W & M
[2005] FMCAfam 267
•27 June 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| W & M | [2005] FMCAfam 267 |
| CHILD SUPPORT – Application to discharge a child support agreement – where applicant received a forced redundancy – duty to support another dependent child from his present marriage – where applicant made appropriate and reasonable attempts to secure paid employment commensurate with his previous employment without success – applicant commences full time tertiary course after outplacement assessment – applicant’s age and skill level – whether in the circumstances his decision to study was reasonable – earning capacity where applicant has the ability to work but opportunity to work is lacking – financial resources of the parties – whether special circumstances warrant – special circumstances established – course of education found to be reasonable – where the respondent sought a capitalisation of child support in the amount of $300,000. |
| Child Support (Assessment) Act 1989 (Cth), ss.3, 4, 4(2), 4(3), 95, 98, 100, 114, 117, 117(2), 117(2)(c)(i), 117(4), 117(5), 117(6), 117(7), 117(8), 121, 123, 123(1), 124, 124(1), 124(1)(b), 124(2), 124(5) Family Law Act 1975 (Cth), ss.66N(2), 79, 100 |
| Gilmour & Gilmour (1995) FLC 92-591; (1994) 18 Fam LR 646 Liu & Chen [2003] FMCAfam 322 Prpic & Prpic (1995) FLC 92–574 Bendeich (1993) FLC 92-355 |
| Applicant: | g w |
| Respondent: | m m |
| File Number: | SYM 5081 of 2001 |
| Judgment of: | Pascoe CFM |
| Hearing date: | 27 May 2005 |
| Delivered at: | Parramatta |
| Delivered on: | 27 June 2005 |
REPRESENTATION
| Counsel for the Applicant: | Nil |
| Solicitors for the Applicant: | Nil |
| Counsel for the Respondent: | Nil |
| Solicitors for the Respondent: | Nil |
ORDERS
THAT the provisions of the Child Support Agreement entered into between the applicant and the respondent on 13 August 2001 and registered with the Child Support Agency on 24 September 2004 be departed from, and the obligations of the applicant pursuant to the said agreement be hereby discharged with effect from 27 June 2005.
THAT there be an administrative assessment of child support.
THAT the applicant pay to the respondent a lump sum payment of child support in the amount of $10,000 within 14 days.
THAT all applications otherwise be dismissed and removed from the List of Cases awaiting finalisation.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
SYM 5081 of 2001
| G W |
Applicant
And
| M M |
Respondent
REASONS FOR JUDGMENT
Introduction
This application is brought by the applicant father (“the applicant”) pursuant to the provisions of the Child Support (Assessment) Act 1989 (Cth) (“the Assessment Act”) in which he seeks a departure from his child support obligations pursuant to a Child Support Agreement (“the agreement”) made between the parties on 13 August 2001.
The respondent seeks that the applicant’s application be dismissed and that in the event the Court discharges the agreement the applicant be ordered to pay a lump sum payment in the amount of $300,000.
Background and chronology
The applicant was born in Australia on 27 September 1960 and is presently aged 44 years.
The respondent was born in China on 15 June 1963 and is presently aged 41 years.
The parties were married in Guangzhou on 21 September 1984 and separated on a final basis on 31 August 2000. A Decree Nisi was pronounced by this Court on 9 January 2002.
There are two children of the marriage, the subject of these proceedings. They reside with the respondent.
Parenting and property orders were made by consent in the Family Court of Australia on 26 November 2001.
The applicant is a full time student.
At present the respondent is unemployed and has the full time care of the children.
In June 2002 the applicant remarried.
In October 2004, the applicant’s son was born.
On 13 April 2005, Ryan FM stayed the operation of the provisions of the Assessment Act and the Child Support (Registration and Collection) Act 1988 (Cth). That order was conditional upon the applicant paying child support for the children in the sum of $75 per week per child.
Documents relied upon
The applicant relies upon the following documents, to which I have regard:
a)His amended application filed 6 April 2005;
b)His affidavit filed 21 January 2005;
c)His affidavit filed 31 March 2005;
d)His affidavit filed 18 May 2005; and
e)His updated financial statement filed 18 May 2005.
