Bedell & Kastens & Anor (SSAT Appeal)
[2010] FMCAfam 1250
•15 November 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BEDELL & KASTENS & ANOR (SSAT APPEAL) | [2010] FMCAfam 1250 |
| CHILD SUPPORT – Appeal from SSAT – whether error of law in way Tribunal determined income – whether appellant was granted procedural fairness by the Tribunal – whether Tribunal erred in the method by which it extrapolated the appellant’s future income – matter remitted to Tribunal for re-hearing. |
| Child Support (Assessment) Act 1989, ss.98B, 98C, 98S, 117 Child Support (Registration and Collection) Act 1988, ss.103X, 110B,110F Federal Magistrates Court Rules 2001, r. 25A.06 |
| Agrippa & Horton (SSAT Appeal) [2010] FMCAfam 1144 PJ & Child Support Registrar (SSAT Appeal) [2007] FMCAfam 829 |
| Applicant: | MR BEDELL |
| First Respondent: | MS KASTENS |
| Second Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | SYC 6891 of 2009 |
| Judgment of: | Sexton FM |
| Hearing date: | 23 July 2010 |
| Date of Last Submission: | 23 July 2010 |
| Delivered at: | Sydney |
| Delivered on: | 15 November 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Jauncey |
| Solicitors for the Applicant: | Jack Rigg Solicitors |
| Counsel for the First Respondent: | Ms Kennedy |
| Solicitors for the First Respondent: | Legal Aid NSW |
| Solicitors for the Second Respondent: | Excused with leave from the Court |
ORDERS
The Appellant’s appeal against the decision of the Social Security Appeals Tribunal dated 6 October 2009 be upheld.
The decision of the Social Security Appeals Tribunal dated 6 October 2009 be set aside.
The matter be remitted to the Social Security Appeals Tribunal for re-hearing according to law.
IT IS NOTED that publication of this judgment under the pseudonym Bedell & Kastens is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 6891 of 2009
| MR BEDELL |
Applicant
And
| MS KASTENS |
First Respondent
| CHILD SUPPORT REGISTRAR |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal from a decision of the Social Security Appeals Tribunal dated 6 October 2009 with respect to the child support assessment of the parties.
Although the Notice of Appeal contains a number of appeal grounds, the Appellant’s counsel advised that not all grounds were relied on. Counsel submits that the substantive complaints concern the method used by the Tribunal to reach its decision as to the Appellant’s child support income amount until 31 December 2011, and the lack of procedural fairness afforded to him.
The Respondent Mother asks that the appeal be dismissed.
The parties have two children the subject of the child support assessment, [X], aged 12 and [Y], aged 10 years. The parties separated in November 2002. The children have been the subject of a child support assessment since 11 August 2003 and have been spending substantial time with each parent.
The Appellant has re-married, and he and his present wife, who was born in Thailand, have two children aged 5 and 13 months. The Appellant deposes to his wife suffering from anxiety and depression which limits her day to day functioning, and to being a carer for his father, aged 72. The Tribunal did not accept the Appellant’s evidence as to the effect of his caring responsibilities on his capacity to earn income.
The Appellant is the sole shareholder of a company known as [D] (the company) which he says once operated an [omitted] business. He resigned his position as sole Director of the company in November 2008 when his wife was appointed in his place. In his Statement of Financial Circumstances, affirmed on 24 September 2009 and provided to the Tribunal, the Appellant deposed to a total weekly income of $380, sourced entirely from Centrelink, being $257.50 by way of a carer’s pension and $122.50 by way of family tax benefit. The Tribunal did not accept his evidence as to his financial position.
The Appellant was represented at the Tribunal hearing and by counsel in these proceedings. The Respondent Mother was unrepresented at the Tribunal but was represented by counsel in these proceedings. With leave of the Court, the Child Support Registrar took no part in the hearing.
Child Support history
The Respondent Mother was administratively assessed to pay child support in the amount of $476 per annum for the period 8 September 2008 to 30 November 2009. This was based on her estimated income of $23,464 and the Appellant’s deemed income of $10,752.
