Syme & Wroe
[2009] FamCAFC 89
•28 May 2009
FAMILY COURT OF AUSTRALIA
| SYME & WROE | [2009] FamCAFC 89 |
| FAMILY LAW – APPEAL – PROPERTY – SECTION 79 – CONTRIBUTION – Where Appellant husband made significantly greater initial contribution – Where Federal Magistrate found parties’ non-financial contributions during the course of the marriage were equal – Where post-separation contributions favoured the Respondent wife – Where Federal Magistrate’s findings as to contributions were carefully identified – Where discretionary judgment – No merit in challenge to contribution assessment FAMILY LAW – APPEAL – PROPERTY – SECTION 75(2) – Where Appellant husband asserted an adjustment under s 75(2) was manifestly outside the ambit of discretion – Where Appellant husband asserted a 28 per cent differential in entitlements was not warranted – Where majority of assets received by husband not immediately realisable – Whether the adjustment made in the Respondent wife’s favour falls outside the reasonable ambit of discretion – Where both parties professionally qualified and employed – Where Federal Magistrate failed to consider the monetary impact of the adjustment – Where Federal Magistrate failed to explain factors warranting such a significant adjustment – Whether effect of ‘mix’ of assets retained by Appellant husband not given appropriate weight – Appeal allowed – Matter remitted for rehearing FAMILY LAW – APPLICATION IN AN APPEAL – LEAVE TO APPEAL – CHILD SUPPORT – Where Appellant husband ordered under s 124 to pay non-periodic child support – Where Federal Magistrate ordered that non-periodic payments not be credited against the administrative assessment – Whether the Federal Magistrate failed to identify any ‘special circumstances’ of the case which would warrant the order under s 125(2) – Lightfoot & Hampson (1996) FLC 92-663 and Ivanovic & Ivanovic (1996) FLC 92-689 followed – Circumstances considered by Federal Magistrate not ‘special’ such as to fall within the narrow ‘special circumstances’ outlined in Lightfoot – Proposed grounds have merit – Leave to appeal granted – Appeal allowed FAMILY LAW – APPLICATION IN AN APPEAL – FURTHER EVIDENCE – Where further evidence controversial – Application dismissed FAMILY LAW – COSTS – Appeal succeeded on the basis of an error of law – Costs certificates under the Federal Proceedings (Costs) Act 1981 sought and granted in respect of the appeal and the re-hearing |
| Family Law Act 1975 (Cth) ss 75(2), 79, 93A(2) Child Support (Assessment) Act 1989 (Cth) ss 102, 177, 123, 124, 125, 126 |
| Adam P Brown Male Fashions Pty Ltd v Phillip Morris & Anor (1981) 148 CLR 170 Wild & Ballard (1997) FLC 92-771 |
| APPELLANT: | Mr Syme |
| RESPONDENT: | Ms Wroe |
| FILE NUMBER: | SYC | 3519 | of | 2007 |
| APPEAL NUMBER: | EA | 77 | of | 2008 |
| DATE DELIVERED: | 28 May 2009 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Boland J |
| HEARING DATE: | 15 December 2008 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 3 June 2008 |
| LOWER COURT MNC: | [2008] FMCAfam 536 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lloyd |
| SOLICITOR FOR THE APPELLANT: | Blanchfield Nicholls Partners |
| COUNSEL FOR THE RESPONDENT: | Mr Batey |
| SOLICITOR FOR THE RESPONDENT: | Maclarens Solicitors |
Orders
The husband’s application for leave to appeal Orders 9, 10 and 11 made 3 June 2008 is allowed.
The appeal against Orders 2, 9, 10 and 11 of Federal Magistrate Sexton made 3 June 2008 is allowed.
Orders 2, 9, 10 and 11 of the orders of Federal Magistrate Sexton made 3 June 2008 be set aside.
The application for settlement of property be remitted for rehearing before a Federal Magistrate other than Federal Magistrate Sexton.
That the Court grants to the appellant husband a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by them in relation to the new trial ordered.
IT IS NOTED that publication of this judgment under the pseudonym Syme & Wroe is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 77 of 2008
File Number: SYC 3519 of 2007
| Mr Syme |
Appellant
And
| Ms Wroe |
Respondent
REASONS FOR JUDGMENT
Introduction
On 3 June 2008 Sexton FM made orders adjusting the property of Mr Syme (“the husband”) and Ms Wroe (“the wife”) under s 79 of the Family Law Act 1975 (Cth) (“the Act”). Her Honour divided the parties’ assets, which she found to be $1,484,580.00 as to 62 per cent or $920,439.60 in favour of the wife and 38 per cent or $564,140.40 in favour of the husband. Her Honour also made an order dismissing a departure application in respect of child support for the parties’ two children brought by the husband under s 117 of the Child Support (Assessment) Act 1989 (Cth) (“the CSA Act”), but she went on to make an order under s 124 of that Act that the husband pay 75 per cent of the children’s school fees and expenses. The Federal Magistrate determined under s 125 of the CSA Act that the children’s school fees and expenses should not be taken into account for the purpose of the husband’s liability to pay child support pursuant to an administrative assessment.
This is the husband’s appeal against the property orders and his application for leave to appeal the order made under s 125(2) of the CSA Act. The appeal, and the application for leave to appeal, is resisted by the wife.
At the hearing of the appeal the husband sought to rely on further evidence. I reserved my reasons in respect of the further evidence, and indicated I would publish my reasons in respect of that application at the same time as my reasons in respect of the appeal. I will return to that application later in these reasons.
The husband’s appeal was argued under essentially two topics – asserted error in the contribution assessment, and in the adjustment made under s 75(2) in the wife’s favour. Encompassed in each challenge was an assertion of inadequacy of reasons unpinning her Honour’s assessment, and in the case of the contribution assessment, a claim of “double-counting”. However, the primary basis of the husband’s appeal was his assertion that the Federal Magistrate’s adjustment of 14 per cent to reflect relevant factors under s 75(2) was outside the reasonable ambit of her Honour’s discretion.
The husband’s counsel argued that if I found appealable error established in respect of any ground, then in order to properly re-exercise the discretion, I should admit the husband’s further evidence which was in broad terms that he had been terminated from his very well paid employment, and was unemployed.
Addressing the husband’s application for leave to appeal the child support orders, counsel for the husband argued this should be dealt with as an appeal, rather than requiring the husband to file an application at first instance seeking a variation by way of departure on the basis of the husband’s changed circumstances. Thus he submitted it would be appropriate for me to deal with the child support aspects of the husband’s appeal as, if the husband was successful in relation to these grounds, it would also demonstrate error in the Federal Magistrate’s s 75(2) adjustment.
I heard this appeal pursuant to a direction of Chief Justice Bryant pursuant to s 94AAA(3) of the Act.
