TGN and TMW
[2002] FMCAfam 250
•14 August 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TGN & TMW | [2002] FMCAfam 250 |
| FAMILY LAW – Child support – departure order – taxable income not actual income – school fees – orthodontic expenses. |
| Applicant: | TGN |
| Respondent: | TMW |
| File No: | (P)MLM 9804 of 2001 |
| Delivered on: | 14 August 2002 |
| Delivered at: | Melbourne |
| Hearing Date: | 8 March 2002 |
| Judgment of: | Walters FM |
REPRESENTATION
| Counsel for the Applicant: | Ms Stewart |
| Solicitors for the Applicant: | Mason Sier Turnball |
| Counsel for the Respondent: | Mr Ramsey |
| Solicitors for the Respondent: | Anderson Partners |
ORDERS
There is to be a departure from all relevant administrative assessments of child support for the period 1 July 2000 to 4 August 2003, in such a manner as to provide for the variation of the annual rate of child support payable by the husband from $4,128.00 per annum (or such other annual amount as may have been determined from time to time) to the amount of $15,000.00 per annum.
There is to be a further departure from all relevant administrative assessments of child support for the period 8 March 2002 to 8 August 2003, to the effect that the husband provide child support for the children otherwise than in the form of periodic amounts paid to the wife — such child support to comprise the following:
(a)payment by the husband of one half of the School Costs (as I have defined them) and dental expenses; and
(b)payment by the husband of the whole of the orthodontic expenses for the child J.
The order referred to in (b) above is an order under section 124 of the Assessment Act, and the child support to be provided by the husband pursuant to it is not to be credited against the husband’s liability under any relevant assessment.
The order for the indemnity sought by the wife is to be made by consent.
Counsel will be heard as to the precise terms of the orders that will be required to give effect to the within Judgment.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
(P)MLM 9804 of 2001
| TGN |
Applicant
And
| TMW |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is the wife’s application for departure from the current administrative assessment of child support payable by the husband for the two children of the marriage, A born 8 August 1985 (now aged 17) and J born 12 December 1987 (now aged 14).
The wife’s form 63 application was filed on 12 December 2001. The orders sought by the wife were not stated with precision in her application. It is clear from the submissions filed on her behalf, however, that the orders now sought by her are as follows:
a)There be a departure from administrative assessment for the period 30 June 1999 to 8 March 2004 as follows:
i)the annual rate payable by way of periodic support be fixed at $15,000.00 per annum;
ii)the husband pay one half of the children’s school, extra curricular and dental expenses, such payments to be made within 7 days of the provision of a receipt for expenditure on the same by the wife; and
iii)the husband pay, as and when due, orthodontic expenses for J.
b)The husband indemnify and keep indemnified the wife and/or the children or either of them with respect to money owing or required to be repaid to either the Australian Taxation Office or Centrelink as a result of distributions of income to them through the T Group.
c)The sum of $1076.50 paid by the husband to the wife pursuant to the orders of 15 January 2002 be deemed a non-periodic contribution to the children’s school and extra-curricular expenses for the commencement of the 2002 school year and shall not be credited against the husband’s liability for periodic child support.
d)The husband pay the wife’s costs thrown away of 15 January 2002.
e)The husband pay the wife’s costs generally.
The husband did not file a formal response to the wife’s form 63. In the submissions filed on his behalf, however, the Court was advised that the husband seeks the following orders:
a)There be a departure from the administrative assessment of child support in respect of the obligation of the husband to pay child support in the sum of $160.00 per week to the Child Support Agency for the children A and J for the child support period commencing from the date of these orders to 8 August 2003.
b)The husband continue to pay the children’s orthodontal expenses.
The husband consents to the order set out in 2(b) above (being the indemnity).
Documents relied upon
The wife relied upon the following documents:
a)her form 63 application filed on 12 December 2001;
b)her affidavit sworn 10 December 2001; and
c)her form 17 financial statement sworn 10 December 2001.
The husband relied upon the following documents:
a)his affidavit sworn 4 February 2002; and
b)his form 17 financial statement sworn 31 January 2002.
Each of the parties gave evidence at the hearing, and various exhibits were tendered and received into evidence.
Both parties provided written submissions after the conclusion of the evidence phase of the trial.
Background
The parties were married in March 1985. They separated in February 1995, and a decree nisi of dissolution of their marriage was granted in March 1999.
The wife was born in June 1955. The husband was born in August 1949.
A and J are the only children of the parties’ marriage. A is now aged 17 years. J is aged 14 years.
Both parties have re-partnered. The husband’s partner (“B”) lives with him. The wife’s partner (“K”) spends much of his time with her and at her home — but I am satisfied on the basis of the evidence presented to me during the course of the proceedings, and I find, that the wife does not cohabit with K.
The children live with the wife. There was a factual dispute between the parties as to the contact actually exercised by the husband.
In May 1997, final orders were made in the Family Court of Australia. These orders provide for the children to live with the wife and the husband to have contact each alternate weekend from Thursday after school until Monday morning, and in each other week from after school Thursday until the commencement of school on Friday. The orders also provided for contact to take place for one half of all school holidays and on special days. The orders have not been varied.
In paragraph 8 of his trial affidavit, the husband asserted that his “…contact with the children included 155 nights from 1 January 2001 until 31 December 2002.” I assume that the reference to December 2002 should be a reference to December 2001. He also asserted that, in the previous year, he had contact with the children for 148 nights of the year.
Both parties gave evidence that they have kept records of the time that the children have spent with the husband. After paying careful attention to the presentation and content of each party’s evidence, I am not satisfied that either party accurately stated the times that the children were with the husband. Even taking into account the fact that both parties were likely to be anxious and tense whilst giving evidence, I was nevertheless left with the clear impression that each party was determined to present the facts (as he or she perceived them to be) in as persuasive manner as possible.
It does not seem to be in dispute that the husband did not have contact with the children on all the occasions to which he was entitled pursuant to the orders made in May 1997. For example, the children were with him for one week during each of the first, second and third term school holiday periods during 2001 and for two to three weeks during the summer (Christmas) holidays. As well, days (or nights) were missed at other times. I accept the wife’s evidence in this regard.
