Toms and Toms
[2004] FMCAfam 688
•29 October 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| T & T | [2004] FMCAfam 688 |
| CHILD SUPPORT – Agreements – variation – whether circumstances contemplated by agreement – agreement providing for rate per child – change of residence of one of two children. CHILD SUPPORT – Agreements – variation – change of circumstances – whether threshold issue changed a circumstance – proper approach. |
| Child Support (Assessment) Act 1989, ss.117, 98 |
| Bassingthwaite & Leane (1993) FLC ¶92-410 Phillips & Phillips [2004] FMCAfam 250 |
| Applicant: | MR T |
| Respondent: | MS T |
| File Number: | BRM5627 of 2002 |
| Judgment of: | Riethmuller FM |
| Hearing dates: | 5 August & 24 September 2004 |
| Date of Last Submission: | 15 October 2004 |
| Delivered at: | Townsville |
| Delivered on: | 29 October 2004 |
REPRESENTATION
| Counsel for the Applicant: | Ms Hogan |
| Solicitors for the Applicant: | Barry & Nilsson |
| Counsel for the Respondent: | Mr Dearne |
| Solicitors for the Respondent: | McCullough Robertson |
ORDERS
The provisions of the child support agreement of 20 November 2000 be varied by deleting clauses 4.3.1 and 4.4.
Any arrears of child support payable pursuant to clause 4.3.1 of the child support agreement of 20 November 2000 be discharged.
The wife’s enforcement summons of 3 March 2004 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym T & T [2004] FMCAfam 688 is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT TOWNSVILLE |
BRM5627 of 2002
| MR T |
Applicant
And
| MS T |
Respondent
REASONS FOR JUDGMENT
The applicant husband seeks orders altering or effecting the discharge of a child support agreement signed on 20 November 2000 and consequential orders. The precise orders he seeks are set out in his application filed 30 April 2004 in the following terms:
1.That the child support agreement signed by the parties on 20 November 2000 be discharged.
2.That both parties pay child support for both B and R in accordance with the provisions for administrative assessment of child support in the Child Support (Assessment) Act 1989.
3.That any arrears currently outstanding pursuant to the child support agreement dated 20 November 2000 be discharged.
4.That the enforcement summons filed by the Mother on 3 March 2004 be dismissed.
5.Any other or further order as this Honourable Court deems necessary.
6.That the Mother pay for the costs of and incidental to this application.
The respondent wife in her response seeks orders in these terms:
1.That the Child Support Agreement dated 20 November 2000 be varied so as to discharge any provision made for B (born [in] 1987).
2.That the Applicant Father’s application filed 30 April 2004 be dismissed.
3.That there be a garnishment order against the Applicant’s employers attaching to the earnings of the Applicant.
4.Such further or other Order as this Honourable Court deems necessary.
5.That the Applicant Father do meet the costs of and incidental to this response occasioned by the Respondent Mother.
There is also an enforcement summons by the respondent wife seeking to recover outstanding school fees pending before the Court. The amended enforcement summons was filed on 4 June 2004 and seeks an order for the payment of arrears in the sum of $11,815.50. At the conclusion of the evidence in this matter the respondent wife’s Counsel agreed with Counsel for the application as to the quantum of the outstanding school fees.
Whether or not the school fees must be paid depends entirely upon the orders that I make with respect to this substantive application. During discussions with Counsel it became clear that the husband would, within a short time frame, make payment of any outstanding amount, once I determined the substantive application.
Background
The parties’ have two children, B born [in] 1987 and R born [in] 1989. The parties separated on 18 June 2000 and divorced on 28 October 2002.
On 20 November 2000 the parties entered into a Child Support Agreement (‘the Agreement’). This agreement was subsequently registered with the Child Support Agency and has been registered with the Court by filing the same annexed to the affidavit of the husband. The Agreement is a three page document that follows the general form of the precedent in the CCH Child Support Handbook. The Agreement recounts the circumstances of the parties, and in particular at clause 3.6 recounts that ‘the children reside with the wife’.
The obligations created under the Agreement are set out in clause 4 which is in the following terms:
4.OBLIGATIONS
4.1 The liable parent will pay or cause to be paid to the Wife a total of periodic child support of $1,041.66 per month per child.
