Meredith v Matarese
[2017] NZHC 3005
•5 December 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-849 [2017] NZHC 3005
IN THE MATTER of the Family Proceedings Act 1980 BETWEEN
STEVEN PATRICK MEREDITH Appellant
AND
AMY ELISABETH MATARESE Respondent
Hearing: 7 September 2017 Appearances:
G Harrison for Appellant
SD Cummings for RespondentJudgment:
5 December 2017
JUDGMENT OF TOOGOOD J
This judgment was delivered by me on 5 December 2017 at 4.00 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Meredith v Matarese [2017] NZHC 3005 [5 December 2017]
Introduction
[1] Mr Steven Meredith applied to the Family Court for the discharge of a child maintenance order and variation of the child maintenance arrears owed to
Ms Amy Matarese, the mother of his son Maxx. In a decision dated 4 April 2017, Judge SJ Maude determined Mr Meredith’s remaining child maintenance liability to be $49,436.32, after allowing remission of two years of arrears.1 Mr Meredith appeals that decision.
Background
[2] Ms Matarese and Mr Meredith began a relationship in Hawaii in 1993. They moved to live in New Zealand, where Maxx was born in October 1994. The parties separated in 1996. Mr Meredith spent some time working as a tiler in Tauranga, before he returned to the United States of America in 2002 where he worked as a tiler in San Francisco.
[3] The parties entered into a voluntary agreement stipulating that Mr Meredith would pay Ms Matarese $600.00 per month by way of child maintenance. On
24 January 2007, a court in San Mateo County, California ordered that Mr Meredith pay child support of USD$686 per month (approximately NZD$981.82) beginning from “the 10-01-06” which I assume, applying the usual United States format of expressing dates in month-day-year order, to be 1 October 2006. The Californian order was registered in New Zealand under s 136 of the Family Proceedings Act 1980 on
30 January 2008.
[4] Mr Meredith returned to live in New Zealand on 23 September 2014. He lives with his parents in Beach Haven, Auckland; is presently unemployed; and receives a benefit under the Social Security Act 1964. The maintenance obligation and, therefore, the accumulation of arrears (apart from penalties and interest) ceased on Maxx’s 20th birthday in October 2014. Mr Meredith applied under s 142B of the
Family Proceedings Act 1980 for a discharge, variation and remittance of the child
1 Meredith v Matarese [2017] NZFC 2457.
maintenance order, payment of the arrears, and discharge of the associated penalties and interest.
Family Court proceedings
[5] Judge Maude noted that Mr Meredith had presented evidence by affidavit which lacked corroborating material in the form of income records or bank statements. The Judge observed that no supporting evidence, no budget evidence, no affidavit evidence as to assets and liabilities, and no evidence as to his employment prospects, had been filed by Mr Meredith.
[6] Ms Matarese asserted that Mr Meredith’s income was understated and that he had hidden funds in United States and New Zealand bank accounts, which he denied. After a review of the bank account information discovered, the Judge concluded that the difference was that Ms Matarese was referring to Mr Meredith’s gross earnings prior to work related expenditure and Mr Meredith to his taxable income.
[7] Ms Matarese’s counsel commissioned an orthopaedic surgeon to compose a report as to Mr Meredith’s working ability as a result of the deterioration of his knees. The surgeon’s key conclusions as to his ability to work were that, while Mr Meredith faced some barriers into the workforce because his knee would cause him some discomfort, he would be able to engage in sedentary employment where he is predominately sitting and not required to be on his feet all day or engage in heavy lifting or ladder work or kneeling.
[8] Mr Meredith explained his significant reduction of income between 2009 and
2011 as a result of the global financial crisis. Mr Meredith acknowledged, however, that he had not undertaken retraining to try produce reasonable income, accepting that his accumulated knowledge from working life would be valuable to large hardware and home improvement stores such as Bunnings or Mitre 10, and that he has not undertaken any job search either directly or online. The Judge found that faced with both knee deterioration and child support obligations, Mr Meredith had a responsibility to retrain or re-enter the workforce, of which he had done neither.