On 9 October 2008, the Respondent Mother applied for a departure from the administrative assessment on the grounds that:
a)She incurred significant medical costs for the children (Reason 2);
b)She was required to pay private school fees for the children (Reason 3); and
c)The Appellant’s income and financial resources were not properly reflected in the assessment (Reason 8).
The Appellant subsequently lodged a cross-application on the basis that:
a)The Respondent Mother’s income and earning capacity were not properly reflected in the assessment (Reason 8); and
b)He had a duty of care to his then 3 year old daughter from his current relationship (Reason 9).
On 10 December 2008, a Senior Case Officer changed the assessment on the basis that Reasons 2 and 3 and 8 had been established. For the period 1 July 2008 to 31 December 2011, the child support payable to the Appellant by the Respondent Mother was set at nil, and for the period 1 January 2009 to 31 December 2011, the Appellant’s adjusted taxable income was set at $46,000. The Senior Case Officer also determined that the annual rate of child support payable would increase by $1,640 per annum for the same period for the children’s dental and educational expenses. In relation to the Appellant’s income, the Senior Case Officer determined that the Appellant was involved in a company which had a substantial turnover and operated at a profit. She decided that the Appellant should be assessed as earning the average weekly wage for all employees of the company. She also increased the annual rate of child support payable by him by half of the children’s school fees ($865) and half of [X]’s orthodontic costs ($775) over the following three years.
On 2 February 2009, the Appellant lodged an objection to the decision on the basis that the Senior Case Officer had failed to take into consideration a court order made on 7 March 2008 which was intended to be a child support agreement. He also argued that costs in relation to [X]’s orthodontic treatment were unnecessary, and that he had to care for his younger daughter and his wife who was unable to work.
On 3 April 2009, the objection was disallowed. The Objections Officer agreed that Reasons 2, 3 and 8 were established, and found that although the Appellant had transferred his business over to his wife’s control, its income should be treated as the Appellant’s for child support purposes. The Objections Officer noted that the adjusted income of $46,000 for the Appellant was a fair outcome for both parents. The Objections Officer said that she could not “reconcile the anomalies
Mr Bedell has discussed in both the change of assessment process and his objection with regard to the changes in both his business circumstances and his personal circumstances.” [1][1] At page 13 of Appeal Books
On 11 May 2009, the Appellant lodged an appeal against the Objection Officer’s decision of 3 April 2009 with the Social Security Appeals Tribunal. The Tribunal heard the review on 6 October 2009. The Appellant was represented by a solicitor. The Respondent Mother appeared at the Tribunal unrepresented.
The Appellant’s appeal to the Tribunal was unsuccessful.
Reasons of the Social Security Appeals Tribunal
Section 103X(3)(b) of the Child Support (Registration and Collection) Act1988 requires the Tribunal to set out in its reasons, its findings on material questions of fact and the evidence on which those findings were based.
At pages 4 to 5 of its Reasons, the Tribunal correctly identified the issues it was required to consider as:
i)Whether a ground for departure from the administrative assessment exists;
ii)If so, whether a departure would be just and equitable; and
iii)If so, whether it would be otherwise proper to depart from the administrative assessment.
The Tribunal outlined the provisions of the legislation it intended to apply under Part 6A of the Child Support (Assessment) Act 1989:
a)Section 98B provides that a liable parent may make an application to the Registrar for departure from an administrative assessment;
b)Section 98C provides that the Registrar may make a determination for departure, and sets out the matters as to which the Registrar must be satisfied before making a determination. This is the three step process which applies in all departure applications: whether a ground for departure is established; if so, whether it would be just and equitable as regards the child, the liable parent, and the carer entitled to child support; and whether it would be otherwise proper to make a particular determination.
c)Section 117(2) sets out the grounds for departure from an administrative assessment of child support.
d)Section 98S sets out the range of determinations the Registrar may make if satisfied that a ground or grounds exist and that it would be just and equitable and otherwise proper to make a particular determination. These include varying a parent’s adjusted child support income, or the annual rate of child support payable by a parent.