4.2CHILD SUPPORT
4.2.1That the liable parent pay or cause to be paid to the Wife by a direct credit to a bank account nominated by the Wife, the first payment to be made on the first day of the month commencing after the signing of the agreement and on the first day of each month thereafter and the final payment to be made upon the happening of a child support terminating event in relation to the child as defined by sec 12 of the Act.
4.2.2That the child support payable by the liable parent pursuant to cl 4.2.1 is to be varied each year in accordance with the CPI Index for Brisbane with the first adjustment to be made on the 1st October 2001 and then in each subsequent year based on the Consumer Price Index quarterly figures for the quarter ending 30th September.
4.3CONTRIBUTION TO PRIVATE SCHOOL FEES
4.3.1That the liable parent pay direct to the children’s schools the private school fees for the children as defined in paragraph 2.1.8 as and when they fall due and that the liable parent provide to the Wife a copy of each receipt for payment within 7 days of payment being made.
4.4The non-periodic child support payable by the liable parent pursuant to cl 4.3 has an estimated present annual value of $6,400 per child per annum (but such sum will vary as the school fees vary for each child each year noting that R has been awarded a 5 year scholarship) and when combined with periodic child support is intended to represent the total annual rate of child support payable by the liable parent for each year until the happening of a child support terminating event in relation to each of the children as defined by sec 12 of the Act.
4.5That within 14 (fourteen) days of this agreement being executed the parties shall do all things and sign all documents necessary to cause this document to be lodged with the Agency for the purpose of registering liabilities in this agreement.
The event that was the catalyst for the application to discharge the Agreement occurred in September 2002: The child B changed his residence from that of the wife to that of the husband.
This resulted in the husband and his current spouse having to move homes as the husband was living in a two bedroom cottage until that time. A residence suitable for the husband’s current family including an appropriate room for B had to be obtained. This increased the housing costs for the husband. The husband maintains B, who is attending a TAFE College and studying Year 11 Studies. B ceased attending [school omitted] in December 2001. The husband is also paying for lessons and tuition towards a [qualification omitted] relating to B’s study course and fees towards B obtaining a motor vehicle drivers licence.
Pursuant to the Agreement the husband has continued to pay child support to the wife in the sum of $262.00 per week for R, but has not continued to meet the school fees liability under the Agreement on the basis that he says the Agreement is no longer ‘just and equitable’ and should be altered. The crux of the husband’s case is that a contribution of $262.00 to the wife is an appropriate contribution by him to the costs of caring for R having regard to the differences in the financial positions of the parties and the costs of caring for the children.
Is there a threshold test?
Counsel for the wife relied upon Phillips & Phillips [2004] FMCAfam 250 to argue that the case was not one where there was a change of circumstances apparent on the face of the material such as to justify any change to the current Child Support Agreement. The law in this regard needs careful consideration.
In the cases leading up to Gilmore & Gilmore (1995) FLC ¶92-591 there was some uncertainty as to the law relating to an application to change a Child Support Agreement. The Court in Gilmore’s case made clear that a Child Support Agreement is not discharged by way of showing some specific changed circumstance by reference to sections of the Family Law Act 1975 or section 141 of the Child Support (Assessment) Act1989, rather, by reference to s.117 of the Child Support (Assessment) Act1989.
However, as was made clear in Bryant & Bryant (1996) FLC ¶92-690, there must be some difference in circumstances from the time that the agreement was made in order to show a ‘special circumstance’ in an application for the discharge or variation of the agreement. This is because the agreement takes effect as if it were an order of the court (see s.98 of the Child Support (Assessment) Act). An order of the court will not be varied or discharged unless there is some change in circumstances to show that that order is no longer appropriate. This issue was discussed in Bryant & Bryant at pages 83,169 to 83,170.
