Venson & Venson (No. 2)
[2010] FamCA 963
•2 November 2010
FAMILY COURT OF AUSTRALIA
| VENSON & VENSON (NO. 2) | [2010] FamCA 963 |
| FAMILY LAW – CHILD SUPPORT – Father seeks to set aside child support agreement created by him and the mother in 2000 – Alleged failure to disclose – Alleged unconscionable conduct – Alleged exceptional circumstances – Mother resists the father’s application – Child support agreement set aside for a closed period from a retrospective date due to exceptional circumstances not particularised by the father in his claim – No procedural unfairness to the mother as the facts relevant to the finding were always expressly considered by the Court and the mother concedes the Court is at liberty to make orders beyond the polarised options advocated by parties |
| Child Support (Assessment) Act 1989 (Cth), ss 136, 137, 138, 140A, 141 Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 (Cth) Family Law Act 1975 (Cth) s 79A Property (Relationships) Act 1984 (NSW) |
| Allen v Snyder [1977] 2 NSWLR 685 Balzano v Balzano (2010) FLC 98-048 Baumgartner v Baumgartner (1987) 164 CLR 137 Calverly v Green (1984) 155 CLR 242 Christian & Donald [2008] FamCAFC 44 Commercial Bank of Australia v Amadio (1983) 15 CLR 447 In the Marriage of Simpson & Hamlin (1984) 9 Fam LR 1040 Martin v Martin (1959) 110 CLR 297 Muschinski v Dodds (1985) 160 CLR 583 Pritchard v Racecage Pty Ltd (1997) 142 ALR 527 Weiss v Barker Gosling (1993) 16 Fam LR 728 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 |
| APPLICANT: | Mr Venson |
| RESPONDENT: | Ms Venson |
| FILE NUMBER: | SYF | 2376 | of | 2004 |
| DATE DELIVERED: | 2 November 2010 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Justice Austin |
| HEARING DATE: | 28, 29 & 30 September 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lloyd SC |
| SOLICITOR FOR THE APPLICANT: | Mr Chapple, Newnhams Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Brender |
| SOLICITOR FOR THE RESPONDENT: | Not Applicable |
Orders
The child support agreement reached between the parties on 24 November 2000 and registered with the Child Support Registrar on or about 11 June 2003, is set aside for the period between 11 March 2003 and 31 August 2006, both dates inclusive.
Leave is granted to the parties to furnish a copy of these orders and reasons to the Child Support Registrar.
Any and all outstanding applications, other than as to costs, are dismissed.
Costs are reserved for 28 days, and in default of any costs application being filed within that time, any monies paid by the Applicant to the Registry Manager pursuant to Order 3 made on 22 June 2010 shall be refunded by the Registry Manager to the Applicant.
IT IS NOTED that publication of this judgment under the pseudonym Venson & Venson is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: SYF 2376 of 2004
| MR VENSON |
Applicant
And
| MS VENSON |
Respondent
REASONS FOR JUDGMENT
Introduction
This is the latest chapter in the sorry litigious saga of the parties that has now extended over a decade.
The parties are presently in dispute about whether part of an agreement they reached on 24 November 2000, which the mother successfully registered as a child support agreement in June 2003, should be set aside.
The father previously tried and failed with an application to set aside the child support agreement (see Venson & Venson [2009] FamCA 859). This is his second attempt.
Background
The following history is taken from the judgment between the parties in relation to the father’s first attempt to set aside the child support agreement, with footnotes omitted:[1]
[1] Venson & Venson [2009] FamCA 859 at [8-24]
The parties began cohabitation in October 1992. Two children were born to their relationship, being S [in] February 1997 and K born [in] August 1998.
The parties separated in September 2000. Unfortunately, they have been in a state of almost perpetual litigation ever since.
On 26 October 2000 the Child Support Agency wrote to the father advising him of the assessment calculated for the children on the application of the mother.
The parties were at that time in negotiations about the adjustment of their property interests, which resulted in their agreement on 24 November 2000.
Orders were that day made by consent between the parties in the Local Court at Sydney pursuant to the Property (Relationships) Act 1984 (NSW). Each party consented to the making of those orders following their receipt of independent legal advice.
Order 5(d) then made by the court was in the following form:
5. (d) The applicant and the respondent agree that the net monthly income from [B] Pty Limited shall be paid equally to the applicant and the respondent from the 30th November 2000 subject to:
(i)The applicant providing from his share of the net monthly income the sum of $1,000 per calendar month for each of the said children by way of child support, making a total payable by the applicant of $2,000 per month.
(ii)In the event of the sale of [B] Pty Limited or in the event of the sale of all or any of the assets of the company the proceeds of sale after payment of any indebtedness shall be shared equally between the applicant and the respondent, and the applicant shall thereafter continue to make a payment of $1,000 per calendar month for each of the said children.
(iii)A reasonable provision of funds for re-equipment of the commercial fishing vehicle operated by [B] Pty Limited.
On 20 June 2003 the Child Support Agency wrote to the father advising him that the mother had applied to register a child support agreement that the parties had made together. The agreement is not identified in the correspondence, other than by reference to the date of the agreement being 24 November 2000. The child support liability was retrospectively recalculated from that date by the Child Support Agency.
The parties have conducted this litigation on the mutual basis that the “child support agreement” identified by the Child Support Agency was that contained within Order 5(d) made by the Local Court on 24 November 2000.
In 2003 the parties were involved in litigation concerning enforcement of the property adjustment orders made between them on 24 November 2000. That litigation was concluded by further orders made in the Local Court at Sydney on 11 November 2003. The mother thought it curious that no application to set aside the child support agreement was made by the father in the context of those proceedings, given the grievances he now raises.
In May 2004 the father instructed his solicitor to lodge objection with the Child Support Agency to the registration of the child support agreement. His objection was disallowed some months later.
On 2 February 2005 the father commenced the current proceedings by filing an Application for Final Orders, seeking an order that Order 5(d)(i) made on 24 November 2000, and subsequently registered as a child support agreement with the Child Support Agency, be set aside. His Application in its amended form seeks that the child support agreement registered with the Child Support Agency on or about 20 June 2003 be set aside as and from 24 November 2000, which accords with the Minute of Order tendered by him at trial.
The original Application came before his Honour Justice Watts on 6 June 2005. On that day the Court made orders between the parties with their consent, including the following order:
5. That the operation of and enforcement action in respect of the Child Support Agreement and in respect of the arrears thereof be stayed pending further order, but this is not to apply to the fees and costs referred to in Order No.11 of the Orders made on 24 November 2000.
Otherwise, the Court ordered that the Application of the father, and an Application filed by the mother on 19 April 2005, be both transferred to the Supreme Court of NSW for determination. Separate proceedings were already then pending between the parties before the Supreme Court under the Property (Relationships) Act 1984 (NSW).
The litigation came on for hearing before [the] Supreme Court of NSW [in] February 2006. The proceedings under the Property (Relationships) Act were settled on certain conditions, but the child support proceedings were transferred back to this Court.
