Taggart & Pelly - [2008] FMCAfam 1321

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TAGGART & PELLY

[2008] FMCAfam 1321

CHILD SUPPORT – Interim proceedings – child support agreement entered into in December of 2005 – Registrar has determined child support agreement “transitions” to new legislative regime – agreement fixed child support payable by reference to “capped” amount of father’s income – concept of “capped” amount repealed by applicable legislation currently in operation – transitional arrangements – father seeks discharge of agreement – mother seeks stay of collection pending departure application – what is appropriate level of child support for father to pay pending departure application or application to discharge agreement – what legislative regime is applicable – criteria to be considered in fixing appropriate amount of child support.

Family Law Act 1975, ss.72, 77
Child Support (Assessment) Act 1989 (current to 30 June 2008) ss.3; 4; 42; 95(2); 98; 114; 116; 117;136
Child Support (Assessment) Act 1989 ss.3; 42; 136
Child Support (Registration & Collection) Act 1988 ss.3, 111B; 111C
Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006
Child Support Legislation Amendment (Reform of the Child Support Scheme – Initial Measures) Act 2006
Families, Community Services and Indigenous Affairs Legislation Amendment (Child Support Reform Consolidation & Other Measures) Act 2004

Bryant & Bryant (1996) FLC 92-690
In the Marriage of Gyselman (1992) FLC 92-279
Wild & Ballard (1997) FLC 92-771
Savery & Savery (1990) FLC 92-131

Applicant:

MS TAGGART

Respondent:

MR PELLY

File Number:

ADC 2539 of 2008

Judgment of:

Brown FM

Hearing date:

21 November 2008

Date of Last Submission:

21 November 2008

Delivered at:

Adelaide

Delivered on:

9 December 2008

REPRESENTATION

Counsel for the Applicant:

Ms Lewis

Solicitors for the Applicant:

Robinson & Mason

Counsel for the Respondent:

Mr Whittle

Solicitors for the Applicant:

Norman Waterhouse

ORDERS

Pursuant to section 111C of the Child Support (Registration & Collection) Act 1988 the parties’ current child support assessment, arising from the acceptance of the child support agreement between them dated 12 December 2005, be stayed and in lieu thereof the father pay child support to the mother for the children [L] born in 2000 and [C] born in 2004 as follows:
(a)From 1 July 2008 onward at the rate which would have been assessed by the Registrar of the Child Support Agency by reference to the legislatively mandated formula applicable in the event that the parties’ child support agreement had not been accepted by the Registrar in respect of the calculation of periodic amounts of child support;
(b)All private school fees, fixed and sundry expenses as appear on school invoices, uniforms and books required for the aforesaid children to attend such private schools as the parties agree with attendance commencing when each child enters Year 8;
(c)Private medical insurance at the top level of cover.
The proceedings be otherwise adjourned to 12 February 2009 at 4:00pm for further directions and if necessary to allocate a date for the final hearing of the parties’ competing applications in respect of both child support issues and children’s issues.

IT IS NOTED that publication of this judgment under the pseudonym Taggart & Pelly is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
ADELAIDE

ADC 2539 of 2008

MS TAGGART

Applicant

And

MR PELLY

Respondent

REASONS FOR JUDGMENT

Introduction

Mr Pelly “the father” and Ms Taggart “the mother” are the parents of [L] born in 2000 and [C] born in 2004.
The parties separated on 9 November 2004. Since that time, the children have lived predominantly with their mother. On 13 December 2005, the parties agreed on final arrangements for the care of [L] and [C] and in respect of the division of their marital property.
As a result, orders were made by the Family Court of Australia at Adelaide to ratify this agreement. At the same time, the parties entered into a child support agreement, which was intended to deal with the financial support required for the two children for the indefinite future, including the payment of their private school fees and the provision to them of high level health insurance.
Due to recent and comprehensive changes to the legislative framework of the child support scheme, brought about by the Commonwealth Government, complex issues have arisen about the application of the parties’ child support agreement to their current financial circumstances and the agreement’s inter-relationship with how child support is now calculated pursuant to the new scheme.
The orders made by the Family Court, on 13 December 2005, are prefaced by a number of notations. These notations recognise that, at the time, Mr Pelly was earning $170,000.00 per annum and Ms Taggart was in part-time employment, working three hours per fortnight. This remains the position at this time. Comparative to Ms Taggart, Mr Pelly is a high income earner.
The child support agreement, which is at the centre of the current controversy between the parties, is a simple document, based upon a proforma document produced by the Child Support Agency.[1] The agreement identifies the parties to the agreement and the children concerned. It provides that Mr Pelly will provide Ms Taggart child support for [L] and [C] as follows:
[1] See Annexure AT1 to the mother’s affidavit filed 26 June 2008
“All private school fees, fixed and sundry expenses as appear on school invoices, uniforms and books required for [L] and [C] to attend such private schools as the parties agree with attendance commencing when each child enters Year 8.
Private medical insurance at the top level of cover.”
The agreement is stated to commence on 16 December 2005 and terminate on 7 December 2018, so far as [L] is concerned and on 3 May 2022, where [C] is concerned. These are the dates on which each will attain their respective eighteenth birthday.
More importantly, in the context of these proceedings, the parties agreed “to modify the current child support formula assessment in the following way:
“That Mr Pelly child support income will be fixed at the capped rate as calculated pursuant to section 42 of the Child Support (Assessment) Act, when calculating child support payable to