The respondent relies upon the following documents, to which I have regard:
a)Her amended response filed 25 May 2005;
b)Her affidavit filed 4 February 2005;
c)Her affidavit filed 8 March 2005;
d)Her affidavit filed 25 May 2005; and
e)Her financial statement filed 8 March 2005.
The Child Support Agreement
The parties with the assistance of their solicitors entered into the agreement on 13 August 2001, at which time the applicant was resident in the Peoples Republic of China. The agreement was registered with the Child Support Agency (“the Agency”) on 24 September 2004.
The agreement records the applicant as the liable parent and the respondent as the carer and custodial parent entitled to receive child support for the two children until they attain the age of 18 years.
The agreement states that it is the intention of both parties that the payment of child support under the agreement provide for the children’s maintenance, education and advancement in life and operate in substitution of any present or future claims for child maintenance by the custodian parent against the liable parent.
It was agreed between the parties that child support payments be paid directly to the respondent no later than the fifteenth day of each month in the sum of $1219 per child per month until the children respectively attain the age of 18 years and that the amount be credited against the applicant’s liability under any relevant administrative assessment of child support for the period from the date of the agreement until the children respectively attain the age of 18 years. The amount payable was to account for 100% of the annual rate of child support payable under any relevant assessment for each child support year in the relevant period. Provision was made for the variation of payments in accordance with Consumer Price Index (All Groups) with the first adjustment to occur after 1 July 2002.
The relevant law governing this application
The obligation to pay child support is created by the provisions of the Assessment Act. Section 3 creates the obligation for parents to maintain their children. The objects of the Assessment Act are each to be found in s.4 and must be borne in mind when deciding an application for child support. Section 4(3) of the Assessment Act recognises the desirability of parents reaching agreement for the financial support of their children.
The objects of the Assessment Act are described in s.4(2) as being intended to ensure:
a) that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support;
b) that the level of financial support to be provided by parents for their children should be determined in accordance with the legislatively fixed standards;
c) that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
d) that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them.
There are additional particular objects in Divisions 4 & 5 of Part 7, outlined in ss.114 and 121 ensuring:
(a) that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
(b) that parents share equitably in the support of their children.
Pursuant to ss.95 and 98 of the Assessment Act, a child support agreement takes effect as if it was an order of the Court and may be discharged, suspended, revived or varied in the same manner and circumstances in which the Court could treat an order of that kind. In other words, the provision in the child support agreement for payment of periodic amounts of money can be varied in the same way as a departure order for the payment of periodic amounts of money made under the Assessment Act ( See Gilmour & Gilmour (1995) FLC 92-591; (1994) 18 Fam LR 646; Liesert & Nutsch (1996) FLC 92-665; (1996) 129 FLR 367; Bryant & Bryant (1996) FLC 92-690; (1996) 20 Fam LR 575).
In the case of Gilmour (supra), the Full Court of the Family Court of Australia was faced with the task of determining whether or not, by virtue of s.100 of the Assessment Act, s.66N(2) of the Family Law Act 1975 (Cth) was imported into the Assessment Act and therefore required as a threshold that the applicant show a change in circumstances. The Full Court in Gilmour determined that s.100 of the Family Law Act does not import the principles or provisions in the Family Law Act into a Division of the Assessment Act in which those provisions have not been given express legislative effect. In other words, the Full Court concluded that it was not a precondition to a successful application under the Assessment Act to establish that there had been a change in circumstances. In Liu & Chen [2003] FMCAfam 322, Bryant CFM (as she then was) concluded that a change in circumstances alone would not necessarily therefore be sufficient to provide a ground on which an agreement may be varied or discharged.
The provisions of s.117 of the Assessment Act empower a Court to make an order for departure from administrative assessment in special circumstances. Section 117(1) provides as follows:
Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b)the court is satisfied:
(i)that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii)that it would be:
1. just and equitable as regards the child, the carer entitled to child support and the liable parent; and
2. otherwise proper;
to make a particular order under this Division;
the court may make the order.
If these three conditions are satisfied then the Court should make the departure order sought.