[9] Judge Maude took a self-described “robust attitude” to remit some of the arrears of maintenance to take account the impact of the global financial crisis, borne out by the United States income tax returns, and remitted two years of payments.
[10] In response to Mr Meredith’s argument for further remittance of penalties on account of his medical incapacity, the Judge determined that the orthopaedic assessment indicated that Mr Meredith’s knee condition became severe in about 2015. He concluded there was no evidence that Mr Meredith was not able to work prior to
2015. Noting that a parent has an obligation to maximise their earnings so as to ensure that child support or child maintenance obligations are met, Judge Maude was not persuaded to allow further remittance of arrears. The Judge found that it was incumbent on Mr Meredith to take steps to either return to New Zealand to seek work or to retrain to enable him to earn sufficient income to meet his obligations in light of the fact he is only 49 years of age and is medically fit for certain work.
[11] Accordingly, Judge Maude made a reduction for two years’ payments of
$23,563.68 “to be deducted from the arrears owing after first deduction of penalties and interest”, resulting in $49,436.32 remaining owed by Mr Meredith to
Ms Matarese. Judge Maude held that Ms Matarese should suffer no reduction in the value of that sum as a consequence of inflation and increased it by a sum equal to the consumer price index posted most recently after 31 March of each year from first calculation on the first posted CPI after 31 March 2015.
Grounds of appeal
[12] Mr Meredith stated the following grounds of appeal in his notice of appeal:
(a) The Judge made errors of fact concerning Mr Meredith’s assets and liabilities along with his income and outgoings despite affidavit evidence before the Court;
(b)The Judge erred by failing to discharge the substantial penalties and arrears owning to the Inland Revenue Child Support agency when their cancellation would not prejudice the respondent;
(c) The Judge erred by setting a new base sum as child support that is beyond Mr Meredith’s reasonable financial ability to pay;
(d)The Judge failed to provide for instalment payments, which makes it inevitable that Mr Meredith will continue to accumulate penalties and other arrears to Inland Revenue.
[13] Arguing the appeal, Mr Harrison’s primary submissions on behalf of
Mr Meredith are that:
(a) the Family Court should have remitted the penalties and interest down to a more manageable level, when doing so would not have any adverse impact on the respondent; and
(b)the Family Court should have allowed Mr Meredith to repay by weekly instalments, so further accumulation of penalties and interest could be avoided.
[14] However, he also maintained the position that the Judge’s assessment of the new sum of child support is beyond his reasonable financial ability to pay, and arose as a result of errors of fact concerning Mr Meredith’s assets, liabilities, and income. He seeks this base sum of child support to be further reduced.
Approach on appeal
[15] This appeal is brought under s 174 of the Family Proceedings Act 1980, and ss
126 – 130 of the District Court Act 2016 apply with all necessary modifications as if the appeal were under s 124 of the District Court Act. Such an appeal is by way of rehearing.2 Upon hearing the appeal, this Court may make any decision it thinks should have been made, or may direct the Family Court to re-hear the proceeding,
consider any specific matters, or enter judgment for a specified party.3
2 Family Proceedings Act 1980, s 174(1B); District Court Act 2016, s 127.
3 District Court Act, s 128(1).
[16] The accepted approach for a rehearing is that this Court has the responsibility of arriving at its own conclusion on the merits of the case,4 and must substitute its own decision if it reaches a different decision from that reached in the judgment under appeal, even if it entails an evaluative exercise and was a conclusion on which minds might reasonably differ.5 This Court, however, is entitled to take into account the advantages enjoyed by the first instance Judge in seeing and hearing witnesses give evidence, which may in some limited circumstances have benefits relevant to the disposition of the appeal.
Discussion
[17] Mr Harrison submits that, while Mr Meredith may be criticised for not making the payment of child maintenance for Maxx a priority when living and earning a reasonable income in California, his circumstances have clearly deteriorated and he does not have the means to pay these sums.
Should the Family Court have further reduced the base sum of child maintenance owed
[18] I do not accept Mr Harrison’s submission that the base sum of child maintenance should have been reduced to the sum of $15,000 as sought in
Mr Meredith’s original application. The orthopaedic evidence establishes that
Mr Meredith is still able to work, provided that such work is largely sedentary. His experience is not limited to tiling. There is evidence that he was once a bank teller; that experience may be useful for obtaining other sedentary employment.
