr Segler started using a new medication for his illness in 2002, which improved his health, allowing him to gradually increase his workload.
Mr Segler earned $52,000 per year in each of the financial years ending 30 June 2002, 2003 and 2004 working for Shane Brennan, Barristers and Solicitors. Deductions claimed during these years were work-related expenses such as telephones, dry-cleaning, office equipment, as well as accounting fees.[54]
[54] Mr Segler’s 6 May 2008 Affidavit, Annexure MLS4.
Mr Segler’s employer, Mr Brennan, paid child support on behalf of Mr Segler during his bankruptcy, pursuant to a garnishee order on his income.[55]
[55] Mr Segler’s 22 May 2009 Affidavit, para.21; Ms Ling’s Affidavit, Annexure TL16.
Ms Segler was not required to contribute to his bankrupt estate during his bankruptcy.[56]
[56] Mr Segler’s 22 May 2008 Affidavit, Annexure MLS2.
After bankruptcy
Mr Segler was discharged from bankruptcy on 20 September 2004.
Mr Segler’s taxable income after bankruptcy was as follows:
Financial Year ending 30 June Business Income Business Expenses Net Income 2005 $49,274 $544 $48,730 2006 $96,588 $44,660 $51,928 2007 $173,671 $111,092 $62,579 2008 $276,845 $172,209 $104,636
2005
In the financial year ending 30 June 2005, Mr Segler earned $49,274 and claimed an amount of $544 in deductions. These expenses were attributed to telephone expenses. This income included $43,333 from Brennan & Co, Barristers and Solicitors, and a supplemental income from working as a barrister (post-bankruptcy) of $6,288, with $347 of business expenses related to telephone and cleaning.[57]
2006
[57] Exhibit A3, Mr Segler’s Individual Tax Return for the year ended 30 June 2005.
In the financial year ending 30 June 2006, Mr Segler’s total business income was $96,588 and he claimed an amount of $44,660 in total expenses, comprising:
a)an amount of $21,864 in contractor, subcontractor and commission expenses; and
b)$22,796 for all other, unspecified expenses.[58]
[58] Ms Ling’s Affidavit, Annexure TL13.
When Mr Segler was asked what these expenses related to he was not immediately forthcoming with an answer, saying that the tax return was completed by his accountant with the assistance of Mrs Segler.[59] When asked if part of the contractor, sub-contractor and commission expenses could represent money paid to Mrs Segler, he replied that a significant part of the expenses would represent money paid to Mrs Segler.[60]
[59] Transcript, page 13; Ms Ling Affidavit, Annexure TL13.
[60] Transcript, page 13.
In the period of 29 May 2005 to 2 February 2006, Mr Segler invoiced fees of $100,244.65 to Mr Brennan. Only $60,179.90 was paid to Mr Segler, the remainder being retained by Mr Brennan for rent of chambers to Mr Segler.[61]
[61] Ms Ling’s Affidavit, Annexure TL16.
On 11 April 2006, following receipt of a garnishee order from the CS Registrar, Mr Brennan commenced providing chambers facilities to Mr Segler free of charge.[62]
[62] Ms Ling’s Affidavit, Annexure TL16.
On 8 March 2006 there was a consent order made in the Family Court of WA that Mr Segler was to pay $1,000 per month commencing on 10 March 2006, being a contribution to his child support arrears; and that Mr Segler provide to the Registrar documentary evidence of his income and expenses every 2 months commencing on 8 May 2006 and ongoing.[63] Mr Segler made one payment of $1,000 and has never provided documentary evidence of his income and expenses.[64] Mr Segler has failed to pay any child support since 23 March 2006.[65]
[63] Mr Parnell’s 11 March 2008 Affidavit, Annexure RPK15.
[64] Mr Parnell’s 15 May 2008 Affidavit, paras.58-60; Mr Parnell’s 5 May 2008 Affidavit, paras.37-38.
[65] Transcript, page 15.
Mr Segler decided to commence his own legal practice from 30 November 2006. Mr Segler deposes that as, by reason of his bankruptcy, he had no recourse to credit facilities, he was obliged to invest the majority of his income in the capital required to fit out his legal practice.[66]
2007
[66] Mr Segler’s 22 May 2009 Affidavit, paras.22-23.
In the financial year ending 30 June 2007, Mr Segler’s total business income was $173,671 and he claimed an amount of $94,748 in all other expenses. Some of these expenses were attributed by Mr Segler in cross-examination to money paid to his wife.[67]
2008
[67] Transcript, page 17.