In Savery and Savery (1990) FLC 92-131 Kay J said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.
In the Marriage of Gyselman (1992) 15 FLR 219 at 225 the Full Court of the Family Court discussed the phrase “special circumstances”:
“Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.”
Section 117(2) of the Assessment Act sets out the various grounds for departure. These grounds include:
(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
(ii) special needs of any other child or another person that the parent has a duty to maintain; 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
(iv) high costs involved in enabling a parent to have contact with any other child or another person that the parent has a duty to maintain;
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i) because of:
(A) high costs involved in enabling a parent to have contact with the child; or
(B) special needs of the child; or
(C) high child care costs in relation to the child; or
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of the 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
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child; or
(iii) because an amount (the additional amount ) of a liable parent’s child support income amount was earned, derived or received by the liable parent for the benefit of a resident child or resident children of the liable parent; or
(iv) because an amount (the additional amount ) of an entitled carer's child support income amount was earned, derived or received by the entitled carer for the benefit of a resident child or resident children of the entitled carer.
The principles to be considered therefore when considering the basis upon which a child support agreement can be varied or discharged are to be found in s.117 of the Assessment Act. I note also the decision of Wild and Ballard (1997) FLC 92-771.
In Gyselman (supra) the Full Court set out the manner in which the court must approach an application for departure. The Court must engage in the three-step process as follows:
a)The Court must be satisfied that in the special circumstances of the case one of the grounds for departure in s.117 has been established;
a)In determining whether to make an order under this Division, the Court is required to consider whether it would be just and equitable as regards to the child, the carer entitled to child support and the liable parent to make a particular order (s.117(4)); and
b)In determining whether it would be otherwise proper to make a particular order under this Division, the Court must have regard to the fact that it is the primary duty of the parents to maintain their children and the effect that the making of an order would have upon any entitlement of the child or carer, to an income-tested pension allowance or benefit (s.117(5)).
Section 117(4) of the Assessment 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 proceedings; 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)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:
1. the child; or
2. the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii)to:
1. the liable parent; or
2. 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.
It is also necessary for the Court to have regard to s.117(5) in determining whether or not it is “otherwise proper” to make the departure order sought.
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.
In Gyselman the Full Court of the Family Court said (at page 240) as follows:
“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”.
Further, it is clear from the Full Court decision Hides & Hatton (1997) FLC 92‑759 that the three-step process must be followed in respect of each year for which departure is sought.
The applicant’s case
It was contended by the applicant that the birth of his son and his loss of employment taken together or separately constitute special circumstances that warrant a departure from the agreement made between the parties and that to continue with the application of the agreement would result in an unjust and inequitable determination of the level of financial support to be provided by the applicant for the children.
The respondent’s case
The respondent argues that the grounds pressed by the applicant do not fall within the ambit of special circumstances. Her case is that although the applicant is unemployed he has the capacity to generate an income and that he has dissipated his assets to his current wife in order to avoid meeting his child support obligations. The respondent states that she is prepared to forego child support in terms of the agreement in return for the payment of a lump sum of $300,000.
The applicant’s evidence
The applicant gave evidence and was cross-examined.
On 31 August 2000 the respondent left the USA with the children without notifying the applicant which affected the applicant most adversely both emotionally and financially. He was left with a $950,000 house subject to a mortgage of $600,000.
At the time the applicant entered into the agreement he was living and working in China earning approximately $US120,000 per year.
Because he missed his children so much the applicant returned to Australia in August 2002. He subsequently suffered a nervous breakdown on Father’s Day.
In the financial year 2002/2003 the applicant earned $82,100 including taxable income and a company car. In 2003/2004 the applicant earned $107,800. For both years his child support payments continued to be made at the maximum rate pursuant to the agreement.
Upon his return to Australia the applicant applied for numerous positions as a remuneration consultant. On 12 August 2002 he commenced employment in Sydney.
