Adema v Adema
[2018] FCCA 2869
•5 October 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ADEMA v ADEMA & ANOR | [2018] FCCA 2869 |
| Catchwords: CHILD SUPPORT – Review of a decision of the Administrative Appeals Tribunal – departure from assessment – no jurisdictional error – application dismissed. |
| Legislation: Child Support (Assessment) Act 1989 (Cth), ss.3, 98C, 117 Evidence Act 1995 (Cth), s.79 |
| Cases cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Barton v Gibb & Anor (SSAT Appeal) [2013] FCCA 644 Frost v Frost & Anor (SSAT Appeal) [2011] FMCAfam 1311 Kane & Naylor & Anor [2015] FCCA 2075 Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 Minister for Immigration and Citizenship v SZIAI (2009) 259 ALR 429 Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164 Morse & Potts (SSAT Appeal) [2010] FMCAfam 1305 Phelps & Child Support Registrar & Anor(SSAT Appeal) [2015] FCCA 1599 Victor & Duncan & Anor (SSAT Appeal) [2015] FCCA 1073 |
| Applicant: | MR ADEMA |
| First Respondent: | MS ADEMA |
| Second Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | MLG 37 of 2018 |
| Judgment of: | Judge Hartnett |
| Hearing date: | 6 July 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 5 October 2018 |
REPRESENTATION
| Solicitor acting as Counsel for the Applicant: | Mr Bacon |
| Solicitors for the Applicant: | Manby and Scott |
| The First Respondent: | In person by telephone |
| Counsel for the Second Respondent: | Mr Grant |
| Solicitors for the Second Respondent: | Sparke Helmore |
ORDERS
The amended Notice of Appeal (Child Support) is dismissed.
The Applicant pay the Second Respondent’s costs fixed in the sum of $7,066.
IT IS NOTED that publication of this judgment under the pseudonym Adema v Adema & Anor is approved pursuant to s.110X(4)(h) of the Child Support (Registration and Collection) Act 1988 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 37 of 2018
| MR ADEMA |
Applicant
And
| MS ADEMA |
First Respondent
| CHILD SUPPORT REGISTRAR |
Second Respondent
REASONS FOR JUDGMENT
By notice of appeal (child support) filed on 8 January 2018 and amended on 12 January 2018 (‘amended notice of appeal’), the Applicant appealed from a decision of the Administrative Appeals Tribunal, Social Service & Child Support Division (‘the Tribunal’) made on 11 December 2017 and posted to the parties on 15 December 2017.
The orders as sought by the Applicant are as follows:-
“1. Any leave for this Appeal to proceed be given.
2. The decision dated 11 December 2017 of the AAT in proceedings numbered be set aside.”
The notice of appeal (child support) filed 8 January 2018 was filed within time. The Applicant does not require any leave as sought.
Order 2 seeks relief in the nature of certiorari; however, if the Court determines an error of law has been made by the Tribunal as alleged by the Applicant, then the appropriate course for the Court would be not only to set aside the decision of the Tribunal but to also make an order that the matter be remitted to the Tribunal for redetermination in accordance with law.
The questions of law said to be raised on this appeal as set out in the amended notice of appeal are as follows:-
“1. Did the AAT fail to properly exercise its jurisdiction in refusing to take into consideration [Ms Adema’s] true income?
2. Did the AAT fail to properly exercise its jurisdiction in determining Ms V’s salary arrangements were not at arm’s length?
3. Did the AAT fail to properly exercise its jurisdiction in treating Company A’s income and financial resources as properly available for [Ms Adema]’s own use? Alternatively, did the AAT misdirect itself about and fail to identify the relevant law surrounding its decision in that regard?
4. Did the AAT fail to properly exercise its jurisdiction in increasing [Mr Adema]’s child support given the financial circumstances of [Ms Adema]?”
The First Respondent and Second Respondent seek dismissal of the appeal. The First Respondent seeks further orders as set out in a response filed by the First Respondent on 13 February 2018. Those orders, in the alternative, as sought by the First Respondent are relevantly as follows:-
“…
3. In the alternative, that the Decision of the Administrative Appeals Tribunal dated 11 December 2017 in proceedings numbered be set aside and the decision of dated 6 December 2016, (affirmed by the decision of dated 1 April 2017) be reinstated.
4. In the further alternative, the assessment should be remitted to the Administrative Appeals Tribunal to review the assessment from 2 April 2015 to 30 September 2018 (being a period over 18 months but less than seven years ago), or such other dates as the Court may determine, and make a new assessment according to law.