It is not in dispute that the husband has had a significant degree of contact with the children. Doing the best that I can with the material now before me, however, I find that I am unable to place a precise figure upon the number of nights that the husband spent with the children. Having reviewed exhibit “W4” (being the wife’s schedule of access nights), my notes of the oral evidence of both parties and the submissions in relation to the subject presented on behalf of the husband, I am satisfied that the children were with the husband for something between 125 nights and 145 nights during 2001. Given that the issues in the current proceedings require me to consider whether a departure from the administrative assessment of child support is warranted both retrospectively and prospectively, its seems to me that I cannot strive for any greater degree of accuracy than that which would be achieved if the mid point in this range were to be adopted as representative of the time spent by the husband with the children. Accordingly, I find that the children spend, on average, 135 nights per year with the husband, and in his care.
Both children attend Scoresby Secondary College, and appear to be progressing well with their studies.
The wife is employed as a book keeper with a firm of accountants. In paragraph 10 of her trial affidavit, the wife said:
I work four days each week, and earn approximately $372.00 net per week from this employment. I also receive social security benefits of $140.25 per week, making a total income in the sum of $512.25 per week. My weekly expenses, as detailed in my financial statement…, exceed my weekly income…
The passage to which I have referred in the previous paragraph was not specifically denied by the husband in his trial affidavit. Although the wife was asked certain questions, in cross examination, about her relationship with K, it was not put to her — or seriously suggested at any other time during the proceedings — that the wife’s income was other than she had described it to be. Nor was it suggested that she has a capacity to earn a higher income than she presently receives.
In his trial affidavit and form 17, and at the commencement of his oral evidence, the husband described himself as a “business proprietor”. He is, in fact, the sole director and shareholder of M Pty Ltd (“M”). M operates the business known as X Motorcycles. The premises from which the business is operated are owned by G Pty Ltd as trustee of the T Family Trust. These entities, together with an entity known as the T Child Maintenance Trust (which was established in 1999), comprise “the T Group”. The financial statements and income tax returns for the T Group for the year ended 30 June 2001 comprise exhibit “W6”.
According to the husband’s form 17, his only form of income is a dividend from M amounting to $386.00 per week. In addition, he receives certain benefits from the business, including the use of a motor vehicle, telephone, superannuation entitlements (paid to the T Superannuation Fund), house insurance and various outgoings associated with the car loan and the house. The value of the benefits received by the husband (including the superannuation contribution) is $437.00 per week.
The husband readily conceded that he “…has an income which would result in an unjust and inadequate determination of his contribution to the financial needs of the children.”[1]
[1] See submissions filed on behalf of the husband, at page 1
During the course of the proceedings, the husband also conceded that he controls the entities comprising the T Group. He said that he could not run the business without the assistance of his accountant, and asserted that he did not really understand the purpose, structure, inter-relationship or functioning of the entities comprising the T Group.
The husband conceded that the entities controlled by him comprise his alter ego. He also conceded that his “…disposable income is the sum total of the money he receives from his business which he has distributed to his company and the child maintenance trust”[2] — but that statement clearly understates the position. For example, in paragraph 10 of his trial affidavit the husband said:
The home I reside in is owned by the business and therefore expenses for same are paid for by the business…The company owns the town house. Its value is approximately $180,000 and the mortgage is for $85,000.
[2] See submissions filed on behalf of the husband, at page 4
The history of the husband’s payment of child support for the children (and related matters) is set out in paragraph 5 of the wife’s trial affidavit. The husband’s response is contained in paragraph 4 of his trial affidavit. It would appear that the relevant position is as follows:
a)From May 1997 to December 1998 the husband paid child support at the rate of $150.00 per week pursuant to a child support agreement.
b)From January 1999 until June 2000 the husband paid child support at the rate of $160.00 per week, pursuant to a decision made by a child support review officer in February 1999.
c)With effect from 30 June 2000, the husband paid child support at the rate of $45.00 per week (being the amount assessed by the child support agency).
d)In August 2000 the wife sought a review of the assessment pursuant to which the husband was to pay child support at the rate of $45.00 per week. On 22 November 2000 the wife’s application to vary the child support assessment was refused “…because the matters that (were) raised are too complex.”[3]
e)The wife objected to the decision (or non-decision) referred to in the preceding paragraph but, for various reasons, did not progress the matter further.[4]
f)In late October 2001 the wife received an assessment from the child support agency relating to the period 1 January 2002 to 31 March 2003 (“the Current Assessment”). The Current Assessment comprises annexure GNT5 to the wife’s trial affidavit. The Current Assessment requires the husband to pay child support at the rate of $344.00 per month, or $79.38 per week. Further, the Current Assessment records the husband’s child support income amount as $30,504.00 — being the husband’s 2001 taxable income “plus any supplementary amounts”. The “child support percentage” as it applies to the husband is 22 percent.
[3] See Child Support Agency Notice of Decision dated 22 November 2000 — being annexure GNT2 to the wife’s trial affidavit
[4] See paragraph 6 of the wife’s trial affidavit
A comparison of the chronology set out in the previous paragraph with the orders sought by the wife reveals that the wife seeks a departure from the amount fixed by the first child support review officer in the decision dated 16 February 1999 (being annexure GNT1 to the wife’s trial affidavit) — with effect from midway through the period covered by that determination. In my view, no (or no adequate) reason has been presented to me to warrant consideration of a departure of an amount fixed by the first child support review officer in the decision dated 16 February 1999. No explanation has been provided as to why, in any event, any variation that might be considered appropriate should date from 30 June 1999 (as opposed to 1 January 1999, being the commencement date of the period covered by the Child Support Review Officer’s determination). Indeed, the wife’s principal concerns are clearly the assessment of $45.00 per week relating to the period 30 June 2000 to 31 December 2001 (which the wife sought — unsuccessfully — to attack by way of the review process) and the Current Assessment.
The wife also sought that the departure order adhere until 8 March 2004. In other words, she seeks that any order that I may be minded to make should adhere for a period of 2 years from the date of the trial. Once again, no (or no adequate) reason has been presented to me to justify the selection of such a period. For his part, the husband has sought that any relevant departure order relate to the period between the making of the orders and 8 August 2003 (being A’s eighteenth birthday).