On 17 April 2003 the applicant and his wife took out a home loan with the ANZ bank to purchase their home. The purchase price for the property was $560,000. A total of $250,000 was borrowed and other funds were provided by the applicant. The applicant conceded in cross-examination that he and his wife only needed to borrow $150,000 to purchase the home but to receive a lower interest rate they borrowed $250,000. The additional $100,000 was placed in a mortgage offset account. The applicant has repaid $70,000 of that to reduce debt and to enable he and his wife to receive greater Centrelink benefits.
On 10 December 2004 the applicant received a forced redundancy from Mercer. Mercer’s decision was made as a result of a strategic business plan and budget process for the year 2005 which was based on changes in both the consulting and superannuation industries. In reaching its decision Mercer took into consideration the needs of its clients, the applicant’s relevant skills, experience, qualifications, attitude and initiative. No alternative position within the company was available to the applicant.
The applicant received a total redundancy payment of $28,062.48 which consisted of fifteen weeks salary and five days annual leave and was also was offered outplacement. The applicant attended counselling as part of his outplacement which assessed him as being more suited to alternative employment based on his age, family responsibilities and personal inclination.
The applicant disclosed that his redundancy payment was used to pay four months of child support at the rate of $2628 per month, mortgage payments of $720 per fortnight and living expenses and the remainder to pay out his car lease agreement of $13,000.
Since his loss of employment in December 2004 the applicant has given evidence that he made numerous attempts to secure similar employment in similar companies and in related sectors, however despite his attempts he was unsuccessful. At the same time the applicant submitted an application for enrolment in the Master of Teaching program at the University of Sydney. On 7 March 2005 the applicant commenced full time study.
In his updated financial statement the applicant records that his weekly income is $179. This sum is from Austudy. His wife receives $295 per week in the form of a family and parenting payment and a family tax benefit allowance. His weekly expenditure is also set out in his updated financial statement which records a weekly total of $1150. The applicant jointly owns, with his wife, the property at Dulwich Hill which he values at about $600,000. He has borrowed funds of about $26,298 in a joint bank account with the ANZ bank which will be used to help support the applicant, his wife and son. He also has $11 in a bank account in his sole name. He is the owner of a 2002 Holden Commodore Acclaim worth approximately $24,000 and household contents worth about $40,000. Thus his total assets would be said to be half of a pool of $690,309 or $345,154.50. The applicant has two superannuation interests with Mercer and ANZ with a total value of $74,562. There is approximately $160,000 owing on the mortgage and he has other liabilities of approximately $10,656.
The applicant’s wife proposes to re-enter the workforce at the end of 2005 and during the summer University holidays the applicant proposes to find casual employment.
The applicant says that he will be in paid employment as early as July/August 2006 in a private school completing the internship component of the teaching degree. He expects to work as a private school teacher at a salary higher than a public school teacher. The applicant has accordingly chosen subjects that will help ensure him a position as a private school teacher. The applicant indicated that at least 60 percent of graduates from the Master of Teaching course find employment in private schools and that employment typically commences on a paid basis during the internship period.
I am satisfied that the applicant was genuinely made redundant from his position with Mercer and that he made appropriate efforts to regain full time employment. I am also satisfied that his decision to retrain as a teacher was an appropriate one in light of his age and the limited employment opportunities available to him especially given his relatively limited area of expertise.
The respondent’s evidence
The respondent also gave evidence and was cross-examined. She is not currently employed. Since the parties separated the applicant and the children have resided in the former matrimonial home which is a two bedroom Californian bungalow. Although the children are happy in the house the respondent said that the house is becoming too small for them.
Both children attend school. Academically they are both talented. Sophie has received yearly awards and both attend weekly extra curricular activities including sports and private tuition classes for maths and English. Sophie has also expressed an interest in learning piano.
The children spend each alternate weekend with the applicant who also has flexible telephone contact with the children. They do not spend any time with the applicant during school holidays.
The respondent has not worked since 1998 despite some attempts to secure fulltime work. The respondent gave evidence that in 2002 she commenced employment with a local real estate agent but due to the full time care of the children and the long hours she was unable to continue working. The respondent says that there were some difficulties with the applicant in that he was not prepared to assist her with the children on the weekends and she had to hire babysitters which became costly. The respondent conceded that it might be possible for her to obtain part time employment during school hours performing general office work such as typing and filing earning about $400 to $500 per week but there would be child care costs for both children before and after school as she did not have any family in Sydney to assist her.