Mr Meredith’s admission that he has not actively sought employment does him no credit; it suggests he has been lazy and self-indulgent at the expense of Ms Matarese who has borne the physical and financial burdens of the care and upbringing of their son. It is time Mr Meredith acted to remedy his failure to meet his past responsibilities for child support by obtaining employment he is capable of undertaking.
[19] Mr Meredith has not established any error in the Family Court’s assessment of the facts. Although Mr Meredith has no substantial assets and child support arrears
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [5].
5 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16];
Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
are being deducted from his benefit at a rate $70.00 per week, he has not provided any justification for failing to engage in any remunerated work since 2007. He has simply prioritised his own wishes over his son’s welfare, returning to New Zealand around the time Maxx turned 20.
[20] After the Californian order for child support, Mr Meredith had the financial ability to meet his maintenance obligations in respect of Maxx. Judge Maude was entitled to conclude that Mr Meredith’s financial position was not as dire as he had contented; I share that view. The evidence reveals that during the period in which the arrears accumulated he had savings in various bank accounts, and he had no valid justification for his repeated defaults in payments.
[21] The key objects of the Child Support Act are to affirm the right of children to be maintained by their parents and to affirm the obligation of parents to maintain their children.6 I am satisfied that reducing the base sum owed to Ms Matarese would not only fail to further these purposes, but would risk sanctioning unconscionable behaviour by a parent who has ignored his fundamental financial responsibility to his son.
[22] There is no basis for a further reduction in the amount owed by Mr Meredith to Ms Matarese; Mr Meredith was treated leniently by the Judge in receiving a reduction of the arrears on account of the global financial crisis. As Mr Cummings points out, if the Court accepts Mr Harrison’s submission that the Court should have regard to the “human element” in this case, it strongly favours the mother. She took on the sole responsibility of parenting Maxx, and should now receive the contribution to his maintenance to which she was entitled.
Should the Family Court have directed Mr Meredith to pay in instalments
[23] Mr Meredith currently receives a benefit under the Social Security Act 1964. Section 131 of the Child Support Act provides for an automatic deduction from the instalment of any benefit to meet Mr Meredith’s maintenance obligations.
I understand those deductions are currently being made at a rate of $70.00 per week.
6 Child Support Act 1991, ss 4(a) and (b).
At that rate, the arrears will not be fully paid off for over 13 years. I do not consider it reasonable that, on account solely of Mr Meredith’s default and his unwillingness to find employment, Ms Matarese should be required to wait as long as that.
[24] If Mr Meredith were to gain remunerated employment, s 130 of the Act requires the payments shall be made by way of automatic deduction, unless the Commissioner considers automatic payment to be inappropriate.
[25] Repayment by weekly instalment is a practical order which will also make it more likely Ms Matarese will receive the payments. In assessing the instalment sum, I must strike the right balance between Ms Matarese receiving reasonably prompt payment, having been largely unaided in her bearing of the responsibility for ongoing child maintenance for the past almost 10 years, and setting a sum that a person in
Mr Meredith’s circumstances may reasonably be expected to pay. I consider weekly instalments of $100 will achieve the right balance. At that rate, bearing in mind that the increase in the arrears balance will be inflation-indexed, it will still take Mr Meredith over nine years to expunge his obligations. In order to give Mr Meredith time to find remunerated employment I am prepared to delay the increase to $100.00 per week until 1 April 2018.
Should the Family Court have remitted all or any of the accrued penalties and interest
[26] Mr Meredith owes approximately $100,000 in penalties and interest to the Commissioner of Inland Revenue. Mr Cummings emphasises that Ms Matarese does not have an issue with penalties and interest being remitted, but that she cannot consent to that as those are debts owed to the Crown. The Crown, by its agent the Child Support Agency, was served with these proceedings and elected to take no steps.
