Zhao & Xie - [2008] FamCAFC 187

FAMILY COURT OF AUSTRALIA

ZHAO & XIE

[2008] FamCAFC 187

FAMILY LAW - APPLICATION FOR LEAVE TO APPEAL – Where error of principle established – Application granted.

FAMILY LAW - APPEAL – CHILD SUPPORT – LUMP SUM – UNDEFENDED HEARING – Where hearing before Federal Magistrate proceeded on an “undefended” basis – Where reasons failed to disclose consideration of all relevant factors including the prejudice to either party in proceeding “undefended” – Where mother sought lump sum child support for three children – Whether lump sum child support sought in substitution for administrative assessment – Whether Federal Magistrate failed to consider relevant matters required by the legislation – Whether failure to comply with requirements of s 125 of the Child Support (Assessment) Act 1989 constituted appealable error – Where reasons for judgment were inadequate – Appeal allowed in part and matter remitted for rehearing.

FAMILY LAW - APPEAL – COSTS – Where appeal against orders for costs for two interim hearings and for the hearing that proceeded “undefended” – Appeal against the former orders dismissed – In light of the partial success of the appeal, the appeal against the costs order in relation to the “undefended” hearing was allowed.

FAMILY LAW - COSTS – Where error of principle found – Both parties awarded costs certificates for the appeal and the rehearing.

Child Support (Assessment) Act 1989 (Cth) – s 117, s 121, s 123, s 124, s 125, s 126 s 128
Family Law Act 1975 (Cth) – s 66L, s 79, s 94AAA(3), s 94AAA(6)
Family Law Rules 2004 (Cth) – r 10.12, 11.02(2)
Federal Magistrates Act 1999 (Cth) – s 3, s 17A
Federal Magistrates Court Rules 2001 – r 13.03A, r 13.07, r 16.01
Federal Proceedings (Costs) Act 1981 (Cth) – s 6, s 8, s 9

Allesch v Maunz (2000) 203 CLR 172; (2000) FLC 93-033
Bennett & Bennett (1991) FLC 92-191
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hendy v Deputy Child Support Registrar & Webb (2001) 27 Fam LR 641
Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378
Ivanovic & Ivanovic (1996) FLC 92-689
Kaljo & Kaljo (1978) FLC 90-445
Lightfoot & Hampson (1996) FLC 92-663
Lujans v Yarrabee Coal Company Pty Ltd (2008) 249 ALR 663; [2008] HCA 51 (16 October 2008)
Prpic & Prpic (1995) FLC 92-574
R & R (No 1) (2002) FMCAfam 153
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
State of Queensland v JL Holdings Pty Ltd (1996-1997) 189 CLR 146
Taylor v Taylor (1979-1980) 143 CLR 1
Wild v Ballard (1997) FLC 92-771
Zane & Allan [2008] FamCAFC 115

APPELLANT:

Mr Zhao

RESPONDENT:

Ms Xie

FILE NUMBER:

SYM

4331

2006

APPEAL NUMBER:

2007

DATE DELIVERED:

28 November 2008

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Boland J

HEARING DATE:

29 July 2008

LOWER COURT JURISDICTION:

Federal Magistrates Court

LOWER COURT JUDGMENT DATE:

7 March 2007

LOWER COURT MNC:

[2007] FMCAfam 438

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Ms Winfield

SOLICITOR FOR THE APPELLANT:

Coelho & Coelho

COUNSEL FOR THE RESPONDENT:

Mr Hodgson

SOLICITOR FOR THE RESPONDENT:

Austin Haworth & Lexon Legal

Orders

That leave be granted to appeal orders made by Federal Magistrate Housego on 7 March 2007.
That the appeal be allowed in part.
That Orders 6, 11, 16 and 19 of the orders made on 7 March 2007 be set aside.
That the mother’s application filed 10 October 2005 be remitted for rehearing on a basis to be determined by Federal Magistrate Housego if the matter remains in her docket or otherwise remitted to the Federal Magistrate now having responsibility for this matter.
That the Court grants to the appellant father a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent mother a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by them in relation to the new trial ordered.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Zhao & Xie.

IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 56 of 2007
File Number: SYM 4331 of 2006

Mr Zhao

Appellant

And

Ms Xie

Respondent

REASONS FOR JUDGMENT

Introduction

Mr Zhao (“the father”) on 24 August 2007 filed an Amended Application in a Case in which he sought leave to appeal orders made by the Federal Magistrate Housego on 7 March 2007, and if leave was granted, to appeal her Honour’s orders. The father annexed to his application a draft Notice of Appeal. The father also sought to adduce further evidence in support of his appeal, being paragraphs 9, 10 and 11 of his affidavit filed 8 May 2007. The applications were resisted by Ms Xie (“the mother”).
The orders made by the Federal Magistrate were in proceedings between the parties commenced by the mother in October 2005 when she sought orders that the father pay an amount of $120,000.00 by way of lump sum child support for the three younger children of the parties’ relationship, and that he pay an amount of $30,000.00 by way of lump sum adult child maintenance for the parties’ eldest child.
The proceedings at first instance were protracted. The final hearing was originally listed before the Federal Magistrate on 18 December 2006, but adjourned on that date, and relisted for hearing on 7 March 2007. On that occasion the mother was represented by Mr Hodgson of Counsel. The father did not appear. His former solicitor, Mr Callanan, filed a Notice of Ceasing to Act on 9 February 2007. Mr Callanan appeared before her Honour as a matter of courtesy to the Court on 7 March 2007.
Her Honour determined that the proceedings should be heard on an undefended basis, and gave reasons for her determination in that regard (“the first judgment”).
Thereafter, her Honour dealt with the mother’s substantive application for lump sum child support under s 124 of the Child Support (Assessment) Act1989 (“CSA Act”) (“the second judgment”), and made orders including an order that the sum of $130,000 be paid by the father to the mother by way of lump sum child support for the parties’ three younger children. Her Honour declined at that time to make an order under s 66L of the Family Law Act 1975 (Cth) (“the Act”) in respect of the parties’ adult child, but adjourned that aspect of the application and continued an injunction restraining the father from dealing with the sum of $20,000.00 retained in his former solicitor’s trust account pending determination of the application.
No application for leave to appeal her Honour’s orders was filed by the father in the time prescribed in the Family Law Rules 2004 (“the Family Law Rules”). On 16 August 2007 I heard and determined the father’s application for an extension of time in which to file an application, and extended time for filing such application to 24 August 2007.
In his amended application filed 24 August 2007 for leave to appeal the father sought, in broad terms, to challenge the Federal Magistrate’s determination to hear the mother’s application on an undefended basis, and the subsequent making of the lump sum order of $130,000.00 payable to the mother. He did not challenge the orders adjourning the application for adult child maintenance or the injunction. A subsequent stay application before her Honour ultimately resulted in an order which required the father’s solicitors to release to the mother’s solicitors the sum of $130,000.00, but subject to a consent order which authorised the mother’s solicitors to pay $65,000.00 to the mother, and to hold the balance of $65,000.00 in their trust account. The Court noted an undertaking of the mother that she would not sell or encumber her property in Western Sydney (“the R property”).
The application for leave to appeal was unfortunately delayed because the Federal Magistrate’s ex tempore reasons were not immediately available. The application was ultimately listed for hearing before me on 1 February 2008, but could not proceed on that day as her Honour’s reasons for judgment were not available. Subsequently, when the settled reasons were available, orders were made in chambers for the matter to be heard on 28 April 2008. As that date was not convenient to counsel, the application was then adjourned for hearing on 29 July 2008.
The application was heard by me as a single judge pursuant to a direction of the Chief Justice under s 94AAA(3) of the Act.
The draft grounds of appeal relied on by the father contains 13 grounds. The orders sought if the application for leave and the appeal are successful are that Orders 6, 10, 11, 12, 13, 14, 15, 16, 17, and 19 of her Honour’s orders be set aside. The orders sought are silent as to whether it is proposed the mother’s application should be remitted for re-hearing. I will set out the relevant orders later in these reasons.
Counsel for the mother asserted that the appeal should be dismissed, although he readily conceded that the order made under s 124 of the CSA Act for lump sum child support was deficient as it did not comply with the mandatory requirements of s 125(1) of that Act. Counsel maintained that was an error which could be corrected under s 94AAA(6) of the Act by application of the slip rule, although he also conceded no application had been made to her Honour for such correction when the matter was before her Honour on 8 May 2007 for the hearing of the stay application brought by the father. I will return later to discuss the amendment proposed to the order by counsel for the mother.
In dealing with this application for leave I propose to undertake the following steps. I will:
·    record non controversial matters from her Honour’s first and second judgments supplemented where necessary by non controversial material from the documents identified as forming the appeal book;
·    set out the relevant principles to be applied in dealing with an application for leave to appeal in a child support matter.;
·    identify the challenges raised by the proposed grounds of appeal;
·    review the relevant parts of the Federal Magistrate’s judgments in which she explained why the matter should be determined as an “undefended” hearing, and consider and discuss that aspect of the proposed appeal; and
·    then consider the grounds attacking the lump sum order, and if necessary, consider the arguments addressed by counsel for the mother asserting the Federal Magistrate’s orders should be amended by me pursuant to the “slip rule”.