In my opinion, the relevant period is from 1 July 2000 (being the commencement date of the assessment referred to in paragraph 27(c) above) to 8 August 2003 (being A’s eighteenth birthday). That is so because the husband has effectively conceded that the quantum of child support for the period to which I have referred is inappropriate or inadequate, and the orders that he has sought reflect that concession (at least in relation to that part of the period that has yet to expire). Further, it seems to me that is inappropriate to endeavour to “fix” a level of child support for a period extending beyond the date upon which A obtains the age of 18 years.
As set out at the commencement of these Reasons, the wife filed her form 63 application on 12 December 2001. The application is expressed to be brought under section 117(2)(c)(i) of the Child Support (Assessment) Act 1989 (“the Assessment Act”). The grounds of the application are set out in paragraphs (1), (2), (3) and (4) on page 2 of the form 63. In essence, it is alleged that the husband’s taxable income does not properly reflect his true income and capacity to earn. It follows that an assessment based on his taxable income would be unjust and inequitable — having regard to the husband’s income earning capacity, property and financial resources. Put another way, the wife asserts that the husband’s taxable income does not adequately reflect his real income, earning capacity, property and financial resources for the purposes of child support.
The wife’s form 63 first came before this Court on 15 January 2002. Various procedural orders were made on that day. In addition, the following orders were made:
5.Pending the adjourned date (8 March 2002) the husband pay child support to the wife at the rate of $120.00 per week.
6.The husband forthwith pay to the wife the sum of $1,076.50, such sum to be characterised by the Federal Magistrate at trial.
At the commencement of trial on 8 March 2002 I was advised that the husband had paid the sum of $1,076.50 referred to in paragraph 6 of the orders made on 15 January 2002, but that he had not complied with the terms of paragraph 5 of the order.
During the course of her cross examination, the wife conceded that the husband has paid A’s orthodontic expenses. The wife said that she did not know how much the husband had paid in this regard. His figure was $4,000.00 — which was effectively unchallenged.
The wife also conceded that the husband has paid some sporting expenses for the children and that he and B have bought clothes for the children from time to time. As well, the wife conceded that the husband and B took the children on a holiday to the Whitsundays in or about December 2001. According to the husband, the cost of the holiday was $3,171.00.
During the course of the proceedings, evidence was given by Michelle Fiona Lughermo. Ms Lughermo is a certified practicing accountant. She is a director of the accounting firm which employs the wife. I accept her status as an expert in the field of accounting. Her evidence was to the following effect:
a)The T Child Maintenance Trust (“TCMT”) was established in August 1999.
b)It appears that assets that had previously been owned by M and/or G Pty Ltd (as trustee of the T Family Trust) were transferred from those entities to the TCMT.
c)An amount is being paid by M to the TCMT for the use of those assets — which include certain fixtures and fittings, office furniture, hydraulic cabinets, a hydraulic press and telephone system. The amount of rental paid for 2001 was $9,445.00.
d)Ms Lughermo referred to a letter from the husband’s accountant to an employee of X Motorcycles dated 3 September 1999. The letter was obtained from the husband’s discovery and was tendered without objection and marked exhibit “W8”. The letter is as follows:
Dear C
RE: Equipment Lease Payments T Maintenance Trust
On 7th of each month (commencing 7th September 1999), X should transfer $790.83 to the account “TMW — T Maintenance Trust” which you recently opened.
The payment should be coded to an account entitled “Equipment Leasing” in the M Pty Ltd ledger. This will be an expense for tax purposes.
Payments after 7th September to the Child Support Agency should be made from the “T Maintenance Trust” account.
As future equipment purchases are made, we will have these bought by the Maintenance Trust. I can advise the procedure when it arises.
There will not be much surplus in the Maintenance Trust account each month, but any surplus can be used to meet any other cost for A and J eg school excursions, dental costs etc.
Please call if you have any queries.
Yours sincerely
BD
e)As a professional accountant involved in assisting many small to medium sized businesses, it is Ms Lughermo’s experience that a manager of a business of a similar type and size to that conducted by the husband would be employed on a salary package of between $60,000.00 and $80,000.00 per annum.
f)Notwithstanding that the husband has deposed to the fact that the townhouse in which he presently resides is owned by “the company” (see the husband’s trial affidavit), a current title search reveals that the townhouse is registered in the husband’s name.
g)M had an annual turnover in the 2001 financial year of approximately $4.3 million. Gross profit from trading was approximately $211,000.00. M’s net profit, before tax, was approximately $26,000.00.
h)There were retained profits held in M at the end of the 2001 financial year — amounting to $287,743.00. Technically, this amount is available to be declared as a dividend to the sole shareholder of the company (being the husband).
i)Certain of the expenses in the profit and loss statement for M for the year ended 30 June 2001 seem high or inappropriate, and require explanation. Relevantly, the figures for “professional fees”, “legal costs” and “employees’ amenities” are of concern.
The cross examination of Ms Lughermo was brief, and no real attempt was made to challenge any of the matters referred to in the previous paragraph. Ms Lughermo confirmed that if the husband is dissatisfied with the financial returns that he is deriving from his business interests, then it is open to him to seek to be employed as a manager of a similar business. The thrust of her evidence was — and I accept — that the husband has a capacity to earn income commensurate with a salary package of between $60,000.00 and $80,000.00. During the course of his cross examination, the husband conceded that if he were to work in a similar position elsewhere, then he should be paid between $70,000.00 and $80,000.00.
On this evidence alone, it is possible to conclude that the husband has an earning capacity of approximately $75,000.00 per annum.
