T and B
[2001] FMCAfam 266
•7 December 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| T & B | [2001] FMCAfam 266 |
| CHILD MAINTENANCE – Variation of consent orders due to changed circumstances – consideration whether s.66S(3)(c) of the Family Law Act 1975 (Cth) also needs to be satisfied – father unemployed – liability for arrears – late payment penalties imposed by Child Support Agency. |
Child Support (Assessment) Act 1989 (Cth)
Evidence Act 1995 (Cth), s.128
Family Law Act 1975 (Cth), ss.66B, 66C, 66H, 66J, 66K66N, 66S
Carpenter and Carpenter (1995) FLC ¶92-583
Kelly and Kelly (1996) ¶92-680
Scott and Scott (1994) FLC ¶92-457
| Applicant: | T |
| Respondent: | B |
| File No: | ZC3145 of 2001 |
| Delivered on: | 7 December 2001 |
| Delivered at: | Canberra |
| Hearing Date: | 23 November 2001 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr G Howard |
| Solicitors for the Applicant: | Hanstein Stacy & Nyman |
| Respondent in Person |
ORDERS
(1)THAT orders 1 and 2 made by the Family Court of Australia on 27 May 1991 be discharged.
(2)THAT the father is to pay $10 per fortnight child maintenance to the mother, commencing on the first day on or after the date of these orders that Newstart allowance is paid to the applicant, and continuing until both children attain the age of 18 years.
(3)THAT in the event that the father resumes paid employment, the father is to pay child maintenance to the mother at the rate that is determined from time to time by the Child Support Agency (“the CSA”), in accordance with the assessment formula applied by the CSA under the Child Support (Assessment) Act 1989 (Cth).
(4)THAT the father is to inform the CSA within seven days of him resuming paid employment.
(5)THAT the father is to lodge with the Australian Taxation Office income tax returns for the financial years ended 30 June 1996‑2001 inclusive within three months of the date of these orders.
(6)THAT any arrears of maintenance owing by the father as at 29 March 2003 be reduced by 50 per cent.
The Court recommends to the Registrar of the Child Support Agency:
(1)THAT if the Registrar is satisfied as at 29 March 2003 that orders 2, 3, 4 and 5 have been complied with, then all then outstanding late payment penalties be waived.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
ZC3145 of 2001
| T |
Applicant
And
| B |
Respondent
REASONS FOR JUDGMENT
Introduction and background
I have before me an application by T, the applicant father for variation of child maintenance orders made by the Family Court by consent on 27 May 1991. The applicant seeks orders discharging child maintenance arrears currently owing, the waiving of late payment penalties, orders that no maintenance be payable by the applicant father during any periods he is unemployed and an order that the applicant father advise the respondent mother within seven days of obtaining paid employment.
The consent orders made by the Family Court in 1991 were registered with the Child Support Agency (“the CSA”) which has been collecting payments on behalf of the respondent mother. The CSA has calculated arrears due and has imposed late payment penalties. As at 14 September 2001 the applicant owed $40,338.65 in arrears and late payment penalties in relation to child maintenance payments being collected by the CSA. Approximately half of this amount comprised penalties.
The application is opposed by B, the respondent mother. The mother seeks to maintain the existing orders and, in addition, seeks orders requiring the production of information from the applicant father relating to his taxable income and financial transactions.
The proceedings were commenced at the Family Court in Canberra and on 11 October 2001 they were transferred to this Court by order of his Honour Faulks J. On 22 October 2001 Federal Magistrate Brewster made interim orders, among other things, requiring the father to provide to the mother copies of all taxation returns and group certificates for the years 1991 to 1997 and the year 2000 and file and serve an affidavit addressing matters raised by the mother relating to property transactions undertaken by the father.
The father is a 47 year old man. He and the mother were married on 26 January 1980 and separated on 6 August 1988. They have two children, N, born 29 March 1985, and C, born 21 June 1989.
The father’s case
The father relied upon his application and affidavits made by him on 21 September 2001 and on 5 November 2001. The applicant was cross-examined on his affidavits by the mother.
The applicant has deposed that up until 1997 he was employed as a plasterer on a sub contract basis and was earning approximately $25,000 per annum. He deposed that since 24 June 1997 he has been unable to work due to medical conditions he has suffered and which he continues to suffer. The father provided copies of medical certificates for the period 24 June 1997 to date. In response to questions from me the father indicated that his injury is in the nature of an occupational overuse syndrome injury to his right arm.
