Telama and Telama (No 2)
[2017] FamCAFC 194
•15 September 2017
FAMILY COURT OF AUSTRALIA
| TELAMA & TELAMA (NO. 2) | [2017] FamCAFC 194 |
| FAMILY LAW – APPEAL – CHILD SUPPORT – Binding child support agreement – Appeal against decision to set aside a binding child support agreement pursuant to s 136(d) of the Child Support (Assessment) Act 1989 (Cth) – Non-disclosure of evidence as required under a Notice to Produce and the Federal Circuit Court Rules 2001 (Cth) – Whether there was sufficient evidence for the primary judge to find exceptional circumstances and hardship – Appeal allowed. FAMILY LAW – APPEAL – LEAVE TO APPEAL – Leave granted. FAMILY LAW – APPEAL – COSTS – No application for costs against the respondent – Application for a certificate under the Federal Proceedings (Costs) Act 1981 (Cth) for the appeal and rehearing granted. |
| Child Support (Assessment) Act 1989 (Cth) s 136 Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554 |
Masters &Cheyne (2016) FLC 98-072
Venson & Venson (No 2) [2010] FamCA 963
| APPLICANT: | Ms Telama |
| RESPONDENT: | Mr Telama |
| FILE NUMBER: | SYC | 1450 | of | 2008 |
| APPEAL NUMBER: | EA | 167 | of | 2016 |
| DATE DELIVERED: | 15 September 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan, Kent & Cleary JJ |
| HEARING DATE: | 4 September 2017 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 30 August 2016 |
| LOWER COURT MNC: | [2016] FCCA 2375 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Sansom SC |
| SOLICITOR FOR THE APPLICANT: | Harris Freidman Lawyers |
| THE RESPONDENT: | In person |
Orders
The applicant be given leave to appeal.
The appeal against Orders 1 and 2 dated 30 August 2016 be allowed.
Orders 1 and 2 dated 30 August 2016 be set aside.
That the proceedings be remitted to the Federal Circuit Court for re-hearing by a judge other than Judge Henderson.
There be no order as to costs.
That the court grants to the applicant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the court, would be appropriate for the Attorney General to authorise a payment under that Act to the applicant in respect of the costs incurred by her in relation to the appeal.
That the court grants to the applicant a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the court, would be appropriate for the Attorney General to authorise a payment under that Act to the applicant in respect of the costs incurred by her in relation to the rehearing.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Telama & Telama has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 167 of 2016
File Number: SYC 1450 of 2008
| Ms Telama |
Applicant
And
| Mr Telama |
Respondent
REASONS FOR JUDGMENT
Introduction
By Amended Notice of Appeal filed on 5 June 2017, Ms Telama (“the applicant”) seeks leave to appeal against orders made on 30 August 2016 in relation to a binding child support agreement. The applicant and her former husband Mr Telama (“the respondent”) have four children together, who at the time of trial were 17, 15, 13 and 11 years of age respectively. The children live with the applicant and see the respondent from time to time.
As is our usual practice, the application for leave to appeal and the prospective appeal were heard simultaneously.
Having separated in May 2007, in September 2010 the parties entered into a binding child support agreement which required the respondent to make financial provision for the children. On 3 April 2013 they entered into a new binding child support agreement (“the 2013 agreement”). This is the agreement to which the appeal relates.
Stated broadly, the effect of the 2013 agreement was to require the respondent to pay child support as follows:
·$6,815.33 per month to the applicant for the children,
·$3,154.29 for school fees for each child annually until the completion of year 4,
·$14,194 for school fees for each child annually from year 5,
·$315.43 per month towards private health insurance,
·An additional payment to a maximum of $5,000 per annum towards the youngest child’s special needs, and
·$6,500 to the applicant to discharge arrears of child support.
The youngest child had reached year 5 and as at the date of hearing the respondent was required to pay total annual child support in the amount of approximately $140,000 [6].
Although the respondent paid child support in accordance with the 2013 agreement for a significant period, sometime after he was dismissed from the position he held when he signed the 2013 agreement he stopped paying child support altogether. The respondent has not paid child support since 3 February 2016 and at 21 July 2016 he was $202,000 in arrears.