It is the case, however, that the husband’s real, notional income is greater than the amount that, in my opinion, represents his theoretical earning capacity (being the amount of $75,000.00 referred to in the preceding paragraph). In paragraph 17 of the submissions filed on behalf of the wife, it is suggested that it is possible to analyse the husband’s income as follows:
Dividend from M $20,000.00
Company profit (2001) $25,822.00
Equipment rental (being the amount paid to TCMT) $9,490.00[5]
Motor vehicle benefits (see the husband’s form 17) $2,548.00
Husband’s telephone benefits (see husband’s form 17) $1,924.00
Voluntary superannuation contributions $9,984.00
Husband’s house insurance $572.00
Husband’s “other” benefits (see husband’s form 17) $7,696.00
[5] See financial statements comprising exhibit W6
Total $78,036.00
In addition, the husband’s business interests pay the mortgage instalments in respect of the property in which he presently resides. According to paragraph 10 of the husband’s trial affidavit, the amount secured by the mortgage is $85,000.00. I am unaware of the amount being paid by the T group in respect of the mortgage. Nor I am aware of the reasonable rental value of the property. I find, however, that the T group is paying not less than $5,000.00 per annum in respect of the property currently registered in his name.
Having regard to the (effectively unchallenged) evidence of Ms Lughermo, I also conclude that the amounts claimed in M’s trading, profit and loss statement for the year ended 30 June 2001 for expenditure in relation to “professional fees”, “legal costs” and “employees amenities” are unrealistically high and are likely to reflect certain benefits received by the husband. Doing the best that I can with the material before me, I am unable to conclude with certainty the precise amount of the benefit that the husband receives from these sources. I conclude, however, that the amount of the benefits is most unlikely to be less than $5,000.00.
Overall, therefore, I find that the husband can fairly be regarded as having had the following gross income in the 2001 tax year (and that such income would have been received in his hands or for his benefit if it had not been “washed” [and I do not use the term in any pejorative sense] through the accounts of the entities forming the T group):
a)
amount referred to in paragraph 36 above
$78,036.00
b)
payments made on the husband’s behalf in relation to the mortgage currently encumbering his residential property
$5,000.00
c)
Additional benefits received by the husband (see preceding paragraph)
$5,000.00
Total
$88,036.00
In all the circumstances, and having regard to the matters discussed above, I find that the husband’s real/notional income for the year ended 30 June 2001 was approximately $88,000.00. Further, having regard to the comparative figures for the 2000 financial year (which appear in exhibit W6), the number of years that the husband has been involved in his present business and his concession to the effect that if he “….did the same work elsewhere, (he) should be paid between $70,000.00 and $80,000.00 per annum”, I am satisfied that the husband has a capacity to earn (or receive benefits totalling) not less than $88,000.00 per annum.
The Law
The Commonwealth’s legislative scheme for assessment and enforcement of child support liabilities is contained in the Assessment Act and the Child Support (Registration and Collection) Act 1988. Certain aspects of this scheme were considered by the High Court in Luton v Lessels (2001) FLC 98-015. In that case, Gaudron and Hayne JJ said (at page 95,659):
The Assessment Act records that the “parents of a child have the primary duty to maintain the child”. This duty is said, by the Assessment Act, (a) to be not of lower priority than the duty of the parent to maintain any other child or another person: (b) to have priority over all commitments of the parent other than commitments necessary to enable the parent to support himself or herself and any other child or another person the parent has a duty to maintain: (c) to be not affected by the duty of any other person to maintain the child or any entitlement the child or another person may have to an income tested pension, allowance or benefit. …The principal object of the Assessment Act is said to be “to ensure that children receive a proper level of financial support from their parents”.
Part 5 of the Assessment Act (ss 35-79) provides for the administrative assessment of child support. “Child support” is defined as “financial support under [the Assessment] Act, including financial support under [the] Act by way of lump sum payment or by way of transfer or settlement of property”. An administrative assessment of child support requires the application of one or more of several statutory formulae that is, or are, apposite in the particular circumstances. Section 79 of the Assessment Act provides that “an amount of child support due and payable by a liable parent to a carer entitled to child support is a debt due and payable by the liable parent to the carer”…
Where there has been an administrative assessment, both the liable parent and the carer may lodge with the Registrar an objection against the assessment. A person aggrieved by a decision on the objection may, pursuant to section 110 of the Assessment Act, appeal to a court having jurisdiction under that Act.
In the same case, Gleeson CJ said (at page 95,653):
The objects of the Assessment Act are set out in section 4. The principal object is to ensure that children receive a proper level of financial support from their parents. To that end, the Act provides for a level of support to be determined in accordance with legislatively fixed standards, and permits carers of children to have the level readily determined without the need to resort to court proceedings.
…It may be observed that, although the legislation is enacted in furtherance of a clearly defined public policy, it creates a distinctly personal liability. The natural and moral obligation of the parent to support a child becomes, by force of the legislation, a legal obligation reflected in a debt, calculated in accordance with the Assessment Act, owing by a parent to a carer of the child.
Gaudron and Hayne JJ continued (at page 95,663):
Part 7 of the Assessment Act (ss 99–146) deals with the jurisdiction of courts under the Act. In particular, provision is made for applications to a court for a declaration about the applicability of the administrative assessment provisions. Provision is made for what are called “appeals” against incorrect administrative assessments and for orders for departure from administrative assessment. (The reference to “appeal”, although similarly used in other contexts, may mislead. The proceeding which is so described is the first application of judicial power; it is an exercise of original, not appellate jurisdiction.) An order by a court for departure from an administrative assessment may be made on the grounds on which the registrar may make a departure determination…
The process involved in the consideration of an application for departure from the administrative assessment of child support was explained by the Full Court in Gyselman (1992) FLC 92-279 at 79,064-5, under the heading “Division 4 — Orders for Departure from Administrative Assessment in Special Circumstances”. The Full Court said (inter alia):
Section 117 is the critical provision.
The structure of that section is that s.117(1)(b) identifies concisely the matters about which the Court must be satisfied and those components are then expanded in subsections (2) to (9). Section 117(1)(b) identifies a clear three-step process:
1. Whether one or more grounds of departure in s.117(2) is established.
2. Whether it is ‘just and equitable’ within the meaning of s.117(4) to make a particular order.
3. Whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order.
It is clear from the careful way in which s.117 has been structured that the Court must address each of those three separate issues...