The father deposed that since 15 October 1997 his only income has been Newstart Allowance from Centrelink. He has provided group certificates for the period 15 October 1997 to 30 June 2001. These indicate that the father’s average weekly income is approximately $125. In view of his inability to work and reduction in income the applicant obtained from the Child Support Agency a suspension of the collection of maintenance payments for the period after 7 October 1997. After 1 December 2000 the CSA commenced accepting payments of $10 per fortnight. The father has sought a discharge of arrears and penalties from the CSA but has received advice that as the arrears related to a court ordered child maintenance liability he must apply to the Court to vary or discharge that liability.
The father has deposed that he has no capacity to meet his child maintenance payments. At trial, however, he did concede through his counsel Mr Howard that he would accept an order to continue to pay $10 per fortnight. The father says that he cannot pay any more and that he cannot pay the arrears and late payment penalties that have been imposed by the CSA.
The father has deposed that sometime between 1993 and 1994 he purchased a house property at 12 Schaffer Place, Charnwood in the ACT for approximately $75,000. He deposed that he received this money as a gift from his mother. The father says that from 1994 he ran up a business debt of approximately $40,000 and that in 1995 or 1996 he sold the Charnwood property and used the proceeds to purchase an undeveloped block of land at Dunlop in the ACT and to pay off an overdraft he had with the Colonial State Bank. However, due to his deteriorating financial position following his injury in 1997 the father says that he was forced to sell the Dunlop property to discharge a debt to the National Australia Bank and, after payment to his solicitors he was only left with $3,000 which he has spent for general living expenses.
The father has further deposed that in response to the orders made by Federal Magistrate Brewster he went to the Australian Taxation Office in Canberra and made enquiries about his income tax returns. The father deposed that he was told that he had lodged income tax returns for the financial years 1991 to 1995 inclusive but had not lodged any taxation returns from the financial year 1996 onwards. The father says that he does not have any documents relating to his taxation assessments for the financial years 1991 to 1995 inclusive and that he does not have readily available any documents relating to the financial years 1996 to 2001 inclusive, although he does intend to locate necessary documents and to file taxation returns for those years.
Under cross-examination, the father admitted that he had not obtained copies of his income tax returns for the 1991 to 1995 years from the ATO because he would have had to pay for them. He also admitted that he would from time to time undertake jobs for cash while he was employed and that he would not declare the income in his taxation returns. I required the father to answer questions relating to his taxation affairs but as it became apparent that his disclosures might tend to incriminate him and expose him to the imposition of taxation penalties, I undertook to provide him with a certificate pursuant to s.128 of the Evidence Act 1995 (Cth). The father was frank and open in his answers to questions. He appeared to be a man whose financial affairs were somewhat disorganised and who operated on a cash basis if the opportunity presented itself. He appeared to have had a somewhat cavalier attitude to his taxation obligations and a similar attitude to his child maintenance obligations in the past. He has in the past put his personal and business needs before those of his children. When asked whether he was concerned about his failure to meet his obligations to his children he replied in the negative, commenting that he understood that his children were being looked after well by the mother and that they were attending private schools which was being paid for by the mother.
The mother’s case
The mother relied upon her response to the father’s application, which was verified by affidavit. She is employed as a public servant and earns $1,070 per week gross, including child maintenance payments of approximately $10 per fortnight when made. She disclosed no separate income for the two children. She disclosed weekly expenses of approximately $1,000 of which $510 were to meet the childrens’ needs. She disclosed assets of $10,718 (including liquid assets of approximately $3,000, plus furniture and effects) and liabilities of $1,100, being hire purchase and credit card debts. The mother provided additional oral evidence through me and was cross‑examined by Mr Howard. She conceded that she would regard it as fair if the father continued to be liable to pay $10 per fortnight so long as he is unemployed. She also conceded that if arrears of maintenance payments were waived then it would be also logical to waive the late payment penalties that the CSA had imposed. However, she stated that the arrears should not be waived. The mother impressed me as a honest and reliable witness who has disclosed her financial circumstances fully. In response to questions from me she stated that the children do not have any paid employment and that they do not have any capacity to earn a separate income due to the education commitments of N and the young age of C. N suffers from dyslexia and needs to spend a substantial amount of time on her studies in order to maintain progress. The mother gave evidence that any paid employment such as paper run by C would require her to spend time away from work which she could not afford.