5. In the further alternative, should the matter proceed in the Federal Circuit Court, that it be transferred to the Parramatta Registry, and security for costs be provided in the sum of $15,000.”
The response of the First Respondent also sets out further grounds of opposition to the appeal, being that the notice of appeal does not disclose a question of law, and alternatively, that the Tribunal properly exercised its jurisdiction. The Second Respondent, in addition to seeking dismissal of the appeal, seeks that the Applicant pay the Second Respondent’s costs fixed in the sum of $7,066.
Background
The Applicant and the First Respondent (‘the Respondent’) are the separated parents of [X] (born 2008) and [Y] (known as [Y], born 2011). A child support assessment made by the Department of Human Services - Child Support (‘the Department’) has been in place since 2 April 2015. The child support assessment at the time of the Tribunal decision was based on the children being in the 73 per cent care of the Respondent and the 27 per cent care of the Applicant.
Under the administrative assessment of child support, the Applicant was assessed to pay child support to the Respondent as follows:-
a)from 1 July 2015 to 30 June 2016 based on his 2016/2017 estimated income of $80,681 and the Respondent’s 2013/2014 adjusted taxable income (‘ATI’) of $56,836;
b)from 1 July 2016 based on his 2013/2014 ATI of $212,957 and the Respondent’s ATI of $56,835;
c)from 2 July 2016 to 1 October 2017 $4,522 per annum based on his 2015/2016 provisional income of $60,000 and the Respondent’s 2015/2016 provisional income of $58,369.
On 27 September 2016, the Applicant applied to the Department for a departure from the assessment on the grounds that the Respondent’s income, property, financial resources and earning capacity were not properly reflected in the assessment. The Respondent lodged a cross-application raising issues about the Applicant’s income, financial resources and property as well as the cost of childcare.
On 6 December 2016, a delegate of the Second Respondent found that a ground for departure existed on account of the Applicant’s income, property and financial resources. The delegate found that it was just and equitable and otherwise proper to depart from the assessment from 27 September 2016 to 31 October 2017 by varying:-
a)the Applicant’s adjusted taxable income to $221,521; and
b)the Respondent’s adjusted taxable income to $87,000.
The Applicant lodged an objection to the decision of the delegate. On 1 April 2017, the Applicant’s objection was disallowed. The decision of the delegate increased the child support payable by the Applicant from $387.50 per month to $1,460.33 per month for the period from 1 January 2017 to 30 October 2017 and increased the child support payable by the Applicant for the period from 27 September 2016 to 31 December 2016 by $4,911. It created arrears of $3,176.25. The period from 2 April 2015, when the original application was made, to 27 September 2016, when the application for review was lodged, was not reviewed. No review was sought.
On 26 April 2017, the Applicant lodged an application for review to the Tribunal. The Applicant sought departure on the grounds that the Respondent’s income, property and financial resources,[1] and earning capacity,[2] were greater than the provisional income used in the assessment.
[1] Child Support (Assessment) Act 1989 (Cth), s 117(2)(c)(ia).
[2] Child Support (Assessment) Act 1989 (Cth), s 117(2)(c)(ib).
The matter was heard by the Tribunal on 7 December 2017. Both the Applicant and Respondent attended the hearing in person. The Child Support Registrar was not represented at the hearing.
The Tribunal had access to the statement and documents provided by the Department, documents provided by the Applicant and documents provided by the Respondent. Following the hearing, the Applicant provided the Tribunal with further documents, copies of which were sent to the Respondent for her comments. The Tribunal decision was made on 11 December 2017 after receiving comments from the Respondent.
The Tribunal
Pursuant to s.98C of the Child Support (Assessment) Act 1989 (Cth) (‘the Assessment Act’) the Tribunal’s decision correctly sets out the three issues it was necessary for the Tribunal to consider. They were:-
a)whether one or more of the grounds for departure in s.117(2) of the Assessment Act existed;
b)if so, would it be just and equitable as regards to the child, the liable parent and the carer entitled to child support to make a departure determination;
c)if so, would it be otherwise proper to make a departure determination.
The Tribunal’s decision of 11 December 2017 had the effect of reducing the monthly amount payable by the Applicant by $343.16 and reducing the amount of arrears by approximately $3,000.
In May 2017, the had Applicant filed an application for a stay of child support payments to be made by him in the Court’s Parramatta registry. The Applicant’s pleadings were defective in that the Child Support Registrar was not named on the application. The Applicant’s application for a stay was heard on 22 June 2017 and was unsuccessful. An order was made on 16 March 2018, by Judge Newbrun such that the Applicant was required to pay the Respondent’s costs as ordered on 22 June 2017 in the sum of $2,095 with such costs to be paid within six weeks. No payment of that costs order has been made by the Applicant to the Respondent.