Background

In my view it is necessary to understand something of the background of the parties’ dispute to appropriately deal with the challenges raised to her Honour’s orders. Perhaps because of the manner in which the matter proceeded before her Honour, and the fact that her reasons were delivered ex tempore, there is little by way of background in the reasons. I indicate below where facts are extracted from her Honour’s reasons, otherwise the material set out below is sourced from the documents identified as forming the appeal book.
The father was born in China in November 1962. The mother was born in May 1965, also in China.
In 1985 the father’s family migrated to Australia.
Sometime between 1985 and mid-1987 the parties commenced living in a de facto relationship. They never married.
In July 1987 the parties’ eldest child, N was born.
The parties’ second child, A, was born in December 1990. Their third child, M, was born in July 1992 and their youngest child, K, was born in November 1997.
The mother’s application for lump sum child support was brought for the support of the three younger children.
Between 1993 - 1996 the parties separated. The mother married another person and was divorced from that person in September 1996.
In 1998 the father asserts he engaged in gyprock plastering activities through a company, H Pty Ltd. The father asserts that he conducted a business known as HS Furniture in 2000 and that it ceased trading in 2003 (father’s affidavit 19 October 2005, annexure C).
In 2000 the father purchased, in his sole name, commercial premises in Western Sydney (“the W property”) for a purchase price of $670,000.00 (mother’s affidavit filed 13 December 2006, paragraph 23).
The mother asserts that in May 2001 the father took $260,000.00 to China (mother’s affidavit filed 13 December 2006, paragraph 29). The mother asserts the funds were eventually given to the father’s present wife. The father asserts the funds were used to buy stock which he imported into Australia for sale. (father’s affidavit filed 19 October 2006, p 3)
In 2002 the father married Ms Jong.
In 2003 the father incorporated CBA Pty Ltd (mother’s affidavit, 13 December 2006, paragraph 30).
In 2003 the father’s wife arrived in Australia but subsequently departed for China in 2004 after appealing to the Migration Review Tribunal about the administrative cancellation of her visa.
The mother asserts the parties separated in 2004.
On 12 December 2004 the Child Support Agency received an application to vary an assessment of child support. (father’s affidavit filed 9 June 2006)
On 16 February 2005 a Notice of Decision was provided by the Child Support Agency. The Child Support assessment for the period 14 December 2004 to 31 December 2006 provided for the father to pay $2,211.00 per month (or $26,532.00 per annum) for the three younger children.
In February 2004 the parties engaged in proceedings in the Supreme Court of New South Wales (“the Supreme Court”) pursuant to the provisions of the Property (Relationships) Act 1984 (NSW) for adjustment of property.
On 14 December 2004 consent orders were made in the Supreme Court in which the father agreed to pay interim maintenance of $2,211.00 per month. The father asserts he made these payments until the sale of the W property.
During the course of the proceedings in the Supreme Court various injunctions were made restraining the father from withdrawing funds or obtaining further borrowings.
On 12 July 2005 the parties entered into final consent orders in the Supreme Court. The orders provided, amongst other matters, for the father to transfer his interest in the R property to the mother at an agreed value of $430,000.00. The orders also provided for the W property to be sold and the proceeds divided between the parties. The father asserts that the mother received the R property at an agreed value of $430,000.00 plus a cash sum of $240,972.79 being her share of the proceeds of sale of the W property, and that he received $670,972.79, such sum being received in November 2006.
On 10 October 2005 the mother filed an application in the Family Court of Australia. The mother sought orders as follows:
1.That the Respondent pay an amount of $120,000.00 by way of lump sum child support in respect of the children of the de facto relationship, [A], [M] and [K].
2.That the Respondent pay an amount of $30,000.00 by way of lump sum child maintenance in respect of the child of the de facto relationship, [N], who has attained the age of eighteen (18) years.
3.That the Respondent pay the applicant’s costs of and incidental to these proceedings.
On 10 October 2005 the mother also sought interim orders restraining disposal of part the father’s share of proceeds of sale of the W property. At the time of filing that application the mother filed an affidavit in support and also filed her only Financial Statement filed in the proceedings. The mother disclosed in her Financial Statement that she was in receipt of social security payments.
On 19 October 2005 the father filed a detailed affidavit replying in part to the mother’s affidavit.
On 1 November 2005 the mother filed a further affidavit disputing various matters in the father’s affidavit filed 19 October 2005.
Orders were made on 16 November 2005 by consent by Judicial Registrar Loughnan. Paragraph 1 of the consent orders provided as follows:
1.That the injunctions granted on 19^th October 2005 be varied in the following manner:
(a)the sum of $150,000 (“the Trust Sum”) shall be held by the Respondent’s solicitors, Ellison Tillyard Callanan, in an interest bearing account with St George Bank Limited until further order of this Court or the agreement of the Applicant.
(b)that the Respondent give fourteen (14) days notice of his intention to leave the jurisdiction
(c)that the applicant be given 28 days notice of any intention by the respondent to purchase a property or business in Australia, thereby giving the applicant sufficient time to consider any approach by the respondent for release of the Trust Sum prior to any determination of these proceedings.
On 1 May 2006 a Senior Case Officer conducted a review of the Child Support Assessment. The review officer’s decision was:
·that for the period 4 November 2005 to 31 August 2006 [Mr Zhao’s] child support income amount increased to $34,700.00;
·that for the period 1 September 2006 to 31 March 2007 the annual rate payable by [Mr Zhao] be set at $26,532.00.
On 2 May 2006 the Child Support Agency wrote to the father notifying him that his assessment from 4 November 2005 was at the rate of $566.38 per month and he had arrears of $3,551.94.
On 3 May 2006 orders were made by consent transferring the matter from the Family Court to the Federal Magistrates Court.
On 18 May 2006 the father lodged a Notice of Objection with the Child Support Agency.
On 6 June 2006 the matter was listed in the Federal Magistrates Court. The father filed an affidavit in Court that day. The father disclosed he had exchanged contracts to purchase in inner-city Sydney (“the inner-city apartment”) with his sister, Ms B as joint tenants.
On 9 June 2006 the father filed a further updating affidavit in the Federal Magistrates Court deposing to the funds received by the parties pursuant to the consent orders made in the Supreme Court.
On 9 June 2006 the father’s application to release the sum of $150,000.00 and to substitute the Certificate of Title for his unit in lieu by way of security was rejected by the Federal Magistrate. On that day her Honour fixed the matter for final hearing on 8 December 2006 and made the following direction:
I make directions for the final hearing as follows; all affidavits and updated financial information to be filed and served no later than 4 pm on 17 November 2006. I require that counsel for each of the parties inform the parties as to their obligations to make full and frank disclosure in proceedings of this nature before this Court. (reasons, 9 June 2005, paragraph 15)
On 15 June 2006 the father filed a response to the mother’s application seeking dismissal of her application for lump sum child support.
On 18 June 2006 the father was arrested on suspicion of receipt of a consignment containing illegal goods. The charge was dismissed 13 December 2006. The father asserted he incurred legal costs of approximately $40,000.00 in respect of this charge (father’s affidavit, 18 December 2006, paragraphs 16-20).

On 17 July 2006 a review officer refused to change the assessment pursuant to the Notice of Objection filed by the father.
On 13 December 2006 the mother filed a further affidavit in the Federal Magistrates Court. She deposed, amongst other matters, that the father was paying child support, but at the rate of $570.00 per month (paragraph 54). The mother set out, in paragraph 67 of her affidavit, the following material in which she asserted her calculations of the lump sum child support sought:
I have performed some calculations in relation to child support. The total amount I require for all of the children until they attain the age of 18 I have calculated as follows:
[A]: $737 x 26 months  $19,162.00
[M]: $737 x 45 months  $33,165.00
[K]: $737 x 109 months  $80,333.00
Total:  $132,660.00
The mother calculated total expenses for the four children of the relationship at $1,195.00 per week.
On 18 December 2006 the father filed in the Federal Magistrates Court affidavit material, including material in reply to the mother’s affidavit. The father asserted he had a capital gains tax liability of $105,000.00 in respect of the sale of the W property. The father also filed a Financial Statement.
On 9 February 2007 the father’s solicitor filed a Notice of Ceasing to Act.
On 1 March 2007 the father’s solicitors wrote to the Federal Magistrate’s associate (with a copy to the mother’s solicitor) in the following terms:
We refer to the above matter and note for the record that we have filed a Notice of Ceasing to act in this matter on the basis that we have not received any or any sufficient instructions in relation to the hearing of this matter set down on 7 March 2007.
Notwithstanding, yesterday afternoon we received a four page fax, a copy of which is attached, from China which appears to evidence the fact that:
a)Mr Zhao is currently in China; and
b)He was admitted to hospital on 26 January 2007 with a fracture of the right patella; and
c)He was discharged on 9 February 2007 and was advised to have three months of bed rest.
Mr Zhao then contacted this office to indicate that, in the circumstances, he seeks an adjournment of the hearing. As a matter of courtesy we are advising both the Court and the Applicant’s solicitors.