Consideration of the issues
Under the Family Law Act 1975 (Cth) (“the Family Law Act”) a child maintenance order can be varied. The criteria which need to be satisfied before a child maintenance order is varied are set out in s.66S(3) which provides:
The Court must not vary the order so as to increase or decrease any amount ordered to be paid by the order unless it is satisfied:
(a) that, since the order was made or last varied:
(i) the circumstances of the child have changed so as to justify
the variation; or
(ii) the circumstances of the person liable to make payments under the order have changed so as to justify the variation; or
(iii) the circumstances of the person entitled to receive payments under the order have changed so as to justify the variation; or
(iv) in the case of an order that operates in favour of, or is binding on, a legal personal representative—the circumstances of the estate are such as to justify the variation; or
(b) that, since the order was made or last varied, the cost of living has changed to such an extent as to justify its so doing (this is expanded on in subsections (4) and (5)); or
(c) if the order was made by consent—that the amount ordered to be paid is not proper or adequate (this is expanded on in subsection (6)); or
(d) that material facts were withheld from the court that made the order or from a court that varied the order, or material evidence previously given before such a court was false.
Before a court can exercise any jurisdiction increasing or decreasing an amount ordered to be paid under an existing maintenance order it must be satisfied as to the existence of the criteria in s.66S(3). The section, like the previous s.66N which it replaced, is to be interpreted disjunctively, not conjunctively: Carpenter and Carpenter (1995) FLC ¶92-583. Hence it is sufficient to vary an order made by consent if an applicant can satisfy one of the criteria set out in s.66S(3). In most cases, however, if an applicant could satisfy one of the other criteria set out in s.66S(3), he or she could also satisfy s.66S(3)(c). Indeed, the learned authors of Broun and Fowler’s Australian Family Law and Practice, at page 23,383, indicate that a consent order is more readily variable than an order made after a contested hearing, because proof of changed circumstances or an absence of full and honest disclosure is not required. Given the apparent policy underlying s.66S(3)(c) that was referred to in Carpenter and Carpenter, however, a court should, in my view, have regard to s.66S(3)(c) before varying an order made by consent, and should clearly justify a variation to a consent order should s.66S(3)(c) not be satisfied in a particular case.
The father relies upon his inability to work as a significant change in circumstances justifying a variation of the existing order. Clearly, at the time the consent orders were made in 1991 the father was a self employed tradesman with a fair earning capacity. His evidence as to his unemployment and injury was uncontested. He has been unemployed since 1997 and his only regular income is his Newstart allowance. The father proposes to undertake technical studies in the hope of being retrained to obtain paid employment at some time in the future. I am satisfied that the father has demonstrated changed circumstances justifying a variation to the child maintenance orders of the Family Court, for the purposes of s.66S(3)(a)(ii). I also find that the consent order made by the Family Court is no longer proper, because the amount the father is required to pay is excessive in the circumstances existing at the time of the hearing in this matter.
The issue before me then is what, if any, child maintenance order should now be made by the Court. The provisions of the Family Law Act concerning child maintenance apply where child births occur before 1 October 1989, a jurisdictional requirement that is met in this case. The principal object of this part of the Act is to ensure that children receive a proper level of financial support from their parents: s.66B(1). Other objects include ensuring that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both their parents: s.66B(2)(a) and the parents share equitably in the support of their children: s.66B(2)(b).
Section 66C provides that the parents of a child have the primary duty to maintain the child and that that duty is not of lower priority than the duty of the parent to maintain any other child or to maintain any other person: s.66C(2)(a). The section also provides that the parental obligation has priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself or that any other person or child that the parent has a duty to maintain: s.66C(2)(b) and, further, the duty is not affected by the duty of any other person to maintain the child or by any entitlement of the child or any other person to an income tested pension, allowance or benefit: s.66C(2)(c).
The approach that a court should follow in dealing with an application for child maintenance is set out in s.66H. That section provides that the Court should first consider what financial support is necessary for the maintenance of the child and then determine the financial contribution towards the financial support necessary for the maintenance of the child that should be made by a party or parties to the proceedings. Section 66J(1) provides that, in considering the financial support necessary to maintain the child, the Court may only take into account the objects already referred to, the proper needs of the child and the income, earning capacity, property and financial resources of the child. The Court is not entitled to make assumptions about the needs of the child but the courts have generally been prepared to accept more generalised evidence of needs for child maintenance than in respect of orders for spouse maintenance.
It is apparent that the needs of these children have increased since 1991. They are now aged 12 and 16 and are undertaking secondary education. N has special educational needs on account of her dyslexia. I accept the mother’s evidence as to the financial cost to her of meeting the childrens’ needs. This is approximately $500 per week. I also accept that at the present time neither of these children has any independent earning capacity and neither has any assets apart from modest savings.
