CASLEY & CASLEY

[2010] FamCAFC 109

Family Court Of Australia

CASLEY & CASLEY [2010] FamCAFC 109

FAMILY LAW - APPEAL – CHILD SUPPORT – Appeal against child support departure orders – Appeal against a decision of a Federal Magistrate – Where the SSAT made a finding that the Husband remained the owner of the company – Where the Federal Magistrate fell into error by failing to make a finding as to the ownership of the Husband’s company and its business – Where his failure to deal with the issue of ownership would affect the result – Whether the Federal Magistrate was in error in relation to his findings as to the income and earning capacity of the Husband – Where the Federal Magistrate failed to take into account certain expenses and fell into error – Where the Husband failed to produce documents – Where the Federal Magistrate gave no adequate reasons as to why he decided that the Husband had no child support income for a certain period

FAMILY LAW - REDETERMINATION – Appeal allowed – That the matter be remitted for rehearing

FAMILY LAW - COSTS – Reserved

Child Support (Assessment) Act 1989 (Cth)
Family Law Act 1975 (Cth)

APPELLANT: MS CASLEY

RESPONDENT: MR CASLEY

FILE NUMBER: DGC 1760 of 2007

APPEAL NUMBER: SA 4 of 2009

DATE DELIVERED: 18 June 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Melbourne

REASONS OF: O'Ryan J

HEARING DATE: 26 August 2009

LOWER COURT JURISDICTION: Federal Magistrates Court

LOWER COURT REASONS DATE: 17 December 2008

LOWER COURT MNC: [2008] FMCAfam 1371

Representation

THE APPELLANT: Ms Casley in Person

COUNSEL FOR THE RESPONDENT: Mr Crozier-Durham

SOLICITOR FOR THE RESPONDENT: Peninsula Law

Orders

1. The appeal be allowed.

2. The child support departure applications be remitted for rehearing before a Federal Magistrate other than Federal Magistrate Phipps.

3. Each party be at liberty to make an application by way of written submissions in respect of costs incurred in relation to the appeal by the Appellant by filing such submissions at the Southern Region Appeal Registry of the Family Court of Australia and serving them on the other parties within 28 days of the date hereof.

4. Each party have a further 14 days in which to make written submissions in answer thereto by filing such submissions at the Southern Region Appeal Registry of the Family Court of Australia and serving them on the other parties.

5. Each party be at liberty to reply to an answer by way of written submissions by filing such reply at the Southern Region Appeal Registry of the Family Court of Australia and serving it on the other parties within a further seven days.

6. Each party endorse on the cover sheet of any submissions filed pursuant to orders 3, 4 and 5, the date upon which a copy of that submission was served on the other parties.

IT IS NOTED that publication of this reasons under the pseudonym Casley & Casley is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA
AT MELBOURNE

Appeal Number:       SA 4 of 2009
File Number:            DGC 1760 of 2007

MS CASLEY

Appellant

And

MR CASLEY

Respondent

Reasons For Judgment

Introduction

1. This is an appeal by Ms Casley (“the Wife”) against child support departure orders made by Federal Magistrate Phipps on 17 December 2008.  On that day the Federal Magistrate delivered reasons for judgment in proceedings relating to property settlement and child support.  The Respondent is Mr Casley (“the Husband”).

2. On 5 February 2009 the Chief Justice made an order pursuant to s 94AAA(3) of the Family Law Act 1975 (Cth) (“the Act”) that it was appropriate for the jurisdiction of the Family Court in relation to the appeal to be exercised by a singe Judge.

3. Unfortunately, the child support proceedings have been on foot since at least early 2006.  It is regrettable that there has been a considerable delay since the hearing before me in August 2009 and the delivery of these reasons for judgment.  The child support proceedings have been before a Senior Officer and Objections Officer of the Child Support Agency and also the Social Security Appeals Tribunal (“the Tribunal”).

Background

1. The Husband was born in November 1965.  The Wife was born in April 1966. 

2. The parties were married in December 1996.  

3. There are three children of the marriage, twins X and Y born in late 1997 and Z born in mid 2002.  Final parenting orders were made on 8 May 2008.

4. At the commencement of the relationship the Husband worked as a self employed sub contractor making collections and deliveries for a firm called LPH Pty Ltd.   

5. At the commencement of the marriage the parties purchased a property at R.  The Federal Magistrate said at [9] that the Husband contended that he contributed $15,000 towards the purchase and that he had accumulated approximately $12,000 of superannuation prior to the marriage.  Throughout the marriage the Wife worked as a secondary school teacher.

6. In about May 2000 the Husband commenced a concreting business.  He used a company called A Pty Ltd (“the company”) to own and conduct the business.  