The federal magistrate’s orders – 7 march 2007

The engrossed orders of 7 March 2007 provide as follows:
1.The s.66L proceedings be adjourned until 10.00am on 18 February 2008 for hearing before me.
2.The injunction made on 11 October 2005 continue and be extended in so far as the sum of $20,000 is concerned so as to preserve a fund for the payment of such order pursuant to s.66L as may be appropriate when that matter is determined before me on the adjourned date.
3.I DIRECT that each party file and serve all affidavits on which they intend to rely at the hearing no later than 14 days prior to the hearing date.
4.I DIRECT that the affidavit material to be filed in accordance with Order 3 herein include an updated affidavit and a financial statement by the adult child, [N] born 20 July 1987.
5.I DIRECT that the documents be served both on the respondent at [the inner-city apartment] and the respondent’s previous solicitor, Mr Callanan from TILLYARD & CALLANAN.
6.I DIRECT that the partners at TILLYARD & CALLANAN do all acts and things necessary to cause the sum of $130,000 to be released within 14 days to the solicitors for the applicant.
7.Mr Callanan, solicitor, be given liberty to apply in relation to the retention of monies in his trust account pursuant to these Orders.
8.Mr Callanan, solicitor, be granted leave to withdraw from these proceedings.
9.Leave be granted to the wife to file the affidavit of [Ms Yee] affirmed today.
10.Leave be granted to amend the application as to costs in accordance with the scale.
11.The applicant be paid costs in accordance with the scale from the date of commencement of the proceedings.
12.I certify for counsel fees incurred on each occasion that Counsel has appeared in this matter.
13.The husband to pay to the wife, or as she may direct in writing, the costs thrown away on 9 June 2006, in the sum of $3,214.00.
14.The husband pay to the wife, or as she may direct in writing, the costs thrown away on 18 December 2006, in the sum of $6,845.30, being the amount set out in paragraph 4 of the affidavit by [Ms Yee] filed on 7 March 2007.
15.The orders for costs made herein are secured against the husband’s [inner-city unit].
16.The sum of $130,000, as sought by the mother today for lump sum child support, be paid by the husband to the wife for the children [K] born [in] November 1997, [M] born [in] July 1992 and [A] born [in] December 1990.
17.I DIRECT that the applicant serve a copy of these orders on the Child Support Agency.
18.Liberty is granted to the parties to restore the matter to the list on 7 days notice by way of writing to my Associate.
THE COURT NOTES THAT:
19.Order 16 herein can be satisfied by way of monies held in trust.
20.It is envisaged that any order made will be in the form of a periodic sum to be drawn down in the retained funds.
Neither counsel directed any submission to the effect of the notations and the inter-relationship of those notations with Orders 7 and 16.

Proposed grounds of appeal

The proposed grounds of appeal contain 13 grounds. Grounds 1, 2 and 3 are directed to the determination of the Federal Magistrate to hear the mother’s application in the father’s absence and assert in summary that:
·    her Honour erred in failing to apply correct principles to the conduct of the hearing on 7 March 2007;
·    her Honour erred in failing to afford the father an opportunity to be heard; and
·    the father was denied natural justice in the making of the orders in his absence.
Closely associated with those grounds is the assertion raised in ground 12 that Order 18 (the liberty to apply order) was inadequate as it did not enable the father to apply to have the orders set aside.
Ground 4 attacks, in substance, the principles applied by the Federal Magistrate in making the lump sum order pursuant to the CSA Act, and in particular, that her Honour failed to identify the source of power for the order made, and further failed to identify “the periods of the assessment or assessments departed from”.
Proposed ground 4 was argued, together with ground 13, on the basis that her Honour had failed to comply with the mandatory requirements of s 125(1) of the CSA Act, and that such failure could not be remedied by application of the “slip rule”. This challenge is associated with the challenge raised in ground 13 which asserts that the Federal Magistrate erred in dealing with an application for a lump sum which did not seek departure from the existing assessment.
Ground 5 as drafted is as follows:
Whether Order 16 made 7 March 2007 was capable of amendment pursuant to “the slip rule”.
Grounds 6 to 9 all attack the exercise of discretion by her Honour in failing to give any adequate weight to the father’s financial position.
Ground 10 asserts that the Federal Magistrate failed to give adequate reasons.
Finally, ground 11 attacks the exercise of discretion of the Federal Magistrate in making costs orders against the father, and securing payment of the costs orders against the father’s jointly owned home unit.
I propose to firstly consider the challenges raised by grounds 1, 2, 3 and 12 as a group. I will thereafter consider grounds 4, 5 and 13 together. I will in the course of my discussion consider the lack of adequate reasons challenge, and will consider the grounds attacking the exercise of discretion by the Federal Magistrate both in respect of the father’s financial position and the costs orders made.

applicable principles – leave to appeal a child support order

The applicable principles have been discussed in a number of cases and it is unnecessary for me to revisit those principles in this case. Leave to appeal may be granted if the appellant can establish that his or her substantive rights have been significantly affected by an error of principle made by the judicial officer or a substantial injustice is established. However, in determining whether to grant leave the approach to be adopted in a child support matter should not be too restrictive (see Wild v Ballard (1997) FLC 92-771, at 84,488, Hendy v Deputy Child Support Registrar & Webb (2001) 27 Fam LR 641.

The undefended hearing challenge

The Federal Magistrate’s reasons

The first judgment delivered by the Federal Magistrate on 7 March 2007 dealt with her Honour’s determination to hear and determine the mother’s application for lump sum child support on an undefended basis. Her Honour delivered ex tempore reasons noting that when the matter had been before the Court on the last occasion “the husband [semble “the father”] was present in court and was represented by his solicitor and the parties were advised of the adjourned date” (paragraph 1).
Her Honour noted that an order had been made, by consent, on 16 October 2005 in which the father agreed he would give “14 days notice of his intention to leave the jurisdiction” (paragraph 2). Her Honour then went on to explain evidence given before her orally that day was that the first notification the mother or her solicitor had received indicating the father was out of the jurisdiction was as a consequence the letter received by them from the father’s solicitors “setting out some documentation received by him which referred to an accident that the husband had sustained in China and to consequent admission to hospital on 26 January and consequential discharge” (paragraph 3).
Her Honour went on to note, in paragraph 4, that the mother’s solicitors had received the letter from the father’s solicitors at about the same time as correspondence “to the same effect” to the Court. In considering the correspondence her Honour said:
Together with each of those letters is a photocopy of a document entitled Certificate of Diseases which identifies the diagnosis of the husband’s injury as a fracture of the right patella, and the notes then require rest for 14 months with clinical follow up. There is also a Discharge Summary from a hospital which is identified on the face of the document as Changji City shi Boai Hospital, it makes no reference in that document to either the name, sex, age or race of the relevant patient although the diagnosis is consistent with the earlier document in that it refers to a fracture of the right patella. The patient was then, according to that document, discharged on 9 February 2007 and required to have bed rest. There is no statement in that Discharge Summary as to any prohibition on aeroplane travel by the respondent such that he could return from China to Australia to be present in Court today.
Her Honour then proceeded to consider evidence in the form of affidavits filed by a paralegal in the employ of the mother’s solicitor which she described as purporting to cast “considerable doubt on the veracity of those documents [the medical records]”. Her Honour then, correctly in my view, noted the material in the affidavits was in a form which was inadmissible. Her Honour then said “I do not place any significant weight on those aspects of the affidavit” but went on to note at paragraph 5:
…However, on the face of the document itself, the Certificate of Diseases, and the Discharge Summary there is no adequate explanation as to why the husband cannot be present in Court today and together with the fact that his departure from the jurisdiction is, on the information provided to me today in sworn evidence, in breach of the orders of Loughnan JR. I intend to proceed. I will grant the application to proceed undefended and that application will be dealt with today in the husband’s absence.