The respondent also gave evidence that she suffers from insomnia and chronic migraines which can last up to 12 hours and which are not curable by conventional medicine. The respondent said she is receiving acupuncture treatment for her migraines. She also said that her health has been adversely affected by disrupted sleep over a long period as a result of Henry’s sleep problems. I note that the respondent has no family support.
The respondent discloses in her financial statement filed 8 March 2005 that her weekly income totals $1126. Included in this sum is the income derived from her investment property, interest with St George Bank, a family tax benefit and parenting allowance and child support for both children. However, on my calculations (taking into account the orders made by Ryan FM on 13 April 2005 staying child support whereby the applicant pays $150 per week) her weekly income would now total $670.
The respondent’s weekly expenditure is also set out in her financial statement which records a weekly total of $1160. As far as assets are concerned, the respondent is the owner of the former matrimonial home in which she and the children live and which she values at about $550,000. Her other assets consist of an investment property worth about $200,000, savings in the bank, some shares in CISCO and Intel and a 1999 Toyota Camry CSI worth about $10,000 and household contents to the value of $20, 000. She has three superannuation interests with a total of about $12,300. There is approximately $88,000 owing on the mortgage on the home and she has other liabilities of approximately $1465. Her liabilities therefore total $89,465. In relation to the respondent’s investment property at it is unclear as to how she derived the necessary funds to purchase the property.
There was some uncertainty regarding the respondent’s claimed expenditure in relation to the children’s weekly expenses.
Earning capacity
The Assessment Act requires the Court to have regard to earning capacity, not just whether a parent is working or not. The concept of earning capacity was discussed at great length by the Full Court of the Family Court of Australia in the reported decision of DJM v JLM (1998) FLC 92-816. Whilst it is ultimately a question of fact[1] in each case, it is appropriate for the Court to consider some of the following matters:
a)The ability to generate income;
b)The opportunity to generate income; and
c)Whether the parent’s pursuits to secure employment are appropriate and reasonable.
[1] See generally Scott and Scott (1994) FLC 92-457.
Ability to generate income
Whilst the applicant holds tertiary qualifications his experience has been confined to a specific and specialised area namely, remuneration consulting. He has not worked in other fields of employment. In his positions he has demonstrated a capacity to earn in excess of $100,000. However, while it may be true that he has the capacity to generate an income at this level if employed, this needs to be measured against the reality of the employment opportunities (or lack of them) available to him.
Opportunity to generate an income
The opportunity to work is largely a factual matter. The respondent contended that the applicant has the opportunity to generate an income commensurate with his previous earnings. However, the applicant gave evidence that upon being made redundant he applied for a number of positions in his field and related areas. He was not successful either within the specialised area of remuneration consulting or associated areas. In all of the circumstances I am satisfied that the applicant does not, on the balance of probabilities, have the opportunity to work in a position similar to his previous positions, having regard to the applicant’s level of skill and his age.
Thus, I am satisfied that the applicant’s income and earning capacity is considerably different to his capacity at the time he entered into the agreement. The applicant’s redundancy and consequent loss of income from his employment is in my view a special circumstance under the Assessment Act.
Whether the applicant’s pursuits are appropriate and reasonable
I am conscious of the comments of the Full Court in DJM v JLM (supra), in particular:
Child support and child maintenance orders are governed by legislation which emphasises and prioritises the obligation of parents to support their children and seeks to ensure that the level of financial support is to be measured according to the parent’s “capacity to provide financial support”.
Property adjustment orders have far less focus and are arrived at on the basis of what is “appropriate” after weighing up many competing factors. Spousal maintenance is governed by a test of what is proper having regard to the reasonable ability of the liable spouse to meet the needs of the other.
In our view there can be different answers to the same question about earning capacity depending on which head of power is sought to be exercised.