The Tribunal then considered whether a ground was established to depart from the administrative assessment as a result of any of the following:
a)The costs of educating [X] and [Y] [s.117(2)(b)(ii)];
b)The medical costs for [X] and [Y] [s.117(2)(b)(ia)];
c)The income, property and financial resources of the Appellant [s.117(2)(c)(ia)];
d)The income, earning capacity, property and financial resources of the Respondent Mother [s.117(2)(c)(ia) and (ib)]; and
e)The Appellant’s duty to support other people [s.117(2)(a)(i)].
The Tribunal decided that a ground for departure was established on the basis of the children’s private school fees, on the basis of the children’s medical expenses and on the basis of the Appellant’s income and financial resources. The Tribunal was satisfied that the Appellant’s taxable income used in the child support assessment period of September 2008 to November 2009, an amount of $10,800, did not reflect his actual capacity to provide child support for his two children. In relation to the Appellant’s income, the Tribunal found that many of the Appellant’s responses to questions about his financial position were inconsistent with other evidence and lacked credibility[2]. The Tribunal did not accept, as contended by the Appellant, that his earning capacity was affected by his responsibilities to care for other family members.
[2] At paragraph 71 of the Tribunal’s Reasons
The Tribunal found that the company of which the Appellant was the sole shareholder, provided the Appellant with significant financial resources not reflected in his taxable income, and not disclosed in his Financial Statement provided to the Tribunal. The Tribunal made certain findings about the expenses of the company at paragraphs [80] – [82] of its Reasons and decided that those expenses should be added to the disclosed income of the Appellant of $10,800 per annum.
The Tribunal considered the income, earning capacity, property and financial resources of the Respondent Mother, and the Appellant’s evidence in relation to his duty to support others[3] but did not find a basis for departure on either ground.
[3] At paragraphs 105 to 108 of the Tribunal’s Reasons
The Tribunal decided it would be just and equitable to make a departure order under s.117(4) of the Child Support (Assessment) Act, and decided it would be otherwise proper to make the order. In determining what change to the assessment would be “just and equitable” the Tribunal said[4]:
120…The tribunal does not accept that Mr Bedell plays no part in the continuing operations of [D] and considers that he receives significant benefits from the company.
121. The tribunal had regard to Mr Bedell’s financial resources as a whole and determined that he should be regarded as having an annual income of $75,300. That income is made up of the carer payment he receives from Centrelink ($10,800), the benefit of private travel paid for by [D] ($31,500), the unexplained amount claimed for materials and supplies ($20,000) and the amount borrowed by the company in 2008/2009, less the cost of the [equipment omitted] ($13,000).
122. The tribunal considers that assessing Mr Bedell as having an income of $75,300 is appropriate in all the circumstances. When factored into the child support formula, along with the care he provides for [X] and [Y], and his two relevant dependent children this brings about an amount payable of $6,400 per annum (or about $120 per week).
123. In addition the tribunal considers that Mr Bedell should be responsible for half of the children’s school fees and half of [X]’s orthodontic and medical costs ….
124. The tribunal is unable to find that payment of such amounts would cause hardship to Mr Bedell. The tribunal is satisfied that he has income and financial resources from [D] that are not indicated by his taxable income. The tribunal is satisfied that the payment of child support of [sic] in the terms discussed would properly assist Ms Kastens to meet the necessary expenses she has for [X] and [Y].
[4] At paragraphs 120 to 124 of the Tribunal’s Reasons
The Tribunal determined to extend the time for the departure from the assessment until 31 December 2011 “to provide some certainty to the parties.”[5]
[5] At paragraph 126 of the Tribunal’s Reasons
Social Security Appeals Tribunal decision
On 6 October 2009, the Social Security Appeals Tribunal set aside the decision under review, and substituted a new decision that:
a)For the period 1 July 2008 to 31 December 2011, the Mother’s annual rate of child support be set at nil;
b)For the period 1 January 2009 to 31 December 2011, the Appellant’s adjusted taxable income be set at $75,300, and the annual rate of child support payable by the Appellant be increased as follows:
i)For the period 1 January 2009 to 31 December 2009, an increase of $2,337 for medical and orthodontic expenses;
ii)For the period 1 January 2010 to 31 December 2010, an increase of $1,925 for orthodontic expenses; and
iii)For the period 1 January 2009 to 31 December 2011, an increase of $1,012 for school fees.
