Backus and Backus and Anor (SSAT Appeal)
[2011] FMCAfam 503
•23 May 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BACKUS & BACKUS & ANOR (SSAT APPEAL) | [2011] FMCAfam 503 |
| CHILD SUPPORT – Appeal from the Social Security Appeals Tribunal – whether there was any error of law in the decision of the Social Security Appeals Tribunal. |
| Federal Magistrates Court Rules 2001 (Cth); rr.3.05; 25A.06 Child Support (Assessment) Act 1989 (Cth), ss.3; 4; 98S;117 |
| Abebe v Commonwealth of Australia (1999) 162 ALR 1 Minister for Immigration and Ethnic Affairs v Wu Shan Liang and Ors (1996) 185 CLR 259 Cook v ASP Ship Management [2009] FCAFC 113 |
| Appellant: | MS BACKUS |
| First Respondent: | MR BACKUS |
| Second Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | SYC 311 of 2010 |
| Judgment of: | Emmett FM |
| Hearing date: | 23 May 2011 |
| Date of Last Submission: | 23 May 2011 |
| Delivered at: | Sydney |
| Delivered on: | 23 May 2011 |
REPRESENTATION
| Counsel for the Appellant: | Ms A Petrie |
| Solicitors for the Appellant: | Mr S Gray (Hozack Clisdell) |
| Solicitors for the First Respondent: | Mr P White (White & Associates) |
| Counsel for the Second Respondent: | Mr B D Kaplan |
| Solicitors for the Second Respondent: | Ms L James (Child Support Agency) |
IT IS NOTED that publication of this judgment under the pseudonym Backus & Backus & Anor (SSAT Appeal) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
FEDERAL MAGISTRATES |
SYC 311 of 2010
| MS BACKUS |
Appellant
And
| MR BACKUS |
First Respondent
| CHILD SUPPORT REGISTRAR |
Second Respondent
EX TEMPORE
REASONS FOR JUDGMENT
Introduction
This is an appeal from a decision of the Social Security Appeals Tribunal (“the Tribunal”) dated 16 December 2009.
The Tribunal decision arose from an objection lodged by the Appellant in respect of a child support assessment made by the Child Support Agency (“the CSA”) in respect of her three children for the period
1 January 2009 to 31 December 2010.
Background
On 16 December 2009, the Tribunal was satisfied that it was proper to depart from the administrative assessment made by the CSA on
12 January 2009. That decision disallowed an objection by the Appellant to an assessment made setting the First Respondent’s taxable income at $90,000 for the period 1 January 2009 to 31 December 2010.
The basis of the Appellant’s objection before the Tribunal was that the First Respondent’s income was higher than $90,000 and that it had been set at that amount by the CSA because of the complexity of his financial position. The Appellant asserted before the Tribunal that the First Respondent’s income available for child support should be assessed to an annual taxable income in the order of $101,274.
Ultimately, the Tribunal varied the First Respondent’s child support income from $90,000 to $95,475 for the period 1 January 2009 to
31 December 2010 and increased the annual rate of child support payable by the First Respondent by $2,000 for the same period.
The relevant law
Section 110B of the Child Support (Registration and Collection) Act 1988 (Cth) (“the Registration and Collection Act”) makes clear that an appeal to this Court in respect of a decision of the Social Security Appeals Tribunal is on a question of law.
Section 117 of the Child Support (Assessment) Act1989 (Cth) (“the Assessment Act”) sets out the relevant matters to be considered by the Tribunal in a review commenced pursuant to s.89 of the Registration and Collection Act.