It was the joint position of the parties that the child support dispute not be determined before this Court until after the Supreme Court proceedings were finally concluded under the terms of their settlement, and that did not occur until December 2007.
Thereafter, the matter was listed before this Court for the allocation of a hearing date. Further procedural orders were made by the court on 10 March 2008, 14 November 2008, and 10 June 2009.
The matter came on for hearing before this Court on Wednesday 5 August 2009.
The father’s claim in those former proceedings to set aside the child support agreement was heard in August 2009 and dismissed on 8 September 2009.
On 27 November 2009 the father filed a fresh Initiating Application seeking orders in the following terms:
1.That pursuant to Section 136 of the Child Support (Assessment) Act 1989, the child support agreement registered with the Child Support Agency on or about 20 June 2003 be set aside as and from 24 November 2000.
2.That the respondent pay the applicant’s costs of and incidental to these proceedings.
It is that Application which now requires determination. The mother simply resists the Application. Although she filed an Amended Response on 7 April 2010 seeking various orders, those orders were of an interlocutory nature, irrespective of the manner in which they were described in the Amended Response. All interlocutory disputes between the parties merged in another prior judgment between them (see Venson & Venson [2010] FamCA 501).
The case therefore began as a contest between the parties’ polarised positions of either setting aside the child support agreement ab initio or not. However, by the time of final submissions, the parties mutually submitted that the breadth of the Court’s power was such that the child support agreement could be set aside on any terms deemed appropriate, including as to the time during, or from, which the agreement could be set aside.
Particulars of the father’s claim
The father’s claim to set aside the child support agreement is based upon s 136 of the Child Support (Assessment) Act 1989 (Cth) (“the Act”).
In response to an order requiring him to particularise his claim,[2] on 7 July 2010 the father filed a statement of the following particulars:
[2] Order 3 made on 22 June 2010
1.In April 2000 the mother, without the knowledge or consent of the father or [B] Pty Limited (“[B Pty Ltd]”), transferred the ownership of the vessel [S] (“[S Vessel]”) from [B Pty Ltd] into the name of the mother.
2.At approximately the same time the mother, without the knowledge or consent of the father or [B Pty Ltd], changed the registered address of [S Vessel] to the address of the mother’s mother [in] Queensland.
3.In about May 2000 the mother obtained an offer of finance in respect of [S Vessel] but did not communicate that offer of finance to the father.
4.The mother, without the consent of the father, entered into an agreement with [T] Pty Limited for the management of [S Vessel] by that company.
5.As a result of the above the father lost the power of the day to day management of [B Pty Ltd] and [S Vessel] and the income that would have otherwise been derived from the operation of [S Vessel].
6.The mother appropriated to her own account and failed to account to the father for funds from [B Pty Ltd] in an amount exceeding $54,900.
7.The mother failed to make payments to the father for the full amount of his share of the net monthly income.
8.The mother made payment to or on her behalf in respect of child support from the father’s loan account with [B Pty Ltd].
9.The mother did not give possession of the property at [P] after September 2002 and as a result the father was denied the use of the proceeds of sale that would otherwise have been available to him and otherwise incurred mortgage and other expenses.
10.The father’s financial circumstances changed as a result of the loss of power relating to the day to day management of [S Vessel] and the mother entering into the agreement with [T] Pty Limited whereby the operation of [S Vessel] was lost to the father and as a result the income derived therefrom.
11.The father did not receive income sufficient to meet his obligation under that part of the agreement whereby he was required to pay $2,000 per month in respect of the support of the children of the parties.
12.The father’s financial position continues to be that he does not have sufficient income to pay the $2,000 per month in respect of the support of the children of the parties.
13.The father did not receive sufficient income within the meaning of the agreement to make the payment of $2,000 per month and in addition thereto the mother received substantial funds from the proceeds of sale of the property at [P] providing her with substantially more available funds than the father from which she could make contributions to the children.
14.The father does not have the ability to pay the “accumulated arrears” and any order to do so would cause his bankruptcy.
15.The father has continued to pay child support in accordance with the current assessment.
In response to another procedural order,[3] the father filed a Case Outline specifying his reliance upon the Act in the following way:
Section 136(2)(a)
- “failure to disclose” (Particulars 1, 2, and 3)
Section 136(2)(b)(ii)
- “engaged in unconscionable conduct” (Particulars 1, 2, 3, 4, 6, 7, 8, and 9)
Section 136(2)(d)
- “exceptional circumstances” (Particulars 6, 8, 9, 10, 11, 12, 13, 14, and 15)
[3] Order 11 made on 22 June 2010
Relevantly, s 136 of the Act provides as follows:
(1) A party to either of the following agreements may apply to a court having jurisdiction under this Act for the court to set aside the agreement:
(a) a child support agreement that has been accepted by the Registrar under section 92 or 98U;
(b)a termination agreement, or a written agreement referred to in paragraph 80G(1)(b), that has been accepted by the Registrar under section 92.
(2) If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:
(a)that the party's agreement was obtained by fraud or a failure to disclose material information; or
(b) that another party to the agreement, or someone acting for another party:
(i)exerted undue influence or duress in obtaining that agreement; or
(ii)engaged in unconscionable or other conduct;
to such an extent that it would be unjust not to set aside the agreement; or
(c) in the case of a limited child support agreement:
(i)that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
(ii)that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement); or
(d)in the case of a binding child support agreement – that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.
Despite some initial prevarication in final submissions by the mother, it is common ground that the subject agreement is a binding child support agreement to which the abovementioned extract of s 136 of the Act is capable of application.
Primary evidence of the parties
In support of the orders sought in his Initiating Application the father was permitted to rely upon the following evidence:
a)His affidavit filed on 27 August 2010.
b)His Financial Statement filed on 27 August 2010.
c)Paragraphs 4.30 – 4.36 inclusive of the report annexed to the affidavit of Ms E filed on 25 August 2008, which report was also exhibit “MFI 49” to the affidavit of the father.
In rebuttal of the father’s case, the mother was permitted to rely upon:
a)Her affidavit filed on 7 September 2010.
b)The affidavit of Ms M filed on 24 September 2010.
There were a plethora of objections taken by each party to the affidavit material of the other, many of which were sustained.
Alleged “failure to disclose”
In early April 2000, still several months before their final separation in September 2000,[4] the parties purchased a vessel called “S Vessel” (“the vessel”). It was purchased as part of a business venture.[5] It was intended by the parties that the vessel would be worked on their behalf by a captain and crew to catch fish for profit, generated mainly by the sale of the catch to Japanese and American markets.[6]
[4] Father’s affidavit, par 49; Mother’s affidavit, par 29
[5] Mother’s affidavit, par 16
[6] Mother’s affidavit, par 17
The purchase price of the vessel was raised by the father selling some shares.[7] It was further intended that after its acquisition the vessel would be re-financed with a loan facility, because the parties were unable to raise a loan in the time available to them before purchase of the vessel.[8]
[7] Father’s affidavit, pars 21, 30-31
[8] Father’s affidavit, pars 17-20
A corporation called B Pty Ltd (“B Company”) was formed by the parties as the corporate vehicle through which the business venture would be operated.[9] The parties were both directors of and equal shareholders in B Company.