Appeal from decision of the Tribunal
On 13 November 2009, the Appellant filed a Notice of Appeal in this Court in relation to the Tribunal’s decision.
Section 110B of the Child Support (Registration and Collection Act) 1988 provides that a party to a proceeding before the Tribunal may appeal to a court having jurisdiction, on a question of law, from any decision of the Tribunal in that proceeding. This is not a review on the merits.
In Agrippa & Horton (SSAT Appeal)[6], his Honour Federal Magistrate Halligan summarised the applicable law when the Court reviews a decision of the Tribunal. His Honour said[7]:
…the reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error (Collector of Customs v Possolanic Enterprises Pty Ltd (1993) 43 FCR 280, at 287, cited with approval in Minister for Immigration and Multicultural Affairs v Wu Shan Liang (1996) 185 CLR 259 at 272 per Brennan CJ, Toohey, McHugh and Gummow JJ…
Nonetheless, as Riethmuller FM noted in PJ & Child Support Registrar [2007] FMCAfam 829 at [38]
…such an appeal does not allow for a review on the merits. As a result, it is important for the Tribunal to provide appropriate reasons. This will usually entail careful findings of fact and clear explanations of the reasons for any decision, particularly where it involves the exercise of a discretion such as altering a child support amount.
[6] [2010] FMCAfam 1144
[7] At paragraphs 10 and 11
Leave to appeal out of time
In his Notice of Appeal, the Appellant seeks an order that leave be granted for the Appellant to file a Notice of Appeal out of time, against the decision of the Tribunal of 6 October 2009 and despatched on 14 October 2009.
Rule 25A.06 of the Federal Magistrates Court Rules 2001 provides that an appeal from a decision of the Tribunal must be filed within 28 days of the Appellant receiving a written statement of reasons from the Tribunal. In the present case, the decision was despatched from the Tribunal on 14 October 2009. The Notice of Appeal was filed on
13 November 2009, 30 days after the date the Tribunal decision was despatched. Given I am not satisfied the Appellant would have received the decision before 16 October 2009, I find that the Notice of Appeal was filed no later than 28 days from that date, and that leave is therefore not required.
Grounds of Appeal
The Appellant relies on the Notice of Appeal filed on 13 November 2009 which sets out 9 grounds of appeal. At hearing, the Appellant’s counsel advised the Court that the Appellant would rely only on grounds (1) and (5)-(7) inclusive as follows:
(1) That the Tribunal failed to appropriately deal with the question of the Appellant’s income;
(5) That the Tribunal failed to allow the Appellant the opportunity to be heard on the question of whether or not the decision should extend beyond December 2009;
(6) That the Tribunal erred in the method by which it extrapolated the Appellant’s income for the future;
(7) That the Tribunal erred in its determination of the Respondent Mother’s earning capacity.
The Appellant’s counsel advised the Court at hearing that the Appellant did not challenge the Tribunal’s finding that a ground for departure exists on the basis of the children’s medical expenses. In relation to school fees, the Appellant conceded that he had always been prepared to pay half the children’s school fees[8].
Ground 1 – was there an error of law in the way the Tribunal dealt with the question of the Appellant’s income?
[8] At page 14 of the transcript of SSAT proceedings
This Ground is broadly drafted. It is therefore not clear whether the Appellant contends that the Tribunal was in error when addressing whether a ground of departure was established on the basis of the Appellant’s financial circumstances or when addressing the question of whether a departure order was ‘just and equitable’ under s.117(4). In addition, while the Appellant’s counsel submits that the Appellant was denied procedural fairness when the Tribunal determined the Appellant’s income in the manner it did, error on the basis of lack of procedural fairness was not specifically pleaded under this Ground.
The Tribunal identified the need to analyse the Appellant’s financial position to determine whether his taxable income in the 2009 financial year reflected the actual income available to him to meet his child support obligations. For this purpose, the Tribunal analysed the financial statements of [D] for the 2008 and 2009 financial years and evaluated the Appellant’s evidence about the operations of the company as well as his personal circumstances. I find no error in this approach.