Ms Taggart for the children [L] and [C]. This payment is to be suspended during periods when the paying parent is unemployed and in receipt of an income tested pension or benefit. It is the parties’ intention that during periods of suspension a formula assessment will apply.”[2]
[2] See Part C of the Child Support Agreement dated 12 November 2005 at paragraph 35 and annexure A.
Section 42 of the Child Support (Assessment) Act 1989, referred to in the parties’ child support agreement, has been repealed effective from 1 July 2008 onwards. Prior to this date, the section provided a formula for calculating the maximum or “capped” income against which a parent, who was liable to pay child support, would have his or her child support levied. The formula has changed during the currency of the parties’ child support agreement.
Basically, the capped amount, pursuant to the previous section 42, was two and a half times average weekly earnings within Australia less the exempted income amount relating to self support.[3] In 2005 the capped amount was $130,767.00. Due to the changes in the statistical methodology of calculating the cap, its amount has changed from time to time. However, the capped level has mostly been less than

Mr Pelly’s actual taxable income.
[3] Prior to 2006 the capped amount was based on figures for “full-time adult average weekly total earnings” (AWE). From 2007 onwards it was based on “all employees average total earnings” (EAWE). Both figures are published by the Australian Bureau of Statistics.
Prior to 1 July 2008, the Child Support (Assessment) Act 1989 provided a formulaic process by which child support payable by a child’s parents was calculated. The aim of the formula was to provide certainty as to what was the exact amount of child support payable by one parent to the other in respect of their children.
In simple terms, the formula provided for the non-residence providing parent to pay a percentage of his taxable income, dependent on the number of children concerned, after deduction of a fixed amount for his or her living expenses.
In Mr Pelly’s case, as there were two children involved, the percentage concerned was initially fixed at twenty-seven percent. Given the agreement between the parties, contained in their agreement of December 2005, this percentage was levied against the capped amount. This resulted in Mr Pelly being liable to pay child support to

Ms Taggart, in 2005, at an annual rate of $31,672.00.
The legislation provided a range of modifications to the formula in cases where the care of any child concerned was split or shared by the child’s biological parents. The same formula applied regardless of the age of the child concerned. The steps at which the formula changed to reflect levels of care, between a child’s parents, were not subject to any subtle graduations.
The recent legislative changes to the child support scheme have now significantly modified this basic formula. Obviously, it was not in the minds of the parties concerned, when they entered into their agreement, that the basic formula would be so significantly modified.
Section 42 of the Child Support (Assessment) Act 1989 now reads as follows:
“Work out the parent’s combined child support income for a child for a day in a child support period by adding together each parent’s child support income for the child for the day.”

This legislative change is reflective of more wide sweeping changes to the child support scheme. The Child Support Agency has summarised these changes as follows:
“The new Child Support Scheme seeks to ensure both parents effectively share the costs and responsibilities of raising their children.
The Child Support Agency (CSA) will use a new formula to calculate a parent’s child support contributions. Of course, every parent’s situation is different so we also have variations on the formula to take this into account.
The current formula uses fixed percentages of income to work out child support assessments. It doesn’t take into account the different costs of raising children of different ages, or care arrangements for paying parents with care of the children two to three nights per fortnight, or the effect of income tax.
The new formula is quite different to the current one. It ensures a more balanced and flexible way of working out child support payments.
The key components of the new formula are:
·    The costs of raising children, based on independent, Australian research, will now be the basis of the formula
·    Both parents’ incomes will now be taken into account and considered equally
·    The same self-support amount will now be deducted from each parent’s income before child support is worked out
·    Shared care of the children will be better acknowledged
·    Children from first and subsequent families will be treated in a similar way.”[4]
[4] See: The new Child Support Scheme and changes to Family Assistance: Your Guide to the New Child Support Scheme: published 2008 by the Commonwealth Government at page 5
It is against this background that a significant dispute arises between the parties, particularly as the Child Support Agency has determined that the agreement, made in December of 2005, can “transition” to the new legislative framework and is not negated by it.
This raises matters of controversy, between the parties, as to the appropriate amount of child support payable by Mr Pelly to Ms Taggart for [L] and [C]. The difficulty arising is that the concept of a “capped” rate of child support, applying to one parent’s income, is now foreign to the legislation concerned.
Under the new legislative regime, new formulae will apply to the calculation of child support payable. Specific percentages will be applied to the combined child support income of liable parents. The amount of child support payable will be calculated, in percentage terms, by reference to this combined amount.
The percentages will change with the number of the children applicable and the ages of the children concerned. In terms of the maximum amount of child support payable, it will be referenced to 2.5 times the “male total average weekly earnings (MTAWE)” and apply to the parents concerned’s combined income. This figure is also annually calculated by the Australian Bureau of Statistics.
Subsequently a “cost percentage” will be applied to each of the liable parents, depending on their respective level of care of any child or children concerned. This too will be expressed as a percentage.
There will be a far more complex and subtle formula which will change the applicable cost percentages and when they cut in and out, depending on how much time any relevant child spends in the care of each of his or her parents.