Before the arrears reached that level, on 9 October 2015 the applicant filed an application to enforce payment of the $75,036.83 then outstanding. By way of response, the respondent applied for the 2013 agreement to be set aside pursuant to s 136(d) of the Child Support (Assessment) Act 1989 (Cth) (“the Assessment Act”). These were the applications heard by Judge Henderson.
On 30 August 2016 the primary judge made orders and published her reasons for judgment. The orders provided:
1.That the binding child support agreement entered into between the parties on 3 April 2013 be and is hereby set aside.
2.The question of arrears under the agreement is reserved.
3.The issue of costs is reserved.
The effect of Order 1 is that the 2013 agreement was set aside from the date of the order. Order 2 seems to indicate that the primary judge may yet deliver judgment in relation to the application to enforce payment of the arrears. That application was fully ventilated in the August 2016 hearing and as best we can discern the only aspects outstanding are dispositive orders supported by reasons. Ordinarily a court’s decision to delay judgment pending further consideration would be described using words such as “judgment is reserved” (Griffiths v Boral Resources (Qld) Pty Ltd (2006) 154 FCR 554). Given that judgment was pronounced in relation to the agreement and the “question of arrears” was reserved it is unlikely that her Honour planned to address this point in a separate decision. Another possibility is that her Honour reserved for further consideration, what orders, if any might be made pursuant to s 137(2) of the Assessment Act. Yet another possibility is that Order 2 gave the parties the right to relist the enforcement application. Her Honour was satisfied that the respondent had no assets of value and it may be that rather than dismiss the enforcement application it remains on foot until the applicant provides evidence of a fund that could satisfy the arrears.
Parties should not be left guessing about the nature and effect of orders. Orders should quell the controversy, and in our view the enforcement application should have been finalised. Assuming it was dismissed, it was open to the applicant to bring fresh enforcement proceedings. In any event, before us the consensus seemed to be that whatever was intended by Order 2, if the challenge against Order 1 was successful and it was set aside, Order 2 should also be set aside. Although no challenge is made in relation to Order 3, we were informed that written submissions were made on the topic but that issue remains unresolved.
Binding Child Support Agreements
Provision is made in the Assessment Act for the quantification of child support payable for a child. There are various mechanisms for so doing, including, for example, administrative assessment, assessment set through departure (including departure by agreement) and relevantly, limited child support agreements and binding child support agreements. Depending on the mechanism adopted, different considerations apply as to how the relevantly agreed amount of child support might be changed.
The point of a binding child support agreement (entered into after the parties have received independent legal advice) is that it provides certainty for the parties as to the amount payable. As might be anticipated, of the various mechanisms by which parties agree for the payment of child support, these types of agreements are the most difficult to change. They cannot be varied and may only be terminated in limited ways, and as such it is obvious “that each party to such an agreement takes a risk that the certainty they gain by entering into such agreement is balanced against the difficulties in changing it” (Masters &Cheyne (2016) FLC 98-072 per Aldridge J at [148]; Murphy J at [74]).
The circumstances in which a binding child support agreement may be set aside are governed by s 136 of the Assessment Act. Section 136(1) of the Assessment Act provides for acceptance by the Child Support Registrar of a child support agreement as a precondition to a party having standing to seek relief pursuant to s 136(2)(d). It is uncontroversial that the parties’ binding child support agreement was accepted by the Registrar.
Section 136(2)(d) of the Assessment Act provides:
(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:
…
(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.
The central issues in this case were whether the respondent’s changed financial circumstances constituted an exceptional circumstance for the purpose of s 136(2)(d) and amounted to hardship within the meaning of the provision. The primary judge was satisfied that the conditions in s 136(2)(d) were established. Concerning these matters the primary judge adopted the approach to the meaning of “exceptional circumstances” and “hardship” discussed in Keane v Keane (2013) 50 Fam LR 120 per Watts J and Venson and Venson (No 2) [2010] FamCA 963 per Austin J. Based on those decisions the primary judge was satisfied the test for “exceptional circumstances” was “tough” and “the bar is high” but “not impossible” [54] and that the respondent carried the onus [70]. As the primary judge understood, this meant that the respondent needed to establish on the balance of probabilities the facts relied on by him at the relevant time.
The essence of her Honour’s reasons is found in the following passages:-
81. I am satisfied today that the husband has only his income, some modest superannuation and some personal items. Otherwise, what he has are debts.