The Relevant provisions of the Federal Magistrates Court Rules 2001

I was not directed by counsel to any relevant provision of the Federal Magistrates Act 1999 (Cth) (“the Federal Magistrates Act”) or Federal Magistrates Court Rules 2001 (“the rules”) except r 13.07 and r 16.01 (relied on by the father’s counsel). The father’s counsel submitted that her Honour had summarily dismissed the father’s response relying on r 13.07 and was in error in so doing. I will refer to the former rule shortly. For reasons I will shortly explain, I do not accept it had relevance to this application.
Section 17A of the Federal Magistrates Act (which was inserted into that Act in 2005) provides that a matter may be disposed of by summary judgment. This provision of the statute allows summary judgment to be entered without strict application of the principles developed by the common law in cases such as General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. Rule 13.07 applies to proceedings determined in reliance on s 17A.
There was no application to her Honour that the father’s response should be summarily dismissed under s 17A (applying rule 13.07). Rather, the mother’s counsel made an oral application to the Federal Magistrate for the mother’s application to be heard on an “undefended basis” (Transcript, 7 March 2007, p 2).
Rule 13.03A of the rules as then in force applied in default of appearance of a party. It was in the following terms:
If a party to a proceeding is absent from a hearing (including a first court date), the Court may do one or more of the following:
(a)adjourn the hearing to a specific date or generally;
(b)order that there is not to be any hearing unless:
(i) the proceeding is again set down for hearing; or
(ii) any other steps that the Court directs are taken;
(c)if the party absent is an applicant - dismiss the application;
(d)if the party absent is a party who has made an interlocutory application or a cross-claim - dismiss the interlocutory application or cross-claim;
(e)proceed with the hearing generally or in relation to any claim for relief in the proceeding.
It is in different terms to Rule 10.12 of the Family Law Rules (the rule which deals with summary dismissal), and although analogous, it is not identical with r 11.02(2) of those rules which enables the Family Court to deal with an application as “undefended” if a party has failed to comply with the Rules, Regulations or a procedural order.

Material relied on by the Federal Magistrate

Her Honour does not identify in her reasons the material she took into account in arriving the orders ultimately made, but it is clear that she was referred by the mother’s counsel to material filed by the father (Transcript, 7 March 2007, p 13 lines 1-3, p 23 lines 26-47, p 38 line 34 – p 39 line 20).

General principles – application heard in the absence of a party; application to adjourn having regard to imperatives of case management

It is well settled law that both a superior and inferior court has, even absent specific statutory power, as a necessary incident of its power to control its processes, the ability to set aside an order made against a person who did not have a reasonable opportunity to appear and present his case (see Taylor v Taylor (1979-1980) 143 CLR 1; Allesch & Maunz (2000) 203 CLR 172; (2000) FLC 93-033).
The tension between the manner in which cases are heard to ensure effective case management of a court’s workload, and the overarching necessity to ensure case management (and imposition of rules of court) do not preclude access by a party to justice are discussed by the High Court in State of Queensland v JL Holdings Pty Ltd (1996-1997) 189 CLR 146. The competing interests are captured by Kirby J in his reasons at 171-172 as follows:
6. …Writers on effective case management repeatedly stress the importance of adhering to a “firm, credible ... trial date” as an important element in securing the serious attention to a dispute which may help to promote its resolution. They call attention to the risks of “litigation abuse” by which some litigants seek, at all costs, to avoid firm hearing times. Courts are entitled to react unfavourably to repeated default on the part of a litigant whose conduct has the effect of frustrating a proper timetable fixed for the trial. Justice will not necessarily require that a party should have multiple opportunities to plead and present its case. A court must accord justice to the particular litigant. But it must also maintain its responsible use of scarce public resources and consider, in a general way, the impact which its orders have on other litigants and on the public generally.
7. Whilst taking all of the considerations relevant to the circumstances of the case into account, the judge must always be careful to retain that flexibility which is the hallmark of justice. New considerations for the exercise of judicial discretion in such cases have been identified in recent years. But the abiding judicial duty remains the same. A judge who ignores the modern imperatives of the efficient conduct of litigation may unconsciously work an injustice on one of the parties, or litigants generally, and on the public. But a judge who applies case management rules too rigidly may ignore the fallible world in which legal disputes arise and in which they must be resolved. [footnotes omitted]

Discussion

The challenges articulated in respect of the Federal Magistrate dealing with the mother’s application as an “undefended” matter raise the following questions:
·First, what factors was her Honour required consider in balancing whether or not the mother’s application should be adjourned, and did her discretion miscarry in that exercise?
·Second, if her Honour was correct in refusing to adjourn the application, on what provision or provisions of the Federal Magistrates Act and or rules did she rely?
·Third, what procedure should her Honour have followed in determining the application, what material did she take into account in determining the mother’s claim, and did she err in this respect?
·Fourth, did her Honour err in not providing the father an opportunity to seek to set aside her orders after 7 March 2007, or did Order 18 properly afford the father an opportunity to do so?

Factors to be considered

Section 3 of the Federal Magistrates Act sets out the two principal objects of that Act, which are to create a Chapter III court under the Australian Constitution and for the Court to operate with streamlined procedures and lack of formality. The latter objects of the Act are expressed in s 3(2) as follows:
(2) The other objects of this Act are:
(a) to enable the Federal Magistrates Court to operate as informally as possible in the exercise of judicial power; and
(b) to enable the Federal Magistrates Court to use streamlined procedures; and
(c) to encourage the use of a range of appropriate dispute resolution processes.
The objects expressed in the rules reflect the objects in s 3(2) of the Federal Magistrates Act.
These objects and rules (including r 13.03 as it then was enacted) appear to me to be designed to enable a Federal Magistrate hearing cases in a busy court, where often the dispute will be between private citizens of limited means who need a quick and economical resolution of their dispute, to adopt a more robust approach than may be the norm than in other courts, particularly superior courts. The need to balance the objects of the Federal Magistrates Act and rules, and the attainment of justice may often be a difficult one for the judicial officer (see State of Queensland v JL Holdings Pty Ltd). This case presents an example of that complex balancing exercise.
Rule 13.03 as then in force, prima facie, may have permitted her Honour to proceed to hear the matter in the father’s absence. But in circumstances where her Honour was on notice that he sought or was attempting to seek an adjournment, I consider strict compliance with the rule, without further consideration of the history of the proceedings to that date by her Honour, would have worked an injustice on the father.