[9] Father’s affidavit, par 22
In addition to contributing the sale proceeds of his shares towards the purchase of the vessel, the father deposited into the bank account of B Company further monies he appropriated from another corporation controlled by him, O Pty Ltd (“O Company”), to meet other capital and operating expenses.[10]
[10] Father’s affidavit, par 23
Once purchased, the vessel needed to be registered with the relevant maritime authority, Queensland Transport. It was intended that the vessel would be registered in the name of B Company.[11] It was also intended that the registered address for the vessel would be the residential address of the mother’s mother in Queensland.[12]
[11] Father’s affidavit, pars 24-25, 27-28
[12] Mother’s affidavit, exhibit AV1, page 3a
At a time contemporaneous with the intended registration of the vessel in the name of B Company, the mother surreptitiously changed the registration of the vessel from the name of B Company to her own name.[13] Contrary to the facts asserted in the second paragraph of the father’s particulars, at the time of altering the name of the registered owner of the vessel, the mother also changed the registered address of the registered owner to that of the family home in Sydney.[14]
[13] Father’s affidavit, pars 36 (part), 59, 78; Father’s exhibit folder page 54
[14] Father’s exhibit folder page 54
The mother asserted both in her affidavit[15] and in cross examination that she informed the father of her intention to change the registration of the vessel into her own name, but I do not accept that evidence. Firstly, it is inconsistent with the logic of forming B Company as the corporate vehicle for ownership of the vessel and the conduct of the fishing business, and secondly, her evidence tends to be inconsistent with her later admitted refusal to change the registration back into the name of B Company once the father demanded rectification of the registration, which the father said occurred when he learned of the change. Although the mother wrote to the father in September 2003 asserting a prior agreement about the transfer of registration,[16] that assertion was made years after the event when the parties were in deep conflict. That letter was not written at a time that affords corroboration of the mother’s evidence. In any event, her assertion is expressly denied by the father.[17]
[15] Mother’s affidavit, par 22
[16] Father’s exhibit folder page 182
[17] Father’s affidavit, par 87
As it transpired, contrary to expectations, the parties did not raise finance for the vessel. The father ascertained many years later that the intended lender had approved finance, but not only did the mother fail to advise the father of the finance approval, she denied the availability of finance when the father questioned her about it at the time. As a consequence, the parties did not avail themselves of the financial accommodation when it was available.[18] The mother refutes the father’s allegation of her mendacity,[19] but I accept the father’s evidence in preference to the mother. He is supported by verifying documents and the mother is not.
[18] Father’s affidavit, pars 38 (part), 39; Father’s exhibit folder pages 56-60
[19] Mother’s affidavit, par 9.3 (part)
The gravamen of the father’s complaint about those circumstances is that the mother deceitfully failed to disclose to him the changed name of the vessel’s registered owner, the changed address of the vessel’s registered owner, and the offer of finance. He was therefore ignorant of those facts at the time he subsequently entered into the agreement and orders with the mother on 24 November 2000. Consequently, the father asserts that s 136(2)(a) of the Act is engaged because he would not have agreed to the orders, or at least not the child support agreement contained in Order 5(d), had he been aware of that material information.
I am not satisfied that the father’s consent to the child support agreement was obtained by reason of his ignorance of the changed registration details. The argument proceeds from a premise that, had the father been aware of the changed registration details, he would then have refused to enter into the child support agreement. The father did not actually give direct evidence to that effect, but even if he had, I do not accept the efficacy of the argument.
It is inherently unlikely that the mother’s failure to disclose the change of registration details for the vessel had any effect upon the father’s decision to consent to the orders on 24 November 2000, and in particular Order 5(d). That is because the changed registration details for the vessel were of no legal effect. In such circumstances the father would not likely have withheld his consent to the orders.
The father disavowed the suggestion in cross examination that no detriment had accrued to him as a consequence of the change of registration details pertaining to the vessel, but his disavowal is repugnant to the facts.
The changed name of the registered owner of the vessel did not change legal or beneficial title in the vessel. The mother was not challenged about that assertion,[20] presumably because the assertion is consistent with advice received by the father from Queensland Police and Queensland Transport that ownership in the vessel had never passed from B Company.[21] It follows that if the change in registration details about the registered owner of the vessel had no effect upon title in the vessel, then a change in details about the contact address of the registered owner of the vessel caused no detriment to the father either. In any event, the registration details were amended to re-instate B Company as the named registered owner by November 2003.[22] The child support agreement had only been registered a few months before in June 2003, and as a consequence, the child support liability calculated in accordance with that agreement was backdated to March 2003.[23]
[20] Mother’s affidavit, pars 9.1, 36, 83
[21] Father’s affidavit, par 80 (part); Father’s exhibit folder pages 138, 202-203
[22] Father’s affidavit, par 95; Father’s exhibit folder pages 202-208
[23] Mother’s affidavit, par 98; Mother’s Exhibit AV1 page 67; Exhibit M6
Because the change in registration details caused no detriment, even though it occurred deceitfully, I am not satisfied that the mother’s failure to disclose the changed registration details induced the father’s consent to the child support agreement when he would not otherwise have given it.
Even if I am wrong in reaching that conclusion, the evidence would still not persuade an exercise of discretion to set aside the child support agreement for that reason. It should be recognised that s 136(2) of the Act is expressed in permissive terms. The Court may, but need not, set aside a child support agreement if the provisions of that section are engaged. An exercise of discretion depends upon the circumstances being sufficiently compelling to properly warrant such intervention. Even if one accepts the honesty of the father’s position, in that he genuinely believes that in the knowledge of those circumstances he would have been dissuaded from entering into the child support agreement, his position is unreasonable in the circumstances described.
Although the father has particularised only the mother’s failure to communicate to him the offer of finance made in or about May 2000 in respect of the vessel, presumably because that formulation mirrors the legislative provision relied upon, I am satisfied that the mother actually deceived the father about it. She was expressly asked about the finance and she deliberately misled the father about its availability.
The question is whether the Court, in the exercise of its discretion, ought set aside the child support agreement for that reason.
There can be no doubt that the mother failed to disclose to the father the availability of the financial accommodation in about May 2000, but I am not persuaded that the Court should exercise discretion to set aside the child support agreement on account of that failure.
The child support agreement was only a component of a comprehensive and detailed agreement about division of property interests following upon the breakdown of the parties’ relationship. The proceedings then in train between the parties before the Local Court of NSW pertained to the division of their property interests as former domestic partners under the Property (Relationships) Act 1984 (NSW). The Local Court of NSW had no jurisdiction to entertain a controversy between them about child support. The parties reached agreement about the payment of child support as an adjunct to the principal agreement they reached concerning the division of their property interests.