However, the considerations relevant when determining whether or not the agreed amount ought to be altered are those set out in the departure process provisions available under section 117 of the Child Support (Assessment) Act, using the approach set out in Gyselman & Gyselman (1992) FLC ¶92-279: that is to first consider whether a ‘special circumstance’ exists under section 117(2) and then whether any particular alteration would be ‘just and equitable’ and ‘otherwise proper’. Of course, the fact that the amount payable under a child support agreement differs from a formula assessment will not, of itself, be a special circumstance under s.117: see Ross & McDermott (1998) FLC ¶98-003 (at [21])
In this case it was suggested that there is some threshold question to be answered as to whether or not there is a change of circumstances. It appears to me that this is contrary to the manner in which the matter should be approached, as discussed in Gilmore’s case. However, this is not to say that in considering whether a ‘special circumstance’ under section 117 has been established it would not be necessary to show some change in the circumstances since the time of the agreement as part of the process of showing a ‘special circumstance’ under s.117.
To the extent that it may be necessary to show some prima facie evidence of a change of circumstances, if it were necessary to show an arguable case, this would clearly be demonstrated in this case. The change of residence of one of two children is a significant change in the circumstances of the children and the parties. However, the real question that must be determined is whether or not the current circumstances amount to a ‘special circumstance’ under section 117(2) in the context of the current child support assessment as set by the Agreement: It is not simply a question of whether or not any fact or circumstance has altered slightly or significantly since the Agreement was entered into.
In Phillips & Phillips’ case, which was specifically relied upon, there was an issue with respect to a number of different ‘special circumstances’ alleged under section 117(2). One of the grounds relied upon was an allegation that one of the children had changed residence. Counsel referred to Federal Magistrate Baumann’s comments that a court will not lightly interfere with an agreement. Counsel argued that as the Agreement provided for an amount per week per child that this should be read as an intention by the parties to cover a situation where there is only one child in the wife’s care.
In Phillips & Phillips’ case his Honour did not conclude that the child had in fact changed residence, finding that it was too early to tell given the circumstances of the case (see paragraph [28]). Ultimately the case turned on different factors, namely the failure to demonstrate a ‘special circumstance’ under section 117(2), rather than a failure on any alleged threshold issue. The financial circumstances of the parties loomed large in the Phillips & Phillips decision, and those circumstances were very different to the present case. Phillips & Phillips’ case turns on its own facts and is of little assistance in the present case.
Are changes contemplated by this agreement?
As this is likely to be an issue that arises from time to time it is appropriate that I state my views with respect to the style of child support agreement used in this case, which is commonly used by parents throughout the country:
The most common reason for referring to a rate per period per child is that inevitably one of the children will attain 18 years (or some other child support terminating event will occur with respect to one child) before the others.
Whilst it would be more appropriate when splitting the total agreed rate to a rate per child to use the same proportions in which the child support percentage alters as the numbers of children reduce, it is nonetheless common for parties to simply divide the rate per child equally among the number of children.
The fact that the Agreement refers to a rate per month per child when more than one child is residing with the payee does not, of itself, demonstrate that the agreement is meant to cover a situation where one or more of the children change residence to live with the payer.
If it is intended by the parties to govern a situation when a child changes residence to that of the payer then the agreement would usually need to specifically describe what is to occur if there is a change of residence to the payer.
To read into an agreement such as this an intention that the child support agreement is to govern a variety of changing situations with respect to care arrangements for the children would be unrealistic, and an inappropriate attempt to fetter the general discretion of the court provided for specifically under section 117 of the Child Support (Assessment) Act 1989.
In some cases certain changed circumstances are clearly contemplated by, and provided for, in a child support agreement. How such cases should be approached is a different issue to the one I must determine here. In this case the change of care arrangements that has occurred was not, in my view, contemplated by or provided for in the agreement. It is therefore unnecessary for me to determine this issue in this case.
The grounds for departure
In Gyselman (supra) the Full Court of the Family Court said (at page 240):
“As we have already indicated, the exercise under section 117 involves three steps. The first, which we have already examined, is whether one or more of the grounds in subsection 2 has been made out. The legislation then requires the court to consider whether any proposed order is “just and equitable” and “otherwise proper”.
It is clear that each of the three steps must be addressed by the court, namely:
a)whether one or more of the grounds of departure in section 117 is established; and if so:
a)whether it is ‘just and equitable’ within the meaning of section 117(4) to make a particular order; and
b)whether it is ‘otherwise proper’ within the meaning of section 117(5) to make a particular order.