It is therefore necessary to consider whether there was error of principle or a substantial injustice caused by her Honour in proceeding with the hearing in the father’s absence, errors in the procedure followed, and whether the ultimate result was supported by adequate reasons.
The matter had commenced two years prior to the hearing date, and had required determination of at least one interlocutory application. Neither party had complied with the Federal Magistrate’s order for updating documents in the time provided by her orders (17 November 2006). But as is apparent from the background set out above, the father had filed material on and from 2005, and he had filed his updating Financial Statement and affidavit on 18 December 2006.
Factors relevant to her Honour’s consideration favouring her determination to hearing the matter in the father’s absence were:
·the need for a speedy resolution of the matter;
·the nature of the application (child support for three dependent children);
·that the mother gave sworn evidence that the father had not notified her of his intention to travel overseas (this prima facie supported a determination that the father had acted in breach of consent orders made 16 November 2005 by travelling to China);
·the father did not formally seek an adjournment of the hearing and support his application with sworn evidence in support;
·the mother sought to challenge, albeit with essentially inadmissible material, the father’s purported injury to his knee which he asserted had required hospitalisation; and
·the nature of the financial disclosure made by the father.
Other factors relevant to her Honour’s consideration were:
·the fact the father’s share of the proceeds of sale of the W property were held in a trust account to secure payment of child support, including, if deemed appropriate lump sum child support;
·that both parties had been late in filing their updating material (the mother’s material being filed on 13 December 2006 not 17 November 2006 as ordered);
·that the father had filed an updating Financial Statement and an updating affidavit on 18 December 2006 and had filed extensive material from the commencement of the proceedings in 2005;
·that payments of child support had been made by the father albeit at the rate of $570.00 per child per month and not the increased rate of $737.00 per child per month payable from 1 September 2006;
·that the father’s solicitors (who by February 2007 had filed a Notice of Ceasing to Act) had written to the Federal Magistrate’s Associate (with a copy to the mother’s solicitors) on 1 March 2007 advising they had received a facsimile transmission which asserted the father had been admitted to hospital on 26 January 2007 with a fractured patella, and had been discharged on 9 February 2007 with advice he should have three months bed rest. The letter annexed a translation of a medical certificate, a discharge summary (which did not however independently name the patient), and a translation of inpatient medical records (naming the father) and which did disclose a fracture of the right patella;
·on the hearing day the father’s former solicitor advised he had received a call that morning by a lady who asked him what was happening about the adjournment; and
·that any prejudice to the mother if the matter was further adjourned could be ameliorated by an order for costs, including indemnity costs, by payment from the father’s funds held in his former solicitors’ trust account.
I have already noted her Honour delivered two separate judgments on 7 March 2007. It appears to me that it would be artificial in the circumstances the case came before her Honour to rely strictly on her reasons in the first judgment in considering these challenges, but fairness requires I also consider the expansion of her reasons in the second judgment.
In her first judgment, which contained six paragraphs, her Honour only referred to the unsatisfactory nature of the manner in which the father had sought to put evidence before the Court about his asserted medical condition. In her second judgment her Honour repeated the first six paragraphs of the first judgment, and then noted, at paragraph 10, that the father was absent from the jurisdiction without explanation. Her Honour then explained that the father had been in Court on earlier occasions and was aware the mother sought a lump sum order (paragraph 11). Her Honour went on at paragraph 13 of the second judgment to say:
These are circumstances where there has been a clear failure by the father to satisfy his obligation to make full and frank disclosure of his financial position, such that I have no material before me which explains how he is able to provide himself with food, fund his return trip to China, or any other such matters. I am not satisfied that the father has discharged the obligation that is imposed on him and accordingly I find that he has intended not to make such information available to me for the purpose of thwarting the application in relation to the lump sum child support.
Her Honour did not identify in either judgment the basis on which she proposed to determine the matter other than the reference in paragraph 1 of both judgments that she had been asked to “proceed to a final determination on an undefended basis”. I return shortly to discuss the challenge to her Honour’s orders on the basis of lack of adequate reasons. It would have been of assistance if her Honour had identified the provisions of the Federal Magistrates Act and/or rule she proposed to rely on in proceeding to hear the matter in the father’s absence. It appears to me that her Honour may have relied on r 13.03. Further, in the circumstances of this case, (her Honour being on notice the father had been hospitalised and it appeared from his written communication to the Court was seeking an adjournment), I consider her Honour was required to consider whether strict compliance with that rule would work an injustice to either party.
There is no discussion in either of her Honour’s brief ex tempore reasons that she took into account in the exercise of her discretion any factor favouring the father in determining to proceed on an undefended basis, or considered the question of prejudice to either party, and how prejudice to the mother could be ameliorated by an order for costs, including indemnity costs.
This lack of discussion by her Honour is relevant to the challenge asserting a lack of adequate reasoning by her Honour.
The need for a judicial officer to give adequate reasons is well known (see Bennett v Bennett (1991) FLC 92-191; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378. Adequate reasons are necessary so that a losing party can understand why he or she lost, and to enable an appellate court to understand the basis for orders ultimately made.
I discern that that her Honour’s discretion did miscarry by her failure to take into account any relevant matters favouring the father, or if her Honour did so, failing to adequately explain why she rejected those factors in favour of factors supporting the mother’s case, when determining to hear the matter on an “undefended” basis.
My determination of, prima facie, appealable error by the Federal Magistrate in proceeding to determine this matter “undefended” would, subject to the requirements as expressed by the High Court on the hearing of an appeal by an intermediate appellate court which is charged by statute in “rehearing” to examine the whole of the record in the Court below, (see Lujans v Yarrabee Coal Company Pty Ltd (2008) 249 ALR 663; [2008] HCA 51 (16 October 2008)), require the application for leave to appeal to be allowed. But in this case the matter came back before her Honour on 8 May 2007 when the father was represented by counsel. It was conceded before me by the father’s counsel that no application was made at that time to set aside the orders and for the matter to be re-heard, but reliance was then placed on this application for leave to appeal and a stay sought. In those circumstances, I consider it would not be proper to determine error of principle by her Honour proceeding with the mother’s application on the hearing date and to allow the appeal without further consideration of the other asserted appealable errors.

What was encompassed in an “undefended” hearing?

The expression “undefended” hearing is not defined in the CSA Act, the Act or the Federal Magistrates Act, the rules or Family Law Rules although the Dictionary to those rules defines “undefended basis” as follows:
undefended basis - the court may order that a hearing or trial may proceed, because of the respondent’s failure to comply with a rule or order, as if a response has not been filed. The court may make the orders set out in the application on being satisfied by evidence that the orders should be made.
In Zane v Allan [2008] FamCAFC 115 the majority in the Full Court set out, without deciding the correctness thereof, the trial Judge’s summary of what is encompassed in an undefended hearing. In Zane the trial Judge had clearly identified the material which he read, and considered the evidence relevant to the provisions of the Act before proceeding to make property orders under s 79. The majority allowed the appeal on the basis that the father’s actions in not complying an order regarding the appointment of a single expert was inadequate to support an undefended hearing under r 11.02(2) of the Family Law Rules. Their Honours (Finn and Thackray JJ) considered, but without the necessity to determine the correctness thereof, the trial Judge’s detailed examination of the procedure to be followed, including the documents to be relied on, in determining an undefended application.
There was no submission from counsel for either party as to the course it was asserted her Honour ought to have followed if she was entitled to proceed on an undefended basis. As presently advised, it would appear to me that although reasons not need be lengthy, the relief sought and the relevant statutory basis for the relief should be identified. Material taken into account should also be identified, and some indication given of the weight attached to particular material. Some reasoning should be demonstrated to explain why, based on the evidence considered and applied to the relevant provisions of the statute, the orders ultimately made are seen to be appropriate.
I am unable to discern from her Honour’s reasons in either judgment what material she relied on, save and except material filed on the mother’s behalf by a paralegal in her solicitors’ office, and the oral evidence of the mother and her solicitor which was limited to the question of whether or not the father had provided prior notice of his intention to travel overseas as required by the 2005 consent order.
Unfortunately, her Honour’s reasons do not disclose any consideration of the evidence other than the quantum of the child support assessment which her Honour noted to be $737.00 per month for the three children (paragraph 8) (in fact, per child). I am simply unable, because of the lack of sufficient reasons by her Honour, to determine the path of reasoning leading to the orders made except her Honour’s explanation that the father advised her Honour on previous occasions he wished to support his children, that he was on notice that the mother sought a lump sum order, and her Honour’s finding that the father had failed to make a full and frank disclosure of his financial position. I will return shortly to the latter aspect of her Honour’s reasons.
In this case an examination of the transcript reveals that her Honour was referred by the mother’s counsel to material filed by the father. That material included the father’s evidence in his affidavit filed 18 December 2006 of how he had disposed of his share of the sale of the proceeds of sale of the W property, his retention of $20,000.00 to fund his living expenses and repayments of loans to family members. He also referred to his tax liability including a liability for payment of capital gains tax of $105,000.00 as a result of the sale of the W property.
In neither of her Honour’s two judgments did she:
·    identify the parties’ competing applications;
· identify the relevant provisions of the CSA Act as then in force particularly sections 117, 124, 125 and 128 which were relevant to the order to be made;
·    consider whether it was appropriate to depart from the assessment and / or to make a lump sum order in substitution for the assessment (which had been subject to the review and objection process within the Agency);
· consider the evidence relevant to the provisions of the CSA Act identified above; or
·    explain what portion of the lump sum was to be paid out by the mother’s solicitors, and the timing of such payment pursuant to her notation.
I will expand my conclusions in respect of the matters highlighted above more fully in my discussion of grounds 4, 5 and 13.

Did Order 18 overcome any natural justice challenge by permitting the father to set aside the orders of 7 March 2007?

Little needs to be said about this challenge. It is clear from the authorities that an order for liberty to apply does not afford an opportunity to re-litigate a final order. The purpose of an order for liberty to apply is discussed in Kaljo & Kaljo (1978) FLC 90-445 at 77,274-77,275. The use of such a provision is clearly explained in Abigroup Ltd. v Abignano (1992) 112 ALR 497 where the Full Court (Lockhart, Morling and Gummow JJ) said at 509-510:
The reservation of liberty to all parties to apply to a court is a provision directed essentially to questions of machinery which may arise from the implementation of a court's orders. They include cases where a court may need to supervise the enforcement of orders after they have been made. They relate essentially to orders (not often to declarations) in practice in our experience. We agree with the submission of counsel for the appellant that orders of this kind relate to enforcement and not to statements of the rights of the parties. Historically orders reserving liberty to apply are for limited purposes. They arise, for example, upon a decree for specific performance where the unsuccessful defendant declines to sign all documents and do whatever is necessary to ensure that the contract the subject of the suit is performed. The reservation of liberty to apply ensures that the court may then make orders to secure that the relevant contract is enforced by the defendant by, for example, appointing the appropriate officer of the court to execute the necessary documents of conveyance so as to give title to the successful plaintiff. Historically the reservation by the Court of Chancery of further consideration of a decree was intended to cover the circumstance where following the pronouncement of the decree (a final decree) a further hearing was necessary for the court to deal with some outstanding issue sometimes requiring taking further evidence and making further declarations or orders. But this did not detract from the initial orders as being final orders. Rather it was a mechanism designed by the Court of Chancery to obviate the necessity of a further suit being instituted to deal with matters that were essentially consequential upon the making of the initial final decree. This demonstrates that there is no inconsistency between the making of final decrees, judgments or orders or declarations and subsequent orders of the court. It all depends upon the circumstances of the case and the particular orders or decrees formulated by the court. See generally the discussion with respect to liberty to apply and further consideration in Ritchie's Supreme Court Practice (NSW), paras 42.12.2 and 42.12.3.
This asserted challenge to her Honour’s orders is, in reality, not that this order was on its face defective, but rather by implication it is asserted her Honour ought to have made an order by which the father, having been served with the orders made in his absence, had a period of time in which to apply to set them aside. That submission has little merit. Just as a party can apply to a court without liberty for machinery provisions to implement final orders, so too could the father have applied to her Honour for the orders to be set aside, but did not do so.