[27] It is not clear whether Judge Maude intended to address the issue of penalties and interest at paragraphs [62] and [63] of his judgment:
[62] The result is remission of two years arrears calculated at $981.82 per month ($23,563.68) such sum to be deducted from the arrears owing after first deduction of penalties and interest.
[63] On the basis that the agreed outstanding child maintenance exclusive of penalties and arrears was $73,000.00 there remains now $49,436.32 owing by Mr Meredith to Ms Matarese.
[28] It seems that the Judge excluded the accrued penalties and interest of $73,000 from consideration but remitted two years of maintenance arrears. Judge Maude ordered that the outstanding balance of the arrears shall be increased annually, as from
31 March in each year, in line with increases in the consumer price index.7 The issue
of concern in my assessment of the merits of the appeal is whether refusing to remit the penalties owed to the Crown will have an adverse impact on Ms Matarese, by limiting Mr Meredith’s ability to pay the arrears he owes her.
[29] At the conclusion of the hearing, I invited counsel to confer as to the relevant provisions of the Child Support Act 1991 to determine the priority for child support payments that Ms Matarese is due to receive from Mr Meredith. I am grateful for their assistance.
[30] Any amount of financial support payable under the Act, including penalties and interest, is a debt due to the Crown.8 Section 137 of the Child Support Act determines the order and priority in which payments are to be applied by the Commissioner. Section 137(g) of the Act provides that the penalties and interest owed by Mr Meredith to the Crown is ranked the lowest priority; that is to say, payments towards reducing penalties and interest will be deducted from Mr Meredith’s income only after he has satisfied the child support debts he is liable to pay to Ms Matarese.9
Counsel agree that there would be no adverse financial consequences to Ms Matarese if the penalties and interest were to be remitted. Moreover, I accept Mr Cummings’s submission that remittance of the penalties and interest would increase the likelihood of Mr Meredith actually making the repayments of the arrears to Ms Matarese.
[31] Penalties and interest imposed under the Act are sanctions against defaulters, no doubt intended to provide an incentive for compliance. They are not compensatory in nature so the taxpayer suffers no loss if they are remitted. It is plain Mr Meredith’s
present financial circumstances do not allow any reasonable expectation that he will
7 Meredith v Matarese [2017] NZFC 2457 at [63]
8 Child Support Act 1991, s 128.
9 Child Support Act, s 137(d).
be in a position to meet his obligations to both Ms Matarese and the taxpayer within any reasonable timeframe. Remittance may be considered appropriate if the burden of the obligation to pay penalties and interest to the Crown has an inhibiting effect on Mr Meredith’s commitment to paying off the arrears he owes Ms Matarese. In the particular circumstances of this case, I conclude that the penalties and interest should be remitted.
[32] I assume other enforcement action will be available to Ms Matarese if
Mr Meredith continues to default on obligations which are unmistakably clear.
Mr Meredith should not expect any sympathy from the courts in that event.
Conclusion and orders
[33] I conclude that there is no basis for interfering with what was a well-reasoned decision of the Family Court regarding the arrears of the child maintenance owed to
Ms Matarese.
[34] I allow the appeal in part, however, by varying the Family Court’s decision as follows:
(a) From the date of this judgment until 31 March 2018, Mr Meredith shall continue to repay the arrears to Ms Matarese in weekly instalments of
$70. From 1 April 2018, the weekly repayments shall increase to instalments of $100.
(b)The penalties and interest accrued and owing to the Commissioner as at the date of this judgment are remitted. Penalties and interest shall not accrue except to the extent they may be imposed in respect of any default in the making of a weekly instalment payment.
[35] Costs are reserved for the exchange of memoranda unless the parties can reach agreement. Mr Meredith failed in his principal objection to the determination of the arrears, after receiving a sympathetic reduction by the Family Court, and the appeal
has been allowed only to the extent that Mr Meredith has received a further indulgence. I consider him to be the unsuccessful party. There may be legal aid implications.
[36] Any application for costs shall be by memorandum filed and served no later than 19 December 2017. Any memorandum in response shall be filed and served by
31 January 2018. Costs shall then be dealt with on the papers unless the Court directs otherwise.
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Toogood J
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