I propose to set out brief background material which gives context to this appeal, and application for leave to appeal. Thereafter, I will consider the contribution grounds by reference to her Honour’s reasons, and the submissions made by each party. I will adopt the same procedure in respect of the challenge mounted to her Honour’s s 75(2) adjustment. I will then consider the child support challenge, and the application to adduce further evidence.
Background
The following background appears in her Honour’s reasons for judgment and is not controversial.
At the date of the hearing before the Federal Magistrate the husband was aged 39 years and the wife 41 years. The parties were married in 1995 and they physically separated in January 2005. At separation the wife moved into her parents’ home where she remained until December 2006. She thereafter rented accommodation.
The husband remained living in the property at M Street, on the lower north shore (“the matrimonial home”) until the sale of that property in November 2006. The husband then moved into the home of his current partner, Ms O, in a northern suburb.
At the date of the hearing the husband was engaged as an Accounts Manager for CS, a US based software company. The wife was a solicitor engaged in full-time employment with an insurance/investment company. The children were living with the husband for five nights each fortnight and for one half of all school holidays. At all other times they were living with the wife.
At the commencement of cohabitation the husband owned a property at D Road, also on the lower north shore (“the first property”). The husband had equity of approximately $70,000.00 in the D Road property at the commencement of cohabitation. Additionally the husband owned an Audi motor vehicle, household contents and AMP shares. He also had a GIO superannuation entitlement with a value of $19,912.00.
At the commencement of cohabitation the wife had “minimal”, if any, assets.
From 1995 until March 2002 the parties lived in the D Road property which was substantially renovated. The D Road property was sold in March 2002 and the parties received net proceeds of sale of approximately $370,000.00.
The parties applied the net proceeds of sale of the D Road property to the purchase of the matrimonial home. The matrimonial home was purchased for a purchase price of $850,000.00.
The parties’ elder child, A, was born in August 1999. He was aged eight years at the date of the hearing.
The parties’ younger child, E, was born in March 2001. E was aged seven years at the date of the hearing.
In 2003 the parties purchased an investment property in the northern coast area, as well as a half share in an investment property at W Road on the lower north shore. The majority of the purchase price of the investment properties was borrowed. The investment properties were sold in July 2006 and net proceeds of sale totalling $127,741.00 were retained in a solicitor’s trust account pending the determination of the property proceedings.
In 2004 the wife contributed retrenchment monies of $44,410.60 in reduction of the mortgage secured over the matrimonial home. The husband also made reductions in the mortgage by applying bonuses received from his employment to the mortgage loan account so that account was in credit at the date of separation in the sum of approximately $100,000.00.
Throughout the marriage the husband was engaged in full time employment working for four different companies until 2000 when he joined CS.
At the commencement of cohabitation the wife was working full time as a secretary and studying law. The wife had two periods of maternity leave, each of approximately 12 months duration, and until May 2004, worked as a solicitor on a part time basis. The wife ceased employment in May 2004. At the date of the hearing the wife had resumed work on a full time basis.
In December 2004, shortly prior to the parties’ separation, the husband withdrew $20,000.00 from the parties’ joint loan account and applied those funds to the parties’ credit card debts.
In January 2005 the husband withdrew $18,600.00 from the joint loan account which he also used in part to pay credit card debts but retained $10,000.00 for his own use.
In September 2005 the parties withdrew $53,514.00 from the joint loan account and applied that sum to discharge the lease on the wife’s Volvo motor vehicle which was then transferred to the wife’s sole name.
Following separation and until September 2005 the husband paid outgoings on the matrimonial home, lease payments on the parties’ two motor vehicles, home and car insurance, car registrations, the shortfall between the income and expenses on the investment properties, the wife’s mobile phone, school fees for the children, and until the wife commenced work, $500.00 cash per month to the wife.
From July 2005 until its sale in October 2006 the husband did not make payments pursuant to the mortgage secured over the matrimonial home.
At the date of the hearing the children were attending a private school on the Lower North Shore (“Z School”). Their tuition fees totalled $31,000.00 per year.
In August 2005 the wife sought an assessment of child support. Thereafter the husband paid various monthly amounts of child support and various changes were made to the child support assessment. The assessment in place for the period 4 February 2008 to 30 June 2008 was for $3,042.33 per month. The husband sought to depart from that assessment before the Federal Magistrate.
Trial judge’s reasons - contribution
At the commencement of her reasons, the Federal Magistrate referred to the two applications before her noting that the parties had resolved parenting issues in dispute between them. At paragraphs 7 to 28 of her Honour’s reasons for judgment, she dealt with disputed assets to be included in the pool available for division and concluded that the parties’ net assets, including superannuation, had a value of $1,484,580.00. No challenge is raised in respect of her Honour’s findings about the pool to be divided between the parties.
At paragraph 29 of her reasons, her Honour referred to the decision of the Full Court in Aleksovski & Aleksovski (1996) FLC 92-705 and, at paragraph 31, commenced her discussion of the parties’ contributions during cohabitation dealing firstly with their financial contributions during cohabitation. At the conclusion of that paragraph her Honour found that the husband had property, including superannuation, with a value approaching $100,000.00 at the commencement of cohabitation and, at paragraph 32, made a finding that the wife had “minimal”, if any, net assets at the commencement of cohabitation.
Her Honour recited the use which the parties made of the D Road property, and referred to authorities on the weight to be afforded to initial contributions. Her Honour found, at paragraph 36, that the funds generated from the sale of the D Road property were used “in significant part” to purchase the former matrimonial home.
Having explained the nature of the improvements carried out to the D Road property, and recorded the parties’ agreement about the wife’s role as primary homemaker following the birth of the children, her Honour concluded, at paragraph 37, as follows:
Given the use made by the parties of the [D Road property], while I find the wife made both indirect financial contributions and non-financial contributions to that property, I am satisfied the husband is entitled to an adjustment on contributions in his favour as a result of this and his other initial contributions, but not to the extent submitted by his counsel.
Thereafter, prefaced by a heading “Employment”, at paragraph 38, the Federal Magistrate recorded the agreement of the parties that the husband “earned significantly more than the wife during the marriage and … made the greater direct financial contribution to the acquisition of the parties’ assets”. At paragraph 41 her Honour concluded that both parties contributed their income “to the benefit of the family”. There is no challenge in respect of that finding.
At paragraphs 42 and 43 her Honour referred to the acquisition of property during the parties’ marriage funded from “joint resources”, and she concluded, at paragraph 45, “[o]n a weighing of all these factors, I am satisfied the husband made the greater direct financial contributions during the period of cohabitation”.