The applications

Ms Taggart commenced these proceedings on 26 June 2008, which was prior to the commencement of the legislative changes initiated by the Child Support Legislation Amendment (Reform of the Child Support Scheme) – New Formula and Other Measures Act 2006.
This is important. Pursuant to the transitional arrangements, a person is entitled to bring an application pursuant to section 98(1) of the now repealed provisions of the Child Support (Assessment) Act provided such application is made prior to the commencement of the new provisions.
In her original application, Ms Taggart sought the following orders:
“1. Pursuant to section 98 of the Child Support (Assessment) Act 1989 (as amended) the Child Support Agreement between the husband and wife dated 12 December 2005 be varied from 1 July 2008 by deleting annexure A and inserting a provision that provides for periodic child support of $1,803.75 per month payable to the wife and adjusted each year for CPI.
2. This matter be heard as a matter of urgency.
3. The husband do pay the wife’s costs of and incidental to this application.
4. Such further or other order as this Honourable Court deems just and equitable in the circumstances.”[5]
[5] See mother’s initiating application filed 26 June 2008
Ms Taggart has twice since amended this application, on 18 August 2008 and 20 October 2008. Pursuant to the most recent amendment, she seeks the variation of the parties’ child support agreement by the insertion of a provision that Mr Pelly pay her the sum of $2,548.00 per month by way of child support, which amount is to be annually indexed by reference to the consumer price index.
In addition, as an alternative to such an order, she seeks that there be departure from the agreement, pursuant to sections 116(1)(b)(ii); 118; and 123 of the repealed Child Support (Assessment) Act 1989 so that Mr Pelly pays her the sum of $2,548.00 child support per month, together with all the children’s private school fees; top level private health insurance; and half of all the expenses related to the children’s agreed extra curricular activities.
Concurrently with this application, the wife has made an application for spousal maintenance, in the sum of $200.00 per week, pursuant to the provisions of section 77 of the Family Law Act 1975. This aspect of the application has not been pursued in the current proceedings before me. In a formal sense, she does not wish the court to make any changes to the orders relating to the care of the children.
At the interim stage, the wife seeks orders pursuant to section 111C of the Child Support (Registration and Collection) Act 1998 which would result in the stay of collection of child support resulting from the present arrangements in place pursuant to the “transitioned” agreement. In lieu thereof, she seeks payment to her of the sum of $1,803.75 per month, which was the sum she was receiving immediately prior to 1 July 2008.
Mr Pelly responded to this application on 26 September 2008. He has sought some variation to the arrangements for the care of the children concerned. Ultimately, it is his position that the children should live with each of their parents on a week about basis. In the interim, he wishes orders be made that would see [L] and [C] spending more time with him than the current orders provide, which is four overnight periods per fortnight.
I am not specifically dealing with the care arrangements for [L] and [C] in these reasons for judgment. The parties seem to tentatively agree that the orders of December 2005, which were made when [C] was a baby, have outlived their usefulness and, in more recent times,

Mr Pelly has been spending more time with the children than the orders currently provide.
However, some significant areas of dispute still remain between the parties as to the appropriate arrangements for [L] and [C]’s care. In this context, the parties have agreed to jointly commission a family assessment report to be prepared by an experienced child psychologist, Ms Cole. Once this report is to hand, they will be better placed to determine what the appropriate arrangements for the children’s care should be.
In the meantime, the vexed issue of the appropriate level of financial support for the two children remains. In his response, Mr Pelly has indicated that he seeks the following orders:
“8. The child support Agreement dated 12 December 2005 be set aside.
9. The husband pay periodic child support for the said children at the rate assessed by the Child Support Agency.
10. The husband pay the following by way of non-periodic child support in respect of the said children.
10.1 All private school fees, fixed and sundry expenses as appear on school invoices, uniforms and books required for the said children to attend such private schools as the parties agree with attendance commencing when each child enters Year 8; and
10.2 Private and medical insurance at the top level of cover.”
Mr Pelly has not specifically responded to the wife’s most recently amended application and the interim application arising pursuant to section 111C of the Child Support (Registration and Collection) Act 1988.

The evidence

These proceedings have come before me at the interim stage. As a result, I have not heard any oral evidence from either of the parties or seen them being cross-examined. Accordingly, where there is a dispute between the parties of a factual nature, I am unable to resolve that dispute in the context of these proceedings.
Ms Taggart relied on the following documents:
i)An affidavit of herself filed 26 June 2008;
ii)A further affidavit of herself filed 20 October 2008;
iii)A further affidavit of herself filed 18 November 2008;
iv)A statement of her financial circumstances filed 26 June 2008.
This latter document confirms that Ms Taggart continues to work on a limited basis. She estimates her average weekly earnings, from personal exertion, as being $98.00 gross per week. This equates to around $5,000.00 per annum.
Mr Pelly relies on the following documents:
i)An affidavit of himself filed 26 September 2008;
ii)A statement of his financial circumstances filed 26 September 2008.
This latter document provides a weekly income of $3,495.00 prior to tax for Mr Pelly. This equates to an annual gross salary of just over $180,000.00. Accordingly, the disparity between the parties’ respective level of income remains.
At this stage, Ms Taggart contends that the parties have always recognised that she would be the parent, who remained at home to care for [L] and [C] and that Mr Pelly, as a high income earner, would always provide a generous level of financial support for the children in recognition of this agreement reached by the parties.

Mr Pelly contends that there was no agreement that his level of child support would inexorably rise. Rather, he says that it was to be calculated by reference to the applicable legislative scheme, with the proviso that he would pay the amounts required to ensure that the children were able to have a private school education and access to high level health insurance.

Background

The parties agree that currently [L] and [C] are spending five nights per fortnight with their father but otherwise live with their mother. At the time of the parties’ child support agreement, Mr Pelly was paying child support to Ms Taggart at the capped rate, which equated to an amount of around $2,500.00 per month.
At the time of the parties’ separation, Mr Pelly was employed as the state manager of [D] Pty Ltd. He earned around $170,000.00 per annum.
In August of 2006, Mr Pelly commenced a new business venture,