I turn then to the determination of financial contributions. Section 66K(1) provides that, in determining the financial contributions that should be made by a party or by parties to the proceedings towards the financial support of the children, the only matters that the Court may take into account are the objects already referred to, the nature of the duty of a parent to maintain his or her children, the matters mentioned in s.66D (which are not currently relevant), the income, earning capacity, property and financial resources of the party in question, which includes the capacity of the party to earn and derive income, including any assets of, under the control of or held for the benefit of the party that do not produce, but are capable of producing income: s.66K(2). Being unemployed and without income is not of itself necessarily an answer by a parent to an application for child maintenance. It is a question of fact whether an unemployed parent without income or financial resources has any earning capacity and, if so, the extent of it: Scott and Scott (1994) FLC ¶92-457.
The Court may also take into account the commitments of each of the parties, that are necessary to enable a party to support himself or herself or any other child or another person that the person has a duty to maintain, the direct and indirect costs incurred by the parent or other person with whom the child lives in providing care for the child and any special circumstances which, if not taken into account in the case, would result in injustice or undue hardship to any person.
Mr Howard has submitted, and I accept, that the time for considering the capacity of a party to pay is at the time the application for maintenance is heard: Kelly and Kelly (1996) ¶92-680. It is clear from the uncontested evidence of the father that his capacity to provide maintenance by way of periodic payments is currently very limited and has been so limited for several years. He is not destitute, but his income is limited to social security payments and is, on any view, very modest. His general living expenses consume all but about $20 per week of his income. He has only nominal assets. The father is currently meeting only about 1 per cent of the cost of the children’s needs. The mother meets the balance. She is able to do so on her present income, which is between eight and nine times greater than that of the father. The present contribution of the father, while nominal, does at least give formal recognition to his legal obligation to contribute to the support of his children.
The father’s capacity to pay child maintenance is likely to remain limited to a nominal amount for the foreseeable future. The CSA has apparently purported to administratively determine the father’s current periodical obligation at $10 per fortnight. Whether there has in fact been any administration determination is not clear, but the CSA has suspended collection of payments, save for $10 per fortnight. The father has conceded that he would accept a continuation of that obligation and the mother has conceded that, in the circumstances of the father’s unemployment, that determination is fair and reasonable. It is not apparent on what legal basis the CSA purported to vary the existing child maintenance order of the Family Court. Nevertheless, I accept that the result is a fair and reasonable one, for so long as the father remains unemployed. It follows that status quo should be maintained in the orders now made by this Court. In addition, the father has conceded that he should be required to advise the mother within seven days if he obtains paid employment. However, as it is the CSA which is collecting payments on behalf of the mother that obligation should be owed to the CSA. Given the father’s history of undertaking cash work which he has not declared for taxation (or possibly other purposes) this is an important obligation which the father must take seriously.
In relation to the arrears remaining due from the father, Mr Howard submitted that these should be waived given that the father has no capacity to pay them and that the appropriate time to consider his capacity is now. He relied upon Kelly and Kelly where the Full Family Court held that if the Court determines that a party is unable to meet a level of payment in excess of a given amount as at the date of the hearing, then it follows that the party would, as at the date of the hearing, also be unable to meet substantial retrospective payments in excess of that amount. I accept that but I do not accept that the father currently has no capacity to pay the arrears due. The father conceded in cross-examination that he has previously received refunds of tax remitted to the Tax Office under periodic business income tax payment arrangements and that those refunds have been intercepted by the CSA on behalf of the mother. He further conceded that in relation to several years of income in respect of which he has to date failed to lodge a taxation return, a refund would be due which would provide a benefit to the mother. The capacity of the father to pay is a contingent one, dependent upon him meeting his obligations to file outstanding taxation returns promptly and receiving an assessment which entitles him to a refund. Nevertheless, given the father’s concession that he anticipates receiving a taxation refund which could be applied towards meeting his arrears, it would be unreasonable to relieve him of that obligation until that contingency has been put to the test. What is reasonable and appropriate is that this Court should make orders to facilitate that contingency being put to the test and I will make appropriate orders. I will, however, order that the arrears which remain payable at the time N attains 18 years of age be reduced by 50 per cent, noting that at that time in the ordinary course the father’s maintenance liability in respect of N would cease.
There was some discussion at trial concerning the late payment penalties imposed by the CSA. It was accepted by both parties that these were a matter for the CSA and that this Court does not have the power to order the CSA (which was not a party to these proceedings) to forego money which is currently due and payable to the Commonwealth. The Court can, however, make a recommendation to the Registrar of the CSA that the Registrar will no doubt take into account. Given the father’s substantially reduced financial circumstances and the low level of likelihood that the arrears currently owing will ever be discharged in full it seems most unlikely that the father will ever have any capacity to pay the late payment penalties. I will, therefore, recommend that if it appears to the CSA that the father has met his obligations arising from these orders then the late payment penalties could properly be waived.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 7 December 2001
0
0
0