At paragraphs 46 to 49, under the heading “Non-financial contributions during cohabitation”, the Federal Magistrate discussed what she referred to as “[t]he husband’s largely unchallenged evidence” that he was responsible for the financial management of the household. Her Honour also recorded the husband’s evidence concerning his contributions to the renovation and improvements to the D Road property and the matrimonial home. At paragraph 49, her Honour concluded “I am satisfied the parties made approximately equal non-financial contributions during cohabitation”.
Her Honour then turned, under the heading “Contributions to welfare of the family during cohabitation”, to discuss assertions made by the wife about the husband’s consumption of alcohol and concluded, at paragraph 51, “I am satisfied that the wife carried the majority [sic] responsibility for the domestic tasks and care of the children day to day during cohabitation, and therefore made the greater contribution to the welfare of the family”.
Although still appearing under the heading “Contributions to welfare of the family during cohabitation”, at paragraphs 53 and 54 of her reasons, her Honour said:
The wife’s counsel urges the court to find that each party made equal contributions during cohabitation, taking into account the husband’s initial contribution and the fact that the wife had the majority care for the children and the household, as well as contributing income to the fullest extent of her capacity to do so. The husband’s counsel submits the court should assess the husband’s contributions during cohabitation as significantly greater than those of the wife, because of his substantially greater initial contribution.
On a weighing of the contributions made overall by each party during the course of cohabitation, I assess the husband to have made the greater overall contributions because of his substantially greater initial capital contribution and the way in which the husband’s equity in [D Road] was used by the parties. However, I find the difference in each party’s contributions assessed at separation is considerably lessened because of the wife’s greater contributions in relation to the running of the household and the care of the children, and because the wife also earned an income which she contributed to the expenses of the family. [emphasis added]
Her Honour concluded her contribution discussion by considering, under the heading “Contributions after separation”, firstly, financial contributions during the period from separation to trial. Her Honour recorded the draw downs from the joint loan facility and set out, in paragraph 56 of her reasons, the gross income of the husband which disclosed:
·$305,898.00 “in the 2005 financial year”;
·$255,345.00 “in the 2006 financial year”;
·receipt of gross income of $217,739.00 to 31 May 2007; and
·the first half of the 2008 financial year gross income of $158,686.51 (with a base annual income of $115,000.00).
Having noted each party’s living arrangements after separation her Honour explained, at paragraph 60:
There was no real challenge to the husband’s evidence that for a few months after separation, he paid the outgoings on the former matrimonial home in which he was living, the lease payments on the parties’ two cars, home and car insurances, car registrations, the shortfall between the income and expenses on the two investment properties, the wife’s mobile phone, school fees for the children at [Z School], and until the wife commenced work, $500 cash payments each month to the wife. The husband acknowledges contributing funds each month until July 2006 to the employee share purchase plan, for which he received a refund of $11,622 in September 2006. The husband says he did not pay any mortgage instalments on the former matrimonial home after July 2005, because he had contributed to the loan account with his bonus payments so by separation the facility was ahead by $100,000. He says “something had to give…” as he could not meet all his financial commitments which included the school fees. The husband conceded that he had intended to continue to meet the mortgage repayments, and chose not to use money he held in his bank account to meet those payments.
Later, at paragraphs 61 and 62, the Federal Magistrate summarised the wife’s assertions concerning her use of the husband’s credit card until May 2005. At paragraph 63 of her findings in respect of the mortgage repayments (or more correctly lack thereof by the husband post separation) her Honour said:
I do not accept the husband’s explanation for stopping repayments on the mortgage, nor that his decision to do so was reasonable or necessary. The husband was living in the home. The wife had contributed indirectly to the additional payments made on the loan account prior to separation which put the facility in advance. The husband was earning a high income. The wife had the majority care of the children and was largely supporting them. I make a contribution adjustment in favour of the wife as a result of these factors.
Later, at paragraph 65, her Honour set out her conclusions about post separation financial contributions and said:
On a weighing of these factors, particularly the fact that the husband withdrew substantial funds from the parties’ joint accounts and did not meet the mortgage payments after July 2005, I am satisfied the parties’ financial contributions after separation favour the wife. [emphasis added]
Thereafter, her Honour turned to consider “Non-financial contributions and contributions to the welfare of the family after separation”. Having noted the care arrangements for the children her Honour accepted submissions made on the wife’s behalf that for the period after separation the wife had made the “greater overall contributions” (to the welfare of the family).
Her Honour then proceeded, under the heading “Conclusion on overall contributions”, to record each party’s submissions on contribution and to set out her conclusions as follows:
On a weighing of each party’s contributions during cohabitation and after separation, I assess the husband’s contributions at 52% and the wife’s contributions at 48% of the net pool available for distribution. (paragraph 70)
The contribution grounds
Grounds 1 and 2 were directed to an asserted of lack of adequate reasons by the Federal Magistrate, and an asserted “double counting” error. The husband’s counsel submitted her Honour had failed “to articulate the degree to which she took the husband’s initial contribution (relative to other contributions found) into account in determining ultimate contributions overall” (husband’s submission page 1).
Counsel for the husband further submitted that the Federal Magistrate had, at paragraph 54, made a finding that the husband made “a greater overall contribution because of his substantially greater initial contribution” but he submitted she failed to give any reason as to how her findings translated into her assessment of contributions of 52 per cent by the husband and 48 per cent by the wife.
It was asserted the learned Magistrate had fallen into error by “double counting the income earned by the wife when concluding that the divergence or difference of contributions was significantly lessened by that fact.” It was submitted:
… At that point of the judgment it is respectfully submitted that a reader of the judgment would not have any idea as to where contributions fell at that time so as to understand the next phase of the judgment dealing with contributions post-separation, as it is submitted that the learned Trial Magistrate gives no adequate or any reasoning as to her conclusion as to contributions found at paragraphs 69 and 70. (Husband’s submissions, unnumbered p 3)
Appellate principles
This was an appeal against a discretionary judgment. The limits on appellate interference with such a judgment are well known. In Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 at 345 Asquith LJ said:
… It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.
Relevant principles – adequacy of reasons
The necessity for adequate reasons in respect of an application for final orders is not in doubt. The rationale underlying this necessity has been discussed in many authorities, as have the qualifications to the underlying principle. In summary, the giving of reasons fulfils at least three essential criteria in the administration of justice. First, reasons provide an explanation of the path which led a Judge to his or her decision. Second, reasons enable a party to exercise appeal rights – this requires reasons to be sufficient to enable an appellate court to determine the findings of fact and the law on which the judgment is based. Third, reasons enable unsuccessful party to understand why a claim was rejected. For the purposes of this appeal, it is unnecessary to discuss the role played by reasons in the development of precedent, and their educative purpose although this role, as will be later discussed, has relevance to the application for leave to appeal. (see Bennett & Bennett (1991) FLC 92-191, Pettitt v Dunkley (1971) 1 NSWLR 376, Housing Commission of NSW v Tatmar PastoralCo Pty Ltd (1983) 3 NSWLR 378 and Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247)
Discussion
Counsel for the wife in his written submissions noted that “[p]rovided the learned Federal Magistrate’s course of reasoning can be followed revealing that she accepted and maintained the husband’s greater initial contribution, there is no requirement for an exact dollar or % finding to be made to each and every contribution when assessing the various components of the party’s [sic] contributions”. For reasons I will shortly more fully explain, I accept that submission.