A judge might reasonably say that a parent should be working longer hours or in more lucrative employment to meet child support obligations. A spouse is only required to support the other spouse to the extent that he or she is reasonably able to do so. This requirement does not impute the same degree of compulsion about it that the child support and child maintenance tests express. Thus a parent may be required or expected to work long hours or at more than one job if the parent has the capacity and opportunity to do so, and if the children need greater support than they would receive if the parent was only to work shorter hours. At the same time it might not be reasonable to expect an estranged spouse to avail himself or herself of such opportunities so as to provide maintenance for the other spouse. In the latter case it is a question of what is reasonable in the circumstances.
I note the decision of Scott and Scott (supra) where the Full Court said:
whilst the above cases establish that in some circumstances an unemployed parent without income may be held to have an earning capacity or financial resources sufficient to justify an order that he or she contribute to the support of his or her children, they are not authority for the proposition that in all such circumstances such a conclusion must or should be reached. If they establish any principle of general application it is only that being unemployed and without income is not of itself necessarily an answer by a parent to an application for child maintenance. The circumstances in which the parent became unemployed or without income, the reasons for it, the nature of his/her previous employment and the efforts (if any) which he or she has subsequently made to obtain employment are all relevant matters for consideration by the court in deciding whether the parent has any and what earning capacity such as to justify an order for child maintenance. Even in the absence of any current income or earning capacity, a parent may be required to pay maintenance for his/her children if he/she has property or financial resources which are or ought reasonably to be available for that purpose. It is ultimately a question of fact, in each case, whether an unemployed parent with no particular qualifications or skills for employment could not be held, at least in times of high unemployment such as currently exists in this country, to have a current earning capacity sufficient to support an order for maintenance unless he/she has recently given up, without good reason, secure remunerative employment, or unless, having become involuntarily unemployed, he/she has made no reasonable efforts to obtain employment for at least a significant period of time.
The above passaged was applied by Kay J in Scott v Stauder (unreported, judgment delivered 20 November 1996). His Honour said:
“the passage from Scott can be read, on the facts of this case, as not only referring to ‘unemployment’ and being ‘without income’ but to ‘under employment’ and being with ‘less than adequate income’. If I read that into the passage it reads effectively that in some circumstances an underemployed parent may be held to have an earning capacity or financial resources sufficient to justify an order that he or she contribute to the support of his children and that being underemployed and without adequate income, is not of itself necessarily an answer by a parent to an application for child maintenance.”
The respondent contended that the Court should accept that the applicant’s earning capacity is far greater than he asserts. As I have stated I am satisfied that the applicant has made reasonable attempts to secure both commensurate employment in his field of expertise and employment in other related sectors. He registered with employment agencies, attended upon interviews and despite these attempts was unsuccessful. I accept that mature age workers experience difficulties in securing employment just as I accept that the respondent may face difficulties in seeking employment in light of her long period of unemployment and the full time care of the children.
The applicant’s course of study
It is important that I consider whether the applicant’s course of study is reasonable. In March 2005 the applicant commenced full time study in the Master of Teaching Program at University. The applicant contends that this will enhance both his skills and earning capacity which will ultimately benefit the children.
In DJM v JLM the Full Court considered the weight in which parents were obliged to continue to generate an income. Their Honours said:
“… Whether it is or not appropriate to require a party to work particular hours of work in a particular occupation is a question peculiarly within the province of a trial judge and needs to be measured on a case by case basis.
…
A judge might accept that it is unreasonable to expect a parent to continue to work 80 hours per week whilst having obligations to care for one child, and whilst that parent is still earning more than sufficient for his or her own needs and the needs of that parent’s children. Alternatively, a judge might conclude, based on a proven work history, that such a work pattern is entirely reasonable in the circumstances. Ultimately the matter reverts to the exercise of discretion by the trial judge based on the individual circumstances of the case then being tried.”
It is without question that there will be some immediate disadvantage to the children now that the applicant has commenced full time study. However, I am satisfied that the applicant’s decision to embark upon a course of study was a decision reached after it was made clear to him that the opportunity to work in his previous field had closed off. This is not a case where the applicant has chosen to leave paid employment to further his education with the intention of diminishing his income to avoid his child support obligations. To the contrary, the evidence suggests that his motivations were not driven solely by his own personal desires as the respondent put, but rather a decision to restore stability to his career which in turn will ultimately benefit the children. In all the circumstances, I am satisfied that the applicant’s course of study is reasonable.