…Each of those grounds (in s.117(2)) is prefaced by the words, "in the special circumstances of the case". Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something which 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. (It has been held) that "special circumstances" were "facts peculiar to the particular case which set it apart from other cases". The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
In Hallinan & Witynski (1999) FLC 98-009, the Full Court said (commencing on at p. 95,321):
In Hides v. Hatton (1997) FLC 92-759, the Full Court said this (at 84,352):
“it was also made clear in Gyselman that when the Court is considering whether it is just and equitable within the meaning of s.117(4) to make a particular order, the Court is required to undertake the task of considering the matters set out in paragraphs (a) to (g) of that sub-section, and in this regard the Full Court said as follows (at 79,078):
‘However, some of the matters listed in sub-section (4) may overlap with matters already considered under sub-section (2) and some of the paragraphs in sub-section (4) may be more significant in one case than they would be in another or of little relevance in a particular case. It is an essential part of the s.117 exercise to carry out the obligation under sub-section (4). However, that does not mean that it is necessary in each case to slavishly go through each of the paragraphs. The extent to which it is necessary to do so will depend upon the facts and conduct of the individual case and the analysis already performed under sub-section (2).’
The Full Court also made it clear in its decision in Gyselman that similar considerations apply to the Court’s determination as to whether it is ‘otherwise proper’ within the meaning of s.117(5) to make a particular order (see at 79,080), and furthermore and very relevantly for present purposes the Full Court emphasised the importance of trial Judges providing adequate reasons for judgment in order to ensure a proper exercise of the discretion under s.117 (see at 79,080).”
In the same vein, a differently constituted Full Court…in Ross and McDermott (1998) 23 Fam.L.R. 613 at 623-4 (paragraph 39) said this:
“In our view a practical and flexible approach should be adopted to the task of considering these s 117(4) and (5) matters, that is an approach similar to that which this court has long adopted to the ‘s 68F(2) matters’… in child-related proceedings under the Family Law Act 1975 (Cth), and to the ‘s 79(4) matters’ and ‘s 75(2) matters’ in property settlement proceedings under that Act. Accordingly, we consider it is unnecessary to make any reference to those s 117(4) and (5) matters which have no real relevance in the circumstances of the particular case. We also consider that it would be permissible to group together and consider as a whole, those relevant matters which by their nature lend themselves to such an approach in the circumstances of the particular case, and in the case of those matters which are required to be considered under more than one subsection of s 117, to examine such matters only once, although they may need to be taken into account under more than one subsection.”
As the judgment of the Full Court…in Hampson v Lightfoot (1997) FLC 92,775 at 84,560-1 demonstrates, the reasons for answering the two questions posed by s.117(1)(b)(ii) need not be elaborate, but the task of considering, at least broadly, the matters referred to in s.117(4) and 117(5), respectively, and then making a finding as to satisfaction or otherwise in relation to the relevant matter, must be undertaken as a necessary part of the exercise of discretion imposed on the Court by s.117(1).
I turn now to consider the matters as to which I must be satisfied — pursuant to section 117 of the Assessment Act — before making any order under Division 4 of Part 7 of the Act.
“Special Circumstances” — Section 117(2)
It was conceded by the husband that the wife has established a ground for departure within the meaning and contemplation of section 117(2) of the Assessment Act. In the submissions filed on his behalf, the husband conceded that “…pursuant to section 117(2)(c)(i) of the [Assessment] Act, the husband has an income which would result in an unjust and inadequate determination of his contribution to the financial needs of the children”.
That concession manifested itself in the departure order proposed by the husband (which order is referred to in paragraph 3 of these Reasons). In all the circumstances, I need do no more than record that I am satisfied that one of the grounds of departure in s.117(2) of the Assessment Act has been established.
“Just and Equitable” — Section 117(4)
Because of the structure of the orders sought by the wife, it is apparent that I must first determine whether or not it is appropriate to make the order sought by the wife as described in paragraph 2(a)(i) of these Reasons. Such an approach is mandated by the provisions of section 123(3) of the Assessment Act — which states that, before hearing an application for provision of child support otherwise than in the form of periodic amounts paid to the carer entitled to child support, the court must “…hear and determine any pending application made to the court for an order under Division 4 (orders for departure from administrative assessment in special circumstances) in relation to the child, the carer entitled to child support and the liable parent”. The orders sought by the wife as described in paragraph 2(a)(ii) and (iii) of these Reasons are orders for the provision of child support otherwise than in the form of periodic amounts paid to the wife, and thus fall within the contemplation of Division 5 of Part 7 of the Assessment Act. Even if that is not precisely how they are drafted, I find that that is their practical effect.
It follows from the above that my current consideration of the provisions of section 117(4) is in the context of endeavouring to determine whether it would be just and equitable as regards the children, the wife and the husband to make the particular order set out in paragraph (2)(a)(i) of these Reasons.
I remind myself of the nature of the duty of a parent to maintain a child (as stated in section 3 of the Assessment Act).
It is extremely difficult to ascertain the proper needs of the children from the material presented to me during the trial and in the submissions filed on behalf of each of the parties. In Part F of her Financial Statement, the wife estimates that her average weekly expenses for the children are $391.00. This estimate was not (or not seriously) challenged by the husband. During the course of her evidence, the wife produced a schedule (being exhibit W1), comprising estimated expenses associated with the attendance of the children at Scoresby Secondary College. The estimated expenses include items of clothing, haircuts, school fees and camp expenses and school bags — and even an allowance for A to attend the school ball. The total of the expenses was $5,630.50 (or $108.00 per week).
In the written submissions filed on behalf of the parties, reference was made to the costs of children based on the Lee table (in this regard, see CCH Australian Family Law, Court Handbook, at para 3-115). According to the Lee table, the current total expenditure on a weekly basis for children of the approximate age of A and J is in the order of $279.00. I note, however, that the expenditure includes medical and dental costs and education costs. If I ignore the amount contained in the “other” column of the Lee table, it is apparent that the total expenditure allowance amounts to $244.46 per week. Given that the wife has sought separate orders relating to the children’s educational expenses and dental and orthodontic expenses, it seems to me that this is a fairer way of approaching the task of determining the overall costs of the children.