Notwithstanding the Applicant’s failure to secure a stay order, the Applicant has, in effect, unilaterally imposed a stay of his own volition.
As at 12 February 2018, being the date of affirmation of the affidavit of the Respondent, the operative child support assessment requires the Applicant to pay $1,117.17 per month. No payments were being made by the Applicant and arrears were outstanding as at that date of $16,752.20.
The Tribunal Decision
Ground of Departure
The Tribunal found that the Respondent commenced part-time work as an (occupation omitted) in late 2014 and that shortly after her separation from the Applicant she increased her hours from three days a week to four. She commenced full-time work on 1 March 2017. The Tribunal found that her salary package, including superannuation, increased from $94,943 to $96,842 from 1 July 2015 and to $99,747 from 1 July 2016.
The Tribunal noted that the Respondent’s 2013/2014 ATI of $56,835 continued to be used for the period 2 April 2015 to 1 July 2016; that her ATI of $87,503 replaced her provisional income in the assessment from 2 July 2016; and that her 2016/2017 ATI of $94,775 had been used for the new child support period beginning 1 November 2017.
The Tribunal found as set out in paragraph 22 of its Reasons for Decision (‘the Decision Record) that:-
“…the adjusted taxable income of $56,835 used for [Ms Adema] for the period 2 April 2015 to 1 July 2016 was significantly less than her actual income. However, the tribunal is satisfied that [Ms Adema]’s adjusted taxable income for 2015/16 fairly represents her income from 2 July 2016 to 28 February 2017. The tribunal finds that since 1 March 2017 [Ms Adema] has greater income than indicated by her 2015/16 or 2016/17 adjusted taxable incomes. Her current income, after allowance for reasonable income tax deductions and some leave without pay, is in the vicinity of $110,000.”
The Tribunal was satisfied that the Respondent had not reduced her work hours or altered her work pattern in order to affect the child support assessment and that the third criterion of s.117(7B) of the Assessment Act was not met to allow a determination of unused earning capacity.
The Tribunal had regard to the Applicant’s income, property and financial resources and made the findings including those as set out (commencing from paragraph 26) in the Tribunal Decision Record:-
a)based on his recently lodged tax returns for the 2015/2016 and 2016/2017 financial years, the Applicant’s ATI for 2015/2016 of $80,681 had been used in the assessment for the period 1 July 2015 to 26 September 2016 and the Applicant’s 2016/2017 ATI of $73,894 had been used in the assessment from 1 November 2017;
b)in his 2015/2016 income tax return, the Applicant claimed work-related expenses totalling $5,237 being telephone and internet expenses of $4,236; virtual office expenses of $365 and depreciation of $636. In 2016/2017, the Applicant claimed work-related expenses of $7,262 being telephone and internet expenses of $4,295 and depreciation of $2,967;
c)on 8 July 2015, the Applicant had become sole director of a newly registered company, Company A. The Applicant was the sole shareholder, holding 5000 ordinary shares. His new partner, Ms V, became a director of Company A on 15 January 2017. Ms V did not become a shareholder in Company A until 4 September 2017 and that until then, contrary to the Applicant’s evidence, the Applicant was the sole shareholder and owner of Company A. The Applicant had stated to the Tribunal that Ms V had owned 1500 shares in Company A since 1 September 2015 and not as set out in the Australian Securities and Investments Commission (‘ASIC’) extract for Company A dated 7 December 2017, which provided evidence that Ms V owned 1500 fully paid ordinary shares and that ASIC were notified of the change to the share structure and issue of the shares being a date of 4 September 2017.
After considering the evidence before it, including in relation to Ms V’s other employment four days per week and on weekends, the Tribunal found that the $33,000 salary paid to Ms V in 2015/2016 and the $66,000 salary paid to Ms V in 2016/2017 was not an arm’s length arrangement. The Tribunal, as relevantly set out in paragraph 34 of the Decision Record found:-
“…that the salary paid to Ms V is not an arms’ length arrangement. She has not been paid an hourly rate commensurate with any hours worked. The tribunal infers from [Mr Adema]’s evidence concerning Ms V’s shareholding in Company A that he entered into an arrangement in an attempt to justify splitting income with Ms V.”