The Profit and Loss Statement for [D] in the 2009 financial year[9] disclosed that the company received income of $162,849.89 in that year, an increase of over $34,000 from the previous financial year[10]. The Statement disclosed that the company also increased its expenditure between the 2008 and 2009 financial years. The Appellant told the Tribunal he had been the sole operator of the business until November 2008 when he resigned as the sole director of the company. He said that after November 2008, he continued to play a role in the company. The Appellant asked the Tribunal to accept that he received no remuneration and no benefits at all from his role in the company in the 2009 financial year. The Profit and Loss Statement for that year disclosed no expense for wages or director’s fees.
[9] At Folio A25 of appeal papers
[10] At Folio A25 of appeal papers
The Tribunal questioned the Appellant’s decision to appoint his wife as company director in substitution for himself in November 2008, only a matter of weeks after the Respondent Mother sought a Change of Assessment from the Agency. The Appellant said he made this decision on the advice of his wife’s psychologist who thought her working might improve his wife’s self-esteem.[11] He said that at that time, his wife and his sister proposed to use the company to start an [omitted] business. However, when asked by the Tribunal whether that was now the business of the company, the Appellant said it was not.
[11] Page 37 of the transcript of SSAT proceedings
When explaining its decision that a basis for departure from the assessment existed on the ground of the Appellant’s financial position, the Tribunal made a number of credit findings against the Appellant at [71] to [82] of its Reasons:
a)[72] In May 2005 the Appellant told a Senior Case Officer that he had closed down his business and had caring responsibilities for his father[12]. Yet it is clear from his 2008 taxation return, that he continued to operate the business run by [D] while receiving the carer’s pension in the 2008 financial year[13].
b)[73] The Appellant’s contention that he was unable to work because of his caring responsibilities for his father did not make sense when a number of members of his family, including his mother and sister, live on the same property and can assist him.
c)[74-77] The Appellant’s contention that he is unable to work because of his responsibilities to care for his wife is inconsistent with the evidence. The Appellant relies on a letter from the wife’s psychologist[14] which says the wife has suffered an anxiety-depressive disorder, and stress since March 2007, such that she cannot be left alone at all and needs support with everyday activities. Yet the Appellant claimed he had spent 29% of his time in the previous 12 months looking after his wife, and that his wife was quite capable of driving several kilometres in the afternoons to collect [Y] from school. The Appellant also told a Senior Case officer in November 2008 that his wife had a greater earning capacity than he did. At that stage he said his wife was working for the company on 2 days, and for another employer on 3 days.
d)[78] The Appellant’s explanation for his wife becoming a director of the company is not credible when it is evident from the company’s financial statements that the company was doing almost as well in the 2009 financial year as the 2008 financial year. There is no evidence of a significant downturn at the end of 2008.
(e)[79] It was not credible that the company would purchase [equipment omitted] for almost $23,000 in August 2008[15] after borrowing funds, but leave the [equipment] idle on the Appellant’s parents’ property, particularly when the Appellant holds a [omitted] licence and acknowledges ongoing involvement in the company, of which he remains the sole shareholder.
(f)[80] The Appellant was unable to satisfactorily explain a number of the company’s expenses in the 2009 year.
[12] At Folio 384 of appeal papers
[13] At Folio 228 of appeal papers
[14] At Folios A68 and 69
[15] At Folio A33 of appeal papers
The Tribunal concluded[16] that the Appellant was not a witness of credit, and had significantly understated his involvement in the continuing operations of [D]. I am satisfied these findings were open to the Tribunal on the evidence.
[16] At paragraph 120 of the Tribunal’s Reasons
The Appellant’s counsel contends that the Tribunal was wrong to treat expenses claimed by the company in the 2009 financial year as personal income to the Appellant. Counsel further contends that if the Tribunal had made it clear to the Appellant at the hearing that it intended to increase his child support income to $75,300 per annum by this method, the Appellant may well have sought an adjournment to enable him to provide a fuller explanation of these company expenses.