The Tribunal’s decision
The Tribunal’s decision is accurately summarised by counsel for the second respondent, Mr Kaplan, in his written submissions as follows:
“34. The Tribunal first considered whether there existed ‘special circumstances’ in the present case. In respect of the First Respondent’s income, property and financial resources, the Tribunal noted (at [29]) that the difference between his taxable income ($69,830) and his income which included the additional financial resources by way of loan repayments and the use of the company vehicle “t[ook] this case out of the ordinary”. Special circumstances, therefore, existed. The question, then, was whether, in the light of the difference, the First Respondent’s child support assessment has resulted in an unjust and inequitable determination of the level of financial support provided by the First Respondent. The Tribunal answered this question in the affirmative (at [29]) and found that sub-paragraph 117(2)(c)(ia) of the Assessment Act had been established.
35. As regards the First Respondent’s earning capacity, the Tribunal correctly identified the relevance of sub-section 117(7B), which provides that the Court may determine that a parent’s earning capacity is greater than that which is reflected in his or her income if the Court is satisfied that (i) the parent does not work despite ample opportunity to do so; (ii) he or she has reduced the number of hours worked per week below the full-time rate; or (iii) he or she has changed his or her occupation, industry or working pattern.
36. In the present case, the Tribunal was satisfied that the First Respondent continued to work in the [P] industry as an employee of [P] (NSW) Pty Ltd and continued to hold a shareholding in that company (at [32]). The Tribunal also found (at [33]) that the Applicant continued to work as a [omitted]. In these circumstances, none of sub-paras 117(7B)(a)(i), (ii) or (iii) applied to either of the parties, in which case the Tribunal could not set their income for child support purposes by reference to their earning capacity as distinct from their income and financial resources. Sub-paragraph 117(2)(c)(ib), therefore, had not been established.
37. The Tribunal summarised the parties’ oral evidence at [35] to [53] of its reasons for decision. In essence, the Applicant claimed that the First Respondent’s income was higher than $90,000 and that he had been using the [P] business to conceal his earnings and assets from the Child Support Agency (at [35]). She claimed that the First Respondent was receiving other benefits which had not been taken into account for the purposes of his child support assessment. She referred to loan repayments of $1,030 per month paid by the majority shareholder in [P], Mr S, on the First Respondent’s behalf. These loan monies, she claimed, came from the First Respondent’s gross income and that it was a reportable fringe benefit which should be grossed up (at [38]). She further claimed that the First Respondent’s private company, [T] Pty Ltd, loaned $136,000 to [P], which, in turn, billed [M] for the interest, and that the Backus Family Trust, of which [M] was the corporate trustee, received an income and dividend payment of $10,500 (at [41]). She also drew the Tribunal’s attention to two bank accounts in the name of the First Respondent and his current partner (at [42] to [43]).
38. The First Respondent gave evidence that there was no money in [M] and that, in order to obtain the loan of $142,000 to purchase his shareholding in [P], he remortgaged his house (at [45]). As part of his package, [P] would pay the additional mortgage, both the principal and interest (at [45]). The First Respondent also gave evidence that, as he did not have sufficient funds to purchase a
30 per cent share in the business, the majority shareholder contributed to the purchase price. The First Respondent entered into an arrangement with the majority shareholder such that the debt belonging to the latter would be paid in preference to all other debts of the First Respondent (at [46]).39. The Tribunal summarised the parties’ further oral evidence at [49] to [53].
40. The Tribunal noted (at [54] to [64]) the various documents provided by the Child Support Agency, the Applicant and the First Respondent. As indicated by the Tribunal at [56], the First Respondent produced a statement of financial circumstances dated 7 July 2009; a financial report for [P] the year ended
30 June 2008; a letter from the majority shareholder in [P] dated 11 June 2008 setting out details in relation to the majority shareholder’s company, [M] Pty Ltd; a letter dated 15 June 2008 from an accounting firm to the First Respondent concerning his usage of a business vehicle; a profit and loss statement for [P] for the period 1 July 2008 to 30 March 2008; and loan repayment statements.