82. I am satisfied as in Venson, the husband at least assumed when he signed the agreement that the [sic] he would continue in his employment with the (employer omitted) or employment at that level of remuneration into the foreseeable future and this has not occurred.
83. I am satisfied that without his employment with the (employer omitted) or remuneration around that level the husband would have struggled to support these four children at the level set out in the agreement together with a second family. Although re-marriage and subsequent children are not of themselves an exceptional circumstance all circumstances found to exist must be looked at to determine if together they create an exceptional circumstance and his re-marriage and support of 6 children is a factor to be considered.
84. I find that not to set aside this agreement will result in a continuation of debt which is increasing and for which the husband has no capacity to pay, and this is a significant hardship.
85. I find that even if he paid all his net income to Ms Telama, he could not pay his obligation under the agreement.
Her Honour was also satisfied that the respondent did not foresee the loss of his high income job or the level of debt that would arise from the liquidation of a company owned and operated by him. In circumstances where the respondent was, as at the date of hearing, maximising his income earning capacity and had no other financial resource available to him:
90. … the husband’s parlous financial state, his significant and increasing debt, inability to meet the binding child support agreement obligation even if all income he earned was given to [the applicant], when combined, with his obligation to his subsequent family and the hardship to him in continuing the agreement create an exceptional circumstance within the meaning of the Act.
Satisfaction of the onus
No challenge is made to her Honour’s statement of the principles that governed the husband’s application to set aside the binding child support agreement. Rather, the focus of this appeal is whether, having regard to the respondent’s failure to give full and frank disclosure of his financial circumstances, her Honour’s findings as to “exceptional circumstances” and “hardship” were available. Allied to this is the adequacy of her Honour’s reasons concerning these matters.
The respondent conceded on appeal that he did not comply with his obligations as to disclosure. He knew he was required to comply with r 24.03 of the Federal Circuit Court Rules 2001 (Cth) (“FCCR”). In cross-examination the respondent acknowledged that he had been served with a Notice to Produce documents and generally understood his obligations as to disclosure. At least in some respects the Notice to Produce replicated the requirement for the production of documents which, in accordance with r 25A.08(2) of the FCCR the respondent was obliged but failed to provide, such as his taxation returns for the three most recent financial years (r 25A.08(2)(a)). This was particularly significant as this was the respondent’s most recent taxation assessment and his case for the 2013 agreement to be set aside was based on:
·A material reduction in his income from when the 2013 agreement was made;
·That he had since become liable for “significant and unmanageable debts” including liabilities to the Australian Taxation Office; and
·That he had since become liable for a significant claim to the liquidator of a company in which he had an interest.
Further, it was the respondent’s contention that he would suffer hardship because he could not meet the obligations of the agreement, even if he applied all of his after tax income to the payments that he was required to make, and had negligible other assets and financial resources on which to call.
However, the respondent:
·Gave no evidence as to his taxable income in any year under consideration (grounds 1.1 and 3.4);
·Personally prepared but made no attempt to obtain copies of the relevant taxation returns (grounds 1.1 and 3.4);
·Provided no documents setting out the taxation debts upon which he relied (transcript of 9 August 2016, pages 43-47);
·Provided no documents for (omitted) Pty Ltd or (omitted) Trust (entities through which the respondent provided professional services and received income) (grounds 1.2, 3.1 and 3.2);
·Failed to disclose settlement of an action with an employer for which he received approximately $45,000 (grounds 1, 3.1 and 3.2),
·Failed to disclose until cross-examination the existence and sale of shares said to have realised approximately $174,000 in late 2014 (grounds 1, 3.1 and 3.4), and
·Although he disclosed the sale of four parcels of real estate, few documents were produced (grounds 1, 3.1 and 3.4).
The trial transcript records her Honour’s disquiet at the respondent’s inadequate disclosure and her recognition that full and frank disclosure was central to the Court’s ability to determine the application to set aside the 2013 agreement, “the high bar”, in a manner favourable to the respondent.
The following exchange illustrates the point:
[THE RESPONDENT]: ... The – the further clarification I want to make is my understanding that the threshold of – that I need to establish is – is the change in circumstances as they existed on 3 April 2013 to as they exist today. And, you know, it’s for that reason that I have put more focus on then and now and less focus on what has happened in between. Because I would, you know, argue that 136(2)(d) actually sort of asks for a comparison of one point in time versus another point in time. So…
HER HONOUR: But you’ve got to know how you got there, because somebody might just have chosen to do things, and I might say, well, you chose to do it, that’s your problem?
