25 August 2008
In CSR & F & M Pty Ltd  FMCA fam 477 the Child Support Agency (CSA) sought to enforce a child support debt against a company owned by the debtor parent. The CSA applied to the court for a declaration against the company on the basis that it was the "alter ego" of the debtor parent.
The first issue for Riethmuller FM to decide was whether the court had the power to grant a declaration in the terms sought by the CSA. He held that s 113 of the Family Law Act 1975 was not broad enough to cover the declaration sought by the CSA. The Federal Magistrates Act 1999 provides a power to make declarations under s 16. However, while the power is not unlimited, it was sufficient to cover the claim in this case.
The next issue to consider was the effect of s 72A of the Child Support (Registration and Collection) Act 1988.
As part of this analysis it was important to determine whether the term "child support debtor" was broad enough to include a related entity.
His Honour saidIt is clear that the purpose of Parts IV and V is to provide a range of administrative processes for the collection of child support such that resort to the court is a matter of last resort, reserved for a small minority of cases. However, it is also clear that one of the purposes of the Act is to enable the Child Support Registrar to bring court proceedings to enforce child support debts, if the administrative processes are insufficient. (para 25)
The company was a third party and the Riethmuller FM considered whether the powers under Pt VIIIAA of the Family Law Act 1975 were applicable to the case.
His Honour saidThus, the literal terms of s.72A(1) and (11) tell strongly against a broad reading of the term "child support debtor". That the section also imposes criminal sanctions does not lead to a narrow reading, however, it does weigh against a reading of the provision beyond its plain terms. However, the fact that s.72A(9) may provide adequate protection for the person paying the debt is a factor in favour of the interpretation sought." (para 30)
Riethmuller FM was not satisfied that the company was either a "sham" or an "alter ego" of the debtor parent. He refused to make the declaration sought by the CSA stating that if the CSA wanted to extend its powers, then specific legislative provision would be required.
His Honour, Grant Riethmuller said"I do not find that the cases dealing with matrimonial property under s.79 of the Family Law Act justify the declaration sought in this case. The limited interference with the rights of third parties in the way contemplated by Ascot Investments (supra) falls far short of the terms of the declaration sought. The declaration would operate directly against the company, not simply require the director to take various steps, and may have real consequences for the creditors of the company." (para 55)