41. On 26 August 2009, the Illawarra Legal Centre, on behalf of the Applicant, sent to the Tribunal a further submission. This document was received by the Tribunal on 15 September 2009, the date of the hearing (at [57]). The First Respondent had not seen this document prior to the hearing, and given that the Applicant had provided this document to the Tribunal after the deadline of 18 August 2009 (which was set at the directions hearing on 27 July 2009: see at [54]), it was agreed that the First Respondent would be given an opportunity to respond.
42. He did so on 9 October 2009, attaching those documents listed at [63] of the Tribunal’s reasons for decision, including financial statements for [P] for the year 2008/2009, indicating a net loss of $144,890.15 (at [59], [63]). The First Respondent further claimed that the proceeds of the second mortgage taken over his home (for the purposes of purchasing a shareholding in [P]) were lent to the business. The business pays a principal amount of $2,317 (shown in [P] accounts as a loan to [M]) and interest on the loan of $10,043 to the Backus Family Trust which, in turn, pays interest to the lender (at [60]). The First Respondent disputed that he received a non-cash benefit of $12,360 per annum on the basis that the outgoings of interest and the borrowing expenses of the Backus Family Trust exceeded the $10,043 paid to it by [P]. He also took issue with the suggestion that he received a non-cash benefit for his use of the company vehicle (at [60]). He indicated to the Tribunal that, at the time, he was in dispute with Mr S, who would not provide further information to the First Respondent (at [62]).
43. Finally, the Tribunal noted (at [64]) that, on 26 October 2009, it received from the Applicant a response to the additional material proffered by the First Respondent.
44. Having set out the parties’ evidence, the Tribunal assessed that evidence (at [65] to [75]) and made findings of fact (set out at [76]). Those findings included that the First Respondent purchased 30 per cent of the ordinary shares in [P] through a private company, [M]; that [M] was the corporate trustee of the Backus Family Trust; that, in order to purchase the 30 per cent stake, the First Respondent was required to provide finance of $173,333, $136,498.50 of which he secured by way of a second mortgage over his home, and $36,834 of which was provided by the majority shareholder in [P]; that the First Respondent’s taxable income from [P] for the 2008/2009 year was $68,529, that the Backus Family Trust received $12,360 per annum from [P], which represented mortgage repayments in relation to the loan taken out to purchase the 30 per cent stake in the business; and that he used the company vehicle to drive to and from work and for private purposes.
45. The Tribunal concluded (at [78]) that the First Respondent’s income for child support purposes amounted to $90,531, consisting of his taxable income of $68,529, loan repayments of $12,360 and $9,642 for the use of his company vehicle.
46. Based on the evidence before it, the Tribunal concluded that the Applicant’s adjusted taxable income for 2008/2009 was $52,322, her sources of income being her employment income, Family Tax Benefit, Carers’ Allowance and child support from the First Respondent (at [79]).
(ii) The needs of the children and their education
47. The Tribunal considered the evidence of the Applicant (at [80]) and found (at [81]) that all three of the children have learning disabilities; that, from the beginning of 2009, A attended a public school and the other two children, J and T, attended private schools; and that the private school fees for 2009 for J and T were $2,580 and $1,444.80, respectively.
48. The Tribunal concluded that the costs of maintaining J and T were significantly affected because of their special needs (at [84] to [85]).
(iii) Whether a departure would be just and equitable and otherwise proper
49. Finally, the Tribunal considered the factors listed in sub-section 117(4) of the Assessment Act, so far as they were relevant to the case, for the purposes of determining the fair amount of child support which should be provided by the First Respondent (at [88] to [95]). The Tribunal considered the financial circumstances of both the Applicant and First Respondent and the hardship that would be suffered by the parties by the making of a departure order. The Tribunal determined that it would be just and equitable for both parties to set an adjusted taxable income for the First Respondent of $95,475 (which included a grossed up fringe benefit of $4,944 – see [56] of these submissions below) and to increase his annual rate of child support by $2,000 to represent his share of the additional costs due to J and T’s special needs.