[THE RESPONDENT]: And that’s why the materials I’ve provided in evidence around employment, financial position, attempts to get other employment, and so on, all point to where I am today versus where I was at then.
(Transcript of 9 August 2016, page 51, lines 46-47 to page 52, lines 1-11)
HER HONOUR: Yes, but because you haven’t disclosed any of this…?
[THE RESPONDENT]: It relates back to that understanding of mine that the objective is to point out…between April 2013 and now.
HER HONOUR: Because you haven’t disclosed all the income you received from all your sources, be it anything, as I’ve told you, share dividends, interest on bank accounts, whatever it is – and this has only come about now because [counsel for the applicant] brought it up in cross-examination – it is very difficult for me to accept what you tell me. Because it’s your obligation to tell me your – make a full and frank disclosure of your financial position?
[THE RESPONDENT]: I’ve done to the best of my ability, subject to the constraints. I have been self-represented, your Honour.
HER HONOUR: But one of the significant difficulties I’m left with now is that you failed to disclose significant income which you received in a particular year. Now, I don’t know if you received it in December or received it throughout – I don’t know you did it, because you didn’t tell me. You failed to disclose trusts, companies – not even mentioned?
[THE RESPONDENT]: Well, certainly, the – you know, the matters of – you know, of particular trusts… referred to in my – the contract of engagement, in the appendix there. There is no concealment about the amount that I earned.
HER HONOUR: You have to tell me. I don’t read this so carefully that I say, “What does that mean?” It’s your life, not my life?
[THE RESPONDENT]: There’s no further matter for clarification on the matters for which I’ve been…
HER HONOUR: There might be – all right?
[THE RESPONDENT]: …cross-examined.
HER HONOUR: So we’ve come to that. I’m letting you know the difficulties I have, because you have to address them. That’s what I’m trying to be – let you know how I’m thinking. Because the obligation is on each of you to provide full and frank disclosure. Now, the [applicant] really didn’t have to do that because she’s just seeking to enforce a debt. But it was absolutely incumbent upon because there are very few source documents you’ve provided to the court to assist me to accept what you tell me in your affidavit. The source documents I’ve got today have come from [counsel for the applicant’s] tenders. Okay. So is there anything else that – when you were going through the evidence, that you need to further clarify with me?
[THE RESPONDENT]: No, your Honour.
(Transcript of 9 August 2016, page 52, lines 29-47 to page 53, lines 1-15)
It would seem that the respondent sensed that the tide ran against him and thus in closing addresses he disclosed that in October 2015 he entered into a limited child support agreement with his subsequent partner which required him to pay her $6,000 per month child support. That document was tendered and documents attached to it disclosed that as at April 2016 the Child Support Registrar assessed the respondent as having an annual child support income of $889,573. This revelation prompted the following response from her Honour:
HER HONOUR: No, you’re missing the point. You’re missing the point entirely. For reasons beyond my comprehension, in a year where you now tell me that your income was inflated by some 600-odd thousand dollars, or $550,000 – some phenomenal amount of money – because of the sale of shares and things which, quite frankly, I haven’t in your material either. That you would then enter into a child support agreement and allow that to be your income for the purposes of a limited support agreement.
(Transcript of 9 August 2016, page 69, lines 4 – 10)
Her Honour’s analysis of the evidence is undoubtedly correct and it comes as no surprise that there is strong criticism of the respondent’s inadequate disclosure evident in her reasons. However, and based substantially on what the respondent said she was satisfied that:
·At the time the respondent entered into the 2013 agreement he was earning $710,000 per annum [63];
·He now earned $220,000 per annum [68]; and
·He had no other financial resources from which to pay child support [66].
That her Honour placed great weight on the husband’s oral evidence and, indeed, unsworn statements made during closing addresses is evident in the findings below:
77.Further, in the child support assessment for Ms S dated 13 August 2015 his income was assessed at $889,573. Mr Telama said from the bar table that this figure included sale of assets in the tax year. These assets are the Property S home, three blocks of land, and share parcels.