In my opinion, the wife’s estimated figures appearing in her financial statement reflect her current ability to pay and are not a fair and proper allowance for their reasonable needs. In any event, the amount referred to by the wife could only relate to the period during which the children are with her. It was the husband’s case that the children had been with him for 155 nights in the year 2001 and 148 nights in the year 2000. The submissions filed on his behalf reflect his assertion that he spends something in the order of $153.00 per week for food, household expenses and clothing for the children. In addition, he asserts that he spends $20.00 per week for “gifts”, $48.00 per week for orthodontics and $45.00 for “child care and education”.
I note, as well, that the husband asserts that he spends $90.00 per week for “holidays for the children”. In his written submissions, the husband asserts that “luxury holidays for the children are important for both parents”. I do not agree. The wife’s evidence was to the effect that she does not see the need for such holidays for the children. As far as she was concerned, the amount spent by the husband in this regard could be better spent on other things. Even if that were not the wife’s view, I find that “luxury holidays” are not important for the children or for the wife. I find that the only relevant person for whom they are important is the husband, and that they are neither a necessary nor proper expense for the children. Nor are such holidays referrable to the children’s proper needs within the meaning and contemplation of that term in section 117(4)(b) of the Assessment Act. This suggestion reflects — at best — an unfortunate lack of insight on the husband’s part. More importantly, it reflects a priority which is inconsistent with the core provisions of the Assessment Act, such as section 3(2), and sections 114 and 121. I accept that some allowance for some form of holiday with the children is appropriate — but an allowance for “luxury holidays” is not.
Having regard to the matters discussed above, to the totality of the evidence before me and to the provisions of section 66J(2) of the Family Law Act 1975 (which states that, when taking into account the proper needs of a child, the court may have regard, to the extent to which it considers appropriate in the circumstance of the case, to any relevant findings of published research in relation to the maintenance of children), and the Lee table[6], I find that a reasonable allowance for the proper needs of the children for a 12 month period (in other words, irrespective of whether the children are with the husband or the wife) is a total of approximately $500.00 per week (excluding medical and dental costs and education costs).
[6] See Coon v Cox (1994) FLC 92-464 and Streets (1994) FLC 92-509.
It would appear from the wife’s financial statement that A earns something in the order of $20.00 per week. I have no doubt that she has a capacity to earn slightly more than this amount and that J (who has no income) also has some form of earning capacity. The fact of the matter is, however, that neither party suggested that the children should be exercising their earning capacity to a greater extent than now appears to be the case. More importantly, neither party suggested that either child should be working to such an extent as to be considered capable of maintaining (or partially maintaining, or even assisting in maintaining) himself or herself.
Neither child appears to have any assets or final resources.
The property and financial resources of the parties form the subject of the relevant parts of their Financial Statements. I have re-read their affidavits and Financial Statements and have taken into account the extent of their assets, liabilities and financial resources (subject, of course, to the comments I have made earlier in these Reasons regarding the husband’s effective “ownership” of the business in which he is involved, and his ownership of the unit in which he resides). Their incomes and earning capacities have also been discussed (directly or indirectly) elsewhere in these Reasons.
To the extent that it may be relevant to my determination in this matter, I find that the commitments of each of the parties that are necessary to enable them to support themselves — on a weekly basis — are as follows:
a)The Husband
Food and household expenses $167.00[7]
[7] Being $292.00 (comprising the total of items 6 to 12 inclusive in Part E of the husband’s financial statement) less $125.00 (being the husband’s claimed expenditure on food and household expenses for the children — see the husband’s written submissions.
Health expenses $68.00[8]
[8] Being $116.00 (comprising the total of items 13 to 19 inclusive in Part E in the husband’s financial statement) less $58.00 (being the amount that the husband asserts, in his written submissions, that he spends in respect of health insurance, medical and “the gap” and orthodontics for the children).
Accommodation expenses (estimate) $300.00
Utilities (estimate) $60.00[9]
[9] See the items referred to in Part B of the husband’s financial statement.
Insurance premiums (estimate) $25.00
Clothing and footwear $13.00[10]
[10] See husband’s financial statement.
Motor vehicle/transport expenses $67.00[11]
[11] Being equal to the amount claimed by the wife in her financial statement.
Motor vehicle loan $114.00
Total: $814.00
It is to be noted that the above expenses do not include income tax, superannuation or expenses associated with the husband’s business interests. Further, I note that the husband’s partner, B, contributes $200.00 per week to the husband’s household. It follows that the total of the husband’s commitments that are necessary to enable him to support himself is approximately $614.00 per week.
b)The Wife
Food, household supplies and house repairs $88.00
Utilities and telephone $17.00
Motor vehicle expenses $67.00
Clothing and shoes $20.00
Medical and dental $3.00
Accommodation expenses $300.00[12]
Insurance expenses $18.00
[12] Being equivalent to the amount regarded as appropriate for the husband.
Total: $513.00
Again I have ignored amounts for income tax, superannuation and expenses associated with the care of the children.
I have not overlooked the provisions of section 117(4)(f) and (g) of the Child Support Assessment Act. I have discussed the matters referred to in these provisions — either directly or indirectly — elsewhere in these Reasons.
Taking into account the provisions of section 117(2) and (4) of the Assessment Act, I am of the view that it is just and equitable to make an order varying the appropriate child support formula in such a manner as to substitute the amount of $88,000.00 for the child support income amount referred to in the Current Assessment[13]. The Current Assessment should otherwise remain intact. Having regard to my conclusion to the effect that the husband has the children for 135 nights per year, it is clear that he should be regarded as having a “substantial” level of care of them. Using the “advanced child support calculator” on the child support agency website, it is apparent that the following details should be inserted:
[13] The husband’s child support income amount in the Current Assessment is $30,504.00.
a)
paying parent’s annual income
$88,000.00[14]
b)
receiving parent’s annual income
$25,428[15]
c)
d)
paying parent’s level of care
child’s age
“substantial” for child 1 and child 2
child 1 — 16 plus child 2 — 13-15
e)
Details of paying parent’s other dependant children
not relevant
f)
Details of receiving parent’s other dependant children
not relevant
[14] See findings earlier in these Reasons.
[15] Being the total of items 7 and 12 in Part A of the wife’s financial statement, calculated on an annual basis.