The Tribunal accepted that Company A’s financial statements reflected the profitability of the company and that it made a loss of $34,355 in 2015/2016 and a profit of $66,814 in 2016/2017. The Tribunal noted that the business activity statement for 1 July to 30 October 2017 showed increased turnover, and a profit and loss statement to 8 December 2017 showed a net profit of $140,457. The Tribunal was satisfied that this “indicates an improvement in profitability for Company A, with the possibility of profits in the vicinity of $300,000 for 2017/18”.[3]
[3] Decision Record dated 11 December 2017 at [37].
The Tribunal noted that the Applicant had $57,321 in net borrowings from the company via director loans and found that if Company A had not lent funds to the Applicant, the company’s profits could have been distributed to him.
The Tribunal had regard to the Applicant and Ms V’s use of two company vehicles and noted that in 2015/2016 Company A claimed motor vehicle expenses of $18,879 and $35,412 in 2016/2017. Additionally, total depreciation of $10,820 was claimed in 2015/2016 and $24,389 in 2016/2017. The Tribunal noted that the Applicant acknowledged that Ms V used one vehicle for private use as well as business use and found that the Applicant also received significant personal benefit from the provision of the other motor vehicle to him. With regard to the Applicant’s evidence that other capital purchases to be made in 2017/2018 were likely to be written off in the same year, it found it appropriate to addback the depreciation claimed by Company A.
The Tribunal noted that bank statements indicated rent payments totalling $4,000 paid to the Applicant by Company A in late 2015. The Tribunal noted that Company A also had significant telephone and computer costs. It found that because of the intermingling of business and private expenses, it was not possible for the Tribunal to ascertain the extent to which the Applicant benefited personally from the provision of those services.
The Tribunal was satisfied that the Applicant as set out in paragraph 42 of the Decision Record, had “income and financial resources far in excess of his adjusted taxable incomes for 2015/16 and 2016/17”. The Tribunal was further satisfied that the Applicant was in full-time work and did not have unused earning capacity. The Tribunal accepted the Applicant’s evidence that his income of $212,957 in 2013/2014 was a consequence of receiving back payment from previous employment.
The Tribunal found that although it was not possible to calculate the Applicant’s income and financial resources with any mathematical precision, the Tribunal was, as set out in paragraph 43 of the Decision Record:-
“satisfied that in 2016/17 [the Applicant] has income and financial resources of at least $175,000 a year, made up of his adjusted taxable income ($73,894) and company profit ($66,814) and adding amounts for depreciation ($24,329), and the private use of motor vehicles and other financial benefits (about $10,000).”
The Tribunal found that even taking the Respondent’s increased income into account, the income and financial resources of the Applicant provided special circumstances from which to depart from the assessment. The Tribunal found the assessment was unfair to the Respondent and to the children on the basis that the Applicant would be liable to pay far more child support if the assessment was based on his income and financial resources, rather than his adjusted taxable income. For that reason, there was a ground established to depart from the assessment under s.117(2)(c)(ia) of the Assessment Act.
Just and Equitable and Otherwise Proper
In considering whether it was just and equitable to depart from the assessment in accordance with the matters outlined in s.117(4) of the Assessment Act, the Tribunal:-
a)had regard to the nature of the parents’ capacity to maintain the children;[4]
[4] Child Support (Assessment) Act 1989 (Cth), s 117(4)(a).
b)found that other than the cost of childcare, the costs relating to the care of the children, which included some expenses relating to psychological treatment for [X] and occupational therapy for [Y], were not out of the ordinary range of expenses for children of their ages, the children at the time being nine years old ([X]) and six years old ([Y]);[5]
c)found that there was no evidence that the children had income, property or financial resources that needed to be taken into account in the assessment;[6]
d)referred back to its earlier findings in relation to the income, property, financial resources and earning capacity of both parents;[7]
e)found that the Respondent was able to meet the reasonable and necessary expenses she had for herself and the children. The Tribunal found as to the Applicant that which it set out at paragraph 57 of the Decision Record:-
“Despite his claim that he is unable to meet his reasonable and necessary expenses, including loan payments of about $5,000 a month, the tribunal notes that his bank statements indicate a level of discretionary spending on restaurants and entertainment that cannot be considered to be necessary. On the basis of the findings made, the tribunal is satisfied that [the Applicant] is able to meet his reasonable and necessary expenses.”