…
88. I find that the husband is maximising his income earning capacity at this time at a salary of $220,000 per annum.
In many respects the issues that arise here by reason of non-disclosure resonate with the issues in Hardman & Hardman [2003] FamCA 1057 (“Hardman”). In Hardman, Coleman J (on appeal) discussed the consequences of a party’s failure to comply with that person’s disclosure obligations. In terms of the importance of disclosure, Coleman J said:
28. The relevant issue before the learned Federal Magistrate was the financial resources of the appellant, from whatever sources those derived. As decisions of the Full Court of this Court in cases, commencing with Oriolo v Oriolo (1985) FLC 91-653 make clear, where a litigant does not make a full and frank disclosure of his or her financial position, that litigant cannot benefit or rely upon the inability of the opposing party by reason of that failure to disclose to suggest a particular capacity or the existence, identity or location and nature of particular assets or resources. A moment's reflection would reveal why that must be so. Any other course would not only encourage litigants to fail to make a full and frank disclosure, but provide a positive incentive for concealment in that regard.
We agree. We also agree with the approach adopted by Coleman J to the significance of non-disclosure by a person seeking to establish hardship, namely:
51. …The difficulty however which the appellant faces in this appeal is that by virtue of his failure to make a full and frank disclosure of his finances ... the learned Federal Magistrate was not able to determine just what level of hardship, if any, the proposed orders involved for the present appellant. The reason for that was that the appellant himself had failed to make a full and frank disclosure of his finances… The appellant bore the onus in those areas. It was not for the respondent to facilitate his discharge of that. To the extent that the sale of the property is known, one could be forgiven for saying that such is the case by virtue of the cross-examination of the appellant by Counsel for the mother in that regard.
However, in this case the primary judge did indeed make findings as to exceptional circumstances and hardship to the respondent, notwithstanding his inadequate disclosure. In our view, where the fact of non-disclosure was so obvious and material it was necessary for the primary judge to explain how and why the respondent’s oral evidence and unsworn explanations were sufficient to meet that deficiency and resolve the confusion created by his failure, for example, to produce necessary and requested documents. Her Honour’s reasons do not address that conundrum and in circumstances where the legal onus sat with the respondent the findings as to “exceptional circumstances” and “hardship” were not available.
The effect of this is the errors of law identified in grounds 1.1, 1.2, 2, 3 (3.6 was abandoned) and 5 were made out.
As to ground 4 this challenged findings concerning the relevance of the circumstances under which the respondent ceased to be employed with the (omitted) Bank. Little was said to us about it other than to acknowledge the respondent was not pressed to disclose those circumstances. Otherwise the primary judge did not find that the circumstances in which of the respondent was dismissed were irrelevant and in its terms the challenge must fail.
Conclusion and Costs
It follows that the applicant has established that the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court. The fact that the 2013 agreement was set aside has the potential for a significant adverse effect on the level of child support payable for the children and thus substantial injustice to the applicant. Leave to appeal will be given and Orders 1 and 2 will be set aside.
As we said at the outset, it was agreed that the proceedings should be remitted for rehearing before a judge other than the primary judge. The applicant seemed to agree that notwithstanding Order 1 would be set aside, pending the rehearing the respondent’s obligations pursuant to the 2013 agreement could be stayed. However, this concession was predicated on a shared misunderstanding that on 8 December 2015 her Honour ordered the respondent to pay $600 per week child support. That order was not included in the appeal books and, with the parties’ agreement, we obtained the orders from the trial file. In short, there is no such order and at its highest there is a notation as follows:
7. The father agrees he owes a debt of $88,961.99 pursuant to the parties’ child support agreement.
8. The father will pay $600 each week as child maintenance (sic).
Given the misunderstanding the appropriate course is that the question about the level of child support payable pending the rehearing should be dealt with by the Federal Circuit Court.
As to costs, the applicant acknowledged that she owned property considerably more valuable than the respondent owned. Ultimately, she did not pursue an order for costs against the respondent and applied for a certificate under the Federal Proceedings (Costs) Act 1981 (Cth) for the appeal and rehearing. The conditions for the issuance of certificates have been met and orders to that effect will be made.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Kent & Cleary JJ) delivered on 15 September 2017.
Associate:
Date: 15 September 2017
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