It is clear from the transcript that the Tribunal did not advise the Appellant or his legal representative that it did not accept the company expenses as legitimate business expenses, and as a consequence, it intended to calculate the Appellant’s child support income by including various expenses of the company in the 2009 financial year, as personal income to him.
The Tribunal asked the Appellant questions about the 2009 company expenses. In particular, the Tribunal noted that the profit and loss statement[17] included a substantial expense for travel and accommodation ($31,531.46), purchases ($79,436.04), materials and supplies ($20,038.59), and that the balance sheet showed an increase of $36,300 in borrowings.
[17] At Folio A25 of the appeal papers
The Appellant gave an explanation for the company’s travel expense. The Appellant told the Tribunal[18] that he had travelled to and from Thailand for business “probably from about July until September/ October [2008] until the global financial crisis occurred.”[19] He recalled approximately 8 trips of a week at a time, which he said he usually made alone, but on a “couple of trips” his wife travelled with him. He said he would meet up with people who purchased the [materials omitted], look at different [omitted] processes and visit various companies. He said sometimes the company, and sometimes his contact overseas, paid for his travel. In relation to the Appellant’s explanation, the Respondent Mother told the Tribunal that the Appellant had also travelled to and from Thailand during the 2009 calendar year. While the Appellant conceded that this was true, he said the trips in 2009 were for holidays and respite from his caring responsibilities. He denied purchasing these tickets with his own money, claiming he had relied on frequent flyer points from his sister who was a [occupation omitted].[20]
[18] Page 30 of the transcript of SSAT proceedings
[19] Page 30 of the transcript of SSAT proceedings
[20] Page 40 of the transcript of SSAT proceedings
As noted earlier, the Tribunal formed the view that the travel expense was falsely claimed by the company and was in fact, a private expense of the Appellant. The Tribunal determined to add the $31,500 to the personal income of the Appellant[21].
[21] At paragraph 80 of the Tribunal’s Reasons
The Appellant could not explain the company expense for purchases, or for materials and supplies. The Appellant told the Tribunal he would need to ask his accountant to explain them, though he believed the purchase of another [equipment omitted] would be a component[22]. He was unable to explain why the business, which he claimed had collapsed in or around October/November 2008, would buy another [omitted], except to say[23]:
…I think any business that is collapsing is going to look at investing in anything that can possibly turn things around…
[22] Page 33 of the transcript of SSAT proceedings
[23] Page 33 of the transcript of SSAT proceedings
In the absence of an explanation from the Appellant as to the nature of the expense for materials and supplies, the Tribunal concluded that the $20,000 was not a legitimate expense of the company, but rather an amount available to the Appellant for his own use. The Tribunal determined to add it to the personal income of the Appellant.
The Appellant was questioned about the purchase of a [omitted] by the company on 16 August 2008 for $22,727, and about the secured loan figure in the company accounts[24] of $60,528 which had increased to $96,828 between the 2008 and 2009 financial years. The Appellant told the Tribunal that he held a [omitted] licence and the [omitted] had been purchased to [omitted]. However, the [omitted] needed repairs before [use] and the costs of insurance and registration were prohibitive given the collapsed state of the business. The Appellant gave an explanation for the increase in the debt owed to his mother, which was not accepted by the Tribunal. The Tribunal determined to include the $36,300 difference in the company’s secured loan figures over the 2008-2009 financial years, less the $22,727 paid for the [omitted], a figure of $13,000, to the Appellant’s child support income amount.
[24] At Folio A27 of the appeal papers
The Appellant’s Counsel submits that the Appellant should be excused for being unable to adequately explain these expenses, given the company’s accountants prepared the financial statements. Counsel sought to rely on material filed in July 2010 to clarify the position, material not available to the Tribunal.
Counsel for the Respondent Mother submits that the Tribunal’s finding about the Appellant’s income is a discretionary one and a question of fact. Counsel refers to a passage from the Federal Court decision of Comcare v Moon[25] when Mansfield J said[26]:
Care must be taken not to convert questions of fact into questions of law. The tribunal moreover does not commit an error of law merely because it finds facts wrongly or upon a doubtful basis or because it adopts unsound reasoning. If there is any evidence rationally and legally capable of supporting the finding of fact, the finding of fact does not involve an error of law.