According to the advanced child support calculator, the child support payable in the circumstances described in the preceding paragraph is an annual rate of $16,777.00, or a weekly rate of $322.00.
I have checked the above calculation and I am satisfied that it accurately reflects and performs the calculations required by the provisions of the Assessment Act, and the following provisions in particular:
a)section 7B(1)(d) (the husband is taken to be an “eligible carer” of the children);
b)sections 8(3)(b)(i) and 8A(4) (the husband is taken to have “substantial contact” with the children);
c)section 47 (regarding the application of Division 2, Sub-Division E — Children Shared or Divided Between Parents); and
d)section 48 (which sets out how child support is to be calculated where one parent has substantial contact).
I do not propose to set out the relevant calculations in these Reasons. They reflect child support percentages of 14% for the wife and 22% for the husband. As the wife’s exempted income amount is greater than her child support income amount, her annual rate of child support is $0. Given that the husband’s child support income amount is $88,000.00 (see the findings that I have made above), the child support percentage of 22% is to be applied to an adjusted income amount of $76,260.00 (comprising the relevant child support income amount less the exempted income amount of $11,740.00).
Given that the wife seeks an order to the effect that the annual rate payable by way of periodic child support be fixed in the sum of $15,000.00 per annum, and given that this amount is less than the amount that would otherwise be payable by the husband if the advanced child support calculator were to be used with the variables referred to above, I conclude that it is just and equitable that the husband should pay the amounts sought by the wife. Further, I am satisfied that the proposed order is “otherwise proper” within the meaning and contemplation of section 117(5) of the Assessment Act (and I have re-read and bear in mind the provisions of that subsection).
I turn now to consider the wife’s claims for school fees and orthodontic expenses.
School Fees and Dental/Orthodontic Expenses
The orders sought by the wife as described in paragraphs 2(a)(ii) and (iii) of these Reasons fall within Division 5 (Orders for Provision of Child Support otherwise than in Form of Periodic Amounts Paid to Carer) of the Assessment Act. Section 121 of the Assessment Act provides that additional particular objects of Division 5 include ensuring:
a)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; and
b)that parents share equitably in the support of their children.
The wife’s application for orders in relation to the payment of school fees and dental/orthodontic expenses is made pursuant to section 123 of the Assessment Act. Before determining her application, in this regard the Court was obliged to determine the wife’s application for the orders set out in paragraph 2(a)(i) of these Reasons. This has been done, and I have determined that an order should be made in the terms sought by the wife.
Section 124(1)(b) of the Assessment Act provides that the Court may make an order for child support otherwise than in the form of periodic amounts paid to the carer where it is satisfied that it would be:
a)just and equitable as regards to the child, the carer entitled to child support and the liable parent; and
b)otherwise proper,
to make the relevant order.
Section 124(2) provides that, in determining the application, the Court must have regard to:
a)the administrative assessment which is currently in force;
b)any order in force under Division 4; and
c)whether the applicant is in receipt of an income tested pension, allowance or benefit (and certain matters consequent thereupon).
Section 124(2) states that there is a further matter to which the Court must have regard in determining the wife’s application, but it is not presently relevant.
Sections 124(3) and (4) refer the Court back to the relevant provisions of section 117 to guide it in determining whether the “just and equitable” and “otherwise proper” tests have been met. Section 124(5), however, states that sub-sections (2), (3) and (4) do not limit the matters to which the Court may have regard.
Section 125 obligates the court — where it is minded to make an appropriate order under section 123 and section 124 — to state in the order whether the child support is to be credited against the liable parent’s liability under any relevant administrative assessment. Having regard to the fact that I propose to make an order departing from the administrative assessment as proposed by the wife in paragraph 2(a)(iii) of these Reasons, the provisions of section 125 would appear to be irrelevant — but if I am wrong in this regard, I have nevertheless dealt with the subject later in these Reasons (under the heading “Conclusion”).
Section 126 of the Assessment Act deals with the Court’s obligation to give reasons for any orders that it may make under section 124 (or statements included in the order under section 125).
It was not in dispute that the children should continue to attend Scoresby Secondary College, and to the extent that it may be necessary to do so, I find that the children are being educated in the manner that is expected by their parents. Similarly, the husband accepts that J will require orthodontic treatment, and he recognises that he is likely to have to bear the costs associated with it. In paragraph 14 of his trial affidavit the husband said:
I bear the expense of the children’s private health cover and have paid for A’s orthodontic treatment. It is highly likely that J will also need braces and I am likely to bear this cost also.
During the course of his evidence, the husband said that he would pay for J’s orthodontic treatment — although much would depend upon the quantum of child support that he is ordered to pay. He confirmed that the children are covered by his private health cover — but that such cover does not include dental expenses.
The husband’s evidence was to the effect that the orthodontic expenses for J are likely to be something in the order of $4,000.00.
For the purposes of the orders that the wife is seeking, it is not necessary for me to specify with particularity the precise amount that the parties are required to spend in respect of school fees, extra curricular activities, dental expenses and orthodontic expenses for J. What is important, however, is that these expenses are not included within those expenses ordinarily covered by the child support of $15,000.00 per annum that I shall be ordering the husband to pay pursuant to the first part of the wife’s application[16].
[16] In this regard, see the discussion under the heading “Just and Equitable — Section 117(4)” in these Reasons.
To the extent that it is relevant to the ultimate determination of this matter, I find that the school fees and extra curricular expenses for which the husband should be expected to bear some responsibility comprise the following:
a)tuition fees;
b)books, stationery and equipment on school booklists or otherwise specifically recommended by the school for acquisition;
c)class or school excursions; and
d)school camps.
I shall refer to these fees or expenses as “the School Costs”.
Doing the best that I can with the evidence now before me, I find that the total of the School Costs for the 2002 school year — for both children — total approximately $3,300.00[17]. In my opinion, items of clothing, haircuts, school photographs, school bags and expenses associated with the debutante ball do not properly fall within the School Costs. In any event, I have made allowance for these items in the quantum of child support which I propose to fix pursuant to the first part of the wife’s application.
[17] See paragraphs 7 and 8 of the wife’s trial affidavit and the amount for “school camps” and “excursions etc” in exhibits W1 and W3.