[X] Pty Ltd, on his own behalf. As a result his income dipped to around $65,000.00 but has now returned to a sum in excess of $180,000.00. During the intervening period, he continued to pay child support at the previous levels, notwithstanding his income had dropped.
The child support agreement between the parties was filed in the Family Court at Adelaide on 15 December 2005. The agreement was also accepted for registration by the Child Support Agency itself.
The parties agree that Mr Pelly has paid Ms Taggart the following amounts of child support:
·$2,548.00 per month between December 2005 and October 2006;
·$1,908.00 per month between October 2006 and June 2007;
·$2,126.00 per month between June 2007 and February 2008;
·$1,723.00 between February 2008 and 16 June 2008;
·$1,803.75 between 16 June 2008 and 30 June 2008.
The variations in these amounts have been as a result of a number of factors: CPI increase; changes in the number of nights the children have spent with their father each fortnight; and importantly changes in how the capped amount of income has been calculated pursuant to the child support legislation.
In 2005 the capped amount was $130,767.00. In 2006 the amount was $139,347.00. In 2007 it reduced to $109,135.00 and finally in 2008 it was $113,763.00.
The Child Support Legislation Amendment (Reform of the Child Support Scheme – Initial Measures) Act 2006 amended section 42 in respect of how the capped amount was to be calculated. Basically it was decided that a new statistical basis would be adopted for the calculation of the average weekly wage. The applicable explanatory memorandum reads as follows:
“This Schedule amends the figure that sets the 'cap' on a liable parent's adjusted income for child support purposes, and aligns it with the figure that is used to calculate the payee's disregarded income. That is, in determining the maximum amount used as a liable parent's adjusted income for child support assessment purposes, the 'all employees average weekly total earnings' (EAWE) figure will be used instead of the `full-time adult average weekly total earnings' (AWE) figure. Because the EAWE figure is lower than the AWE figure, these changes effectively lower the maximum amount of child support payable by liable parents with high incomes.
The basic purpose of the cap is to limit the possibility of child support being paid by higher income earners at a level that exceeds the actual costs of caring for the child. However, the existing level of the cap has been seen as too high and inequitable, partly because of the use of a higher statistical income figure than is used for other purposes of the Child Support Assessment Act, such as the disregarded income of a payee. The changes to section 42 mean that a liable parent's maximum adjusted income will be based on the same statistical measure as the one used in section 46 for a payee's disregarded income. The income measure that will be used for assessing a liable parent's income is a more realistic measure of income than is currently used, and is consistent with the treatment of the payee's income.”[6]
[6] Explanatory memorandum to the Child Support Legislation Amendment (Reform of the Child Support Scheme – Initial Measures) Bill 2006 (circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, The Honourable Mal Brough MP
Accordingly, the legislative framework provided by the Child Support (Assessment) Act 1989 has previously significantly impacted upon the amount of child support paid by Mr Pelly to Ms Taggart for [L] and [C]. It thus cannot be said that there has been an inexorable rise in the level of child support paid by Mr Pelly. Rather, it has waxed and waned dependant on both care arrangements for the children and the application of the basic formula, particularly the prescribed legislative capped amount.
As can be seen from the explanatory memorandum outlined above, the legislature’s rationale in reducing the capped level was to ensure that there was not a “disconnect” between the amount of child support paid by a high income earning parent and the actual cost of providing for the financial needs of any child concerned. The rationale of the legislative based formula being that it was based on what it cost to support a child in real terms.
The more recent legislative changes occurring as a consequence of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and other Measures) Act 2006 are also directed to changing the formulaic basis for the calculation of child support so that the applicable formulae result in the payment of child support which is reflective of the actual needs of the children concerned and the capacity of their parents to pay.
The relevant explanatory memorandum read as follows:
“This Schedule repeals Part 5 of the Child Support Assessment Act and replaces it with a new Part 5 that provides a new series of child support formulas. The new formulas are based on recent Australian research on the costs of caring for children, taking account of both parents' incomes after equal self-support amounts are deducted, recognising care of a child for more than 14 per cent of the time, and treating first and second families more equally.
The new administrative assessment adopts an 'income shares' approach to calculating the costs of raising children and sharing these costs fairly between parents. It involves working out the combined incomes of the parents, determining the costs of the parents' children by reference to their combined incomes, then distributing those costs between the parents in proportions equal to their share of the combined income, taking into account the contribution to the costs of the children they may make through providing care for the children.
Child support assessments will be based on the actual costs of children, which have been determined according to Australian research showing that, as parental income rises, spending on children rises in dollar terms but falls as a percentage of income, and that expenditure on children increases as they get older. The costs of children for Part 5 represent the best estimate of the amount that parents, on average, spend on their children according to their income.”[7]
[7] Explanatory memorandum to the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Bill 2006 (circulated by the authority of the Minister for Families, Community Services and Indigenous Affairs, The Honourable Mal Brough MP
Between 16 June and 30 June 2008, thus prior to the recent sweeping legislative changes, the applicable child support formula, applied to the parties, was as follows:
Mr Pelly child support income   $113,763.00
(Capped amount)
Exempt income amount  $15,378.00

Adjusted income amount   $99,385.00

Ms Taggart child support income   $20,174.00

Exempt income amount  $30,829.00

Adjusted income amount  nil
A child support percentage of 22% was applied to Mr Pelly’s adjusted income amount, resulting in an annual amount of child support being paid of $21,645.00 or $1,803.75 per month.
This figure comes about as a result of the application of the formula for calculating the capped income amount, as amended, provided by section 42. As can be seen from her most recent amended application, Ms Taggart seeks orders that would require Mr Pelly to pay her a monthly amount of child support fixed in a sum of $2,548.00 per month.
The rationale for this sum is that it is the previous high water mark of child support, as calculated pursuant to the previous statistical methodology for calculating the capped amount based on full-time adult average weekly total earnings (AWE). The reasoning on which Ms Taggart’s case is apparently based is that the parties agreed on a basic figure for child support, when they reached their agreement in 2005, but not on a methodology for calculating that figure from time to time. Thus it is now fundamentally unfair to her that the figure concerned should significantly decline because of changes to legislation, which were not contemplated when the parties reached their agreement.
The Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 also significantly amended the legislation pertaining to the making and registration of child support agreements. In basic terms, it inaugurated a regime, from 1 July 2008 onwards, where there would be two distinct forms of child support agreements – limited agreements and binding agreements.
As a result of these legislative changes, the legislature and indeed the Child Support Agency recognised that there would undoubtedly be a level of uncertainty as to whether child support agreements in force prior to 1 July 2008 would continue to have effect after this date. Accordingly, the Agency was directed by the legislature to undertake a review of all child support agreements in force prior to 1 July 2008 so it could be determined whether those agreements contained provisions that would enable them to continue after the commencement date of the new legislation.
Initially, there was some uncertainty, within the Child Support Agency, as to whether the agreement reached between the parties in December of 2005 would continue after 1 July 2008, no doubt as a result of the uncertainty arising as to what Mr Pelly’s child support income was to be for the purposes of calculating the amount of child support payable by him to Ms Taggart.
Initially, the agency concluded that the agreement did not “transition” and therefore, in the absence of either a limited or binding child support agreement between the parties, the new formulaic provisions, provided by the amended legislation, should be applied to the parties’ circumstances.
This resulted in an assessment requiring the payment of $1,534.83

per month by way of child support from Mr Pelly to Ms Taggart. However, with the lapse of the agreement, the requirement that