In the financial year ending 30 June 2008, Mr Segler’s total business income was $276,845 and he claimed an amount of $162,452 in all other expenses.
During the course of cross-examination, Mr Segler was seemingly reluctant to provide information. When questioned in relation to the expenses claimed in his 2008 tax return and whether they were attributable to wages paid to his wife, Mr Segler was quick to point out that he doesn’t deal with that side of his business.[68]
[68] Transcript, page 19.
Family Court of WA proceedings
The issue of child support for the children of the marriage of Mr Segler and Ms Carey-Hazell has been the subject of various Family Court of WA proceedings, a very brief outline of which appears above.[69] The Family Court of WA has published various Reasons for Judgment, either in final or draft form, in relation to those proceedings. Relevant judgments are outlined below.
[69] See para.21 above.
29 January 1997
In this judgment the Family Court of WA refused to discharge child support arrears owed by Mr Segler at that time, but did make orders discharging Mr Segler’s liabilities in relation to clothing and HBF payments, and varied the CS Agreement to clarify Mr Segler’s obligations in relation to those issues. A number of relevant observations were made by the Family Court of WA in that judgment, including that Mr Segler:
a)had not given sufficient priority to his obligation to support his children;
b)had pushed his income tax deduction entitlements to the limit with a view to minimising his taxable income, and in the circumstances, it would produce a grossly unjust determination of child support if his liability was calculated on the basis of his taxable income; and
c)had brought about his financial difficulties over many years through his financial mis-management and extravagant lifestyle.
Consequently, the Family Court of WA determined that Mr Segler ought not be released from any obligation to pay child support under the CS Agreement.[70]
[70] Mr Parnell’s 11 March 2008 Affidavit, Annexure RKP5.
1 March 2005
The Family Court of WA issued a draft judgment on 1 March 2005 in relation to Mr Segler’s application to discharge arrears of child support and for the CS Agreement to be set aside, and for an order that his child support liabilities be calculated by way of administrative assessments under the Child Support (Assessment) Act 1989 (Cth).[71] The Family Court of WA did not deal with Mr Segler’s application because Ms Carey-Hazell alleged there was an arrangement between Mr Brennan and Mrs Segler under which income properly payable to Mr Segler was artificially diverted to Mrs Segler. The Family Court of WA adjourned the matter to allow the issue of subpoenas and the preparation of evidence in relation to this issue. Mr Segler then discontinued the application.[72]
[71] “CS (Assessment) Act”.
[72] Ms Dimov’s Affidavit, Annexures JD11 and JD12.
14 February 2006
On 14 February 2006 the Family Court of WA issued a draft judgment in relation to an application by Mr Segler to discharge all but $5,000 of his child support arrears, and for the setting aside of the CS Agreement and an order that child support liabilities be calculated by way of administrative assessments under the CS (Assessment) Act. The application was dismissed, and the Family Court of WA observed that:
a)there was no dispute that Mr Segler had not ever complied with an order to pay educational expenses, and that he had only partially complied with the requirement to make cash child support payments;
b)Mr Segler had been aware for some time that Ms Carey-Hazell alleged that the financial relationship between Mr Brennan and Mr and Mrs Segler was not genuine, but that Mr Segler strongly resisted requests for production of documents concerning whether Mr Segler was being paid at an appropriate commercial level for his services as an employed solicitor;
c)Mr Segler’s attitude toward Ms Carey-Hazell’s request for proof of his case concerning the terms of his employment was that she could take his word for it;
d)under cross-examination Mr Brennan made damaging concessions, including the following:
i)although Mr Segler was ostensibly an employee of Mr Brennan, Mr Brennan never paid the superannuation guarantee levy in relation to Mr Segler, and that that cast doubt on the bona fides of the employment relationship said to exist between Mr Segler and Mr Brennan; and
ii)the Court considered inherently implausible, evidence given by Mr Brennan in relation to his payment of $100 an hour to Mrs Segler for various services, despite the fact that he knew little, if anything about her qualifications;
e)ordinarily, the creation of a consultancy of the type that existed between Mr Brennan and Mrs Segler would result in an easily verifiable paper trail, but in this case Mrs Segler had steadfastly refused to voluntarily provide access to any relevant documents and had strenuously resisted compliance with the subpoena issued to her;
f)Mrs Segler’s invoices to Mr Brennan were remarkably short on detail, and Mrs Segler’s evidence was not convincing;
g)the purported financial arrangements between Mr Segler, Mrs Segler and Mr Brennan required further explanation, and it was not reasonably comprehensible that a sole practitioner operating a small practice, that is Mr Brennan, would pay an unqualified person, Mrs Segler, at a higher rate than a qualified fee-earning solicitor, that is Mr Segler; and
h)it remained unsatisfied that Mr Segler had made full and frank disclosure of his financial circumstances to it, and that his relevant financial history was as he had outlined to it.[73]
[73] Ms Dimov’s Affidavit, Annexure JD16.