[25] [2003] FCA 569
[26] At paragraph 33
I agree with Counsel’s submission. It was one of the tasks of the Tribunal to make findings about the Appellant’s income. That decision is discretionary and one of fact. However, the issue here is not that the Tribunal made findings of fact and exercised its discretion to determine the Appellant’s income. The issue is one of procedural fairness. That is, how the Tribunal came to make those findings and thereby reach its decision.
The Appellant was represented at the hearing. He would have been aware that his financial position would be closely examined during the hearing. While the Appellant did not produce documents to verify the company expenses, neither was he asked to do so by the Tribunal. He told the Tribunal he needed to confer with his accountant to explain the expenses. I am not persuaded it was reasonable to expect the Appellant to have anticipated that the Tribunal might come to the view that the company accounts were false and that various expenses claimed by the company would therefore be treated as income available to him. It is a significant step to conclude that a company’s books are not legitimate, perhaps particularly when advised they were prepared by an accountant. The Tribunal needed to give the Appellant an opportunity to be heard on its preliminary findings. While I can have no regard to the details provided in the Appellant’s affidavit of July 2010, given it was evidence not available to the Tribunal, the existence of this affidavit in itself satisfies me that the Appellant did have additional material he would have provided to the Tribunal for consideration, had he been given the opportunity to do so. This does not mean that any such further evidence would have changed the Tribunal’s ultimate decision.
His Honour Federal Magistrate Riethmuller comprehensively addressed the requirements of procedural fairness and the nature of the Tribunal process in PJ & Child Support Registrar[27]. His Honour referred to the High Court decision of Kioa v West [28] when Gibbs CJ said[29]:
The rules of natural justice are flexible, requiring fairness in all the circumstances, including the nature of the power exercised and the statutory provisions governing its exercise: Bread Manufacturers of N.S.W. v. Evans (1981) 56 ALJR 89, at pp 94, 101; 38 ALR 93, at pp 102, 117; National Companies and Securities Commission v. The News Corporation Ltd. (1984) 58 ALJR 308, at pp 314, 318; 52 ALR 417, at pp 427-428, 434.
and to Mason J’s remarks about the importance of the statutory framework[30]:
…What is appropriate in terms of natural justice depends on the circumstances of the case and they will include, inter alia, the nature of the inquiry, the subject matter, and the rules under which the decision-maker is acting…
[27] [2007] FMCAfam 829 at paragraphs 25 to 27
[28] (1985) 159 CLR 550
[29] At 11
[30] At paragraphs 32 and 33
In this case, I am satisfied the Appellant would have known that his financial position was under the spotlight, and that his role in relation to the company would be closely examined. However, I am not satisfied that he (or his legal representative) should have known it was necessary to provide verification for each entry in the company accounts, without a request from the Tribunal. I find the Tribunal was in error in calculating the Appellant’s income by adding back various company expenses, without at least giving the Appellant the opportunity to provide documentary or other evidence he may have been in a position to access, to explain those expenses.
The appeal must therefore be allowed on this ground.
Ground 5 - Procedural fairness in relation to the period of review
As already noted, in his Notice of Appeal the Appellant states that he was not given an opportunity to be heard on the question of whether or not the decision should extend beyond December 2009.
In its Reasons for Decision, the Tribunal decided[31] to increase the Appellant’s child support income to $75,300 per annum from 1 January 2009 until 31 December 2011. The Tribunal said[32]:
The tribunal proposes to extend the departure from the assessment until 31 December 2011 to provide some certainty to the parties.
[31] At paragraph 125 of the Tribunal’s Reasons
[32] At paragraph 126 of the Tribunal’s Reasons
Counsel for the Appellant made no oral or written submissions in relation to this Ground of appeal. Counsel for the Respondent Mother submits that the appeal on this ground must fail given the decision under review covered the period 1 January 2009 to 31 December 2011. Counsel submits that the Appellant was on notice of the assessment period in issue, from December 2008, and was aware that it was open to the Tribunal to determine the same or some other period of departure. I agree with this submission.