Mr Pelly pay the children’s school fees and health insurance also fell into abeyance.
Later, in September of 2008, the Agency revisited the matter and determined that the agreement did transition. The rationale being that the legislation in force immediately prior to 1 July 2008 did provide a mechanism for calculating the husband’s child support income pursuant to the provisions of the parties’ child support agreement.
Accordingly, the agency determined that Mr Pelly’s “capped” child support income was $113,763.00 to which the new child support formula could be applied. This resulted in an assessment of $1,227.83 per month payable by Mr Pelly to Ms Taggart. However, as the child support agreement between the parties remained in force, the requirement that Mr Pelly pay for the children’s private school fees and health insurance also remained in force.
It appears to be the position that Mr Pelly is paying Ms Taggart child support at the rate of $1,227.83 per month, although he has expressed a willingness to pay at the higher rate, which would be levied if the child support agreement is struck down.
From Ms Taggart’s perspective, the application of the new legislation to her and Mr Pelly’s circumstances, occasioned by the transition of their child support agreement, has resulted in many unfair and unforseen consequences. These can be summarised as follows:
·It unfairly applies a capped rate of income to a different child support formula;
·In these circumstances, it is anomalous that the non-periodic payment component of the parties’ child support agreement has survived but not the essential dollar amount of the previous periodic payments.
·The agreement no longer provides a sufficient level of financial support to enable Ms Taggart to remain a home based parent, who is available at all times to provide for the care of the children concerned, which she says was the parties intention, when they entered their child support agreement in December of 2005.
·In summary, the preservation of the parties’ agreement, in the form ratified by the Child Support Agency, has resulted in a situation which is a gross distortion of what the parties intended their child support agreement to achieve.
My impression is that, in the past, the parties went to some lengths to avoid bitter and protracted litigation regarding the care of their two children. Unfortunately, the complex circumstances surrounding the interpretation and application of their child support agreement has caused each of the parties, particularly Mr Pelly, to want to re-visit the earlier arrangements for the care of [L] and [C].
Sadly, the parties are now engaged in heated litigation regarding whether it is appropriate that the children should live in a shared care arrangement. Obviously, the outcome of this controversy is likely to have implications for the appropriate level of child support, which should be paid, given the amount of time the children will be spending in each of their parent’s households, depending on the result.
This situation has resulted in a polarisation of the parties’ respective positions. In the past, Mr Pelly has been somewhat resentful as a result of his perception that Ms Taggart has sought to reduce the amount of time he has spent with the children. He is also aggrieved that

Ms Taggart has apparently entered into a financial agreement, with her new partner, regarding the cost of renovations to the property in which they plan to live. From Mr Pelly’s perspective, he believes Ms Taggart is motivated in these proceedings by her need to fund these capital expenses and other aspects of her current lifestyle.
Mr Pelly’s position is that he did not regard the child support agreement, at the time it was made, as being an “integral part of [the parties] overall financial settlement”. Rather he regarded it as one part of the process of finalising various family law matters between him and Ms Taggart.
It is Mr Pelly’s position that he did not agree to pay a particular figure of child support to Ms Taggart, rather he agreed to pay child support at the capped sum fixed by the applicable legislation. Accordingly, he asserts that it would be unfair to him if the court were to order him to pay child support at the rate sought by Ms Taggart, which no longer has any proper nexus to either the parties’ child support agreement or the relevant legislation.

The legislation

The law relating to the variation of the provisions of child support agreements, by court order, has also been significantly changed as a result of the new child support regime, which commenced on 1 July 2008. However, in respect of applications brought prior to 1 July 2008, the previous legislative regime applies.[8]
[8] See Schedule 5 of Part 2 of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 at 73(1)
In addition, as earlier indicated, the legislation involved requires the Registrar of the Child Support Agreement to review every child support agreement made prior to 1 July 2008 and determine which are taken to be terminated by the new legislation and which are to be taken as being binding child support agreements.[9]
[9] Ibid at 74(1)
As a result of the legislative direction placed on him, the Registrar of the Child Support Agency has reviewed the child support agreement made between Mr Pelly and Ms Taggart on December 2005 and determined that it will remain in force after 1 July 2008. As such, it is taken to be a binding child support agreement.
Accordingly, after 1 July 2008, it can only be reviewed, varied or set aside pursuant to the provisions of section 136 of the Child Support (Assessment) Act 1989.
The bases for setting aside child support agreements, pursuant to the new legislative regime, are limited to a number of specific circumstances namely: where agreement is vitiated by fraud, undue influence or unconscionable conduct; there has been a significant change in circumstances; the annual rate of child support payable under the agreement is not proper or adequate; or exceptional circumstances arise after the agreement was made.
Ms Taggart commenced these proceedings on 26 June 2008. Accordingly, it is clear to me that the legislative regime previously in place remains applicable. The relevant provision is section 98.
Section 98(1) reads as follows:
“98 Variation etc. of provisions of child support agreement by court order
(1) Where:
(a)under section 95, provisions of a child support agreement have effect, for the purposes of Part 5, as if they were a court order of a particular kind; and
(b)the agreement, or those provisions of the agreement, are registered in a court having jurisdiction under this Act;
the provisions may be discharged, suspended, revived or varied by the court in the same manner and in like circumstances as the court could discharge, suspend, revive or vary an order of that kind made by it.”
There is no controversy between the parties that the Registrar of the Child Support Agency has previously accepted the child support agreement between the parties for registration and that it is a child support agreement which makes provision for the payment of periodic amounts of child support.
As such, the agreement is taken to have the same consequences as if it were an order made by a court pursuant to Division 4 of Part VII of the Act, which deals with orders for departure from administrative assessments of child support in special circumstances.[10]
[10] see Child Support (Assessment) Act 1989 (current to 30 June 2008) at section 95(2)
Accordingly, any application to vary or discharge a child support agreement must be considered within the overall legislative structure created by the Child Support (Assessment) Act 1989. Pursuant to section 3 of the Act, the parents of children have the primary duty to maintain their children. This duty has priority over all other commitments a parent may have, other than the necessary commitments which enable that parent to support him or herself, or any other child that the parent may have a duty to maintain.
The objects of the Act are described in section 4(2) as being intended to ensure:
a)that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
b)that the level of financial support to be provided by parents for their children should be determined in accordance with the legislatively fixed standards; and
c)that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
d)that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them;