As I have already noted the husband’s contribution challenge was agitated on three bases: First, counsel for the husband was critical of the Federal Magistrate’s post separation contribution findings. He asserted that as there was no finding of waste by the husband, nor that his conduct in not making payments pursuant to the mortgage fell within the principles enunciated by Baker J in Kowaliw & Kowaliw (1981) FLC 91-092 that her Honour was in error in making an adjustment in the wife’s favour for post separation contributions in that she “double counted” the wife’s financial contributions, or failed to explain how her financial contributions post separation exceeded those of the husband. Second, the husband’s counsel submitted the path of her Honour’s reasoning in arriving at the parties’ entitlements expressed as a percentage of their assets was not discernable. Third (and overlapping with his challenge to the adjustment under s 75(2)) was the contention that the division of the parties’ assets on a contribution assessment was outside the reasonable ambit of discretion.
Did her Honour “double count”?
The nub of counsel for the husband’s argument on this topic was that her Honour, at paragraph 45 of her reasons, had assessed and made findings about each party’s financial contributions, and concluded during cohabitation the husband’s financial contributions exceeded those of the wife. Then, at paragraph 54, her Honour under the heading “Contributions to the welfare of the family during cohabitation said:
On a weighing of the contributions made overall by each party during the course of cohabitation, I assess the husband to have made the greater overall contributions because of his substantially greater initial capital contribution and the way in which the husband’s equity in [the first property] was used by the parties. However, I find the difference in each party’s contributions assessed at separation is considerably lessened because of the wife’s greater contributions in relation to the running of the household and the care of the children, and because the wife also earned an income which she contributed to the expenses of the family. [emphasis added]
Although paragraph 54 appears under the heading “Contributions to the welfare of the family during cohabitation” I am satisfied on a fair reading of her Honour’s reasons that she did not fall into error by “double counting” the wife’s financial contributions at this point in her reasons. At paragraph 53 her Honour summarised the submissions made by each party’s counsel, and in paragraph 54 recorded her overall findings about contributions during the marriage. Those findings encompassed both financial contributions and contributions to the welfare of the family.
Post separation contributions
The second complaint agitated by the husband’s counsel focused on her Honour’s post separation contribution findings. It is not asserted that her Honour was in error in her finding that the wife had contributed indirectly to the additional payments made on the mortgage account prior to separation, namely by the contribution of her redundancy monies. Thus the submission that the wife received a benefit from the husband by reason of the drawdown in the mortgage to purchase her motor vehicle post separation is without substance.
It is not asserted that her Honour made any error of fact in her findings that during the post separation period the husband was earning a high income. Nor is it asserted that her Honour was in error in her finding that the husband had drawn down the sum of $18,600.00 on the mortgage and retained $10,000.00 for his own use.
I was referred to both parties’ affidavit evidence of their post separation financial contributions. That evidence disclosed that the husband ceased making payments in respect of the mortgage secured over the matrimonial home in July 2005, and by September 2005 the husband ceased payments he had voluntarily made up until that date including the periodic payment of $500.00 per week to the wife. The husband was assessed to pay child support and paid such child support from September 2005. I was not directed to any other financial contribution asserted to have been made by the husband in the period of approximately three years from separation up until the trial. The husband had the benefit of occupation of the matrimonial home until its sale in November 2006. There was no dispute that the wife returned to full time employment after separation and that her earnings were used for her support, the support of the children including payment of school fees, board to her parents, and subsequently rent for her accommodation.
In Norbis & Norbis (1985-1986) 161 CLR 513 at 524 Mason and Deane JJ in referring to the different approaches which may be employed to assessment of contribution said:
…The Family Court has rightly criticized the practice of giving over-zealous attention to the ascertainment of the parties’ contributions, and we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.
As the authorities make clear, it is not necessary for a trial Judge to detail each factor which he or she has found relevant, or to give “over zealous” attention to each and every contribution. The evidence before her Honour was sufficient to enable her to make the finding in paragraph 65 that “the parties’ financial contributions after separation favour the wife”.
Were her Honour’s contribution reasons adequate?
As to the general complaint of lack of adequate reasons to support the adjustment of the parties’ assets in percentage terms to 52 per cent to the husband and 48 per cent to the wife, it is apposite that I refer to the discussion in Brodie & Brodie [2009] FamCAFC 6 a recent decision of the Full Court (Boland, Thackray and Watts JJ). At paragraph 90, the Full Court discussed, and cited with approval, the decision of Coleman J in Steinbrenner & Steinbrenner [2008] FamCAFC 193, of the transition from qualitative assessment of contribution to quantitative assessment as follows:
In Steinbrenner & Steinbrenner [2008] FamCAFC 193 Coleman J, on hearing an appeal from a Federal Magistrate as a single Judge, dealt with an appeal ground which asserted the Federal Magistrate had erred in his contribution based assessment and awarded the wife a sum which was unjust. In considering the transposition from evaluation of actual contributions to determination of a monetary sum (or impliedly a sum represented by a percentage of assets), his Honour said at paragraph 234:
Given that the evaluation of contribution based entitlements inevitably moves from qualitative evaluation of contributions to a quantitative reflection of such evaluation, there will inevitably be a “leap” from words to figures. That is the nature of the exercise of discretion, whether it be in the assessment of contributions in the matrimonial cause, assessment of damages in a personal injuries case, or determination of compensation in a land resumption case. In some cases, the “leap” is so great, and so unheralded by the discussion which precedes it as to render the reasoning process defective. …
In this case, her Honour carefully identified and made findings about:
·the husband’s greater initial financial contributions;
·the greater financial contributions by the husband during cohabitation to the acquisition and maintenance of assets;
·greater contributions by the wife to the welfare of the family;
·equal non-financial contributions by each of the parties up to the date of separation;
·the wife’s greater contribution to the welfare of the children after separation;
·the wife’s financial contributions post separation which she found exceeded those of the husband.
This was a discretionary judgment. The ambit of the parties’ contribution assessment was delineated by their counsel in their respective final addresses. The husband submitted that contributions overall should be assessed in his favour at 60 per cent, (with no s 75(2) adjustment) (Transcript 30 January 2008, p 150) and the wife submitted her contribution based entitlement to separation should be 50 per cent, with some further adjustment to reflect her post-separation contributions of between 5 and 10 per cent) (Transcript 30 January 2008, p 171). Accepting the discussion of Coleman J in Steinbrenner as correct nothing to which I was referred established appellable error by her Honour in her contribution based assessment, or her reasons underpinning that assessment which are readily discernable on a fair reading of her Honour’s reasons. I am satisfied there is no merit in grounds 1 and 2.