The father has not contended that the property division orders made by agreement between them in November 2000 are vitiated by his ignorance about the availability of finance for the vessel. In fact, he acted to assert the legitimacy of the orders. The father commenced proceedings against the mother before the Local Court of NSW in July 2003 to enforce the orders made between them in November 2000.[24] It should also be born in mind that at the time those proceedings were commenced and prosecuted the father was well aware of the mother’s earlier alteration of the vessels’ registration details.[25]
[24] Mother’s affidavit, par 89 (part); Exhibit M4
[25] Father’s exhibit folder pages 131, 133, 136, 163, 182
Although the father later commenced proceedings in the Supreme Court of NSW in November 2004 to set aside some of the orders made in November 2000,[26] that claim was not premised upon the mother’s non-disclosure of financial accommodation,[27] and the claim was resolved to the father’s satisfaction in December 2007 in a manner that left the orders made in November 2000 intact.[28] No point was taken by the mother that the father was estopped from pursuing these proceedings to set aside Order 5(d) made on 24 November 2000 when the father had already concluded proceedings in the Supreme Court in which one remedy initially sought was the setting aside or variation of Order 5 made on 24 November 2000.
[26] Mother’s affidavit, par 136; Mother’s Exhibit AV1 pages 91d-91m
[27] Mother’s Exhibit AV1 pages 91h-91k
[28] Father’s exhibit folder pages 448-450
If the father does not seek to disturb the efficacy of the property division orders made in November 2000, which have at least as much as, and perhaps more, connection with the parties’ interests in B Company and its vessel than the child support agreement, it would be curious indeed if the child support agreement alone could be set aside on the basis of non-disclosure about those circumstances.
The father was ignorant of the offer for re-finance of the vessel when he decided to proceed with the agreement in November 2000, including the child support agreement. Given that he was prepared to proceed with the agreement believing that no financial accommodation was available to the parties, it is incongruous that he would have revoked his consent to the agreement if he had been aware that even more money, albeit borrowed, was available for the parties’ use.
At the time the agreement was struck in November 2000, the parties’ financial affairs were in quite reasonable health. The father was sufficiently confident in their financial status that he was prepared to borrow nearly $400,000 against the security of real property to invest in other projects and to buy furniture to furnish a new residence for himself.[29] He did so in the belief that there was no loan available to re-finance the vessel and that the funds he had personally contributed to the purchase of the vessel would not be unlocked by any re-finance with borrowed funds.
[29] Father’s affidavit, par 45; Mother’s Exhibit AV1 page 91g
The father took over control of the vessel and B Company’s business in mid 2002. When that occurred he did nothing to re-finance the vessel. He would not likely have eschewed that opportunity if it was such a pressing issue for him. Although the father did not learn of the mother’s non-disclosure of the financial accommodation until he made further inquiries in 2005, he was well aware from when the vessel was purchased in 2000 that no funds had in fact been raised to re-finance the vessel as had originally been intended.
I therefore decline to set aside the child support agreement pursuant to s 136(2)(a) of the Act.
Alleged engagement in “unconscionable conduct”
Once the vessel was acquired and operation of the business was commenced by B Company, the mother was consensually accorded the role of financial controller of the business. The mother admits that from September 2000 she took financial control of B Company.[30]
[30] Mother’s affidavit, pars 31-32
Whilst discharging that role, the mother unilaterally decided to vest management of the business in an agent organisation called T Pty Ltd (“T Company”). That occurred in March 2001.[31] The father was ignorant of the mother’s decision until she informed him of it during a conversation some months later in June 2001. The father then procured a copy of the management agreement.[32]
[31] Father’s exhibit folder page 236; Mother’s affidavit, pars 41-42
[32] Father’s affidavit, par 63; Father’s exhibit folder page 104; Mother’s affidavit, pars 9.4, 43
The father later assumed responsibility for B COmpany and the vessel from the mother in or about June 2002,[33] and thereafter elected to maintain the management agreement with T Company in November 2002.[34] Although the father said in cross examination that occurred in September 2002, the discrepancy is immaterial. The father endorsed the arrangements made earlier by the mother.
[33] Mother’s affidavit, par 9.11 (part)
[34] Mother’s affidavit, pars 69, 81; Exhibit AV1 page 54
The management agreement with T Company was later terminated by the father in or about January 2004, and from that time the father assumed complete control of the vessel and B Company’s business.[35]
[35] Mother’s affidavit, pars 9.11 (part), 122; Father’s affidavit, par 112
Over the period of years that the vessel was operated, the mother, T Company, and the father were in successive control of the profits generated by B Company and the manner in which those profits were disbursed. Undoubtedly, of the income generated by B Company, some monies were paid to the mother, some monies were paid to the father, and some of the monies payable to the father were deducted and paid to the mother in the form of child support. There is enormous conflict about the equivalence of the disbursements to the parties. The evidence adduced by them simply does not permit proper analysis of their respective receipts from B Company.
One thing is clear – by January 2004 the father was aware that the business of B Company had not been particularly profitable, because T Company told him so in a letter.[36] By that time, T Company had been answerable to the father about the operation of the business for well over a year. The business had accumulated losses for the 2003 financial year, and was running at a loss for the 2004 financial year. T Company did not consider that it could continue to run the business at a profit. The opinion expressed by T Company corroborates the mother’s assertion that the business was not very profitable.[37] The opinion of T Company is also borne out by the financial data seen by Ms E,[38] the expert relied upon by the father. Even though the mother argued that Ms E’s evidence was worthless, the father does not think so. After he took over control of the vessel and business, the father did not make the operation any more profitable.
[36] Father’s exhibit folder pages 236-238
[37] Mother’s affidavit, par 11 (part)
[38] Ms E’s affidavit, par 4.33
The operation of the vessel in B Company’s fishing business, firstly by the mother, then by T Company, and latterly by the father, continued until the vessel was sold in or about August 2006.[39] B Company was then later de-registered.[40] The financial affairs of B Company were resolved by the settlement finally reached between the parties in the Supreme Court of NSW in December 2007.[41]
[39] Mother’s affidavit, pars 158-159; Father’s affidavit, pars 131(second)-132
[40] Father’s affidavit, pars 157, 206
[41] Father’s affidavit, pars 131(first), 145-146, 157; Father’s exhibit folder pages 448-450;
Part of the original property division agreement reached by the parties, ratified by court orders in November 2000, entailed sale of the former family home in P, Sydney. The mother failed to vacate the property and the father consequently decided to commence proceedings to enforce the orders. Those proceedings were commenced in July 2003[42] and were compromised by further consent orders on 11 November 2003.[43] Pursuant to those orders, the residential property was sold in January 2004,[44] yielding sale proceeds to the parties. Had the mother vacated the property in a timely way in compliance with the initial orders then the sale proceeds would have become available to the parties at a much earlier time.
[42] Exhibit M4; Mother’s affidavit, par 89 (part)
[43] Father’s affidavit, par 75; Father’s exhibit folder page 121
[44] Father’s affidavit, par 97
As a combined consequence of those events concerning control of the vessel and sale of the Sydney property, the father asserts that he was improperly deprived of both income from B Company and capital from the proceeds of sale of the Sydney property. He asserts that such deprivation impeded his ability to sustain himself and meet his child support liability.
The father further contends that the mother’s conduct in causing those consequences was unconscionable, so as to attract the operation of s 136(2)(b)(ii) of the Act and warrant the child support agreement being set aside.