Section 4(3) of the Act recognises the desirability of the parents reaching agreement for the financial support of their children. When interpreting the Act, the section requires that “the Act should be construed, to the greatest extent consistent with the attainments of its objects:
a)to permit parents to make private arrangements for the financial support of their children; and
b) to limit interferences with the privacy of persons.”
The Full Court of the Family Court has determined that an application to vary a child support agreement must be determined in accordance with the provisions of section 117 of the Act.[11] In Wild & Ballard[12] it said as follows:
In order to vary a consent order made under the provisions of Division 4 of Part 7 of the Child Support (Assessment) Act a Court must be satisfied that a ground for departure mentioned in s 117(2) of the Act exists, and that it would be just and equitable as regards to the child, the carer entitled to child support from the liable parent, and otherwise proper within the meaning of s 117 that to make an order changing an existing order.”.
[11] See Bryant & Bryant (1996) FLC 92-690
[12] Wild & Ballard (1997) FLC 92-771 at 84,490
Section 117 of the Act appears in Division 4 of Part VII of the Child Support (Assessment) Act. Section 114 identifies the further objects of this division as follows:
(a)that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
(b)that parents share equitably in the support of their children.
Similar provisions apply to Division 5 of Part VII, which deals with the provision of child support otherwise than in the form of periodic monetary payment.
As a child support agreement is to be regarded as a consent order made pursuant to the provisions of Division 4 of Part VII, an application to vary a child support agreement is analogous to an application for a departure from an administrative assessment of child support. Accordingly, the three step process described by the Full Court in the case of Gyselman[13] is applicable.
[13] In the Marriage of Gyselman (1992) FLC 92-279
The provisions of section 117 of the Child Support (Assessment) Act empower a Court to make an order for departure from administrative assessment in special circumstances. Section 117(1) provides as follows:
Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b)the court is satisfied:
(i)that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii)that it would be:
1. just and equitable as regards the child, the carer entitled to child support and the liable parent; and
2. otherwise proper;
to make a particular order under this Division;
the court may make the order.
If the three conditions as set out in section 117(1) of the Act are satisfied then the court may make the departure order sought. The proviso to any departure application is that special circumstances should exist.
In Savery and Savery[14] His Honour Justice Kay held that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”. In the Marriage of Gyselman[15], the Full Court of the Family Court said as follows of the phrase “special circumstances”:
“Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.”[16]
[14] Savery and Savery (1990) FLC 92-131
[15] Ibid at 79,065
[16] (supra) at page 225
In the past, the Child Support (Assessment) Act 1989 has been described as a “statute enshrouded in fog”. If that be the case, the fog has grown thicker in regards to the application of the proper legislative regime to child support agreements, which are held to have transitioned to the new legislative regime but to which, in certain circumstances, the previous legislative provisions apply.
In this case, at the interim stage, I have not been provided with any submissions regarding the application of the three step process, provided by Gyselman to this case. In addition, neither party alluded to the provisions of section 136 of the Act, either as they stood prior to 1 July 2008 or afterwards. These seem to be issues for the final hearing.
In particular issues may arise as to whether it is appropriate to deal with the matter as an application to discharged the agreement under the new legislative provisions or depart from it under the former provisions.
The previous section 136 provided limited grounds for setting aside a child support agreement on the basis of fraud or undue influence only. The current section 136 has extended these grounds. Section 136(2) now reads as follows:
“136(2) If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:
(a)     that the party’s agreement was obtained by fraud or a failure to disclose material information; or
(b)     that another party to the agreement, or someone acting for another party:
(i)     exerted undue influence or duress in obtaining that agreement; or
(ii)     engaged in unconscionable or other conduct;
to such an extent that it would be unjust not to set aside the agreement; or
(c) in the case of a limited child support agreement:
(i)     that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
(ii)     that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement); or
(d)     in the case of a binding child support agreement—that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.”
In the context of the application of this section to the circumstances of the present case, it is interesting to note that the objects of the Act have also been amended to include one that provides that the level of financial support, to be provided by parents for their children, should be determined in accordance with the costs of the children concerned. This is one of the underpinning principles of the amending legislation, particularly the rationale regarding the changing of the various child support formulae.
Section 4(3) of the Act remains unchanged. Accordingly, I am required to interpret the Act in a way which is consistent with its objectives or aims. As such, I must bear in mind that parents are permitted to make their own private arrangements in respect of financial support is to be provided for their children and I must recognise the sanctity of such arrangements.
I am dealing with the parties respective applications at the interim stage. Ms Taggart seeks orders pursuant to section 111C of the Child Support (Registration & Collection) Act 1988. This is the section of the Act which empowers the court to stay the collection of child support if there are proceedings on foot, in a court of appropriate jurisdiction, regarding any applicable child support matter.
The provisions relating to stay orders were removed from the Child Support (Assessment) Act and placed in the Child Support (Registration & Collection) Act by the Families, Community Services and Indigenous Affairs Legislation Amendment (Child Support Reform Consolidation & Other Measures) Act 2004. The operation of section 111C commenced on 22 June 2007. It does not appear to be the case that the law relating to stay applications has been substantially changed, other than to recognise the role of the Social Security Appeals Tribunal in respect of child support assessments.
Pursuant to section 3, the principle objects of the Child Support (Registration & Collection) Act 1988 are to ensure that children receive the financial support that their parents are liable to provide and those periodic amounts are paid on a regular and timely basis.
Concurrently with her application for a stay in collection of child support pursuant to the parties child support agreement, Ms Taggart seeks an order that she receive periodic payments of child support, from Mr Pelly, in the sum of either $1,803.75 per month or as would be collected if the new child support formula was applied to the husband’s child support income, rather than the capped amount as at 30 June 2008.
Ms Taggart has not specifically outlined the legislative basis, on which she relies, for these latter aspects of her interim application. However, pursuant to section 111B of the Child Support (Registration & Collection) Act 1988 the court has a wide range of general powers. These include an order for the payment of a weekly, monthly, yearly or other periodic amount of child support and the power to make any orders, which it considers appropriate.[17]
[17] See Child Support (Registration & Collection) Act 1988 at section 111B(1)(b) and (l)
Section 111B was inserted as a result of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006. Its operation commenced on 1 January 2007. The relevant explanatory memorandum indicates that the purpose of the legislation was to simplify the relationship between the courts and the new child support scheme.
Accordingly, one of the ironies of this case is that Ms Taggart wishes the final determination of her case to be governed primarily by the provisions of the Child Support (Assessment) Act which prevailed prior to 1 July 2008, whilst on the other hand, she wishes to have the interim aspects determined according to the new legislative provisions. In my view, such a situation emphasises the uncertainty of the present legislative regime to the parties’ transitioned child support agreement.