The applicant’s mortgage repayments
It was contended by the respondent that the applicant places a greater priority on his mortgage repayments than his child support obligations. I do not accept this. The applicant took out the home loan in April 2003, at which time he was employed full time generating a significant income and meeting his child support obligations under the agreement. At this time he was not aware of a potential forced redundancy. If the applicant had entered into the home loan agreement prior to being made redundant but with full knowledge that it was pending, my view would be different. The applicant must repay the loan and this responsibility is shared with his present wife.
Lump sum child support
In her amended response the respondent sought that the applicant be ordered to pay a lump sum payment of $300,000 by 30 July 2005 should the Court discharge the applicant’s obligations under the agreement. In R & R (No 1) FMCAfam 153, Bryant CFM (as she then was) set out the approach which the Court should take in such applications. Her Honour said (at pages 21-22) that:
Section 123(1) of the Act provides that application may be made to a Court exercising jurisdiction under the Act for an order that the liable parent provide child support otherwise than in the form of periodic amounts paid to the carer.
Before the Court can make an order for substituted support, the Court is required by Section 124(1)(b) to be satisfied that it would be just and equitable as regards the child, the carer entitled to Child Support and the liable parent, and otherwise proper to make such an order. The Court is required to have regard to the matters contained in section 124(2) and in determining whether it is “just and equitable” or “otherwise proper” the Court must have regard to the matters contained in subsections 117(4), (5), (6), (7) and (8) of the Act. The Court is not limited by those factors alone (see section 124(5) which suggests that the Court has a wide discretion in determining the application.
The Full Court of the Family Court of Australia in Prpic v Prpic (1995) FLC 92-574 at 81,688 said:
Capitalisation orders may well be appropriate where there are difficulties in enforcement or where it is proper to sever the financial link between the parties. However, as a general rule, given that the payments of child support depend upon circumstances prevailing from time to time, which circumstances cannot be predicted with any significant degree of certainty; it seems to us that the provision of child support by way of lump sum should not be considered to be a readily available alternative but one that is only exercises where there are circumstances that make it appropriate to do so. We would endorse the observations of Mushin J in Bendeich (1993) FLC 92-355 at 79,954 where his Honour said:
‘The rationale underlying the general approach of the court was that the longer a lump sum order operates the greater chance of change in circumstances necessitating a variation of that order, thereby making the order unjust. Those changed circumstances might be in relation to the liable parent or the children. Incomes may increase or decrease and the children may change their living arrangements from one parent to another.’
It is clear that I have discretion to order a lump sum subject to being satisfied as to the matters which I have identified in the Act, but it is also clear that I must exercise that discretion only when there are circumstances which make it appropriate to do so and that normally it is preferable for periodic support to be paid.
The respondent argued that the applicant has dissipated his assets to his present wife in order to avoid his child support obligations. It would seem that the respondent expects the applicant to sell his home and pay lump sum child support in the amount of $300,000. For the Court to order a lump sum payment of child support in lieu of ongoing payments there would normally need to be evidence that the conduct of the applicant presented difficulties for the respondent in receiving ongoing support for the children. In this case that is lacking. The applicant has met his obligations even when his income was reduced by a change in his employment on return to Australia. He sees his retraining as an opportunity to gain secure employment which will enable him to provide for his family in the future. The bulk of his capital resources apart from some cash held in bank accounts is tied up in his current home which he shares with his wife and child. I accept the respondent’s evidence that the bulk of the money for purchase of the home came from the property settlement consequent upon the dissolution of the marriage of the applicant and the respondent. However, I must accept that the property settlement was fair and it would be unjust for the applicant’s new family to loose their home.
Section 117 criteria
In order to determine this application I must follow the three step process. Firstly, I am required to determine whether or not the respondent has established a ‘special circumstance’ in accordance with s.117, secondly determine what is “just and equitable” and thirdly whether the order would be “otherwise proper”.