It is convenient to consider separately the income received by the parties from B Company and the father’s entitlement to a share of the proceeds of sale of the Sydney property.
Not even the parties can untangle the details and present a complete picture of the amounts disbursed to each of them from B Company. The banking records are incomplete, there is argument about the accuracy of B Company’s numerous annual and periodic financial statements, and there is conflict about the entries in the parties’ directors’ loan accounts with B Company. The parties previously engaged experts in their Supreme Court dispute and those experts were unable to reach agreement either. As already noted, the parties reached a compromise of the Supreme Court proceedings in December 2007, which drew a line under the parties’ disagreement about B Company and their respective claims upon that corporation. In cross examination the father conceded that the parties’ controversy over the equality of their receipts from B Company was resolved by the settlement in the Supreme Court.
Although it is impossible to discern with any precision the amounts of money disbursed to the parties from B Company, it is plain that each did receive substantial sums. The father deposed to sums of money that were paid to him prior to his seizure of sole control of B Company in January 2004.[45] The father also deposed to sums withdrawn by the mother from B Company before January 2004.[46] The father alleged, and has previously pleaded, that the mother withdrew $54,937.24 from B Company whilst she had control of the corporation.[47] That is the assertion he makes in the sixth paragraph of his statement of particulars.
[45] Father’s affidavit, pars 74, 76, 81, 109
[46] Father’s affidavit, par 107 (part); Father’s exhibit folder page 219
[47] Mother’s Exhibit AV1 page 91j
The sums paid to the father before January 2004 were paid when B Company was under the effective control of either the mother or T Company. It is not therefore the case that the father was deprived of all income from B Company by reason of its management by the mother and/or T Company. Rather, the argument is merely one about the sufficiency of his due receipt of entitlements from B Company.
One of the father’s apparent grievances is the mother’s deduction of child support from payments otherwise due to him from B Company.
The father admits he had a conversation with the mother shortly following separation at which time he told her that she could deduct the sum of $2,000 per month from his share of the B Company profits to meet his child support liability,[48] which accords with the mother’s recollection.[49] The mother confirms that she later acted in accordance with that agreement.[50]
[48] Father’s affidavit, par 53
[49] Mother’s affidavit, par 33
[50] Mother’s affidavit, par 9.8 (part)
It should be noted that the father’s admission of an agreement for child support payments of $2,000 per month to be deducted from his share of dividends or disbursements from B Company is quite different from other evidence adduced on the issue. The father represented in writing to accountants in July 2001 that child support payments of $2,000 per month were to be deducted from B Company profits and then the surplus profits divided equally between the parties.[51] The father instructed the accountants in the following terms:
“[The wife] was only allowed to do the following;
Take $2,000 each month from the surplus [of B Company income] for the children then divide the balance 50/50 between us.”
[51] Mother’s affidavit, par 45, Exhibit AV1 page 26
In the event of such an accounting process, the child support payments would diminish both parties’ dividends from B Company, not just the father’s. That seems plainly inconsistent with the meaning of Order 5(d)(i) made on 24 November 2000, which provides:
“…the net monthly income from [B Company] shall be paid equally to the [father] and [mother] from the 30th November 2000 subject to:
(i)The [father] providing from his share of the net monthly income the sum of $1,000 per calendar month for each of the said children by way of child support, making a total payable by the [father] of $2,000 per month.”
[emphasis added]
The father also said in his affidavit that $2,000 per month was payable in child support from the cash flow of B Company,[52] which although ambiguous, is more capably construed as corroborative of his misrepresentations to the accountants.
[52] Father’s affidavit, par 126 (part)
Although it possibly occurred, the evidence does not support a finding on the balance of probabilities that the mother improperly withheld payments from B Company to the father, or improperly overpaid monies to herself from B Company.
The delay in the father’s receipt of his share of the proceeds from the sale of the Sydney property is not a compelling feature of the case. Despite the delay caused by the mother, over the period before the delayed sale of the property the father had effective access to its value by using it as collateral for loan withdrawals he made for various personal purposes, namely investment and establishing a separate home for himself.[53] The husband had an existing overdraft facility of $400,000 secured against the Sydney property,[54] which he commenced to draw upon. Before the withdrawals were made the facility was not in overdraft.[55] The father drew down $210,000 during late 2000,[56] and thereafter other sums to take the debit balance of the loan to nearly its limit of $400,000 by June 2003.[57] Those withdrawals occurred even though the father was ordered not to encumber the property with debt in excess of $300,000.[58]
[53] Mother’s Exhibit AV1 page 91g
[54] Father’s affidavit, par 40
[55] Mother’s affidavit, par 9.13
[56] Father’s affidavit, pars 41, 45
[57] Mother’s affidavit, par 90; Exhibit AV1 page 59
[58] Order 3(a) made 24 November 2000; Mother’s Exhibit AV1 pages 60-60a
Despite his implication to the contrary, the father ultimately received his proper entitlement from the proceeds of sale of the Sydney property. When the property was sold and expenses met, the parties shared the net proceeds equally, allowing for the extent of the encumbrance created by the father.[59] That distribution accorded with the provisions of Order 4(c) made on 24 November 2000.
[59] Mother’s Exhibit AV1 pages 66, 78, 78a
The Act does not define, nor exemplify, conduct that is “unconscionable” for the purposes of s 136(2)(b)(ii) of the Act. It is a descriptor for conduct which is well known to the law though, and is the subject of authoritative discussion in cases in other superior courts dealing with equitable principles (see Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 461, 474-475) and similar legislative provisions (see West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620-622; Pritchard v Racecage Pty Ltd (1997) 142 ALR 527 at 544-546). The concept of unconscionable conduct has been construed consistently in this jurisdiction, albeit in different circumstances from those immediately at hand (see Weiss v Barker Gosling (1993) 16 Fam LR 728 at 755-758).
It is unnecessary to quote those authorities at length. In simplistic terms, unconscionable conduct is evocative of unscrupulousness by reason of which one party takes improper advantage of another. The father has failed to prove that the mother acted in that vein, at least in respect of the allegations concerning payment of funds out of the coffers of B Company and also in respect of the delay caused in the sale of the Sydney property.
Even if the mother’s conduct was proven to be unconscionable, so as to fall within the threshold ambit of s 136(2)(b)(ii) of the Act, the evidence is not such as to impel a determination that her conduct of that ilk was so pronounced or egregious that it would be unjust not to set aside the child support agreement. The test imposed by s 136(2)(b)(ii) of the Act comprises those two distinct considerations.
The father also argued, although the argument was not particularised at the outset, that the mother acted unconscionably by failing to rectify an alleged misunderstanding of the child support agreement by the Child Support Registrar.