Grounds of departure
The grounds of departure relied upon in this case are said to fall within s.117(2)(a)(i), (iii) and (c)(i) which provide:
(2)For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i) the duty of the parent to maintain any other child or another person; or
…
(iii) commitments of the parent necessary to enable the parent to support:
(A)himself or herself; or
(B)any other child or another person that the parent has a duty to maintain; or
…
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of either parent or the child; or
Justice and equity
After considering the various grounds for departure (whether or not a ‘special circumstance’ exists) the Court must then consider section 117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought.
Section 117(4) of the Act reads as follows:
In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) the income, earning capacity, property and financial resources of the child; and
(d) the income, earning capacity, property and financial resources of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:
(i)to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.
Otherwise proper
Finally, it is necessary for the Court to consider section 117(5) and determine whether or not it is proper to make the departure order.
Section 117(5) reads as follows:
In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
As set out in Hides & Hatton (1997) FLC ¶92-759 it is clear that the court must follow this three-step process in respect of each child support period for which a departure order is sought. Whilst Hides & Hatton referred to financial years, that was at a time when the assessments under the Act ran for financial years, now assessments run for periods of various lengths (see ss.7 and 34A of the Child Support (Assessment) Act). The principle that emerges from Hides & Hatton is that the Court must consider each period of time for which a particular child support rate applies.
Cost of caring for the children
Both parties set out the costs they say they incur in caring for the children. Not surprisingly there were a number of inconsistencies with different figures used in the statements of financial circumstances of the parties filed in the Court at different times, relating to the day to day outgoings for their own support and the support of the respective child in their care.
The husband outlined that the weekly expenses of his household so far as it related to the child B, was $516.00 per week. He was not cross-examined in detail with respect to this sum and it is notable that a number of the larger expenses relate to B’s current training or tuition, such as carparking and fares, activities, and education expenses, which total around $139.00 per week. Other expenses, however, do seem a little high, such as repairs of furnishings and appliances of $20.00 per week and household repairs of $40.00 per week.
The wife, in her financial statement, set out the costs of caring for R as being $512.00 per week. However, that sum included $198.00 per week for education expenses including fees and levies and school fees listed as ‘other necessary commitments’. The wife had similarly high expenses with respect to general repairs ($20.00 per week). However, her expenses with respect to household repairs were lower ($5.00 per week). The mother says it costs more to feed R ($90.00 per week) than her father finds it costs to feed B ($88.00 per week), although the difference is very minor.
It appears to me that both parties have, to some extent, exaggerated the real costs of caring for the children. However, having regard to the financial circumstances of the parties (which is discussed below) it is clear that the children lead an affluent lifestyle. It may be that the expenses in total are more realistic than is generally accepted when one has regard to the costs of caring for children surveys and the fact that these children are living a more affluent lifestyle than the families usually considered in the surveys (see for example the surveys by Lee, Levering, and Saunders et al).
In all of the circumstances it is difficult to conclude that there is a significant difference in the cost of caring for the children. Although the child R has school fees, there are other equivalent expenses being incurred by the husband with respect to B. The husband’s case was presented in part upon the assumption that it costs $512.00 per week per child to care for the children (the figure set out by the wife in her financial statement). In the circumstances I accept that figure as the reasonable cost of caring for these children, having regard to the evidence of the parties. To the extent that the husband says that it costs a little extra for the child in his care I find that it would be easy for him to trim some of the figures so as to ensure that B lived within the same budgetary constraints as R without any significant impact on B’s standard of living.
The income and earning capacity of the parties
Both parties have significant income and earning capacities that need to be considered separately.
Income and earning capacity of the husband
The husband in this case is employed by [Q] as a [omitted]. He has a responsible position in the corporation for which he is paid $18,348.63 gross per month, or a yearly salary of $220,183.56.
The husband also runs a business which involves [omitted]. This is a business as he gets paid for [omitted]. The business is described as a [omitted]. For the purpose of taxation the business generates a loss.
It appears to me to be clear that the business is a sideline for the husband, which is a method by which he can incorporate his hobby or interest in [omitted] together with some business activities. This business is not likely to make a profit in the foreseeable future. The husband could easily cease operating this business. It is not appropriate when considering a parents’ income earning capacity, property and financial resources, to the extent that they are available to meet the reasonable needs of the children, to allow a business (which creates losses) to reduce the amount of support that the parent ought to provide for the children. There are a number of cases that discuss this issue: Bassingthwaite & Leane (1993) FLC ¶92-410; Humphries & Humphries (1993) FLC ¶92-430; Ross & McDermott (1998) FLC ¶98-003. Put simply, I do not propose to take account of the losses generated by this business in the circumstances of this case. I therefore find that the husband has an income earning capacity equivalent to his income from his position with [Q], approximately $220,183.56 gross per annum.