The s 75(2) challenge
The principal challenge to her Honour’s property orders was the challenge enunciated in ground 4 of the Notice of Appeal, namely that an adjustment of 14 per cent for factors under s 75(2) was “manifestly outside the proper exercise of judicial discretion”.
It was further asserted that her Honour erred in failing to give proper weight under s 75(2) to the fact that the assets to be retained by the husband were non-realisable assets, and that the wife maintained the majority of the realisable assets.
The trial Judge’s consideration of matters under s 75(2)
Her Honour dealt with matters she considered relevant under s 75(2) in paragraphs 72 to 78 of her reasons. Having noted the respective ages of the parties, namely, that the husband was 39 years and the wife aged 41 years, her Honour then, at paragraphs 74 and 75, dealt with each party’s income and earning capacity:
74.The husband has a current gross income with entitlements well in excess of $300,000 a year, in addition to a car allowance. The wife earns $92,000 gross a year. The husband may earn substantially more, depending on his bonus entitlements, even though the wife may also receive a more modest bonus payment. Each party receives superannuation in excess of the employer statutory requirement, that figure being greater for the husband as a result of his higher salary.
75.The Full Court said In the Marriage of Clauson that:
It has long been recognised that in most cases the most valuable “asset” a party can take out of the marriage is a substantial, reliable income earning capacity.
The husband has earned a high income over many years and has worked in the same company for a number of years. I am satisfied the husband is likely to earn a much higher income than the wife in the foreseeable future, and has the potential to earn a higher salary than he does now. I make a significant adjustment in favour of the wife as a result of this factor. [footnote omitted]
At paragraph 76 of her reasons, her Honour noted that the husband was living with his de facto partner and that he claimed not to know her income but paid $675.00 towards her weekly expenses. Her Honour said:
… The husband adduces no evidence of [Ms O’s] financial position. Section 75(2)(m) of the Act provides that the financial circumstances relating to a party’s cohabitation with another person is a relevant factor to be taken into account. Section 75(2)(o) provides that the court should also take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.” Although the wife’s counsel did not address me on this issue, in my view, [Ms O’s] financial position is a factor to which I should have regard when assessing the future needs of each party, as it is likely to have a direct bearing on the husband’s future needs. The husband adduces no evidence as to why he provided no evidence of [Ms O’s] financial position. On the High Court authority of Jones v Dunkel, I draw the inference that [Ms O’s] evidence, if adduced, would not have assisted the husband’s case. As a result, I make a further adjustment in the wife’s favour. [footnote omitted]
At paragraph 77 of her reasons, her Honour recorded the submissions made on behalf of the husband’s counsel about the nature of the assets each party may retain and noted that the wife’s counsel agreed this was a factor to which her Honour should have regard. Her Honour said:
… I agree with counsel that on each party’s case, the husband will receive his superannuation entitlements, and his share options, neither of which the husband can access at this time. The wife, on the other hand, will take the majority of her entitlement in realisable assets. I am satisfied it is appropriate to make an adjustment in favour of the husband as a result of this factor.
Her Honour then recorded the submissions made on behalf of the husband, namely, that there should not be any adjustment to her Honour’s contribution based assessment as a result of factors under s 75(2).
In dealing with the submissions made on behalf of the wife her Honour explained:
I understand Mr Batey submits that at worst, the wife should receive 65% overall, and a greater adjustment under s.75(2) if she fails in her child support application for non-periodic support. Mr Batey then says that the wife would accept the whole of the trust funds held on behalf of the parties, in addition to the assets and liabilities she presently holds, whatever the precise percentage division that would give her. (paragraph 78)
Her Honour then went on to consider any other orders affecting the child or either party and child support payable or likely to be paid in the future for the children of the marriage. Her Honour noted that the husband was paying $3,042.00 per month pursuant to a Child Support Agency assessment which “includes a component for two thirds of the children’s school fees and expenses” (paragraph 79).
Her Honour then, foreshadowing the orders she proposed to make pursuant to s 124 of the CSA Act, said:
… As a result of these Orders, the husband will pay 75% of the children’s tuition fees and school related expenses at [Z School], currently under $30,000 per annum. He will also pay a periodic sum assessed by the Agency, based on his income presently capped at approximately $113,000, the wife’s income and the amount of time the children spend with him. …
Whilst noting the effect of her proposed orders was that the husband’s periodic liability would be “significantly less than his current periodic liability” he would have an obligation to pay approximately $29,000.00 per annum in school related expenses. Her Honour indicated that she would take the husband’s greater child support liability into account in assessing the adjustment in favour of the wife overall.
Her Honour set out her conclusions on relevant s 75(2) factors at paragraph 80 as follows:
On a weighing of the s.75(2) factors referred to and the husband’s future child support liability, I make an adjustment in favour of the wife of 14%. This will give the wife an overall 62% of the net pool and the husband 38%.
Discussion – s 75(2)
The husband’s counsel argued that on the facts of this case a 28 per cent differential in the asset pool or the wife receiving $356,299.00 more than the husband was not warranted on the s 75(2) factors identified by the Federal Magistrate. He asserted the error was compounded when regard was had to the fact that the husband would not be able to access his entitlements, particularly his superannuation entitlements, for many years hence, and that his entitlements included a notional asset being legal fees paid of $57,139.00.
Whilst counsel for the wife referred to the findings of the Federal Magistrate he focussed his submissions on the discretionary nature of her Honour’s judgment. He conceded that her Honour did not identify as a relevant factor the wife’s care of the two children of the marriage when considering matters under s 75(2) but submitted such responsibility should be implied as having been taken into account by her Honour. It was not in dispute that pursuant to consent orders made between the parties the children spend five nights per fortnight during school terms with the husband and one half of all school holidays. His counsel submitted, in broad terms, this equated to the children being in the husband’s care for approximately 40 per cent of the time.
In his oral submissions, counsel for the husband referred to the fact that her Honour identified only four factors as requiring consideration under s 75(2), those being:
·the superior earning capacity of the husband;
·the financial circumstances of the husband’s cohabitation with his de facto partner;
·the mix of assets to be retained by the husband being non-realisable assets; and
·the husband’s substantial liability for child support and payment of private school fees and expenses.
It is clear from her Honour’s reasons that she found “a significant adjustment” should be made in favour of the wife as a result of the differential in the parties’ income earning capacities. The Federal Magistrate indicated that she would make a further adjustment in the wife’s favour pursuant to s 75(2)(o) by reason of the husband’s failure to adduce evidence of his de facto partner’s financial position.