CS Registrar’s enforcement proceedings
Ultimately, on 8 March 2006 orders issued by consent in relation to the CS Registrar’s enforcement proceedings in the following terms:
2 There be a declaration of the debt in the amount of $122,818.21 as at 3 March 2006.
3.Until further order of the Court, Mr Segler pay to the Registrar the amount of $1,000 per month commencing on 10 March 2006, being a contribution to his child support arrears.
4. Mr Segler is to provide to the Registrar documentary evidence of his income and expenses every 2 months commencing on 8 May 2006 and ongoing.
5.The matter be adjourned generally.[74]
[74] Mr Parnell’s 12 March 2008 Affidavit, Annexure RKP15.
Mr Segler has only ever made one payment of the $1,000 a month required by order 3 above.[75] Mr Segler has never provided documentary evidence of his income and expenses as required by order 4 above.[76]
[75] Mr Parnell’s 5 May 2008 Affidavit, para.37.
[76] Mr Parnell’s 5 May 2008 Affidavit, para.38.
General
Mr Segler has been a member of the Nedlands Golf Club for approximately the last 10 years. The Court was provided with an invoice from the Nedlands Golf Club dated 1 January 2008 in the amount of $1,943, including $1617 for Category (A) Membership.[77] Mr Segler indicated that the invoice for 2009 was somewhere between $2,100 and $2,300. Mr Segler said that payment was due in October 2008 but he did not have any money and so did not pay it until February 2009.[78]
[77] Exhibit A4, Nedlands Golf Club Invoice dated 1 January 2008.
[78] Transcript, page 14.
In the financial year ending 30 June 2006, Mr Segler paid $5,436.14 to the Nedlands Golf Club. These expenses related to golf club fees and his sponsorship of one of the club’s pennants team.[79]
[79] Ms Ling Affidavit, Annexure TL12; Transcript, page 13
During the period of bankruptcy, Mr Segler kept his Nedlands Golf Club membership, which was apparently paid by Mr Brennan.
Mrs Segler gave evidence that:
a)she and Mr Segler held about $500 in the bank;[80]
b)she and Mr Segler live day-to-day, one bill to the next;[81]
c)she and Mr Segler spend $800 per month on entertainment expenses, which includes going to the movies, out to dinner, and also a Foxtel subscription of $100 per month;[82] and
d)she and Mr Segler pay $1,750 per month for Mrs Segler’s daughter to attend a private school.[83] Mrs Segler says that one of the reasons that they chose the particular private school is because of the strong drama program which is suitable for her daughter. Her daughter has attended this private school since 2006. School fees have increased each year and have never been paid on time.[84]
[80] Transcript, page 31.
[81] Transcript, page 33.
[82] Transcript, pages 40-41.
[83] Transcript, page 39; Mrs Segler’s Affidavit, Annexure SLS1.
[84] Transcript, page 48.
Mr and Mrs Segler and Mrs Segler’s daughter went on a ten-day holiday to Queensland in approximately 2001-2002. The holiday was funded by savings of both Mr and Mrs Segler.[85]
[85] Transcript, pages 35-36.
In winter 2005, Mr and Mrs Segler went on a holiday for 10 days to Melbourne and Falls Creek, where they stayed with family and at a bed and breakfast. The holiday was funded by both Mr and Mrs Segler.[86]
[86] Transcript, page 36.
Mr and Mrs Segler went on an overseas holiday to the United States of America and Canada in December 2007. This holiday was paid for by one of Mr Segler’s clients.[87]
[87] Transcript, page 35.
Mr Segler has repeatedly failed to comply with Court Orders on time and to provide full and frank disclosure of his financial circumstances. Mr Segler was less than forthcoming in providing evidence to the Court in relation to his financial situation. This tends to suggest to the Court that Mr Segler is trying to hide something and is not providing full and frank disclosure of his financial circumstances.