The Tribunal has the power to determine a period of departure it considers appropriate. Section 98S(3) of the Assessment Act provides :
(3) A determination under this Division may make different provision in relation to different child support periods and in relation to different parts of a child support period.
The Tribunal applied the departure order to the same period as the period under review and the Appellant was on notice of the assessment period under review from December 2008.
I find no procedural error in the Tribunal’s approach and the appeal on this ground fails.
Ground 6 – That the Tribunal erred in the method by which it extrapolated the Appellant’s income for the future
Neither counsel made specific submissions on this Ground of Appeal. Each party’s counsel reiterated submissions made in relation to Ground 1, which I have already addressed.
Ground 7 – the Respondent Mother’s earning capacity
Counsel for the Appellant makes no oral or written submissions on this Ground.
Counsel for the Respondent Mother submits that this “is not an earning capacity case” it is a “capacity to pay case”.
At hearing, the Appellant did not question the Respondent Mother’s earning capacity. Rather the Appellant questioned the accuracy of the Agency’s finding about the Respondent Mother’s income. He challenged the Mother’s assertion that she was in receipt of a Newstart Allowance. The Appellant said he believed the Mother was supported by her partner, and worked part-time because the children receive presents from her.
The Mother said that she was in receipt of a Family Tax Benefit and another Centrelink payment which she understood was known as ‘Newstart’. She said she used lump sum amounts from Centrelink to meet some expenses and that her parents provide money for gifts for the children. She referred to a medical certificate to verify that she was unfit for work until early 2010[33]. The Mother told the Tribunal that she had stopped working in her part-time [omitted] position in June 2008 because she suffered from irritable bowel syndrome and anxiety, which has been exacerbated by court proceedings. She receives ongoing medical treatment[34]. The Tribunal questioned the Mother about her week to week expenses[35] and as to her financial arrangements with her present husband.
[33] At Folio 144 of appeal papers
[34] At page 21 of the transcript of SSAT proceedings
[35] At B9 of appeal papers
While the Appellant did not accept the Mother’s evidence, neither did he adduce any evidence to contradict her claims.
The Tribunal considered whether the Mother had an earning capacity greater than her income by considering the relevant matters in s.117(7B) of the Assessment Act. Section 117(7B) provides:
In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a)one or more of the following applies:
(i)the parent does not work despite ample opportunity to do so;
(ii)the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per work that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii)the parent has changed his or her occupation, industry or working pattern; and
(b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i)the parent’s caring responsibilities; or
(ii)the parent’s state of health; and
(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
The Tribunal accepted the Mother’s evidence that she was not working and was dependent on Centrelink benefits. The Tribunal accepted the Mother’s evidence as to the nature of her illness, on the basis of her medical certificate, and that she was unfit for work until January 2010. The Tribunal formed the view that her decision not to work was justified on the basis of her state of health[36].
[36] At paragraph 98 of the Tribunal’s Reasons
I find the Tribunal correctly identified the statutory provisions relevant to a departure application based on a parent’s earning capacity. I am satisfied the Tribunal carefully considered the evidence before it as to the Mother’s income and her capacity for work. The Appellant adduced no documentary or other evidence before the Tribunal to contradict the Mother’s evidence. Based on the unsatisfactory nature of the Appellant’s evidence as to his financial position, the Tribunal was entitled to prefer the evidence of the Respondent Mother to that of the Appellant.
This ground of appeal is not established.
Determination
As I have determined to uphold the appeal on the basis of Ground 1 of the Notice of Appeal, the appeal will be allowed.
Section 110F of the Registration and Collection Act sets out the powers of courts when determining an appeal from the Tribunal. It provides that:
The court… may make such order as it thinks appropriate by reason of its decision.
Neither party’s counsel addressed me on the orders the Court should make in the event the Appellant was successful. Given the credit findings made against the Appellant and the extent of the findings that will need to be made, I have decided the appropriate course is to remit this matter to a differently constituted Tribunal.
I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of Sexton FM
Date: 15 November 2010
Key Legal Topics
Areas of Law
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Administrative Law
Legal Concepts
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Judicial Review
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Re-hearing
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Statutory Interpretation
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