Conclusions

I do not think that it can be conceivably possible that the parties, when they entered into the child support agreement in December of 2005, foresaw the possibility that the legislature would so radically modify the method of calculation and collection of child support in Australia.
Firstly, in the period since the agreement, the legislature has changed the statistical basis on which the capped amount was calculated. This resulted in a significant diminution of Mr Pelly’s level of child support, which Ms Taggart accepted without apparent demur. The government’s rationale for changing the capped amount was that it would more reliably reflect the true costs of caring for children.
More recently again, the section by which the capped amount was previously calculated and to which the parties had reference in their child support agreement, has effectively been repealed. The section concerned and indeed the whole fresh legislative framework is now concerned with the concept of parents’ combined child support income.
In addition, whilst the legislature continues to recognise that parents are to be encouraged to make their own arrangements, so far as the provision of financial support to their children is concerned and the court is directed to recognise the primacy of such agreements, the law relating to the implementation and discharge of child support agreements has also been substantially amended.
The agreement, which the parties entered into in December 2005, is deemed to be a binding child support agreement as defined in section 81 of the Child Support (Assessment) Act 1989. Under the new legislation, before such an agreement can be regarded as binding, the parties to it are required to consider a statement of advice regarding the implications of the agreement concerned.
I am uncertain, at this stage of the proceedings, what advice the parties each respectively received about what were the implications of their particular child support agreement. However, it is certain that they could not have received any specific advice about potential changes to the calculation of the capped rate or to changes in the formulaic calculation of child support.
I intend no disrespect to the Registrar of the Child Support Agency and its officers, but, to my mind, there seems an extreme level of artificiality in the manner in which the parties’ child support agreement has been taken to have transitioned to the new child support scheme.
The parties’ agreement made no reference to CPI increases, in respect of the calculation of periodic amounts of child support. Rather, by necessary implication, the agreement intended that Mr Pelly’s child support income would change periodically, according to factors arising from the calculation of full-time adult average weekly earnings, which would be obviously effected by inflationary forces with the Australian economy.
Accordingly, one of the consequences of the Agency’s decision is that Mr Pelly’s child support income is currently forever fixed at the sum of $113,763.00 and unless one or other of the parties takes some action, it will remain so indefinitely, regardless of any inflationary factors in the Australian economy.
Under the new legislative regime, the grounds on which a binding child support agreement may be discharged are limited. It remains a question for the final hearing as to whether the legislative and factual imbroglio, arising from this matter, constitute exceptional circumstances creating hardship, for one of the parties or the children concerned in this case, for the purposes of the amended section 136(2) or whether it is more appropriate for the departure process to be followed pursuant to the previous legislative regime.
At this interim stage, both parties agree that their child support agreement of December 2005 needs some level of modification. I reach this conclusion because, on a final basis, Mr Pelly has indicated that he wishes the agreement to be set aside and in the meantime he is willing to pay a greater amount of child support than that which the agency has assessed as being due from him pursuant to its interpretation of the concerned agreement.
Obviously, given the tenor of her application, Ms Taggart wishes the court to make arrangements for an alternative amount of periodic child support to be paid to her other than that which the Agency has calculated as being due to her pursuant to the “transitioned” agreement.
At this stage, the central issue for the court is how this is to be done and what considerations should influence this decision. I am satisfied that, pursuant to section 111B of the Child Support (Registration & Collection) Act 1988, I have authority to modify the application of the parties’ child support agreement, as it currently impacts upon the parties, at the interim stage. In addition, in my view, the applicable criteria pursuant to which this is done should come from an overall consideration of the objects of the Child Support (Assessment) Act 1989. This of itself is likely to create some controversy.
This is because one of the previous objects in the Act has been substituted with another by the new legislative regime. Prior to 1 July 2008, one of the particular objects of the child support scheme was that the level of financial support, to be provided by parents for their children, was to be determined in accordance with legislatively fixed standards. From 1 July 2008 onwards, this aim is replaced by the object that the level of financial support, to be provided by parents for their children, should be determined in accordance with the costs of the children concerned.
It is the intention of the legislature that these costs are to be determined objectively rather than subjectively. In this regard, the amending legislation makes provision for these costs to be calculated annually. The question for the court is which object is more germane to the circumstances of this case given that at the interim stage Ms Taggart looks to legislative provisions arising under the new scheme but her final application is skewed towards the previous legislative regime.