Conclusions – undefended hearing

I conclude there was error of principle by the Federal Magistrate in failing to give adequate reasons for her decision to permit the mother’s application to be heard on an undefended basis, and further that her Honour’s second judgment did not disclose adequate reasons to support the orders ultimately made. As I indicated above, the latter conclusion is supported by my more detailed consideration of the grounds challenging the making of the order for lump sum support.

Asserted failure to first make a departure order before making a lump sum order

The parties’ submissions

In her written submissions in respect of grounds 4, 5 and 13 counsel for the father primarily addressed the failure of the Federal Magistrate in making an order for lump sum child support to address the requirements of s 125 of the CSA Act when making an order under s 124. I pause here to note that counsel for both parties prepared written submissions without the benefit of her Honour’s reasons for judgment but after they had obtained the transcript of the hearing. They did not however seek to amend their submissions.
At paragraphs 9 and 10 of her written submissions counsel for the father said:
9.It is not apparent from the transcript that the Federal Magistrate had regard to the requirements of section 124 before making the orders of 7 March 2007.
10.Further, Order 16 is defective on the face of it. Indeed, it may be said that the application for that order was defective in that it did not ask the Court to address the relevant requirements in the face of the order. On that basis, the application should have been dismissed. (father’s submissions paragraph 9 and 10 p 3-4)
In opposing the appeal on these grounds counsel for the mother in his written submissions said (at page 5):
Although Reasons for Judgment are not presently available in relation to the substantive proceedings, it would appear that the Federal Magistrate determined it would be appropriate to make a lump sum order because of the unsatisfactory and contradictory nature of the Father’s Affidavit evidence (Transcript page 20.13), his failure to make a full and frank disclosure of his financial affairs (Transcript page 39.25), his failure to explain why he could not work (Transcript page 38.12) and an apprehension that he would reside in China (Transcript page 16.19). She then determined the quantum of the lump sum to be paid, based upon an assessment of $737.00 per month per child and thereafter calculated a lump sum upon the basis of the tables using a 3% multiplier until each of the children attained the age of eighteen (18) years from 10 October 2005 (the date of the Wife’s Application.) Any amounts of child support paid or recovered from the Father since this time were deducted and a total amount of $130,000.00 was determined as the total amount to be awarded by way of lump sum child support pursuant to Section 124 of the Act. (Transcript pages 26.26 and 41 to 44.5)
Later in his submissions referring to the specific grounds the mother’s counsel submitted:
Grounds 4 and 13
It would be apparent from the Reasons for Judgment whether the Federal Magistrate had regard to the provisions of Section 124 of the Act and this would not be specifically gleaned fro [sic] the Transcript. It is submitted that the Federal Magistrate by implication determined that in all the circumstances it was just and equitable or otherwise proper to make an order pursuant to Section 124. She was certainly aware that this was an Application pursuant to Section 124. It is submitted that in the drafting of orders sought, it is not necessary to specify the considerations which the Court should take into account.
Ground 5
It is conceded that Section 125(1) requires the Court to state whether the amount of child support ordered is to be credited against the liable parent’s liability and on the face of her orders the Federal Magistrate has failed to do so. It is however clear from the Transcript that the intention of the Federal Magistrate was for the lump sum order to be “an order in replacement” of the administrative assessment (Transcript page 24.21). It is submitted that this is a matter which could be remedied by application of the “slip rule” to give effect to the intention and that it is not the case that the application of this rule may only be applied in the case of mathematical or clerical error. It exists to permit the correction of an order or decree which may even have resulted from the omission of a party’s lawyer. (mother’s submissions, pp 7-8)

In oral argument before me counsel for the father expanded her challenge to grounds 4, 5 and 13 asserting:
·the mother’s application was defective in form as it did not seek a departure from the administrative assessment;
·that her Honour failed to consider the provision of the CSA Act relevant to a departure application;
·that contrary to authority the Federal Magistrate had made a lump sum order relying on s 124 as an independent source of power; and
·that even if her Honour had found it was appropriate to depart from the administrative assessment (which was not conceded) it was impossible to determine from her Honour’s reasoning how, or if she had dealt with payments made by the father, or any arrears of child support.
I have earlier in these reasons referred to the relief sought by the mother in her application filed 10 October 2005.

The Federal Magistrate’s second judgment

Having set out again in paragraphs 1-6 her reasoning for determining the matter on an undefended basis her Honour immediately went on to state she was satisfied it was an appropriate matter for her to make an order for lump sum child support.
Her Honour referred to payments made by the father, and to the assessment then in force as follows:
8.Since the current assessment issued, which has not been successfully objected to, an assessment stands in place at present of $737.00 a month in relation to the three children.
9.The payments that have been received have been a voluntary payment of $6162.20, together with a further sum of $3043.78 that was taken by action of the Child Support Agency from the financial resources of the father.
Immediately thereafter her Honour said (in paragraph 10):
Otherwise the father is absent from the jurisdiction without explanation and in breach of orders made by Johnston JR [semble Loughnan JR] on 16 November 2005, which orders were made by consent. In those circumstances, it seems to me that this is an appropriate case for there to be provision of the sort asked.
Her Honour further explained (in paragraph 11) that the father had on earlier occasions when he had been present in court, and represented, made aware that the mother sought a lump sum payment of child support. Her Honour then noted that the lump sum child support order could be satisfied held by monies held in trust.
Her Honour then made the following finding about the father’s financial disclosure:
These are circumstances where there has been a clear failure by the father to satisfy his obligation to make full and frank disclosure of his financial position, such that I have no material before me which explains how he is able to provide himself with food, fund his return trip to China, or any other such matters. I am not satisfied that the father has discharged the obligation that is imposed on him and accordingly I find that he has intended not to make such information available to me for the purpose of thwarting the application in relation to the lump sum child support. (paragraph 13)
Her Honour then dealt with the application for adult child maintenance, which reasons are not relevant to this proposed appeal, and concluded, before setting out her reasons for ordering the father to pay costs as follows:
I will order that the sum of $130,000 sought today through her counsel by the applicant be paid to the mother by way of child support for the children, [K] born [in] November 1997, [M] born [in] July 1992 and [A] born [in] December 1990. This payment will be in complete satisfaction of all child support assessments up until the time that each of those children attain the age of 18 years or complete their high school education, whichever is the latter date. (paragraph 16)

Relevant provisions of the CSA Act and principles to be applied in determining an application for lump sum child support