It otherwise found neither parent had a duty to support others; [8]
f)found that the total childcare costs of $10,300 a year which allowed the Respondent to work and earn income and which were borne by the Respondent in 2016 were more than 10 per cent of her gross income and that it would be just and equitable to take such costs into account in the child support assessment for the children as set out in paragraphs 51 and 52 of the Decision Record;
g)found that the proposed decision would assist the Respondent to meet the children’s proper needs and reduce the Applicant’s arrears of $18,000. The Tribunal found that its decision would not result in hardship to either parent. [9]
[5] Child Support (Assessment) Act 1989 (Cth), s 117(4)(b).
[6] Child Support (Assessment) Act 1989 (Cth), s 117(4)(c).
[7] Child Support (Assessment) Act 1989 (Cth), s 117(2)(d) – 117(2)(da).
[8] Child Support (Assessment) Act 1989 (Cth), s 117(4)(e).
[9] Child Support (Assessment) Act 1989 (Cth), s 117(4)(g).
The Tribunal considered under the heading ‘Terms and Period of Departure’ commencing at paragraph 59 of the Decision Record, that the Applicant made his departure application on 27 September 2016. The Tribunal found neither parent were adverse to backdating the assessment, but despite this, the Tribunal determined to depart from the assessment from 27 September 2016, being the date of the Applicant’s application and not from any earlier date. In terms of its reasoning in that regard, the Tribunal set out in paragraph 61 of the Decision Record that:-
“…The tribunal considers that it would not be just and equitable to cause any further arrears or an overpayment for that period as neither parent sought a departure from the assessment at an earlier date.”
The Court notes that this was an intelligible reason for acting in the manner in which the Tribunal did.
The Tribunal found, as set out in paragraph 62 of the Decision Record, that:-
“…it would be just and equitable to depart from the assessment by varying [the Applicant]’s adjusted taxable income to $175,000. The tribunal finds that [the Respondent]’s adjusted taxable income should also be increased to $110,000 from 1 March 2017 when she started full-time work.”
The Tribunal also determined, as set out in paragraph 64 of the Decision Record:-
“…Taking into account the history of the matter and to provide some certainty, the tribunal proposes to extend the variation to both parents’ incomes to 30 September 2018, at which time [the Respondent]’s 2017/18 adjusted taxable income should be available. [The Applicant] should also be in a position to provide financial information concerning Company A’s operations in the 2017/18 year by that time.”
This process of reasoning, as set out by the Tribunal in its Decision Record, tied in with the Tribunal’s earlier reasoning, as set out in paragraph 43 of the Decision Record, which is set out at paragraph 32 above.
The Tribunal also determined to take into account the costs of child care from 26 September to 18 December 2016 by increasing the annual rate of child support payable by the Applicant by 50 per cent of the annual out of pocket costs for that period, namely, $5,150.
The Tribunal found that its proposed variations resulted in a child support liability (approximately $260 a week) which reflected a reasonable level of support for [X] and [Y], given the differences between their parents’ incomes and financial resources.
The Tribunal also noted that at the time of hearing the Applicant owed child supports arrears of more than $18,000. The proposed decision would result in some reduction of the arrears. The Tribunal considered, on the evidence, that the proposed decision would not result in hardship to the Applicant.
In considering whether it was otherwise proper to depart from the administrative assessment, being the third issue for consideration by the Tribunal, in accordance with s.117(5) of the Assessment Act, the Tribunal found that the Respondent was no longer eligible to receive family tax benefit. However, the Tribunal was satisfied that it was otherwise proper to depart from the administrative assessment in the matter and to properly reflect both parents’ income and financial resources.
The Tribunal set aside the decision under review and substituted a decision to depart from the child support assessment by:-
a)varying the Respondent’s adjustable taxable income to $110,000 from 1 March 2017 to 30 September 2018;
b)varying the Applicant’s adjusted taxable income to $175,000 from 27 September 2016 until 30 September 2018; and
c)increasing the annual rate of child support payable by the Applicant by $5,150 from 27 September to 18 December 2016.
Consideration
The Court has before it the affidavits of evidence of the Applicant, sworn 12 January 2018 and 11 May 2018, together with the affidavits of the Respondent affirmed 12 February 2018 and 25 June 2018.
The Applicant’s affidavits contain, as submitted by the Second Respondent, in the main, inadmissible submissions regarding what the Applicant considers to be the appropriate accounting treatment of Company A’s financial affairs and further the Tribunal’s treatment of the resources available to the Applicant. Those matters were questions of fact for the Tribunal to determine. The material contained in the Applicant’s affidavits, exhibits 1 and 2, were not relevant and not admissible. 2 and 4, which were in the nature of exhibits annexed to the Applicant’s affidavit, contained further evidence which was not before the Tribunal and which the Second Respondent objected to the Court receiving. It is well established that appeals to the Court are limited to questions of law in matters of this type, such that the jurisdiction of the Court does not permit the reception of further evidence that was not before the Tribunal. Accordingly, that material was struck out.