At this interim stage, I am applying legislative provisions arising under the new legislative regime, particularly in Part VIIIB of the Child Support (Registration & Collection) Act 1988. As such, I think it more appropriate that, in determining the relevant level of Mr Pelly’s payment of child support, pending final determination, I apply the current legislative mechanisms, which are based on the legislature’s current assessment of the true financial costs of children and which have resulted in its recalibration of the applicable formulae.
I am satisfied that such an exercise will result in a proper level of financial support for [L] and [C] and ensure that they equitably share in their parents’ respective incomes. Such an outcome will also ensure that Mr Pelly continues to bear the vast majority of the burden of providing financial support for the children.
I appreciate that parents are to be encouraged to make their own arrangement in respect of the provision of financial support for their children and the court should respect the sanctity of such agreements. However, in my view, the agreement between the parties is so bedevilled by uncertainty and its application has already been so extensively changed by legislative reforms that it would be inappropriate for the court to try slavishly to maintain the periodic payment aspects of it.
In his second reading speech regarding the new legislative regime, Mr Brough, the relevant minister at the time, said as follows:
“The new formula, on the other hand, will explicitly be based on the costs of children, as drawn from Australian research showing the real cost of children for the level of their parents’ income and the children’s ages. An ‘income shares’ approach will be used so both parents will have the same amount deducted as self-support, both parents income will be taken into account in establishing the costs of the children, and the resulting costs will be apportioned between the parents according to their share of the combined income.”[18]
[18] See Hansard (House of Representatives) for Thursday, 14 September 2006 at page 1
In its amendments of the child support regime, the legislature adopted the recommendations of the Ministerial Taskforce on Child Support, chaired by Professor Patrick Parkinson.[19] In my view, a number of the Taskforce’s recommendations, which have apparently been adopted by the legislature, are relevant to the resolution of this case, at least at the interim stage.
[19] In the Best Interests of Children – Reforming the Child Support Scheme; Report of the Ministerial Taskforce on Child Support – published May 2005.
Firstly, in its recommendation six, the Taskforce recommended that, pending the final outcome of any application, under child support legislation, the court should have a wide discretion to make any orders respecting the staying, collecting or assessing of child support. This recommendation appears to be reflected in the provisions of section 111B of the Child Support (Registration & Collection) Act 1988.
Secondly, in its first recommendation, the Taskforce recommended that the basic child support formula should involve first working out the costs of children by reference to the combined income of their parents, and then distributing those costs in accordance with the parents’ respective capacities meet those costs, taking into account their share of the care of the children involved.

In calculating the cost of children, the Taskforce asserted that the relevant formula should reflect two phenomena primarily. Firstly, expenditure on children rises with the age of the children concerned; and, secondly as income rises, expenditure on children rises in absolute terms, but declines in percentage terms.
Under the present arrangements, pertaining to the parties in this case, Mr Pelly is paying less periodic child support for [L] and [C] than he would have been assessed to pay if the currently applicable legislative formula had been applied to his and Ms Taggart’s income. To my mind, this is an anomaly not in keeping with the current objects of the Act. It is an outcome which does not reflect how the legislature intended, from 1 July 2008 onwards, the costs of a child’s financial support to be calculated.
When the parties entered the child support agreement, in December of 2005, they clearly intended that [L] and [C] should have their financial needs generously provided for by reference to Mr Pelly’s comfortable income.
Under the new legislative framework, this will continue to be the case because Mr Pelly’s income will continue to be the major component of the parties’ combined child support income, given Ms Taggart’s modest level of income.
Accordingly, it cannot be said, I think, that Mr Pelly is trying to escape or will escape his proper responsibility for providing for the children concerned in this case. He will pay child support by reference to the parties’ combined income and the financial needs of the children, based on an objective statistical survey relevant to their respective ages.
It is also clearly the case that the parties agreed, in December of 2005, that Mr Pelly would provide child support, for [L] and [C], in a form in addition to periodic amounts of money. He agreed that he would provide the children’s private school fees and high level health insurance.
In all the circumstances, pending the final outcome of this matter, I have determined that collection child support, pursuant to the parties current child support assessment, should be stayed and in lieu thereof, Mr Pelly should pay to Ms Taggart, from 1 July 2008 onwards, a sum of periodic child support payable by reference to the parties’ combined child support income and the current care percentages as are relevant pursuant to the currently enacted child support regime, particularly the provisions of Part V of Division II of the Act.
In addition, it is appropriate that the provisions of the parties’ child support agreement, which provide for Mr Pelly’s payment of non-periodic child support, in respect of [L] and [C], should continue. In my view, this is clearly what the parties agreed in December of 2005 and I can see no justification to look behind this aspect of the agreement.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.

I certify that the preceding one hundred and thirty-four (134) paragraphs are a true copy of the reasons for judgment of Brown FM

Associate: P Smith

Date: 9 December 2008