50. The Tribunal also considered (at [97] to [98]) whether it would be otherwise proper, as understood in sub-section 117(5), to make a departure determination. The Tribunal found that, by setting the First Respondent’s adjusted taxable income at $95,475, the amount of child support payable to the Applicant would increase, thereby “lessen[ing] the burden on the public purse” (at [97]).
51. The Tribunal determined, pursuant to section 98S of the Assessment Act, that the Applicant’s child support income be increased from $90,000 to $95,475 from 1 January 2009 to 31 December 2010, and that his annual rate of child support be increased by $2,000 for the same period (see at [100] to [101]).”
The proceeding before this Court
On 19 January 2010, the Appellant lodged a Notice of Appeal in respect of the Tribunal’s decision.
The Appellant was represented by Ms Petrie, of counsel.
Rule 25A.06 of the Federal Magistrates Court Rules 2001 (Cth) (“the Rules”) requires that a person must file an appeal from a decision of the Social Security Appeals Tribunal within 28 days of receiving a written statement of reasons for the decision. Counsel for the Appellant conceded that the Notice of Appeal was filed at least 5 days out of time. There was otherwise no evidence before this Court to explain the delay. However, neither respondents filed a Response taking issue with the Appellant’s late filing of the Notice of Appeal, nor was the issue raised by either of the respondents in either of the direction hearings before this Court on 4 February 2011 and 3 March 2011.
In the circumstances, time was extended to the Appellant to
19 January 2010, pursuant to Rule 3.05 of the Rules, to file and rely upon the Notice of Appeal filed in excess of the 28 day period provided for in Rule 25A.06 of the Rules.
Leave was further granted to the Appellant to rely upon an Amended Notice of Appeal filed on 6 May 2011 and 10 May 2011 in circumstances where each of the respondents had addressed the grounds the Amended Notice of Appeal in their written submissions.
The grounds of the Amended Notice of Appeal are as follows:
“Grounds of appeal
In assessing the income of the Respondent, the Social Security Appeals Tribunal’s discretion miscarried in the following respects:-
1. The Social Security Appeals Tribunal did not have regard to the following relevant considerations
a) The true financial position of the Respondent
Particulars
i. By an order made on 6 May 2009 and 27 July 2009 the Social Security Appeals Tribunal directed that the Respondent produce certain specified documentation relevant to his financial position;
ii. There was significant non-compliance by the Respondent with such order; and
iii. The Social Security Appeals Tribunal proceeded to hear and determine the matter in the face of such non-compliance by the Respondent.
b) The adverse inference that was available against the Respondent as a result of his failure to produce relevant documentation
Particulars
i. By an order made on 6 May 2009 and 27 July 2009 the Social Security Appeals Tribunal directed that the Respondent produce certain specified documentation relevant to his financial position;
ii. There was significant non-compliance by the Respondent with such order; and
iii. The Social Security Appeals Tribunal proceeded to hear and determine the matter in the face of such non-compliance by the Respondent.
c) The financial benefit to the Respondent of the loan repayments made by the majority shareholders of [P] (NSW) Pty Limited on the Respondent’s behalf.”
Ground 1(a)
The Appellant’s complaint in Ground 1(a) is that the Tribunal erred in proceeding to hear and determine the matter before it in circumstances where the First Respondent had failed to comply with directions of the Tribunal made on 6 May 2009 and 27 July 2009 that the First Respondent produce certain financial materials.
The Appellant complains that whilst the First Respondent produced some documents, there was insufficient disclosure to enable the Tribunal to properly assess the First Respondent’s financial circumstances. Counsel for the Appellant submitted that, in the circumstances, the Tribunal had failed to hear and determine the matter before it on adequate financial materials.
The Tribunal noted the Appellant’s assertion that the First Respondent had understated income he receives as other benefits from being an employee and shareholder which had not been taken into account when determining his child support.