Mr Segler has been found to be less than forthcoming in providing evidence of financial circumstances in proceedings in the Family Court of WA, and has failed to comply with orders of the Family Court of WA in proceedings before that court.
Mr Segler deposed that, save for his office and equipment, he has no assets of significance.[88]
[88] Mr Segler’s affidavit, sworn 25 May 2009, para.24.
Mrs Segler’s financial circumstances and conduct
Mrs Segler’s taxable income in the financial year ending 30 June 1999 was $6,419.[89]
[89] Ms Ling’s Affidavit, Annexure TL3.
Mrs Segler’s taxable income in the financial year ending 30 June 2000 was $5,652.[90]
[90] Ms Ling’s Affidavit, Annexure TL4.
Mrs Segler deposed that she worked for Mr Brennan over the same period as her husband (that is 2001 to 2004), on a contract basis, and that she was paid an average of $25,000 - $30,000 per annum, working at least 15 hours per week doing various office duties.[91] The joint taxable income for Mr and Mrs Segler during the period of bankruptcy was, on average, approximately $80,000 per financial year.[92]
[91] Mrs Segler’s Affidavit, para.16.
[92] Mrs Segler’s Affidavit, para.16.
Mrs Segler’s taxable income in the financial year ending:
a)30 June 2004 was $55,800, including money earned from Mr Brennan and from her own client files;[93]
b)30 June 2005 was $60,379;[94]
c)30 June 2006 was $40,512;[95]
d)30 June 2007 was $34,280;[96] and
e)30 June 2008 was $44,347.[97]
[93] Mrs Segler’s Affidavit, para.16; Transcript, page 45.
[94] Exhibit A3, Mr Segler’s Individual Tax Return for the year ended 30 June 2005.
[95] Ms Ling’s Affidavit, Annexure TL13.
[96] Ms Ling’s Affidavit, Annexure TL14.
[97] Ms Ling’s Affidavit, Annexure TL15.
There was an issue raised by the CS Registrar’s submissions as to the payment of wages to Mrs Segler out of the business expenses of Mr Segler, and whether or not that was a deliberate diversion of monies to reduce the income earned by Mr Segler. Ultimately the CS Registrar did not press any argument along these lines.[98]
[98] Transcript, page 53.
Mrs Segler has a mortgage on the couple’s home, and on 11 May 2009 a writ was taken out against her in the Supreme Court of Western Australia by the Bank of Queensland for an order for vacant possession of the house in 57 Hope Street, White Gum Valley, or judgment in the amount of $801,812.84, plus interest.[99]
[99] Mrs Segler’s Affidavit, Annexure SLS1.
Consideration
This matter involves a difficult balancing of a variety of conflicting issues.
For Mr Segler it can be argued that:
a)his health issues;
b)his bankruptcy;
c)his consequent inability to obtain credit;
d)some limitation on his ability to earn income during the years of his bankruptcy by reason of his having to be employed as a solicitor;
e)his current financial circumstances, which when taken together with those of Mrs Segler, would indicate that:
i)they do not have any savings to speak of, and are heavily indebted, particularly in relation to the mortgage of the White Gum Valley property, but have also been late in making other payments such as Mrs Segler’s daughter’s private school fees and Mr Segler’s Nedlands Golf Club membership; and
ii)they live from day-to-day and week-to-week, and
f)it is futile for the CS Registrar to continue to pursue the pre-sequestration child support arrears when:
i)the liability is more than a decade old;
ii)the liability is in respect of children who are adults, and who were adults at the time this application was made; and
iii)Mr Segler’s overall financial position remains less than sound,
are such that the Court could be satisfied that Mr Segler does not presently have the financial resources, or access to credit, which would enable him to make a lump sum payment of the child support arrears of $26,022.97. Further, it is probable, given the financial circumstances of Mr Segler, and Mrs Segler, that they would have significant, if not insuperable, difficulty in making regular payments of any amount of any significance in relation to these child support arrears. Further, it must be borne in mind that Mr Segler has further child support arrears in a sum which exceeds $100,000.