The wife’s financial statement, the husband’s financial statement and the submissions filed on behalf of the husband reveal that the likely cost of the children’s dental expenses (excluding orthodontics) is modest — perhaps in the order of $5.00 or $10.00 per week.
The husband (in his submissions) estimates that the cost of orthodontics is something in the order of $48.00 per week — although this figure probably reflects the fact that the husband has already paid part of those expenses.
Having regard to the findings that I have already made in relation to the factors set out in section 117(4) of the Assessment Act — whether those findings were made directly or indirectly — I conclude that it is just and equitable as regards the children and the parties that both parties should contribute towards the School Costs and, further, that they contribute towards their dental expenses and orthodontics. Similarly, I find that it is otherwise proper that they so contribute. The expenses towards which I have referred fall within the category of “proper needs” of the children, and both parties are in agreement that they must be paid.
The wife earns $372.00 net per week from her employment. For the purposes of the present exercise, it is appropriate that I ignore her social security benefits. It would appear that her net income includes the car allowance identified in item 12 of part A of her financial statement[18].
[18] Given that her “salary or wages before tax” is $432.00 in her financial statement, whilst her income tax amounts to $124.00 per week.
In addition, and as a result of the departure order that I propose to make under Division 4 of Part 7 of the Assessment Act, the wife will be receiving child support of $15,000.00 per annum, or approximately $288.00 per week. In other words, the net income available to the wife to meet her expenses, and those of the children (excluding the School Costs, dental expense and orthodontics) is $660.00 per week.
I have found that the husband’s real, notional gross income amounts to approximately $88,000.00 per annum. Leaving aside any form of tax minimisation arrangement and simply applying the relevant tax rates and Medicare levy, it would appear that the husband’s gross income tax liability would equate (on a notional basis) to approximately $28,740.00, plus the Medicare levy of $1,320.00 — being a total of $30,060.00. In other words, the notional net income available to meet the husband’s expenses (and those of the children whilst they are with him) is approximately $57,940.00, or $1,114.00 per week.
I am conscious that the effect of the orders that I propose to make will be that the husband will be paying to the wife an amount of $288.00 per week by way of Division 4 child support. It is apparent, therefore, that his notional net income will comprise the amount of $1,114.00 per week, less $288.00 per week (being the child support for the children). In other words, the husband will have a notional amount of approximately $826.00 per week available to meet his necessary commitments.
After taking into account the assets and liabilities of the parties as they appear from their financial statements (and from the financial statements of the T Group tendered in evidence), and all other evidence regarding their respective financial positions (including the evidence to the effect that the home in which the husband presently resides is registered in his name and that his partner, B, contributes $200.00 per week towards their joint expenses), I find that it is reasonable, proper and equitable (or just and equitable and otherwise proper) that the parties should contribute to the School Costs, dental expenses and orthodontic expenses in similar proportion to the notional amounts available to them to meet their necessary commitments.
I find that the wife has approximately $660.00 per week available to her in this regard, whilst the husband has approximately $826.00 per week available to him. If they were to contribute proportionally to the expenses to which I have referred, then the wife should contribute something in the order of 44% of those expenses and the husband should contribute approximately 56%.
Given that the wife seeks that the husband pay the whole of J’s orthodontic expenses, it seems to me to be both just and equitable and otherwise proper to order that the husband pay one half of the School Costs and dental expenses.
The wife sought a further order that the sum of $1076.50 paid by the husband to the wife pursuant to orders made in this Court on 15 January 2002 be deemed a non-periodic contribution to the children’s school and extra curricular expenses for the commencement of the 2002 school year. Having regard to the terms of the orders that I propose to make, I am of the view that the order sought by the wife is proper. The approach that I have taken is to regard the wife’s application for Division 4 child support as being separate from her claim for the various other expenses. It seems appropriate, however, that the husband’s obligation to pay for those other expenses should only commence from the date of the trial (being 8 March 2002).
Effect of Orders
I am aware that the effect of the orders that I propose to make will be to create “instant arrears” of child support, as it were. I am satisfied, however, that the husband earned enough (or, alternatively, had practical access to funds that would have enabled him) to have paid the level of child support which I have found to be proper and appropriate. As a consequence of his conduct in failing or refusing to pay child support at such a level, the wife has clearly incurred a financial detriment. I am not of the view, however, that the husband was strongly motivated not to pay child support at an appropriate level. I find, though, that he willingly took advantage of the tax effective structure of the entities associated with his business when it became apparent to him that the effect of such a structure would be to minimise the quantum of child support as well as to minimise the overall impact of taxation.
I am satisfied that the husband has sufficient assets available to him to meet the obligations that will flow from the orders that I propose to make. Quite apart from the assets of the T Group and his interest in the townhouse in which he presently resides, the husband has available to him some $28,000.00 held in a Commonwealth Bank account.[19]
[19] See Part G of the husband’s Financial Statement.
Conclusion
I shall now hear Counsel as to the precise terms of the orders that will be required to give effect to this Judgment. In the broadest sense, those orders will be to the following effect:
a)There is to be a departure from all relevant administrative assessments of child support for the period 1 July 2000 to 4 August 2003, in such a manner as to provide for the variation of the annual rate of child support payable by the husband from $4,128.00 per annum (or such other annual amount as may have been determined from time to time) to the amount of $15,000.00 per annum.
b)There is to be a further departure from all relevant administrative assessments of child support for the period 8 March 2002 to 8 August 2003, to the effect that the husband provide child support for the children otherwise than in the form of periodic amounts paid to the wife — such child support to comprise the following:
i)payment by the husband of one half of the School Costs (as I have defined them) and dental expenses; and
ii)payment by the husband of the whole of the orthodontic expenses for the child J.
c)The order referred to in (b) above is an order under section 124 of the Assessment Act, and the child support to be provided by the husband pursuant to it is not to be credited against the husband’s liability under any relevant assessment.
d)The order for the indemnity sought by the wife is to be made by consent.
I certify that the preceding ninety-eight (98) paragraphs are a true copy of the Reasons for Judgment of Walters FM
Associate:
Date: 14 August 2002
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