Her Honour does not indicate in her reasons whether she considered the husband’s overall financial circumstances as a result of her contribution assessment, nor did she indicate the weight she afforded to the fact the wife would retain the majority of the realisable assets. At this point in her reasons her Honour did not refer to s 75(2)(na) although I accept that her Honour did, in discussing s 79(4)(g), take into account the husband’s financial commitments to the children prior to arriving at her ultimate conclusions in relation to s 75(2).
I am unable to accept the submission of the wife’s counsel that her Honour impliedly in her consideration of s 75(2) factors considered the wife’s care of the children under s 75(2)(d) as a relevant consideration. Any discussion of the wife’s care of the children is absent from her Honour’s reasons.
Thus I am left to consider whether on the factors in s 75(2) of the Act identified by her Honour as relevant, the adjustment made in the wife’s favour, falls outside the reasonable ambit of her Honour’s discretion.
In Clauson & Clauson (1995) FLC 92-595 at 81,911, Barblett DCJ, Fogarty and Mushin JJ said when discussing an adjustment under s 75(2):
There is, we think, at times a tendency to assess s. 75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s. 75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.
In this case, the difference between what the husband retained and the wife retained on a mathematical calculation was $356,298.00. Whilst there was a significant difference in the earning capacities of the parties at the date of trial, the wife had professional qualifications, was engaged in full time employment as a solicitor and was earning a reasonable salary with the potential to receive bonus entitlements.
The husband’s superannuation was included in the parties’ assets at its present day value and it is not in dispute that the superannuation will be of considerable worth to him when accessible. It was unlikely, however, absent hardship grounds, that the husband would be able to access his superannuation entitlement for many years. The husband could sell his CS shares. Those shares were included in the list of the parties’ assets and liabilities with Capital Gains Tax taken into account in arriving at the value, but his CS options were not immediately realisable.
The result of the Federal Magistrate’s orders, including the s 75(2) adjustment, had the effect of leaving the husband, after payment of his debts and if he sold the CS and other shares, with realisable assets of $236,061.40 and the wife retained realisable assets of $816,789.60 after payment of her debts. Each party additionally had a motor vehicle, furniture and superannuation (husband’s superannuation $190,034.00 – wife’s superannuation $62,650.00).
I find merit in the arguments of the husband’s counsel on this topic. Her Honour did not consider the monetary impact of her adjustment (a differential of $356,299.00), nor did she explain in her conclusions which factor or factors she identified under s 75(2) warranted such a significant adjustment. I am satisfied that her Honour’s exercise of discretion in relation to the s 75(2) adjustment made to the wife was outside the reasonable ambit of her discretion. This error is compounded when regard is had to the “mix” of assets to be retained by each of the parties having regard to their future needs. I am thus satisfied there is merit is ground 4 of the Notice of Appeal, and that the appeal should be allowed.
Child support
Federal Magistrate’s reasons
In her Amended Response to an Application for Final Orders the wife sought an order pursuant to s 124 of the CSA Act that the husband provide child support for the children otherwise than in the form of periodic payment, specifically that the husband pay 75 per cent of the school fees and all associated costs for the children to attend Z School, together with 75 per cent of all of the costs and expenses associated with the children’s extra curricular and sporting activities, private health insurance and 75 per cent of all medical, dental and orthodontic expenses not otherwise covered by private health insurance.
In his Minute of Order filed at the commencement of the trial, the husband sought a departure order such that the rate of child support to be paid by him should be $2,200.00 per month.
The Federal Magistrate dealt with the issue of child support commencing at paragraph 87 of her reasons. She noted the payments made by the husband in accordance with an assessment commencing in September 2005 and further noted that following the wife applying for a change of assessment in October 2005 child support was increased to $3,476.00 per month, such sum taking into account one half of the children’s school fees at Z School.
Her Honour thereafter set out the various assessments in place from time to time and noted that the current assessment for the period 4 February 2008 to 30 June 2008 was in the sum of $3,042.33 per month, and that the parties agreed that this assessment included a component for two-thirds of the children’s school fees/expenses. Her Honour noted that the husband’s employer paid his private health insurance which included cover for the children.
Having noted the parties’ competing applications, and the wife’s stated aim of not having to keep returning to the Child Support Agency, her Honour recorded she had questioned the wife’s counsel as to how the orders sought would achieve that objective.
At paragraphs 92 to 98, her Honour set out the relevant provisions of the legislation and the relevant legal principles to be applied in determining a child support departure application. There is no challenge in the application to the correctness of her Honour’s statement of the law in respect of departure applications.
Having discussed the husband’s application for departure, which she rejected, and to which there is no challenge in this proposed appeal, her Honour turned to consider the wife’s application for periodic child support commencing at paragraph 111 of her reasons. Her Honour noted that the wife’s counsel relied on s 117(2)(b)(ii) of the CSA Act and recorded the parties’ agreement to enrol the children at a private school. Her Honour then set out the wife’s further contentions, namely given the earning capacity of the husband, compared to her gross annual income, that the husband should be required to contribute 75 per cent of the children’s tuition fees and other school related expenses.
Her Honour then recorded:
… The wife says that fixed amount can then be taken into account when assessing the husband’s periodic child support assessment from time to time. The mother seeks these additional amounts pursuant to s.124 of the Act. Mr Batey, the wife’s counsel asks the court not to interfere with the present assessment of the Child Support Agency, but to leave it as it is, accepting that the assessment is likely to change once the father advises the Agency of the order the wife asks the court to make in relation to school fees and school related expenses. … (paragraph 112)
Her Honour then explained that the present assessment included a component for two-thirds of the children’s school fees.
At paragraph 115 of her reasons, her Honour explained her obligation to determine, under the provisions of the Act, whether an order for payment of school fees should be credited against the current child support assessment or be in addition to it.
Her Honour then set out the basis on which she calculated that it was just and equitable between the parents that the husband should pay 75 per cent of the children’s tuition fees and school related expenses. Her Honour then said, at paragraph 119:
…Section 125(2) of the Act provides that if the court states the non-periodic child support is not to be credited against the liable parent’s liability under any relevant assessment, the court must be satisfied, in the special circumstances of the case, that it would be just and equitable, as regards the children, the carer and the liable parent, and otherwise proper.
Her Honour set out her conclusions in paragraph 120 as follows:
Having regard to the objects of the Act, my findings as to the needs of the children, my findings as to each party’s financial position, my findings as to each party’s commitments, and having regard to any hardship that would be caused to the children or the parties, I have decided it is just and equitable for the husband to pay child support under any relevant assessment without his liability for school fees and school related expenses being credited against his liability under an assessment. I have decided it is otherwise proper to make the statement under s.125(2) having regard to the objects of the Act set out in s.117(5) that it is the parents of the children who have the primary obligation to maintain the children.