In the present case there is no doubt that the applicant has experienced a significant drop in income as a result of his redundancy and that the current level of child support is unjust and inequitable. Thus, I am satisfied that he has established a special circumstance.
In determining what is just and equitable, I note that both parents have an obligation to support the children. I need also to take into account the proper needs of the children (s.117(4)(b)). In this regard, I am satisfied that the mother is a good manager of money and that she does not spend excessively in any way whilst trying to ensure that the children can maximise their abilities. I note that the respondent’s income fell as a result of the orders of Ryan FM on 13 April 2005 which reduced the amount of child support from $303 per week per child to $75 per week per child.
In terms of s.117(4)(c) I note that neither of the children have any income earning capacity.
Turning now to the parties, I must consider each of their income earning capacity, property and financial resources. In the case of the applicant, he is in receipt of a Centrelink benefit in the amount of $179 per week. He owns a home with his current wife which is valued at about $600,000 and is mortgaged in the amount of $116,000. He and his wife rely on the excess borrowings for living expenses.
The respondent has a home in which she and the children reside which is worth approximately $550,000 plus an investment property valued at approximately $200,000. She has a mortgage of $88,000 and some other liabilities totally $1465. Currently the respondent has a total weekly income of $670 made of income from her rental property, family tax benefit and parenting allowance, interest with the St George Bank and child support from the applicant. She has expenditure of $1160 per week as set out in her financial statement.
The respondent is very well educated and has held responsible high paying positions. I accept however that her capacity to work is constrained by her child rearing obligations especially as she has no family support and has some health issues which may have been exacerbated by the exigencies of child care especially where one of the children needed constant comfort at night. It appears that the applicant provides very little support outside of his contact in accordance with the Court’s orders.
Nevertheless, I am of the opinion that perhaps with some retraining and given time to find a suitable position the respondent has the capacity to earn a reasonable level of income although given her child care responsibilities not at her earning level prior to full time parenting. She gave evidence that she would like to re-enter the workforce given the opportunity to do so. I accept that this would necessitate her paying for additional child care.
Section 117(4)(a) requires me to consider the necessary commitments of each parent. I accept the parties’ evidence in that regard.
Section 117(4)(f) requires me to consider the direct and indirect costs incurred by the carer entitled to child support. In this case, I accept the evidence that most of the financial costs are borne by the respondent. They are not excessive and she appears a good manager of money. Further, the respondent’s life is significantly constrained by the necessity for her to single handedly raise two young children.
I am required finally to consider any hardship that would be caused to the children, the carer or the liable parent (s.117(4)(g)). The applicant has a responsibility to his new family. Although he have evidence to the effect that once retrained his employment prospects are good, his income will be lower than that which he was able to earn before being made redundant. The respondent is currently totally reliant on child support and Centrelink payments together with a small amount of rental income. I am satisfied she has the capacity to earn a modest income but must be allowed time to do so. In the interim the children are entitled to a reasonable level of support and the opportunity to continue their outside activities.
Having regard to all of the circumstances, I am of the opinion that the child support agreement dated 13 August 2001 should be discharged. The applicant will then be subject to an administrative assessment of child support. The date of discharge is the date of these orders.
The respondent has sought a lump sum payment of $300,000 in the event that the agreement was discharged. Such a sum would mean the applicant would loose his current home. This is clearly unreasonable. Given the capacity for the circumstances of the parties to change, I think it is just and equitable however that the applicant pay the respondent a lump sum of $10,000 from the cash resources available to him. This represents approximately one year’s child support at the rate of $150 per week plus an amount which recognises the special problems faced by the respondent. This will enable the respondent to adjust and re-arrange her finances. There is an encouragement for her to find employment sooner rather than later. It also recognises that the applicant is unlikely to pay other than a token amount of child support until he finds fulltime work in his new profession. I am also mindful of the need for the applicant to be able to support his new wife and child and meet his necessary commitments during the period he is not in fulltime employment.
For the reasons above I consider the orders I make at the commencement of these reasons are otherwise proper.
I certify that the preceding eighty-eight (88) paragraphs are a true copy of the reasons for judgment of Pascoe CFM
Associate: Peter Smith
Date: 27 June 2005
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