The mother conceded during cross examination that, until she took steps to register the child support agreement in June 2003,[60] she did not expect payment of $2,000 per month in child support from the father irrespective of the profitability of B Company. Before then, the child support she received was dependent upon the profitability of B Company from month to month. In cross examination the mother said that the child support she was paid during 2001 and 2002 was dependent upon the income being generated by B Company. That state of affairs was the subject of the mother’s acquiescence for about two years. However, when the child support agreement was registered, the Child Support Registrar construed the agreement to mean that the father was liable to pay child support of $2,000 per month irrespective of the profitability of B Company. The mother did not impress that different interpretation of the agreement upon the Registrar, but she abided by it. Thereafter she expected the payment of child support of $2,000 per month in accordance with the Registrar’s interpretation regardless of the father’s financial circumstances.
[60] Mother’s affidavit, par 84
The father argued that it was and is unconscionable for the mother to remain mute and accept the Registrar’s erroneous interpretation of the child support agreement because it means that she has accrued an unconditional entitlement to child support of $2,000 per month since 2003, which she knew was not the entitlement agreed upon with the father in November 2000.
It was argued for the mother that, rather than her acquiescence signifying her admission that such was the manner in which the child support agreement was intended to operate, her acquiescence was simply pragmatic. If B Company did not show sufficient profit in a particular month she reluctantly accepted what was available and did not seek to enforce the shortfall against the father. When she became disaffected by the cessation of payments she took steps to register the child support agreement and have the Registrar enforce proper payment.
I do not accept that explanation. It is inconsistent with the mother’s evidence. The mother said in cross examination she had informed the Registrar that she had adopted a different interpretation of the agreement prior to its registration with the Child Support Agency in June 2003. She would not have so informed the Registrar if she had always believed that the child support agreement was properly construed consistently with the Registrar’s interpretation.
The mother’s representations made no difference to the Registrar, which is perhaps unsurprising. It is not for the mother to dictate terms to the Registrar, who acts according to legislative provisions rather than individual’s opinions. The mother submitted the agreement for registration and it was duly registered. The father objected to registration of the agreement and raised the misinterpretation of the agreement as part of his objection. His objection was dismissed with reasons.[61] The father did not articulate in these proceedings any action open to the mother by which she could influence the Registrar’s implementation of the child support agreement.
[61] Father’s exhibit folder pages 346-352, and particularly page 352
Assuming that the Registrar’s interpretation of Order 5(d) is misconceived, as the mother correctly observes, the misconception afflicts only Order 5(d)(i) – not Order 5(d)(ii). That is because the parties expressly contemplated that the father would have a continuing liability to pay child support of $2,000 per month even after his income from B Company diminished or ceased in certain circumstances. The parties provided for that eventuality in Order 5(d)(ii) by agreeing as follows:
“In the event of sale of [B Company] or in the event of the sale of all or any assets of the company [which included the vessel]…the [father] shall thereafter continue to make a payment of $1,000 per calendar month for each of the said children.”
The vessel was an asset of B Company and so sale of the vessel invoked operation of Order 5(d)(ii), requiring the father’s continued payment of $2,000 per month in any event. When the vessel was sold in about August 2006 and B Company became dormant, the father’s accumulated child support liability then totalled only about $54,000 inclusive of penalties.[62] The debt recently calculated to 30 September 2010 stands at $152,926.93 inclusive of penalties.[63] Therefore, an amount approximating $99,000, being nearly two-thirds of the overall child support debt, has accumulated since the vessel was sold. The argument about proper construction of Order 5(d)(i) has no effect upon the accrual of child support liability since at least August 2006 and so the alleged unconscionable conduct of the mother ended at that point in time.
[62] Exhibit F2
[63] Exhibit F2
In light of those facts, even if it was unconscionable for the mother to refrain from rectification of an erroneous interpretation of Order 5(d)(i) by the Registrar, of which I am unconvinced in any event, I am not persuaded that it would be unjust to decline to set aside the child support agreement unconditionally.
Similarly, although not particularised at the outset, the father contended in final submissions that it was unconscionable for the mother to unilaterally register Order 5(d) as a child support agreement. I reject that submission.
As was recognised by the Child Support Registrar when giving reasons for dismissal of the father’s objection to the registration of the agreement,[64] Order 5(d) could not have been characterised as anything other than an agreement between parents about the payment of child support for their children. It was certainly not a property adjustment order under the Property (Relationships) Act 1984 (NSW). The father’s imputation that it was not a child support agreement[65] is nonsense. The orders agreed in November 2000 expressly recognised that they regulated child support.[66] Given that Order 5(d) was a child support agreement, either party was at liberty under the Act to register the agreement with the Child Support Registrar. It is immaterial that the father did not consent to registration.
[64] Father’s exhibit folder pages 346-352
[65] Father’s affidavit, par 165
[66] Order 11 made on 24 November 2000
There was a debate during cross examination of the mother, and later in final submissions, about whether the father had signed a pro forma document for registration of the child support agreement contemporaneously with the making of the consent orders on 24 November 2000, such as to suggest that the father expected and condoned registration of the child support agreement. The mother previously deposed that the father did so,[67] and it was an agreed fact that the father had previously deposed to his denial of that allegation. It is unnecessary to decide that factual controversy. The father voluntarily agreed to the provisions of the child support agreement so it follows that he intended that the mother derive the full measure of its benefit. He cannot derogate from the benefit that he properly conferred.
[67] Exhibit M5
In conclusion, it should be remembered that the conduct promulgated by the father as unconscionable occurred in the context of the parties interacting as equals. Neither suffered under any special disadvantage or vulnerability in their dealings with one another. The father instructed his own solicitor about the proposed contents of the parties’ agreement,[68] which that solicitor then prepared, and the father received independent legal advice about the final version of the agreement.[69] The orders made on 24 November 2000 represented the ratification of the court jointly sought by the parties for their agreement. Thereafter the mother simply acted upon its terms.
[68] Mother’s affidavit, par 33; Mother’s Exhibit AV1 pages 19a, 19b
[69] Mother’s affidavit, par 35; Mother’s Exhibit AV1 page 21
I decline to set aside the child support agreement pursuant to s 136(2)(b)(ii) of the Act.
Alleged “exceptional circumstances”
The father maintains that his financial circumstances are so parlous that he is on the brink of bankruptcy. He contends that his deteriorated financial position is so extreme as to constitute exceptional circumstances, justifying the child support agreement being set aside.