The child support challenge
The Federal Magistrate’s orders
The husband relied on two grounds of appeal if leave was granted to appeal her Honour’s child support determination. It aids understanding of the husband’s challenge if I set out Orders 7 to 11 inclusive of her Honour’s orders. They provide as follows:
(7)Until each child completes his secondary education, or attains the age of 18 years, whichever is the later, the husband be responsible for the children’s private health cover.
(8)Pursuant to s.124 of the Child Support (Assessment) Act 1989 the husband pay to the wife 75% of the following expenses of the children relating to their attendance at [Z School] from 1 January 2008 until each child completes his schooling:
(a)Tuition fees;
(b)Local excursion fees;
(c)Uniform costs including sports uniforms, school shoes and sports shoes;
(d)Other compulsory expenses relating to the children’s attendance at the school;
(e)Extra curricular fees including costs of equipment required for those extra curricular activities, provided that the parties have agreed in writing to the child enrolling in such extra curricular activity.
(9)The payments referred to in Order (8) not to be credited against any administrative assessment for child support for which the husband is responsible to make payment.
(10)The payments referred to in Order (8) not be used by either party as a basis for departure from any Child Support Agency assessment including as a non-agency payment.
(11)The husband pay child support in accordance with the Child Support Agency’s assessment from 1 January 2008, such assessment to be re-calculated from 1 January 2008 to exclude any component for school fees or school related expenses.
Counsel’s submissions
The husband asserted error by the Federal Magistrate in failing to give any proper reasons or to identify the special circumstances of the case which would warrant the activation of s 125(2) of the CSA Act.
He further asserted error by the Federal Magistrate in determining that the school fees and associated costs were not to be credited against administrative assessment for child support in the future, having regard to the quantum of those payments (75 per cent of approximately $31,000.00 for school fees and 100 per cent of school related activities and clothing at $184.00 per week, an additional $7,696.00 per annum).
I note in relation to proposed ground 6(c) that it is not consistent with Order 8 made by the Federal Magistrate which provides for the husband’s liability for school related activities and clothing to be 75 per cent of such expenses.
Counsel for the wife submitted that the husband’s application for leave to appeal was, of necessity, confined to whether or not her Honour had erred in determining pursuant to s 125(2) that school fees and expenses be payable in addition to the assessment and that her Honour had discharged her obligation in paragraph 181 of her reasons in finding “special circumstances”. The wife’s counsel submitted that if I found appealable error then I would not be able to re-exercise the discretion, firstly, because of the inadequacy of the affidavit on which the husband sought to rely by way of further evidence and because there was no evidence before me of the effect of the amendments to the CSA Act which came into effect on 1 July 2008.
The legislation
Section 125 is found in Division 5 of the CSA Act. That division is headed “Orders for provision of child support otherwise than in form of periodic amounts paid to carer”.
Section 123 provides that an application may be made to a court having jurisdiction under the Act, and that such payments may only be made if an administrative assessment is in force in relation to the child, the carer entitled to child support and the liable parent. Section 123(3) provides that before any application may be heard, the Court must first determine any pending application for a departure order. There is no dispute that her Honour dealt with the husband’s application for a departure before considering the wife’s application for payment of school fees and expenses.
Section 125 of the CSA Act provides as follows:
(1) If the court makes an order under section 124, the court must state in the order whether the annual rate of child support payable by the liable parent under any relevant administrative assessment is to be reduced, in the manner specified under subsection (3), by the child support ordered to be provided by the liable parent.
Note: If the court makes a statement under this section that the annual rate of child support is to be reduced, the Registrar must make a provisional notional assessment under section 146B.
(2) The court may state that the annual rate of child support payable by the liable parent is not to be so reduced only if it is satisfied that, in the special circumstances of the case, it would be:
(a) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(b) otherwise proper;
that the annual rate of child support not be reduced by the child support ordered to be provided.
…
(5) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a statement of the kind referred to in subsection (2), the court must have regard to the matters mentioned in subsections 117(4), (6), (7), (7A) and (8).
(5A) In having regard to the earning capacity of a parent of the child under paragraph 117(4)(da), the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied as mentioned in subsection 117(7B).
(6) In determining whether it would be otherwise proper to make a statement of the kind referred to in subsection (2), the court must have regard to the matters mentioned in subsection 117(5).
(7) Subsections (5), (5A) and (6) do not limit the matters to which the court may have regard.
Section 117(4), (5), (6), (7), (7A) and (8) provide as follows:
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i) to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
Proper needs of the child
(6) In having regard to the proper needs of the child, the court must have regard to:
(a) the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b) any special needs of the child.
Income, earning capacity, property and financial resources
(7) In having regard to the income, earning capacity, property and financial resources of the child, the court must:
(a) have regard to the capacity of the child to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child that do not produce, but are capable of producing, income; and
(b) disregard:
(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
(7A) In having regard to the income, property and financial resources of a parent of the child, the court must:
(a) have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing, income; and
(b) disregard:
(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
…
Direct and indirect costs in providing care
(8) In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care.
The Federal Magistrate’s reasons
In paragraph 120 of reasons for judgment, the Federal Magistrate referred to her earlier findings about each party’s financial position and their commitments. Her Honour’s reasons, whilst not specifically mentioning paragraph 117(6) of the CSA Act, discussed the manner in which the parents expected the children to be educated. There was no suggestion that s 117(7) which deals with the income, earning capacity, property and financial resources of the child was relevant. Section 117(7A) required her Honour to have regard to the income, property and financial resources of each of the husband and wife. There is no doubt that her Honour had regard to the income earning capacity of the parties albeit when dealing with the husband’s departure application.
Application for leave to appeal
Relevant legal principles
Section 102 of the CSA Act allows a party to appeal to the Full Court from a decree of the Family Court only with leave of the Full Court. In Gyselman & Gyselman (1992) FLC 92-279 and Tudor & Tudor (1992) FLC 92-273, the Full Court reaffirmed the Full Court decision in Rutherford & Rutherford (1991) FLC 92-255. In Rutherford the Full Court adopted the principles in relation to the granting of leave as set out by the High Court in Adam P Brown Male Fashions Pty Ltd v Phillip Morris & Anor (1981) 148 CLR 170. These principles were that the appellant must show an error in principle and/or the fact that the decision appealed from caused the appellant a substantial injustice. However, in determining whether to grant leave the approach to be adopted in a child support matter should not be too restrictive (see Wild & Ballard (1997) FLC 92-771 at 84,448; Hendy & Deputy Child Support Registrar & Webb (2001) 27 Fam LR 641.
For reasons which I will discuss shortly, I agree with the submissions of the wife’s counsel that the husband’s further evidence application should be refused. I must determine therefore whether any error of principle has been established or whether a substantial injustice would be occasioned if I refuse to grant leave to appeal.