7. It will be seen shortly that there were child support proceedings in the Tribunal.  I observe that in reasons for decision of the Tribunal given on 31 August 2007 it was said at paragraph 24:

   It is common ground between the parties that [the Husband] worked full time as a truck driver early on in their relationship.  However, in about May 2000 [the Husband] started his own business, [A Pty Ltd], in order to start concreting.  [The Wife’s] evidence, which was not disputed by [the Husband], was that cash income was used by the parties to pay for holidays or other expenses incurred by the family.  The business provided [the Husband and the Wife] with company maintained vehicles, reduced telephone and other household costs (claimed as “home office expenses”) as well as enabling them to acquire a number of properties.  [The Wife’s] evidence, which was not disputed by [the Husband], was that the business paid for their needs and wants, such as new clothing each season for the children and [the Wife’s] study costs (kinesiology, massage).  In addition [the Wife] referred to the family eating out quite often, as well as the costs of [the Husband’s] alcohol and cigarettes.

   A copy of the reasons for decision of the Tribunal are attached to the affidavit of the Wife sworn 25 March 2008. 

8. By 2004 the parties had two properties in southeast Victoria, one in S and the matrimonial home at N.  

9. The parties separated under the one roof in August or September 2004.

10. Between August 2004 and December 2004 the Wife withdrew $18,290 in various amounts from a bank account of A Pty Ltd.  There was an issue as to what the Wife did with these funds.  The Husband alleged the money was used by the Wife to fund the costs of her trips to the United States of America.  The Wife said that this was not the case and that she used an amount of $36,000 she received from the proceeds of sale of the S property.  The Federal Magistrate observed at [16] that the Wife contended “that the way family accounts were dealt with was that she paid everything.  The husband’s business bills, telephone, mobile phone and family expenses were paid with her credit card and that she then payed [sic] the credit card account from the business account”.

11. The Federal Magistrate observed at [15] that the “parties’ finances were run jointly until 27 December 2004”.  The Federal Magistrate observed at [17]: “For instance, she says her wage from teaching at school continued to go into the account, the last one about 16 December 2004”.

12. The Wife left the matrimonial home on 27 December 2004.

13. In late 2004 the S property was sold for a price of $211,000 with settlement on 5 January 2005. 

14. The parties reached an informal agreement about distribution of the proceeds of the sale of the S property which included that $85,903 be paid to the Wife.  The Wife received $36,903 from the proceeds of sale of the S property and $49,000 by a payment from the Husband which amount he contended he borrowed from his parents.  The Husband retained the matrimonial home.

15. I observe that in paragraph 14 of the reasons of the Tribunal it was said that the Husband borrowed $100,000 against the title of the home of his parents and from this amount he paid $50,000 to the Wife.

16. The Federal Magistrate set out at [13] to [26] what he described as “[t]he amount each received from sale of property and bank accounts”.

17. The Federal Magistrate said at [13] that the balance of the proceeds of sale of the S property was disbursed to pay debts of the Husband’s concreting business, in the amounts of $6,941 to [   ] Concrete and $4,278.10 to [   ] Sand and Soil.  An amount of $4,000 was applied to pay the children’s school fees at G School.  The amount of $36,803.33 was paid to the Wife as noted above.  

18. The Federal Magistrate said at [15] that the parties were in dispute as to what happened to the balance of the deposit of $10,105 of which a part of the agent’s commission was paid out of that amount.  The Husband contended that the balance was paid to the Wife.  The Wife said she did not receive it.  The Federal Magistrate said at [15] that “[n]o record of payment from the agent, who would have received the commission, was produced” and that “[a]n account from the agent of the receipt and disbursement of the deposit would have been sent to the parties”.  The Federal Magistrate said that it was probable that this happened prior to 27 December 2004, at a time when the parties’ finances were still being conducted jointly, “and that the balance went into the joint account and was part of the $20,000 that the Wife withdrew in December 2004 and January 2005 or was used for various family expenses”.  The Federal Magistrate found that this was “not a separate amount that the wife received”.  

19. In relation to the controversy as to what the Wife did with the amount of $18,290 she withdrew in various amounts from the bank account of A Pty Ltd between August 2004 and December 2004, the Federal Magistrate came to the conclusion at [18] that the amount should not be notionally included in the list of assets.  He said:

    The wife’s evidence that the money was used to pay off the credit card amounts from time to time is consistent with the documents.  That does not decide the issue.  She might still have used it solely for her own purposes.  However, the husband makes no more than an assertion that the wife used the money to go to the United States.  The wife’s evidence has some backing from the documents in the pattern of withdrawals.  I do not consider that it should be treated as part of the matrimonial property.  In any event, the conclusion I have reached means that this issue does not affect the result.  The husband’s proposal is that there should be no order for property, including superannuation, other than that each party retain what they have.  The $20,000 would be treated as an amount which the wife has already received.  It would only improve her position.

20. In February 2006 the Wife applied for child support.

21. The Federal Magistrate said at [32] that “[i]n early 2006 [the Husband] decided to start a business called [K].  The business was that of providing … education to children in primary schools.  [A Pty Ltd] purchased [equipment] and a truck for the transport of the [equipment]”.  I observe that in the reasons for decision of the Tribunal it was said at paragraph 26 that during the marriage the Husband started to develop the … school business and that it was owned by A Pty Ltd.