Income and earning capacity of the wife
In this case it is much more difficult to determine the true income and earning capacity of the wife. She has been employed in a variety of positions over the years.
The respondent filed a statement of financial circumstances on 4 June 2004. In that statement she indicated that her total average weekly income was $1,348.00 and her total personal expenditure was $1,466.00. At that stage she was the proprietor of [G], a [business] in Brisbane. She listed her income as being from a number of sources: a salary of $577.00 per week, a distribution from the corporate trustee of the trust trading as [G] of $440.00 per week, child support of $262.00 per week and some other minor income amounts.
At point 41 of the statement of financial circumstances she was asked to list her interests in a business company trust or partnership which she stated ‘Please refer to annexure at part O’. At Part O she stated, with respect to point 41, the following:
Item 41 – I am the sole director and shareholder of [T] Pty Ltd, the corporate trustee for the [omitted] Family Trust trading as [G]. This business is where I derive my income. Its market value is likely to be less than shown in the books. My equity is shown at item 43 as the book value of the loan owing to me by the business. I am the also the sole director and shareholder of [F] (Qld) Pty Ltd, the corporate trustee for the [F] (Qld) Trust. I derive no income from this trust. Its net market value would be nil. I am also a shareholder and director of [K] Pty Ltd. I derive no income from this company. Its net market value would be nil.
No other information was contained within the wife’s material to satisfactorily explain the corporate interest described very briefly in this paragraph.
During the course of cross examination of the wife it transpired that [T] Pty Ltd was the trustee of the [omitted] Family Trust which traded as [G]. The respondent is the director of that company and holds all of the shares. [F] (Qld) Pty Ltd is the trustee of the [F] (Qld) Trust which trades as ‘[R]’ and ‘[P]’, two separate businesses operated by the trading trust.
The respondent is also involved in [K] Pty Ltd which is a trustee of a unit trust of which 50% of the units are owned by [F] Pty Ltd and 50% are owned by a manager.
[K] Pty Ltd has since been the subject of a change of name to [K] Holdings Pty Ltd. The respondent said that there were 21,000 shares in [K] Holdings Pty Ltd. It appears that the manger of that particular business, Mr M owns 25% of the shares in [K] and that [F] (Qld) Pty Ltd owns the other 75% of the shares, save for a very small proportion of the share holding that is owned by the respondent and her current partner. The small shareholdings owned by the respondent and her current partner are said to be around 0.49% of the share holdings in the company.
During cross examination it also transpired that money had moved between the different corporations or trusts, for example the respondent said that money was placed in [G]’s account by the respondent’s partner and then lent to [F]. Around $33,451.00 moved between the entities during the period that Counsel for the husband was cross examined about.
It appears that [G] was purchased for around $440,000.00 plus the cost of stock and sold for $445,000.00 plus stock. A profit and loss statement for [G] was produced by the respondent and tendered (Exhibit ‘7’). It shows that the sales for the 2003/2004 year (as adjusted and annulaised) was $777,086.00. This produced a net profit from trading of $219,184.00, and a net profit for the business after other income [omitted] and expenses, of around $146,754.00.
The respondent explained that the annualised and adjusted figures were figures representing the profitability of the [G] business assuming that there were two owner operators who were not paid a wage or income. She explained that on the actual figures she had paid an employee to undertake much of the work that a second owner operator would be paid for. In any event, there is clear and significant profit that was able to be generated from the [G] business if the respondent had chosen to operate it or even if she were operating it through staff.
A draft balance sheet for the [R] business, as at June 2004, was produced and tendered (Exhibit ‘5’). This showed that the total equity of the business was only $7,966.94. However, the business was clearly substantial in that the total assets (before account is taken of liabilities) was $1,752,007.78. The most significant liability was a non current liability described as ‘[omitted] Financial Loan’ of approximately $1.57 million.