Part 7 Div 4 of the CSA Act deals with applications for departure from a child support assessment. Substantial amendments have been made to the Act in the last three years, and it is necessary that I refer to the legislation in force at the date of the orders of the Federal Magistrate when considering this application for leave to appeal.
At the date of the hearing before her Honour Part 7 Div 4 and Div 5 contained a number of sections relevant to this application. Although lengthy it is necessary I set out these sections of the CSA Act to adequately deal with the challenges raised in grounds 4, 5 and 13.
Division 5 of Part 7 of the CSA Act, in s 121, sets out the object of that division. Section 122 notes that the division applies where a carer entitled to child support wants a liable parent to provide child support for the child otherwise than in the form of periodic amounts.
Section 123 provided that an application may be made to a court for such an order. It was, at the relevant time, as follows:
(1) Application may be made to a court having jurisdiction under this Act for an order that a liable parent provide child support for a child otherwise than in the form of periodic amounts paid to the carer entitled to child support.
(2) An application:
(a) may only be made if an administrative assessment is in force in relation to the child, the carer entitled to child support and the liable parent; and
(b) may be made by the carer entitled to child support or the liable parent.
(3) Before hearing the application, the court must hear and determine any pending application made to the court for an order under Division 3 (administrative assessments more than 18 months old) or Division 4 (departure orders) in relation to the child, the carer entitled to child support and the liable parent.
(4) Subject to section 145 (Registrar may intervene in proceedings), the parties to the application are the carer entitled to child support and the liable parent.
Sections 124 and 125 are the pivotal sections in this matter. They provided as follows:
Section 124
(1) Where:
(a) a custodian entitled to child support or a liable parent makes an application to a court under section 123; and
(b) the court is satisfied that it would be:
(i) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(ii) otherwise proper;
to make an order that the liable parent provide child support for the child otherwise than in the form of periodic amounts paid to the carer entitled to child support;
the court may make the order.
(2) In determining the application, the court must have regard to:
(a) the administrative assessment in force in relation to the child, the carer entitled to child support and the liable parent; and
(aa) any determination in force under Part 6A (departure determinations) in relation to the child, the carer entitled to child support and the liable parent; and
(b) any order in force under Division 4 (departure orders) in relation to the child, the carer entitled to child support and the liable parent; and
(c) whether the carer entitled to child support is in receipt of an income tested pension, allowance or benefit or, if the carer entitled to child support is not in receipt of such a pension, allowance or benefit, whether the circumstances of the carer are such that, taking into account the effect of the order proposed to be made by the court, the carer would be unable to support himself or herself without an income tested pension, allowance or benefit; and
(d) the effect that the making by the carer entitled to child support of an application under section 128 (Pensioners entitled to apply to have assessed child support not reduced by more than 25%) would have on the order proposed to be made by the court (and any statement included in the order under section 125).
(3) 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 an order under subsection (1), the court must have regard to the matters mentioned in subsections 117(4), (6), (7), (7A) and (8).
(3A) In having regard to the earning capacity of a parent of the child under paragraph 117(4)(da), the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied as mentioned in subsection 117(7B).
(4) In determining whether it would be otherwise proper to make an order under subsection (1), the court must have regard to the matters mentioned in subsection 117(5).
(5) Subsections (2), (3), (3A) and (4) do not limit the matters to which the court may have regard.
Section 125
(1) If the court makes an order under section 124, the court must state in the order whether the child support ordered to be provided by the liable parent is to be credited against the liable parent’s liability under any administrative assessment (in this Division called a relevant administrative assessment) of the child support payable by the liable parent to the carer entitled to child support that relates to the period, or a part of the period, for which the order has effect.
(2) The court may state that the child support is not to be credited against the liable parent’s liability under any relevant assessment only if it is satisfied that, in the special circumstances of the case, it would be:
(a) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(b) otherwise proper;
that the child support should not be credited.
(3) If the court states in the order that the child support is to be credited against the liable parent’s liability under any relevant administrative assessment, the court must also state in the order either:
(a) that the child support has an annual value of a specified amount and that the annual rate of the child support payable under any relevant administrative assessment is to be reduced by that amount; or
(b) that the child support is to count for a specified percentage of the annual rate of child support payable under any relevant administrative assessment.
(4) The court may, under subsections (1) and (3), make different provision in relation to different child support periods and in relation to different parts of a child support period.
(5) 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 statement of the kind referred to in subsection (2), the court must have regard to the matters mentioned in subsections 117(4), (6), (7), (7A) and (8).
(5A) In having regard to the earning capacity of a parent of the child under paragraph 117(4)(da), the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied as mentioned in subsection 117(7B).
(6) In determining whether it would be otherwise proper to make a statement of the kind referred to in subsection (2), the court must have regard to the matters mentioned in subsection 117(5).
(7) Subsections (5), (5A) and (6) do not limit the matters to which the court may have regard.
Also relevant were s 126 and s 128. Those sections provided as follows:
Section 126
(1) If the court makes an order under section 124, the court must:
(a) give reasons for:
(i) making the order; and
(ii) the statement or statements included in the order under section 125; and
(b) cause the reasons to be entered in the records of the court.
(2) Subsection (1) does not apply in relation to an order if:
(a) it is an order made by consent; and
(b) the carer entitled to child support concerned is not in receipt of an income tested pension, allowance or benefit.
(3) A contravention of subsection (1) in relation to an order does not affect the validity of the order.
Section 128
(1) This section applies if:
(a) the court has made an order under section 124 that includes a statement that the child support ordered to be provided by the liable parent is to be credited against the liable parent’s liability under any relevant administrative assessment; and
(b) the carer entitled to child support is in receipt of an income tested pension, allowance or benefit (whether or not he or she was in receipt of the pension, allowance or benefit when the order was made).
(2) If the carer entitled to child support applies to the Registrar, in the manner specified by the Registrar, for any relevant administrative assessment to be made as required by this section, the Registrar must immediately take such action as is necessary to give effect to the application (as from the time when the application was made to the Registrar) in relation to any relevant administrative assessment that has been made (whether by amending the assessment or otherwise).
(3) In making a relevant administrative assessment while the application remains in force, the Registrar must:
(a) work out whether, apart from this section, the annual rate of child support referred to in paragraph 127(3)(a) would be reduced under paragraph 127(3)(b) by more than 25%; and
(b) if the annual rate would be so reduced by more than 25% - work out whether, if the annual rate were instead reduced by only 25%, the carer entitled to child support would be entitled to continue to receive the income tested pension, allowance or benefit; and
(c) if paragraph (b) applies and the carer entitled to child support would be so entitled to continue to receive the income tested pension, allowance or benefit - the Registrar must, under paragraph 127(3)(b), reduce the annual rate by only 25%.
(4) The application stops being in force when:
(a) the carer entitled to child support notifies the Registrar, in the manner specified by the Registrar, that he or she no longer wants any relevant administrative assessment to be made as required by this section; or
(b) the carer entitled to child support is no longer in receipt of any income tested pension, allowance or benefit; or
(c) a child support terminating event happens in relation to the child concerned, the carer entitled to child support, the liable parent or all 3 of them.
Note: Section 150A provides for the Registrar to specify the manner in which an application or notice may be made or given.
(5) If the application stops being in force, the Registrar must immediately amend any relevant administrative assessment that has been made (as from the time when the application stopped being in force) so that the assessment is made as required by this Act (apart from this section).
The relevant sub-sections of s 117 provided:
Section 117
…
(4)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, property and financial resources of each parent who is a party to the proceeding; and
(da)the earning capacity of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i)     himself or herself; or
(ii)    any other child or another person that the person has a duty to maintain; and
(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)any hardship that would be caused:
(i)     to:
(A) the child; or
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii)    to:
(A) the liable parent; or
(B)any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.
…
(6)In having regard to the proper needs of the child, the court must have regard to:
(a)the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b)any special needs of the child.
(7)In having regard to the income, earning capacity, property and financial resources of the child, the court must:
(a)have regard to the capacity of the child to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child that do not produce, but are capable of producing, income; and
(b)disregard:
(i)     the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii)    any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
(7A)In having regard to the income, property and financial resources of a parent of the child, the court must:
(a)have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing, income; and
(b)disregard:
(i)     the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii)    any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
(7B)In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a)one or more of the following applies:
(i)     the parent does not work despite ample opportunity to do so;
(ii)    the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or working pattern; and
(b)the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i)     the parent’s caring responsibilities; or
(ii)    the parent’s state of health; and
(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
…
In Lightfoot & Hampson (1996) FLC 92-663 Fogarty J, with whom Purvis J agreed, extensively examined the provisions of the CSA Act dealing with departure from administrative assessment and the payment of a lump sum under Div 5 of Part 7. In so doing his Honour examined the scope of Div 5 Part 7 to establish whether there was an independent power to make a lump sum child support order in addition to periodic payments rather than in substitution for an assessment. The relevant parts of the legislation in force at the time of his Honour’s judgment were in substantially similar terms to the legislation in force at the time of the hearing before the Federal Magistrate. His Honour, having summarised each of the relevant sections of Div 5, concluded in broad terms:
·    an application for a lump sum order may only be made if an administrative assessment is in force;
·    prior to hearing any application for a lump sum order the Court must determine any pending application for a departure order;
·    for a Court to make a lump sum order it must be satisfied it would be “just and equitable” and “otherwise proper” to make an order for other than a periodic amount;
·    if making a lump sum order the Court must have regard to:
-the administrative assessment “in force”;
-any order in force under Div 4;
-whether the carer is in receipt of an income tested pension or allowance or benefit;
· matters referred to in s 125 and 128.