For the CS Registrar, it can be argued that:
a)the need for comity between judgments of the Family Court of WA and this Court;
b)Mr Segler’s course of conduct, at least since sometime in 1997, and so, before, during and after bankruptcy, evinces an intention not to comply with his child support obligations;
c)Mr Segler has failed, substantially, and certainly almost entirely since the making of the consent orders in 2006, to comply with his child support obligations;
d)Mr Segler’s failure to comply, or make any significant attempt at compliance, is all the more serious because he is a legal practitioner who is not complying with court orders (albeit that those court orders relate to his private and not his professional capacity);
e)Mr Segler’s various attempts to discharge his child support obligations, which have been unsuccessful in the Family Court of WA, and the observations made by that specialist court in relation to Mr Segler’s failure to comply with his child support obligations, and, as long ago as 1997, his maintenance of an extravagant lifestyle;
f)Mr Segler’s continued enjoyment of, and payment of membership fees for, his private recreational pursuit, namely, golf;
g)Mr Segler’s payment of sponsorship of a Nedlands Golf Club pennant team whilst not complying with his child support obligations;
h)Mr and Mrs Segler’s payment of private school fees for Mrs Segler’s daughter, in circumstances where Mr Segler had previously failed to comply with his child support obligations in relation to the educational expenses of his own children; and
i)Mr Segler’s failure to make any payment whatsoever towards his child support obligations in years, particularly 2007 and 2008, when his income was reasonably substantial, and part of that income was, albeit legitimately, distributed to Mrs Segler by way of payment for her services in relation to Mr Segler’s business as a legal practitioner,
demonstrate an intentional lack of compliance with his child support obligations, and an almost complete absence of good faith in relation to compliance with those obligations. In those circumstances, it is open for the Court to find that the public interest is best served by not allowing a person who has refused to, and not complied with, court ordered child support obligations, to escape any of those obligations by an order discharging liability for part of those obligations, notwithstanding:
j)that the obligations are long outstanding; and
k)Mr Segler’s current financial position.
This is not a case where Mr Segler did not have an income sufficient to enable him to make any child support payments at all. Mr Segler’s income, and his combined income with Mrs Segler in relevant years, has been adequate, and even reasonably substantial, and certainly sufficient to enable him to have made some child support payments, and possibly even pay the pre-sequestration liability, particularly in 2007 and 2008. Mr Segler’s circumstances are quite unlike those in, for example, Reilly, where the bankrupt made voluntary payments to his creditors, endeavoured to honour his commitments, and acted with probity, to his own detriment.[100] Further, it is evident that Mr Segler has continued to make financial and lifestyle choices (latterly in conjunction with Mrs Segler) which diminish his capacity to pay child support. Those choices have been made in full knowledge of the circumstances in which he finds himself in relation to his health, his status as a discharged bankrupt, his income and financial circumstances. Ultimately, the Court can only conclude that Mr Segler has failed to make any adjustment to his lifestyle so as to make proper provision for payment of child support. His conduct and circumstances in that regard simply appear to repeat his conduct and circumstances earlier, including his failure to pay his child support obligations. Mr Segler’s income was such that he had capacity to make child support payments, particularly during 2007 and 2008, but even earlier, in 1998-2000 when his income was quite ample. Mr Segler has chosen to live a lifestyle which exceeds his, and seemingly Mrs Segler’s, means, and at the same time, he has failed to comply with his legal obligations in relation to child support, and has subsequently failed to make, at least since 2006, any provision at all for his child support obligations in circumstances where he had the, or at least some, capacity to do so.
[100] Reilly at 272-273 and 278-279 per Lockhart J.
Ultimately, the requirement to pay child support obligations and comply with the law and court orders made under the relevant law, make this case one where the public interest in ensuring obligations are met and the law and court orders are complied with must prevail. The public interest is not served by discharging a liability for a person who has for a lengthy period failed to meet his child support obligations, and failed to comply with the law and court orders, in circumstances where he had the financial capacity to do so, but made other financial choices, as a consequence of which his child support obligations have not been met. To discharge a liability in such circumstances, which are Mr Segler’s circumstances, would be to encourage deliberate non-compliance with child support obligations, and disobedience to the law and court orders, particularly by those with sufficient resources to maintain such a course. That is not a course which is in the public interest.
In all of the above circumstances, the Court has determined that it would not be a proper exercise of its discretion to discharge Mr Segler’s liability for his pre-bankruptcy child support arrears of $26,022.97.
Conclusion
The Court has concluded that the application is to be dismissed. There will be an order accordingly.
The Court will hear the parties as to costs.
I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 25 February 2011
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