The profit and loss statement for the [R] business showed a net profit of only $7,966.94, generated through a gross income of $864,654.66 less expenses. The expenses were not clearly set out in the documents provided.
With respect to [K] Pty Ltd the balance sheet showed that the total equity in the business comprised of the following:
a)Issued shares $ 2,100.00
Retained earnings $ 68,118.17
Current year earnings $ 46,293.10
TOTAL: $116,511.27
The net assets of [K] were said to be $116,511.17, being the total assets of $3,457,622.69 less the businesses liabilities of $3,341,111.52. The most significant liabilities of [K] were hire purchase loans in excess of excess of $2.8 million.
The gross income for [K] Pty Ltd was approximately $2.38 million per annum. To this was added income from a business described as [K] [L] and the business [R] to generate a group income of approximately $2.55 million per annum. The net profit from [K] Pty Ltd was said to be $46,293.10.
The evidence did not make it particularly clear exactly what the extent of the respondent’s interests are in these businesses, in distinction to her current partner (who is also the manager of one of the businesses). Nor is it entirely clear to what extent she would be entitled to moneys from the businesses.
Until March 2001 the respondent was in full time employment with a business known as [S]. She received $80,000.00 per annum and a car allowance.
In 1999/2000 financial year the wife had a taxable income of $117,000.00 from [omitted] work in the [omitted] areas. She said that this was from an hourly rate on casual work at [S] where she was employed by an entity known as [omitted]. In the 2000/2001 financial year she did not work the full financial year.
It was only after this information came to light that a further question was asked by Counsel as to an entry on her Visa card statement relating to [omitted]. It then became apparent that the respondent is a [qualification omitted].
In the light of the evidence as a whole it is clear that the respondent has considerable skills in [omitted] in small to medium size businesses, and has had considerable experience in the [omitted] industry.
In addition the respondent receives superannuation payments from her parents business entity, although on the evidence it appears that that superannuation is money that is paid by the parents into a superannuation fund on her behalf and would not be available to be distributed directly or used by her other than for payment into the superannuation. For this reason it must be seen as a gift from the parents which is not able to be accessed during the time that the children are under 18. I therefore conclude that it is not a presently available income earning capacity, property and financial resource. However, it must still be seen as a long term resource.
It also transpired during cross examination that [G] had owned [omitted] which were said to be purchased with funds borrowed from the respondent’s partner. There was also some cross examination about a loan relating to a [property], which was said by the respondent to relate to an option to purchase a [property] which has now lapsed.
The 1998/1999 tax return for the respondent showed an income of $104,755.00 per annum and the 1999/2000 tax return showed an income of $117,819.00 per annum.
The respondent was unable to say how much she had insured herself against for loss of income, despite the policy being referred to in paragraph 16 of her affidavit.
There appears little doubt that in past years the respondent was able to generate an income in excess of $100,000.00 per annum. There is no doubt that the respondent is a person of professional qualifications and great skill.
On the material available I am satisfied that the respondent has an income earning capacity of approximately $100,000.00 per annum. The fact that she may be pursuing business ventures with her current spouse and at present showing a taxable income less than this figure does not mean that her income and earning capacity is any less. It is not uncommon for people to pursue business ventures which do not immediately return taxable income equivalent to that they were receiving in employment. There are a number of reasons for this, most commonly the benefits of asset creation in companies or real property providing long term wealth and reduction in taxation liabilities which would not be available if they continued in any employee/employer situation.
Is a ground for departure established?
In order to determine whether a ‘special circumstance’ exists under s.117(2) I must consider:
a)Whether the commitments of the applicant necessary to enable him to support B significantly reduce his capacity to provide financial support to R; or
b)whether the current assessment is ‘just and equitable’ having regard to the ‘income earning capacity, property and financial resources of the parties’. This requires consideration of the factors set out in section 117(4).
In this case both parents have a duty to maintain both children in their respective care. That duty is a primary duty of the parents. In this case there is no reason that consideration should be given to third parties fulfilling or assisting in fulfilling that duty and both parents have more than sufficient income to ensure that they are able to share equitably in the provision of resources for the children. Prima facie the parents should share equally in that duty, if their capacity to do so is the same. In this case their capacity to fulfil that duty is different as a result of their very different income amounts.