His Honour explained his conclusion:
In all three of these essential power sections the critical words are directed to the capacity to make an order for child support “otherwise than in the form of periodic amounts”, all of this indicating that Div. 5 is a “substitution” provision. It enables the Court where there is an assessment or departure order to alter the form of that assessment or order from its original periodic form.
The question of making a lump sum order, independent of an assessment for payment of a periodic amount, was discussed by a differently constituted Full Court in Ivanovic & Ivanovic (1996) FLC 92-689. That Full Court, although not necessarily agreeing with the reasoning of the majority in Lightfoot & Hampson, declined to depart from that decision.
In R & R(No 1) (2002) FMCAfam 153 Bryant CFM (as she then was) discussed the inherent problems with making a lump sum child support order. At paragraph 70 of her reasons, her Honour set out an extract from the judgment of the Full Court of the Family Court of Australia in Prpic v Prpic (1995) FLC 92-574 at 81,688 where the Full Court (Ellis, Lindenmayer & Kay JJ) said:
Capitilisation 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 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 exercised when there are circumstances that make it appropriate so to do. We would endorse the observations of Mushin J. in Bendeich (supra) at 79,754 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, custodial parent or the children. Incomes may increase or decrease and the children may change their living arrangements from one parent to another.’
Bryant CFM having found that the father’s conduct was to ensure that he had no income or assets from which he could pay child support found it was appropriate to order a lump sum but went on to explain her rationale for ordering that the lump sum payable be retained in a trust account and drawn on annually to meet the child support obligation. Her Honour said at paragraph 74:
The Mother seeks that the child support be capitalised for the next five years, which she calculates at $40.333.38. I must be satisfied that to make such an order would be just and equitable as regards the children and the parties. It is important, in my view, that there be a fund available for payments of the father’s obligations in circumstances in which I do not consider that he will otherwise meet make [sic] them. However, it is possible that there could be circumstances which might create an unfairness to the Father or to the Mother if there is no ability within that period to seek a departure. Those conditions would have to be significantly different from the present. Any potential injustice however, can be overcome by providing that the Father deposit the appropriate lump sum into a trust account in the names of the Mother and Father to be held by the solicitors for the Mother, upon trust to pay to the Mother annually in advance, the child support assessed by the Agency for that year. In the event that either party was successful in having the Court at some future time depart from the existing orders, then the remaining funds will be available and no potential injustice can arise. I am satisfied that if this occurs, it is just and equitable as between the parties and the child.…

Did Her Honour undertake the steps required by the legislation?

There is no dispute that at the time of the hearing of the application before her Honour an administrative assessment of child support was in force pursuant to which assessment the father was required to pay $2,211.00 per month for the three children, or $737.00 per month per child.
No application was made by the mother to depart from the administrative assessment. On the face of the orders sought by the mother, she appears to be seeking a lump sum payment of child support which could be considered to be in addition to the father’s periodic liability. Notwithstanding this technical difficulty in the form of the order as drafted, it is clear from the mother’s affidavit, which I have set out earlier in these reasons, that what the mother sought was that the child support should be paid in a form other than by way of periodic payments, namely by the payment of a single lump sum. Although not referred to in her Honour’s reasons, it is apparent to me from the notations to her orders, that she did not intend that the whole of the $130,000.00 should be immediately payable to the mother, but rather that further orders would be made which provided for parts of the lump sum to be drawn down from time to time to satisfy the child support liability.
Pursuant to the legislation her Honour was required:
a)to have regard to the objects of the Division and to be satisfied that the children’s proper needs be met from an adequate share of the parents income, earning capacity, property and financial resources, and that they shared equitably in the support of their children;
b)to be satisfied that there was an administrative assessment in force;
c)to determine any pending application for a departure order;
d)to be satisfied the order to be made was just and equitable as regards the children and the parties, and otherwise proper;
e)to determine whether the mother was in receipt of an income tested pension or benefit;
f)to consider whether the order would have the effect of reducing the assessment by 25 per cent or more;
g)before determining to make a lump sum order, to have regard to the matters in s 117(4), (6), (7), (7A) and (8) to ensure the order was just and equitable, and have regard to the income earning capacity of the father (or mother) consider whether his income earning capacity was greater than reflected in his income (s 117 (7B));
h)before determining to make the order, to have regard to matters in s 117(5); and
i)comply with the requirements of s 125
Her Honour’s reasoning does not disclose any consideration of the proper needs of the children, or the income, property and financial resources of each parent, other than her Honour’s finding that the father had not made a full, frank and complete disclosure of his financial affairs. There was no discussion by her Honour of the mother’s financial position or her receipt of social security which was relevant for the purposes of s 128 of the CSA Act. Her Honour did not discuss, as required by s 117(5) the effect of her order on the rate of the mother’s income tested pension or benefit. Neither did she consider the manner in which the children were being educated.
Turning to consider relevant matters under s 124, her Honour’s reasons disclose that she mistook the quantum of the monthly payment noting it to be $737.00 per month for all three children when in fact it was $2,211.00 per month. I accept, however, whilst giving ex tempore reasons her Honour probably made an accidental slip referring to “per month” rather than “per week”.
Whilst her Honour’s orders did not comply with s 125 of the CSA Act paragraph 16 of her Honour’s reasons (which I have set out earlier) makes it clear that her Honour intended the payment of $130,000.00 to be in substitution “of all child support assessments up until the time each of those children attain the age of 18 years or complete their High School education, whichever is the latter”. However her Honour’s reasons do not make it clear whether any arrears then owing to the Child Support Agency remained a liability of the father. Nor do her reasons or orders indicate whether the order was in substitution for the assessment in force up to 31 March 2007.
It is trite to say that the provisions of Div 4 and Div 5 of Part 7 of the CSA Act are cumbersome and contain mandatory requirements to be considered (some of which I have emphasised by setting out the relevant sections of the legislation). The provisions do not permit a “broad brush” approach. I note that The Legal Practitioners Guide published by the Child Support Agency, the Family Law Section of the Law Council of Australia and the Family Law Council in its current (and former editions) provides useful precedent orders for, and guidance to, legal practitioners when dealing with these types of applications. It would have been of assistance to her Honour if the orders sought had been drawn with particularity and amended when the mother’s updating material was filed in December 2006.
The circumstances which presented themselves to the Federal Magistrate may well have supported the type of orders she sought to make. Unfortunately however, in my view, her Honour’s reasons fell short of what the legislation then in force required.
Neither party sought to adduce further evidence before me as to the manner in which the $65,000.00 payable to the mother pursuant to the consent order had been dealt with by the Child Support Agency, or suggest any regime as contemplated by her Honour’s notations for draw downs from the lump sum.
As I am satisfied that her Honour did not provide adequate reasons having regard to the provisions of the CSA Act for her determination and this constitutes error of principle, it is unnecessary for me to determine whether the non-compliance with the provisions of s 125 could be amended pursuant to the slip rule. Although neither party asked me to do so, I am also satisfied that the lack of relevant findings about the mother’s financial position, and the fact she has not filed a Financial Statement since October 2005 render it impossible for me to re-exercise the discretion, and the application for a lump sum order must be referred back to the Federal Magistrates Court for re-determination.

Purported appeal against costs order

The proposed Notice of Appeal seeks that orders 13 and 14 (being orders requiring the father to pay the mother's costs of prior hearing dates), and Order 16 securing those costs against the father's unit be set aside. No submissions were addressed to this ground by the father's counsel other than an assertion the orders were not just and equitable.
Her Honour referred to the father being entirely unsuccessful in his application to have the injunction restraining funds set aside. I accept prima facie there appears been a proper basis from departing from s 117(1) of the Act in respect of the mother's costs of 9 June 2006 and 18 December 2006 as the father was unsuccessful in his application to release funds and provide the certificate of title to his unit as an alternate form of security. He did not comply with her Honour's orders to file documents in time to enable the hearing to proceed on 18 December 2006. No error of principle is established in respect of those orders. I accept there may be potential confusion by reason of order 11 which requires the father to pay the mother's costs in accordance with scale as that order does not, on its face, exclude costs separately ordered in respect of 9 June 2006 and 18 December 2006.
I accept that order 11 of her Honour's orders should be set aside. That order was substantially founded on the father being unsuccessful in respect of the mother's application and cannot stand in light of leave being granted to appeal and the appeal allowed.

Application to admit further evidence

The father sought to admit three paragraphs of his affidavit filed in support of his application for an extension of time in support of his appeal. Having regard to the principles applicable to the admission of further evidence on appeal and in light of my findings that the appeal should be allowed in part, I reject this application.

Conclusions

Although the mother’s counsel submitted that the application for leave to appeal should be dismissed and that I should pursuant to the slip rule make the necessary orders to comply with the provisions of s 125 he did not submit that in the event that the application and appeal succeeded that I should re-exercise the discretion of the Federal Magistrate.
As I recorded earlier in these reasons, the father’s counsel in her proposed Notice of Appeal sought the setting aside of specific orders but did not seek an order for the re-hearing of the matter.
On the basis that an error of principle has been established I propose to grant leave and to allow the appeal in part.
As I have found appealable error essentially on the basis of inadequate reasons, the necessary findings of fact are not available to me to re-exercise the discretion.
Although her Honour determined the matter on an undefended basis in my view the matter should be remitted to her, or if this matter is no longer in her Honour’s docket, to the Federal Magistrate having responsibility for the matter, to redetermine the mother’s application.

Costs

Both parties submitted that in the event I found error of principle that they should receive certificates pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) for the application for leave to appeal, and the appeal. I am satisfied it would be appropriate to grant certificates to each party for the appeal and the re-hearing.

I certify that the preceding one hundred and forty-seven (147) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Boland.

Associate:

Date: 28 November 2008