The father has given comprehensive explanations for his expenditure of money over time, including:
a)His investment in D Pty Ltd.[70]
b)The proceeds from the sale of the former family home in Sydney.[71]
c)The funds provided by O Pty Ltd.[72]
d)The proceeds from the sale of the vessel and his agreed share of the funds held by B Company.[73]
e)His payment of child support.[74]
f)His payments towards school fees,[75] which was an additional liability cast upon the father by the orders made on 24 November 2000.[76]
g)The proceeds received by the father’s wife from the sale of her property in Queensland.[77]
h)The rent received on the Queensland property between October 2009 and June 2010.[78]
i)All monies received by himself and his wife between January 2008 and June 2009.[79]
[70] Father’s affidavit, par 45, 58
[71] Father’s affidavit, par 97, 101
[72] Father’s affidavit, par 105 (part)
[73] Father’s affidavit, pars 132, 145-147, 160
[74] Father’s affidavit, pars 151
[75] Father’s affidavit, pars 149-150, 176, 179
[76] Order 11 made on 24 November 2000
[77] Father’s affidavit, pars 184, 185, 194, 196, 200, 207
[78] Father’s affidavit, par 207
[79] Father’s affidavit, par 205; Father’s exhibit folder pages 599-600
The father is now aged 70 years.[80] He is retired[81] and his only forms of income are a number of modest pensions[82] and some nominal interest payments.[83]
[80] Father’s affidavit, par 2
[81] Father’s Financial Statement, pars 3-4, 8
[82] Father’s affidavit, pars 154, 168, 210-211; Father’s Financial Statement, pars 12, 15
[83] Father’s Financial Statement, par 10
The father has disclosed his taxation returns and Notices of Assessment for the financial years ended 30 June 2000 to 2008.[84]
[84] Father’s exhibit folder pages 365-437
The only assets in which the father declares an interest are the encumbered home in which he lives with his wife, some furniture, an encumbered car, some bank accounts with meagre credit balances, and some miscellaneous chattels.[85]
[85] Father’s Financial Statement, pars 21, 28, 35, 37, 40, 42, 43
Assets in the form of choses in action against corporate entities, which the father previously enjoyed, are now worthless.[86]
[86] Father’s affidavit, pars 157-162, 206
Apart from his child support obligations, the father has numerous liabilities.[87] The value of the liabilities, even excluding child support, substantially overwhelms the value of his assets.[88]
[87] Father’s Financial Statement, pars 29-30, 46, 50-54
[88] Father’s Financial Statement, pars 2C, 2E, 44, 55
The father’s liability for child support arrears, including penalties, now stands at not less than $152,926.93.[89]
[89] Exhibit F2
But for one exception addressed below, the mother took no issue with that dire assessment of the father’s financial circumstances, which I consequently regard as correct.
The parties debated the existence of the father’s equitable interest in funds which are still due and payable to his wife in respect of the sale of real property in Queensland, and the value of his interest.
The father admits that he has some form of interest in those funds,[90] but there remains a dispute about the value of that interest.
[90] Father’s Financial Statement, pars 2F, 57-58; Venson & Venson [2010] FamCA 501 at [39]
Although the father’s wife was the sole registered legal proprietor of the Queensland property, the father made significant financial contributions to its acquisition and retention. The father’s contributions in that regard may be summarised as follows:
a)He paid a lump sum of $15,500 to his wife to put towards the purchase price of the property,[91] although the father said in cross examination that that sum was later repaid to him by his wife.
b)With his wife, he jointly entered into a loan agreement with the National Australia Bank for the sum of $302,451.74, which borrowed funds were attributed to purchase of the property.[92]
c)With his wife, he jointly entered into two loan agreements with Wizard Home Loans when the NAB home loan was later re-financed.[93]
d)He paid $180,000 towards reduction of the Wizard mortgage from proceeds he received following sale of the parties’ Sydney property.[94]
e)He paid a total of $29,352 from the same source towards repayment of the Wizard mortgage over a period of 12 months.[95]
[91] Mother’s affidavit, par 58
[92] Exhibit M1
[93] Father’s affidavit, par 163; Mother’s Exhibit AV1 pages 106-106a
[94] Father’s affidavit, par 101(a)
[95] Father’s affidavit, par 101(c)
The sale of the Queensland property was completed on 28 April 2008.[96]
[96] Father’s affidavit, par 184
Relevant portions of the contract for sale are in evidence.[97] The effect of the transaction was that the sale price was $800,000, payable in two tranches, but that a further $450,000 would be payable on certain conditions being met.[98] Only the first instalment of $600,000 was paid on settlement,[99] and the purchaser defaulted in payment of the second instalment of $200,000.[100]
[97] Father’s exhibit folder pages 536-541
[98] Father’s exhibit folder page 539
[99] Father’s exhibit folder pages 543-545; Father’s affidavit, par 184
[100] Father’s affidavit, pars 187-189
As a consequence of further agreement between the parties to the contract[101] further sums amounting to $135,000 have since been paid.[102] The husband gave confusing evidence about the balance still due. He asserted that it is both $65,000[103] and $40,000.[104] I did not understand his explanation for the discrepancy.
[101] Father’s affidavit, pars 190-193
[102] Father’s affidavit, pars 194-196, 200
[103] Father’s affidavit, par 196
[104] Father’s affidavit, par 207; Father’s Financial Statement, pars 57-58
Of course, the extra sum of $450,000 is still potentially payable.[105]
[105] Father’s affidavit, par 207
The contributions made by the father towards the Queensland property for the benefit of his wife could be considered gifts and, by reason of the presumption of advancement, preclude the creation of an equitable interest in favour of the father through an implied or resulting trust (see Martin v Martin (1959) 110 CLR 297 at 303-305; Allen v Snyder [1977] 2 NSWLR 685 at 690; Calverly v Green (1984) 155 CLR 242 at 268-269; Muschinski v Dodds (1985) 160 CLR 583 at 590). However, in the event of the father wishing to assert his rights, the circumstances of the contributions probably mean that he acquired a significant equitable interest in the property, and hence the proceeds realised upon its sale, by way of constructive trust because it would be unconscionable to allow the legal owner of the property to enjoy sole beneficial ownership of it (see Allen v Snyder at 690; Muschinski v Dodds at 614-617, 620-621; Baumgartner v Baumgartner (1987) 164 CLR 137 at 148-150). For the reasons following, it is unnecessary to finally determine the issue.
The test of “exceptional circumstances” has been the subject of judicial interpretation in respect of s 136(2)(d) of the Act (see Balzano & Balzano (2010) FLC 98-048 at [38-41]) and also s 79A of the Family Law Act 1975 (Cth) (see Christian & Donald [2008] FamCAFC 44 at [34-45]; Marriage of Simpson & Hamlin (1984) 9 Fam LR 1040 at 1045). The term “exceptional circumstances” has not been defined with precision, but generally encompasses events which are quite extraordinary, which occurred unexpectedly, and which could not have been reasonably foreseen or contemplated. Those features incorporate both subjective and objective considerations. Although that is the general characterisation, neither one nor all of those characteristics is either necessary or sufficient to meet the test. It is a question of fact and degree in each case.
For the purposes of s 136(2)(d) of the Act, the applicant must prove not only the existence of exceptional circumstances, but also that those circumstances arose after the subject agreement was made and that hardship would be occasioned by them if the agreement is not set aside.
The deterioration in the father’s financial circumstances certainly occurred after the child support agreement was made. Subject to the father’s ultimate receipt of a share of the money yet to be paid in respect of the sold Queensland property, it is likely that the father will also suffer financial hardship if the agreement is not set aside. However, I am not satisfied that the deterioration in his financial circumstances is an exceptional feature of the case.
When the child support agreement was struck in November 2000 the parties expressly contemplated two things – firstly, that B Company would continue to generate sufficient profit from the operation of its vessel and business to enable the father to pay child support of $2,000 per month from his share of that profit (Order 5(d)(i)), and secondly, that even when the father’s entitlement to a share in B Company’s profits later diminished or even ceased he would nonetheless continue to pay child support at the same rate (Order 5(d)(ii)).