Further, the evidence of opinion, as set out in the Applicant’s affidavits, did not meet the requirements for admission in accordance with the specialised knowledge exception at s.79 of the Evidence Act 1995 (Cth) and thus to that extent is given little weight.
Ground 1
This ground does not identify any error in the Tribunal’s decision and cannot succeed.
Ground 1 attacks a finding which ultimately had no practical impact on the departure decision made by the Tribunal.
To the extent that ground 1 alleges an error of law in the Tribunal’s decision not to backdate its departure order beyond 27 September 2016, on the basis that such a decision was not legally reasonable, this complaint cannot succeed. There was, in the reasoning processes and decision of the Tribunal:-
“An evident and intelligible justification.”[10]
[10] Minister for Immigration and Citizenship v Li (2013) 249 CLR 332, [76].
Ground 2
By ground 2 the Applicant alleges that the Tribunal’s findings as to Ms V’s salary arrangements not being at arm’s length were inferences drawn in the absence of evidence, there being no evidence before the Tribunal that the Applicant:-
“...entered into an agreement in an attempt to justify splitting income with Ms V.”[11]
[11] Decision Record dated 11 December 2017 at [34].
The Applicant argues that the only relevant evidence before the Tribunal was that of the Applicant and the Tribunal was somehow not permitted to make findings contrary to that evidence.
This ground cannot succeed.
In order to make out a “no evidence” ground, the Applicant must show that there is no evidence at all upon which the finding could have been based.[12] That is clearly not the case, as set out above in these reasons. The Tribunal set out in its Decision Record the evidence on which it relied, its reasoning process and its determinations. The findings made by the Tribunal, and in particular the finding that the salary paid to Ms V was not an arm’s length arrangement as it was not commensurate with the hours she worked, were open to the Tribunal on the evidence before it and for the reasons which the Tribunal gave.
[12] Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, [356].
Further, it was open for the Tribunal to have regard to the Applicant’s evidence but to not accept that evidence. In particular the Tribunal found that:-
a)the alleged shareholding of Ms V was not recorded in Company A’s financial statements for 2015/2016 and 2016/2017;
b)there was no evidence of the Applicant having notified the Second Respondent of the shareholding change in the company in the course of the change of assessment process or in the course of the Applicant’s objections to the change of assessment to the decision; and
c)the documentary evidence from ASIC and the Applicant’s own evidence that Ms V did not subscribe for the shares directly but that the subscription price had been debited to the Applicant’s loan account, although the Applicant was unable to locate general ledger entries substantiating the transaction, as set out in the Decision Record at paragraph 30, all went to the Tribunal having an obvious evidentiary basis to prefer other evidence to that of the Applicant.
As is well known, the weight to be afforded to particular evidence is a factual matter for the Tribunal and lies at the heart of merits review.[13] Further, it is also well known that it is for the Applicant to make out his case before the Tribunal and that the Tribunal is under no duty to investigate the Applicant’s case or to consider utilising such permissive statutory powers which might enable it to investigate.[14] There was no obligation on the Tribunal to seek information directly from Ms V, as suggested by the Applicant.
[13] Phelps & Child Support Registrar & Anor(SSAT Appeal) [2015] FCCA 1599, [46]; Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164, [32]-[37].
[14] Phelps & Child Support Registrar & Anor (SSAT Appeal) [2015] FCCA 1599, [51], [62]-[68]; Kane & Naylor & Anor [2015] FCCA 2075, [37]; Victor & Duncan & Anor (SSAT Appeal) [2015] FCCA 1073, [109]-[114].
Again, as is well known in judicial review proceedings of this type, the Tribunal’s decision not to seek out additional evidence cannot be construed in the circumstances of this case as a failure to make an inquiry about a critical fact, the existence of which was easily ascertained and provided a sufficient link to the outcome to constitute a failure to review.[15] The obligation to put evidence before the Tribunal was that of the Applicant. The Applicant adduced no evidence to the Tribunal that the employment arrangement with Ms V was a bona fide employment arrangement. No employment contract was produced. No evidence of superannuation contributions were provided and there was no evidence of workers’ compensation or other relevant documentation submitted to the Tribunal.
[15] Minister for Immigration and Citizenship v SZIAI (2009) 259 ALR 429; Phelps & Child Support Registrar & Anor (SSAT Appeal) [2015] FCCA 1599.