The proper needs of the children are large. Both have capacity to provide for the children, however the appropriate proportions need to be considered as a result of the affluent lifestyle that the children have enjoyed in the households of the parties due to the parties’ high income amounts. I am satisfied that the proper needs of each child are approximately $512.00 per week in the context of this case. Both parents are able to engage in full time employment and the children are of an age where they do not need supervision after school. Both parents have engaged in full time employment.
In this case I am not satisfied that any income earning capacity, property of financial resources of the children are available for their immediate support. Whilst in theory both children could engage in employment, given their ages, it is clear that in the circumstances of this case it is not appropriate to expect the children to leave their current educational and training activities to attempt to earn an income to assist in their support. There is no evidence that either of them have any property or other financial resources that they could draw upon for their support.
The income earning capacity, property and financial resources of each parent are discussed above. In effect it appears to me that the husband has an income earning capacity of approximately $220,000.00 per annum and the wife approximately $100,000.00 per annum.
Both parents have necessary commitments to enable them to support themselves and to support the children. These are outlined in their financial statements. In this case the question is not so much what expenses are strictly ‘necessary’ as what would be reasonable having regard to the circumstances of the parties. In reality it appears that the reasonable expenses of both parties are similar, just as the reasonable needs of the children are similar.
The husband sets out that his average weekly expenses are approximately $624.00 per week. The wife sets out that her average weekly expenses are approximately $307.00 per week. I am satisfied that the real figures are somewhere between this.
I am satisfied that the estimates of expenses that the parties have provided for the children do properly represent not only the direct but indirect costs incurred by them in caring for the children. They have reasonably apportioned all of the recurrent household expenses. It is not a case where the children are of an age that they require the parents to forgo income or earning activity, or provide child care or the like.
Neither party puts forward a proposal that would place the other in ‘hardship’ in the sense usually described. The reality of this case is that it requires an apportionment of the costs of caring for the children as between the parents having regard to their respective financial resources. On either case the parties will continue to live a lifestyle more affluent than the average Australian, as will the children.
Having regard to all of the above matters, I am satisfied that a ‘special circumstance’ has been established in this case and that:
a)the applicant’s capacity to provide financial support for R is significantly reduced because of the commitments necessary to enable him to support B; and
b)the child support assessment in accordance with the existing child support agreement produces an ‘unjust and inequitable’ result having regard to the current care arrangements for the children, the costs of caring for the children, and the income and earning capacity of the parents.
Would the orders sought be just and equitable and otherwise proper?
Having regard to the above matters I am satisfied that a ‘just and equitable’ result would be achieved by adopting the proposal of the applicant. On the applicant’s case he would meet the entirety of the costs for the child living with him and approximately one half of the costs of the child living with the respondent. This amounts to approximately 75% of the costs of the two children. In this regard I note that the income earning capacity of the wife at $100,000.00 per annum represents an income amount of approximately 30% of the total of the income and earnings of both parties.
In the circumstances of this case I am satisfied that the child support proposed to be paid by the applicant to the respondent to contribute to the costs of caring for the child in the respondent’s residence is a ‘just and equitable’ contribution on his part, bearing in mind that he meets all of the expenses relating to the child in his care, and the difference in the parties’ incomes.
Finally, I must determine whether or not the amount that is proposed is ‘otherwise proper’ within the meaning of section 117(5). I have regard to the nature of the duty of the parents to maintain the children. In this case neither parent is receiving any income tested pension benefit or allowance with respect to the children, nor is there evidence that either child receives an income tested pension benefit or allowance.
The amount proposed, therefore, has no negative impact upon the public purse. The amount appears to be otherwise proper, from a public interest perspective when regard is had to the nature of the duty of parents to contribute to the support of the children and the differential in income earnings (or income and earning capacities) of the parties.
Appropriate orders
I therefore propose making orders varying the child support agreement by deleting the requirement that the applicant contribute to the school fees on and from 1 October 2002. I should make clear that this is simply a convenient method of altering the child support agreement not a finding that private school fees are not appropriate.
In the circumstances there is therefore no outstanding child support payable by the applicant to the respondent as he has been paying this rate since that time. I will therefore make orders formally dismissing the enforcement application.
I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Date:
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