The Tribunal noted that the Appellant told it that the First Respondent’s income was higher than $90,000 and that it had been set at that amount by the CSA because of the complexity of the financial situation. The Tribunal noted that the Appellant stated that the First Respondent had a history of underestimating his income and referred to decisions of the CSA on 30 May 2006, 19 October 2007 and 16 January 2008. The Tribunal noted the Appellant’s claim that the First Respondent was “setting up his income to suit himself and she did not accept that he was in financial hardship.”
The Tribunal allowed the Appellant to provide further submissions after the specified deadline of 18 August 2009 directed at the pre-hearing conferences. The submissions had not been provided to the First Respondent prior to the hearing. The Tribunal noted that it was agreed at the hearing that the First Respondent would be provided with a copy of the submissions and allowed reasonable time to provide any comments.
On 9 October 2009, the First Respondent commented on the Appellant’s submissions and supporting documents. Further documents were provided by the First Respondent. On 26 October 2009, the Tribunal received a response from the Appellant to the First Respondent’s further material.
The Tribunal noted the Appellant’ submission to it that the First Respondent was using the business in which he worked to conceal his earnings and assets from the CSA and thereby limit his child support obligations. The Tribunal noted the First Respondent’s response denying the Appellant’s allegation and stating that he had provided the CSA and the Tribunal with all relevant financial information relating to his affairs.
The Tribunal found that the financial material provided by the First Respondent generally did not support the Appellant’s claims. The Tribunal was not satisfied that the First Respondent had arranged his finances to minimise his taxation or his child support liability. The Tribunal found that, on the evidence before it, the First Respondent did not have other assets apart from those declared.
Moreover, the Tribunal found that the Appellant was unable to satisfy the Tribunal that his income was greater than as assessed by the Tribunal.
Nevertheless, the Tribunal was satisfied that repayments by the First Respondent’s employer of the First Respondent’s loan in the amount of $12,360 per annum should be added to the First Respondent’s taxable income of $68,529 for 2008/2009, together with $9,642 for the use of a company vehicle. Those amounts together totalled an annual income of $90,531.
In addition, the Tribunal was of the view that there should be some grossed up amount of the loan repayments of $12,360 by 40% to reflect what the Tribunal found to be just and equitable for the Appellant. The Tribunal did not make any findings as to whether the loan repayment was a reportable fringe benefit. However, the Tribunal was not persuaded that it would be just and equitable to increase the First Respondent’s child support liability by grossing up the benefit to the extent submitted by the Appellant.
This further amount was found by the Tribunal to be $4,944, thereby providing an adjusted taxable income of the First Respondent in the total of amount of $95,475.
The Tribunal set out its findings in a comprehensive manner following its detailed consideration of the financial material provided by the parties before it.
The Tribunal was able to make concluded findings about the First Respondent’s financial circumstances sufficient for it to be satisfied that he was not concealing earnings and assets from the CSA in order to limit his child support obligation. As stated above, the Tribunal was satisfied that the First Respondent did receive other financial benefits which should be added to his salary in order to determine his adjusted taxable income. The Tribunal was unable on the evidence before it to find any assets owned by the First Respondent apart from those declared.
In the circumstances, the Tribunal’s findings and conclusions were open to it on the evidence and material before it and for the reasons it gave.
The Appellant’s complaint is clearly no more than a disagreement with the findings of fact made by the Tribunal in respect of the First Respondent’s financial circumstances. There is nothing in the Tribunal’s decision to suggest that it was impeded in its assessment of the First Respondent’s financial circumstances by any conduct of the First Respondent.
To the extent that the Appellant complains that the Tribunal should not have proceeded to hear and determine the matter without full compliance of its directions by the First Respondent, such a complaint does not raise an error of law. There is nothing before this Court to suggest that the Tribunal in any way misapplied its discretion to proceed and determine the matter. There was no adverse finding made against the First Respondent as a result of a failure by the First Respondent to provide adequate financial information to allow it to properly make its decision.