Discussion
Unfortunately it appears that her Honour was not referred to the decisions of the Full Court in Lightfoot & Hampson (1996) FLC 92-663 and Ivanovic & Ivanovic (1996) FLC 92-689, nor did counsel refer me to those decisions.
In Lightfoot & Hampson, Fogarty J with whom Purvis J agreed, considered whether the operation of Division 5 of the CSA Act provided an independent source of power to make a lump sum order for child support. His Honour referred to s 126 of the CSA Act which provides the Court must give reasons for its order under s 124 and its statement under s 125. His Honour further noted that s 129 gives the Court the power to modify an order made under s 124, including its discharge or suspension. Fogarty J explained, at 82,856, the operation of s 125 as follows:
The overall structure of s. 125 is readily understandable. If a substitution order is made under Div. 5, it is necessary for the Court to order that that is to be credited against the existing liability and provide the manner in which that is to be calculated. That is the primary position established by sub-section (1). However, sub-section (2) enables the Court to state that the Div. 5 order (or part of it) is not to be credited. Those circumstances are very confined, namely “only if it is satisfied that, in the special circumstances of the case” a credit should not occur having regard to the matters referred to in par. (a) and (b).
Hence the argument that if a Div. 5 order or portion of it does not have to be credited against the previously existing liability, Div. 5 provides a power to make a child support order which is independent of and additional to an order made under the other provisions of the Act.
I do not think that that is the correct interpretation. The section allows for a negative, namely that in “special circumstances” a Div. 5 order or part of it may not be credited against the existing liability. It does not provide a positive, that is, the source of an independent order for additional child support. It seems to me to be a rather convoluted way of attempting to give such an additional power. If that were the intention it could have been effected within this division simply by providing that, notwithstanding any other provision in the Act, the Court may, if it considers that there are “special circumstances”, order additional child support of a non-periodic type. If such a power were intended, the appropriate place where one would expect to find it would be within ss. 122-124 rather than within s. 125 which is largely a machinery provision.
The section makes it clear that the strong expectation is that it will be directly credited, but it recognises that there may be “special circumstances” where a credit should not be given. This to me is fundamentally different from the giving of an express additional power to create a further liability.
What s. 125 is directed to is a case where a different form of order has been substituted but there are “special circumstances” which justify the Court not providing a credit for that amount.
Thereafter, his Honour gave examples of what could constitute unusual or “special circumstances” which would justify the Court not providing a credit for the amount ordered to be paid.
In Ivanovic the Full Court, Nicholson CJ, Baker and Rowlands JJ, discussed the majority decision in Lightfoot & Hampson, as well as the approach of the dissenting judge, Kay J, and considered whether it should consider itself bound by the ratio of Lightfoot & Hampson. The Full Court, having discussed cases where a Full Court will depart from a previous Full Court decision, said at 83,157-83,158:
Before us and also before the Full Court in Lightfoot and Hampson was an application to read the Division as conferring through s 125(2) a power to increase the amount of child support liability. The long standing view of Div. 5 has been that it serves as a means of providing a lump sum consolidation of existing obligations, not an avenue for increasing quantum.
The issue is a difficult issue of statutory interpretation concerning which opinions can legitimately differ. While we have some reservations about the correctness of the majority decision in Lightfoot’s case and in particular the very limited operation that it gives to s 125(2), we are not sufficiently persuaded that it is wrong to express a contrary conclusion and we think that the desirability of adopting a consistent approach to legislation such as this which affects so many people is such that we should not do so.
In Ivanovic the Full Court was dealing with a decision where the wife sought a payment for lump sum school fees in addition to a child support assessment. The Full Court found on the facts of the case it fell within the dictum in Fogarty J’s judgment of unusual circumstances “where there should not be a credit”. But they upheld the ratio of the decision of the majority in Lightfoot & Hampson.
In Ivanovic the trial Judge had found that it was, as in this case, the parties’ intention that both children be educated at a private school, that the husband was not earning sufficient income to pay a proper level of child support, that the wife had suffered a financial detriment by having had no contribution by the husband to the school fees and that the husband was “strongly motivated not to pay for private school education for the children” and his Honour suggested such a lack of motivation extended to the payment of maintenance generally. The trial Judge further found that the husband had deliberately reduced his income with a view to evading his child support obligations and that he had in the past deliberately concealed income and was likely to do in the future.
The circumstances referred to by her Honour in the present proceedings were not such as would fall within the narrow bank of “special circumstances” outlined by Fogarty J in Lightfoot or by the Full Court in Ivanovic. The husband was paying a substantial amount of child support which included a component for private school fees. There was no suggestion he had minimised his income for child support purposes.
I am satisfied there was error of principle by the Federal Magistrate and that leave should be granted and the appeal allowed. Accordingly, the appeal against Orders 9, 10 and 11 of her Honour’s orders should be allowed.
Application to adduce further evidence
The husband sought to rely on an affidavit in support of his application to adduce further evidence sworn 19 November 2008. In that affidavit the husband deposed to his employment with CS as an account manager being terminated on 17 October 2008 as a consequence of which he asserted that unvested options in CS held by him could no longer be exercised.
Objection was taken by the wife’s counsel to various paragraphs of the husband’s affidavit and, in particular, objection was taken to the husband’s calculation of the present value of his options.
In CDJ & VAJ (No 1) (1998) 197 CLR 172; (1998) FLC 92- 828, at paragraph 109, McHugh, Gummow and Calinan JJ discussed the construction of s 93A(2) of the Act as follows:
One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
Later at paragraph 113 their Honours noted the discretion to receive further evidence was not so wide that a Full Court should admit such evidence “merely because it is useful”. At paragraph 114 it was noted that the Full Court would readily admit further evidence which was not in dispute.
In this case there is significant dispute about the evidence sought to be adduced by the husband.
Counsel for the husband sought to rely on the further evidence to demonstrate appealable error by the Federal Magistrate, that is, he asserted that the husband’s present asserted financial position demonstrated error by the Federal Magistrate, particularly in her s 75(2) adjustment. Given that I have determined the appeal should be allowed in respect of the s 79 orders irrespective of the further evidence, it is unnecessary that I consider that submission.
I accept that the evidence now sought to be adduced is controversial and that it is likely to affect not only the s 79 proceedings but is also relevant to child support issues. I am satisfied in these circumstances that the further evidence should not be admitted, and that the matter must be remitted for a rehearing.
Costs
Both parties sought in the event that the appeal was allowed that certificates should be granted pursuant to the provisions of the Federal Proceedings (Costs) Act (1981) (Cth). As I am satisfied there was an error of law by the Federal Magistrate it is appropriate to grant certificates for the appeal and the rehearing.
I certify that the preceding one hundred and twenty four (124) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Boland.
Associate:
Date: 28 May 2009
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