Ground 3
Ground 3 really revolves around the Applicant’s submissions that the Tribunal did not adopt the appropriate accounting treatment of Company A’s income, expenses and profit.
As submitted by the Second Respondent, it is well accepted that the question of what constitutes “financial resources” and thus what financial resources were available to an Applicant was a question of fact for the Tribunal to determine.[16] That question is not to be determined by reference to principles of accounting.[17] The ground essentially seeks impermissible merits review of the Tribunal’s decision in the factual circumstances of this case and in the context of the credibility findings of the Tribunal.
[16] Barton v Gibb & Anor (SSAT Appeal) [2013] FCCA 644.
[17] Frost v Frost & Anor (SSAT Appeal) [2011] FMCAfam 1311.
Ground 3 also does not establish jurisdictional error and must fail.
The Tribunal’s decision is a considered one. It is obvious that the Tribunal carefully considered each of the matters put before it by the parties, including the Applicant’s evidence from Company A of which he was the sole director and shareholder until September 2017. On the basis of Company A’s financial statements, the Tribunal found that Company A made a profit of $66,814 in 2016/2017 and that, had the company not loaned him monies in that year, those profits would have been available for distribution to him. That was a finding of fact open to the Tribunal on the material before it.
The Applicant argued that the Tribunal’s findings were not open to it on the basis that Company A’s financial statements were prepared on an accrual rather than a cash basis, which meant that the income in the 2016/2017 year included amounts invoiced but which may have not then been paid to Company A and further, that when regard was had to Company A’s income tax return of 2016/2017 prepared on a cash basis (and which notably backs out $110,826 of accounts receivable) the company made a tax loss of $37,194. Further complaints are made by the Applicant which all revolve around the accounting treatment of matters pertaining to Company A by the Tribunal.
The Tribunal stated relevantly, at paragraph 36 of the Decision Record:-
“[The Applicant] noted that Company A’s income tax returns are prepared on a cash basis while the financial statements are prepared on an accruals basis. The tribunal is satisfied that the financial statements reflect the profitability of the company.”
There were reasons, as set out in the Tribunal’s decision, to support the Tribunal’s view as expressed above. The Applicant did not deny that he received a loan or loans from Company A in 2016/2017 in the quantum claimed. That was clearly a financial resource which he had available to him in that year. Additionally, the Applicant’s complaint that the invoices may never actually be paid to Company A ignores the fact that the company would expect to be paid, if not all, at least some significant proportion of the amounts it invoices. The Tribunal was aware of the limitations upon it on a review of the evidence before it and, indeed, said in paragraph 43 of the Decision Record, as noted in paragraph 32 of the reasons above:-
“…it is not possible to calculate [the Applicant]’s income and financial resources with any mathematical precision…”
The Court finds it was open for the Tribunal to determine as a matter of fact the Applicant’s income for the relevant year in the manner in which it did so.
The Applicant alleged that the Tribunal’s finding that depreciation amounts were available to him as financial resources was an improper “finding” as “business assets wear out and have to be replaced.” The Applicant then went on to state “some account of this must be given for child support purposes.”
The Court finds, as submitted by the Second Respondent, that it was open to the Tribunal to include Company A’s depreciation amounts for cars used by the Applicant and his partner for personal use as financial resources available to the Applicant. This is not an uncommon approach of Tribunal when considering matters of this type, nor is it an incorrect approach. As was said by FM Brown (as his Honour then was) in Frost & Frost and Anor (SSAT Appeal) [2011] FMCAfam 1311 at [81]:-
“To reiterate, in my view, the implications of the claim for depreciation made by Mr Frost, was a question of fact. As such it fell to the SSAT to determine the matter on the basis of the evidence led before it. The SSAT determined that monies designated as arising from depreciation were in fact available to Mr Frost. In my view, this was an issue of fact alone.”
The Court agrees with this assessment of a claim for depreciation as being a matter of fact for the Tribunal. The Tribunal had evidence before it that the company claimed $35,412 in motor vehicle expenses in 2016/2017 and the Applicant’s own evidence was that he and Ms V used the two vehicles for private use. The Tribunal also found that Company A contributed $800 in rent a month to the Applicant’s apartment for office space and that it paid considerable costs for telephone and internet. The Tribunal, as noted above in these reasons, found that due to intermingling of personal and private expenses, the Tribunal was unable to ascertain the extent to which the Applicant benefited from Company A, but was satisfied that a figure of $10,000 was appropriate.