In her written submissions, counsel for the Appellant submits that there was a denial of procedural fairness by the Tribunal to the Appellant because of the First Respondent’s non-disclosure. There was no evidence before this Court to support such a submission and I note it was neither developed nor pressed in counsel for the Appellant’s oral submission.
Indeed, as is apparent from the reasons above, it was the Appellant who sought to rely on further material at the hearing thereby prompting an adjournment to enable the First Respondent to consider her further material. Moreover, the Tribunal noted that the Appellant made further comment to the First Respondent’s response to the Appellant’s further material.
In the circumstances, there is nothing before this Court to suggest that there was any denial of procedural fairness to the Appellant in the manner in which the Tribunal conducted its appeal.
Accordingly, Ground 1(a) of the Amended Notice of Appeal is dismissed.
Ground 1(b)
The complaint in Ground 1(b) relates to a contention that the Tribunal should have drawn adverse inference against the First Respondent as a result of his failure to produce relevant documents.
Such a contention does not demonstrate any error of law. The Tribunal noted the submissions made by the Appellant that the First Respondent was concealing his earnings and assets from the CSA in order to limit his child support obligations. As stated above, the Tribunal noted the First Respondent’s response that he had provided the CSA with all relevant financial information. The Tribunal found that the financial material provided by the First Respondent genuinely did not support the Appellant’s claims regarding the First Respondent’s financial circumstances.
As stated above, the Tribunal further found that it was unable on the evidence before it to find that the First Respondent was structuring his financial affairs in order to minimise his child support obligations. Further, as stated above, the Tribunal was unable on the evidence before it to find any assets owned by the First Respondent apart from those declared. The Tribunal also found that the Appellant was unable to satisfy it that the First Respondent’s income was greater than as assessed by the Tribunal.
As stated above, these findings were open to the Tribunal on the evidence and material before it and for the reasons it gave.
There was no relevant circumstance that compelled the Tribunal to draw an adverse inference against the First Respondent in respect of his financial disclosure.
I accept the submission of the solicitor for the First Respondent,
Mr White, and counsel for the second respondent that the Appellant’s challenge to the Tribunal’s exercise of its discretion not to draw any adverse inference against the First Respondent suggested that the Tribunal mistook the facts before it. Even if that was correct, it does not establish an error of law (See Cook v ASP Ship Management [2009] FCAFC 113 at [20] per Gray, Emmett and Besanko JJ).
Again, such a complaint invites merits review which this Court cannot undertake (see Abebe v Commonwealth of Australia (1999) 162 ALR 1 at 53-54; Minister for Immigration and Ethnic Affairs v Wu Shan Liang and Ors (1996) 185 CLR 259 at 272 per Brennan CJ, Toohey, McHugh and Gummow JJ).
Otherwise, there is nothing before this Court to suggest that the Tribunal somehow misapplied its discretion in failing to draw an adverse inference against the First Respondent arising from his financial disclosure.
Accordingly, Ground 1(b) is dismissed.
Ground 1(c)
Ground 1(c) was withdrawn by the Appellant.
Conclusion
A fair reading of the Tribunal’s decision record makes clear that the Tribunal understood the claims being made by the Appellant; explored those claims with the Appellant at a hearing; and, had regard to all material provided in support.
The Tribunal then made findings based on the evidence and material before it. Those findings of fact were open to the Tribunal on the evidence and material before it and for the reasons it gave. A fair reading of the Tribunal’s decision record makes clear that the Tribunal reached conclusions based on the findings made by it and to which it applied the correct law.
In the circumstances, the Tribunal complied with its obligations under the statutory regime in the making of its decision and no error of law has been established by the Appellant in respect of that decision.
The appeal before this Court commenced by way of Notice of Appeal filed on 19 January 2010 should be dismissed with costs.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Emmett FM
Deputy Associate:
Date: 23 May 2011
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