The father was 60 years of age when the agreement was struck in November 2000. The children were then aged only 3 and 2 years respectively. His liability for child support would therefore remain existent for a further period of some 16 years. The father must have reasonably contemplated that he would not likely remain in gainful employment for the entirety of each child’s minority, by which time he would be aged about 76 years. Accordingly, he must have also realised that he would need a source of income or capital to meet the continuing liability. He must have actually been satisfied of his future capacity to meet the liability, even after his receipt of profit from B Company diminished or ceased, for otherwise he would not have agreed to Order 5(d)(ii). The subsequent change in his economic fortunes, in those circumstances, does not attract any exceptional quality.
The parties reached their agreement about child support years before amendments were introduced to the Act on 1 July 2008 by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 (Cth). Those amendments introduced concepts of binding and limited child support agreements. A material distinction between the two types of agreements is that a binding agreement requires the contracting parties to receive independent legal advice about the agreement. Consequently, the tests for setting aside child support agreements are now in some respects stricter for binding agreements.
The amending legislation caused the child support agreement in this case to be deemed a binding agreement, but that does not mean that the father’s task in this case has been unfairly rendered any more difficult. That is because the father did receive independent legal advice about the entire agreement he reached with the mother in November 2000, including those portions which constitute the child support agreement.
I decline to set aside the child support agreement under s 136(2)(d) of the Act in so far as the asserted exceptional circumstances are the father’s current parlous financial state.
However, there is an aspect of the case that is exceptional. It was not contemplated by either of the parties in November 2000 and could not have been reasonably foreseen by them. The relevant circumstances also arose long after the agreement was reached and clearly occasion hardship to the father.
I find as a fact that, when striking their child support agreement in November 2000, the parties fundamentally believed that B Company would always generate sufficient profit to enable the father’s payment of $2,000 in child support each month from his share of those profits – at least until B Company sold its assets and ceased its business so as to invoke the operation of Order 5(d)(ii). The parties did not ever contemplate that, while B Company conducted the business, their respective share of the profit would be less than $2,000 per month. It was simply assumed by both of them that the father’s share of monthly profit would always exceed that amount so as to permit his payment of $2,000 per month in child support from that source. The problem arises because their expectation was not realised. They did not actually contemplate that B Company’s operation of the vessel would not prove particularly profitable. Their assumptions were not unreasonable, given the advice they received and the plans they made when embarking upon the project.
Those conclusions are drawn from various aspects of the evidence. Importantly, the parties each gave clear evidence to that effect. It is also evident from the way in which Order 5(d)(i) was drafted, which assumes that the father would pay the child support from his share of B Company profits and no other source. In addition, the mother’s acquiescence to the piecemeal payment of child support in 2001 and 2002 is testament to her beliefs. She did not expect receipt of child support from the father at the rate of $2,000 per month when the profits generated by B Company were insufficient to sustain that level of payment.
When the child support agreement (being Order 5(d)) was subsequently registered with the Registrar in June 2003, to the parties’ surprise, the Registrar adopted a quite different interpretation of Order 5(d)(i) to that mutually adopted by the parties. The father’s child support liability was then calculated consistently with the Registrar’s distinct interpretation of the agreement requiring the payment of $2,000 per month regardless of the father’s income from B Company. I accept the mother’s evidence that she sought to disabuse the Registrar of his erroneous interpretation, but the Registrar took no notice. She could do nothing more. Although the father formally objected to the erroneous interpretation, his objection was dismissed. He could do nothing more either.
The father was therefore charged with a child support liability by the Registrar to which neither he nor the mother agreed. Given that the Registrar was purporting to enforce an agreement between the parties, it was an exceptional situation for the parties to be subjected to rights and obligations contrary to their mutual understanding of their agreement.
I am satisfied that, in those exceptional circumstances, the child support agreement should be set aside for the closed period between 11 March 2003 and 31 August 2006.
The first date is the operable commencement date for the child support agreement fixed by the Registrar. Once the child support agreement was registered and interpreted by the Registrar in that way, the father’s child support liability under the agreement was backdated to 11 March 2003.[106] That date was re-calculated after the Registrar accepted the father’s objection to an earlier start date.[107]
[106] Mother’s affidavit, par 98; Mother’s Exhibit AV1 page 67; Exhibit M6
[107] Father’s affidavit, par 83; Father’s exhibit folder pages 140-161, 190-193
The second date is the date by which that part of the child support agreement found in Order 5(d)(ii) must have been invoked so as to render the Registrar’s erroneous interpretation of Order 5(d)(i) otiose. The Registrar’s interpretation of Order 5(d)(i) prevailed until B Company sold the vessel. That occurred in August 2006.[108] No exact date in that month is provided.
[108] Mother’s affidavit, par 159
As discussed during final submissions, the Act invests the Court with broad dispositive power (see ss 140A, 141). The parties agree that the breadth of that power is sufficiently wide to permit the child support agreement to be set aside during a past closed period.
It was observed in Balzano & Balzano (at [68]) that the Court was restricted to either setting aside the agreement in its entirety or not. That observation seemingly creates a tension with the Act (see s 141(j), (k), (n)), but assuming it is correct, the proposed order in this case does not depart from it. The entirety of the child support agreement is set aside, but only for a time.
It is true that the father did not particularise his claim for relief under s 136(2)(d) on that basis, but the facts germane to that finding were always before the Court and were expressly considered and rejected as a proper basis for relief under s 136(2)(b)(ii) of the Act. The mother has not therefore been deprived of procedural fairness, particularly given her concessions in final submissions that the Court was at liberty to make orders beyond the polarised options advocated by the parties of either setting aside the agreement ab initio or not. In making that submission the mother conceded that the child support agreement could be set aside for a closed period or from a retrospective date.
Consequential issues
The order setting aside the child support agreement for that closed period will necessitate a re-calculation of the father’s child support liability by the Child Support Registrar under the Act (s 138).
The child support liability for that closed period will be calculable in accordance with the provisions of the Act. The evidence does not permit the making of any order under Division 4 of Part 7 of the Act departing from an administrative assessment (s 136(4), (5)) or any other just and equitable order (s 137).
In the course of undertaking that re-calculation the Registrar will need to consider penalties previously levied against the father. The certificate recently issued by the Child Support Registrar quantifying the child support liability[109] discloses both the imposition and remission of penalties for the late or non-payment of child support.
[109] Exhibit F2
In the previous proceedings contested between the parties, the Court ordered a stay on the operation and enforcement of the child support agreement on 6 June 2005, which stay remained in force until discharged on 8 September 2009. It follows that the father ought not be assessed as liable for penalties for his non-payment of child support during the operable period of the stay.
Similarly, the father ought not now be liable for any penalties in respect of the period during which the child support agreement is set aside.
As the issue of costs is yet to be addressed that aspect of the case in reserved for 28 days.
I certify that the preceding one hundred and twenty-three (123) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 2 November 2010
Associate:
Date: 2 November 2010
Mother’s affidavit, par 165, 182
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