Even if it could be said that it was improper to add back depreciation to the Applicant’s income for child support purposes, which is not the case here, such an assertion would have to be substantiated by evidence that assets had been depreciated fully or to the extent claimed. No such evidence was provided by the Applicant to the Tribunal.
Each of those findings were open to the Tribunal on the evidence before it. The Tribunal was not required to undertake the “tortuous process of audit in the absence of such transparency and accessibility”[18] which the Applicant now urges upon the Court.
[18] Morse & Potts (SSAT Appeal) [2010] FMCAfam 1305
The Applicant’s argument that Company A’s profitability had not changed over time does not identify jurisdictional error in the decision of the Tribunal. The Tribunal ultimately set the Applicant’s ATI for the 2016/2017 year at $175,000 based upon its findings as to Company A’s profit in that year. The Tribunal then decided, as described above, that it would extend the variation until 30 September 2018 for the reasons which it gave, which included that at that point the Applicant would be in a position to provide financial information concerning Company A’s operations for the 2017/2018 year. Although the Tribunal considered that Company A’s profitability was likely to improve in 2017/2018, it did not increase the Applicant’s ATI to reflect that forecast. Rather, the Tribunal maintained the Applicant’s ATI for 2016/2017 on the basis of its findings as to Company A’s profitability for that completed financial year.
The Tribunal’s finding that on the 8 December 2017 profit and loss statement indicated an improvement in profitability with the possibility of profits in the vicinity of $300,000 for 2017/2018 was open to it. It had the completed financial statements for the 2016/2017 financial year before it. It was satisfied they reflected the profitability of Company A, and on the basis of those statements Company A made a profit in 2016/2017 of $66,814.
The Tribunal was presented with a profit and loss statement recording Company A’s profit for the approximately half year to 8 December 2017 which recorded a profit of $140,000. Extrapolating that profit out for the remainder of the year, the Tribunal’s finding of a possible profit of $300,000 was open to it on the evidence before it.
The Tribunal’s determination as to matters covered within ground 3 were findings of fact for the Tribunal. The Tribunal considered those matters relevant to its deliberation which included what constituted “financial resources” and thus what financial resources were available to the Applicant was a question of fact for the Tribunal to determine. Finding an answer to that question was not to be determined by reference to principles of accounting.[19]
[19] Frost v Frost & Anor (SSAT Appeal) [2011] FMCAfam 1311.
Ground 4
Ground 4 does not establish jurisdictional error in the decision of the Tribunal and cannot succeed.
The Tribunal found that the cost of child care allowed the Respondent to work and earn income which was reflected in the child support assessment and which reduced the Applicant’s liability. The Tribunal further found, as detailed above, that the Respondent’s child care costs for 2016 were more than 10 per cent of the Respondent’s gross income and that it would therefore be just and equitable to take them into account. Given those findings, the Tribunal’s decision to increase the Applicant’s child support to take into account the Respondent’s child care costs clearly had “an evident and intelligible justification”.[20]
[20] Minister for Immigration v Li (2013) 249 CLR 332
No unreasonableness attended the reasoning process, nor the conclusion reached. There is no ground to argue in the Tribunal finding that the Applicant should contribute to the cost of child care in these circumstances.
As submitted by the Second Respondent, the Applicant’s allegations that the Tribunal failed to have regard to unspecified “unsecured debts” of $156,000 and loan repayments of $2,500 a month arising from debts incurred in payment of rent and living costs prior to separation, this latter claim having no substantiation apparent in the materials, cannot be made out. The Tribunal’s Decision Record expressly refers to having the Applicant’s documents at A1-A376 before it as set out in paragraph 11 of the Decision Record.
Moreover, the Tribunal clearly considered the Applicant’s necessary commitments in its Decision Record, including specifically the Applicant’s loan repayments but found, having regard to the Applicant’s discretionary spending, that his expenses could not be considered necessary.
It is apparent on a fair reading of the Tribunal Decision Record that the Applicant’s loan repayments were taken into account and given proper consideration by the Tribunal.
Finally, the fact that the Respondent was able to meet the children’s needs does not absolve the Applicant of his primary obligation to maintain the children under s.3 of the Assessment Act. No error is apparent in the tribunal decision in this regard.
No error of law has been identified by the appeal application. No jurisdictional error attends the decision of the Tribunal. Accordingly, the appeal will be dismissed with the Applicant to pay the Second Respondent’s costs fixed in the sum of $7,066 as sought.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Judge Hartnett
Date: 5 October 2018
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