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Case Summary [Rankin & Rankin [2017] FamCAFC 29]

Case Summary [Rankin & Rankin [2017] FamCAFC 29]

By LIV Family Law Section

Child Support Divorce Family Court Judgment Marriage Settlements 

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There are two aspects of this Full Court’s decision that are worth highlighting, on balance, for practitioners. They are:

  1. That it is open to a Judge in certain circumstances to make an order in the event one party unilaterally pays their legal fees before a final determination, even if from post separation income, that an amount be paid by way of property settlement to the other party first out of the net assets at Trial before the balance of the net asset pool is divided between the parties. Some care needs to be taken in the form of order sought, to be clear that the order is not a costs order, but instead is an Order under Section 79; and
  2. Section 125 of the Child Support (Assessment Act) 1989 (Cth) given its’ mandatory language, must be complied with when seeking an order under Section 124, that is an order for child support other than in the form of a periodic amount, for example school fees and other non- periodic payments.  The terms of this section  are worth reviewing as they provide a road map for evidence to be compiled in the event an order under S.124 is sought.

Payment before a Final Hearing by One Party of Legal Fees
Ultimately, the Court found that in certain circumstances it is open to the court to make an order for a lump sum payment (and not just a percentage adjustment) to one party where the other party has paid legal fees prior to a Trial, was confirmed by the Full Court.

Having said this, the order made by Her Honour Justice Johns was varied by the Full Court to make it clear it was a property order (in substance) and not a costs order.  It was varied from:

Firstly, the sum of $170,000 to the wife’s solicitors in payment of her legal costs and disbursements.
To Firstly, the sum of $170,000 to the wife.


The husband argued that the above order “was a costs Order that could only be made under Section 117 of the Family Law Act and therefore that the Order was fatally flawed because the primary Judge did not have regard to s.117(2A).”  He pointed to the form of the order and what he submitted was the finding of the primary Judge that “the sum of $170,000 should be paid to the Wife’s solicitors on account of her legal costs” in support of this ground.

The Husband also argued that the legal fees were paid from the husband’s post separation income that he was entitled to spend “as he saw fit” and that a different approach should have been taken in these circumstances.   
The Husband was not successful, in the broad, as:

  • Although Her Honour did not state it explicitly the Full Court was satisfied in assessing her reasons as a whole that she, in effect, was making a lump sum adjustment (which was available to her) property order under Section 75(2)(o), that the husband pay the wife the sought $170,000 first.  
  • That even though the payment of the legal fees came from post separation income which can preclude such an approach, it could be treated in this way in this case as:
    • The Trial Judge had found, and this finding was unchallenged on appeal, that “income which otherwise would have been available to support the wife and the children was applied to the payment of his legal fees.”  The evidence was that although the husband was ordered to pay mortgage payments on properties he did not do so and he also provided an estimate to the child support agency that reduced his child support obligation significantly.
    • The wife had contributed to the development of the husband’s career. She had “supported him in the early years of his practice when he was establishing himself.”  She was also “the primary care giver to the parties’ children and was principally responsible for maintaining the home which provided him with invaluable support in the progression of his career and the development of his capacity to earn income.”   

The Full Court found that it was open to Her Honour, particularly given the above unchallenged findings, to make this order.  The Full Court also indicated it would also have been, in the circumstances of this case, open to Her Honour to have added the fees paid back into the asset pool and perhaps to have then discounted them to a degree given they came from the husband’s post separation income.

Section 125 of the Child Support (Assessment Act) 1989 (Cth)
Her Honour made the following order:

  • (15) That pursuant to Section 124 of the Child Support (Assessment Act) 1989 (Cth) the husband pay all tuition fees, extracurricular expenses, uniforms and equipment consequential to attendance by the children to the schools attended by them as at the date of the Hearing.

The Full Court raised (even though it was not an appeal ground) that S.125 had not been complied with and whether that non-compliance “vitiated the Orders”. Given the “mandatory nature of the section” the Full Court found the non-compliance with S. 125 meant that this Order should be set aside because of this non-compliance.

The most pertinent provisions of this Section appear to be:

  • S.125(1) “If the court makes an Order under Section 124, the court must state in the Order whether the annual rate of child support payable by the liable parent under any relevant administrative assessment is to be reduced, in the manner specified under Subsection (3) by the child support ordered to be provided by the liable parent.”

The Section goes on to say that the court “may state that the annual rate of child support …. is not to be so reduced only if it is satisfied that, in the special circumstances of the case, it would be:

  • Just and equitable as regards the child, the carer entitled to child support and the liable parent; and
  • otherwise proper.

that the annual rate of child support not be reduced by the child support ordered to be provided.

S. 125(3) If the court states in the order that the annual rate of child support is to be reduced by the child support ordered to be provided, the court must also sate in the Order either:

  • that the annual rate of child support payable is to be reduced by a specified amount that represents an annual value of the child support to be provided: or
  • that the annual rate of child support payable is to be reduced by 100% or another specified percentage that is less than 100%.

125(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 ….(2) the court must have regard to the matters mentioned in subsections 117(4), (6), (7), (7A) and (8).

125(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 in Subsection 117(5)   

This Section gives the court a path to take if such an order (that is, for child support other than in the form of periodic amounts) is to be contemplated (along with the provisions of Section 124) and then made. These two provisions warrant attention by practitioners when preparing the evidence needed to seek such an order.
      
An interesting question that arises from the judgement is; had the order been made by consent (interestingly it appears in the judgement that at Trial both parties conceded the order should be made, that is, that it was agreed these amounts would be paid by the husband) and had the provisions of S. 125(1) and been complied with in form as an Order by consent, would that have saved the order? The Full Court certainly indicated for an order of the court that would not be enough. No doubt by that point there was unlikely to have been any consent to an order.
 
Further, if such orders are to be made by consent is evidence relating to these matters required to be set out in the Form 11 and/or an affidavit so the court can consider these matters before making the order? It may be prudent to file such an affidavit in such circumstances.

12 July 2017

Summary prepared by Jason Lopes (Lopes Family Law) and member of the LIV’s Family Law Section Maintenance and Property Committee

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