22. For the period 3 May 2006 to 2 August 2007 the Husband was assessed to pay child support of $5,305 per annum based on a child support income of $30,560, which was based on his 2004/2005 taxable income, multiplied by the inflation factor for that period.

23. On 7 June 2006 the parties were granted a divorce.

24. In 2006 the Husband’s partner, Ms W, lent $30,000 to the business She had received $50,000 from a property settlement with her former husband.  I observe that in the reasons for decision of the Tribunal it was said at paragraph 26 that “in order to start the [school business]” the Husband borrowed $30,000 from Ms W.

25. In the reasons for decision of the Tribunal it was said at paragraph 28 that according to the financial documents of A Pty Ltd supplied by the Husband with respect to the 2005/2006 financial year, the total income was $175,817 and that the Husband’s evidence was that the gross income was generated by concreting work and K had not earned an income in that financial year.  The cost of sales for A Pty Ltd was $87,787, depreciation expenses were $19,236, motor vehicle costs were $12,880 and there were other expenses of $82,146 such that overall the business made a loss of $27,004.  It was said that the Husband’s taxable income for the year was $29,700 which included his director’s salary from A Pty Ltd.

26. On 11 October 2006 the Wife applied for an increase in child support relying on the cost of privately educating the children and the Husband’s income, and capacity, property and financial resources.  The Wife requested an increase to $11,637 per annum plus half the cost of childcare and half the cost of school fees. 

27. In October 2006 the former matrimonial home was sold for $367,500.  The Federal Magistrate said at [12] that ‘[t]he husband was unable to keep up payments on [the property] and sold it for $367,500 in October 2006 with settlement in March 2007”.

28. On 27 November 2006 a senior case officer of the Child Support Agency found grounds for departure from the child support assessment and decided that from 1 January 2007 to 31 December 2008 the child support would be based on a child support income of $35,560.  It was considered appropriate to increase the annual rate of child support by $13,974 per annum to reflect half the costs of the children’s private schooling.

29. It was found by the senior case officer of the Child Support Agency that in the special circumstances of the case the Husband’s income, property and financial resources were not properly reflected in the administrative assessment.  It was found that the income used in the administrative assessment was too low as the Husband operated his own business.  It was also found that the cost of privately educating the children significantly affected the costs of maintaining them, warranting an increase in the level of child support.

30. On 19 December 2006 the Husband objected to this determination of the Child Support Agency and appealed the decision.

31. In March 2007 on completion of the sale of the former matrimonial home, after expenses relating to the sale were taken out by the real estate agent from the deposit of $36,750, an amount of $25,285 was paid to the Husband.  The Husband contended that on 24 October 2006 he deposited this amount into a bank account in the name of his parents.  The Federal Magistrate observed at [20] that “[a] statement of account from [C] Pty Ltd shows what happened to the balance”.  The statement was dated 11 March 2007.  The Federal Magistrate observed at [20] that “[a]fter discharging the bank mortgage and various expenses the husband received $24,578.98”.  In total the Husband received $49,863.98 from the proceeds of sale of the property.

32. I observe that in the reasons for decision of the Tribunal it was said a paragraph 14 that the Husband said that he still owes approximately $55,000 with respect to “his parents’ mortgage”.

33. As to the what the Husband did with the amount of $49,863.98 the Federal Magistrate said:

    21.    The wife's argument is that the two amounts totalling $49,863.98 should be treated as property received by the husband and added back to become part of the property pool.  That may be correct, but they need to be offset against the money the husband borrowed from his parents to pay $49,000 to the wife in January 2005.  The husband says that he borrowed more from his parents after that, so that in March 2007 his debt was greater.  Even if that is not correct, at least the amount of $49,000 has to be taken into account if the amount of $49,863.98 is to be treated as part of the matrimonial property pool.  The two cancel each other out.

    22.    Not all documents were available, but the balance of the deposit, $25,285 was paid into a Commonwealth Net Bank account with a credit balance.  The husband says this was his parents and it was in credit because they had borrowed money so that they could make it available to him.  The account shows regular payments of $612.93 on the first of each month to RAMS Mortgage Co.  I see no reason to disbelieve the husband.

    23.    Wherever the money from [the former matrimonial home] was deposited, there is no doubt that the husband borrowed $49,000 from his parents to make the earlier payment to the wife.  The husband says it was a loan not a gift, and again, I see no reason to doubt his evidence.

34. On 1 March 2007 an objections officer at the Child Support Agency made a determination which resulted in an income amount of $57,905 being determined for the period of 1 January 2007 to 31 December 2007.  The objections officer found that the Husband’s income, property and financial resources were not reflected in the administrative assessment and that a reason to change the assessment was established.  The objections officer also found that the cost of caring for and educating the children as intended by the parents significantly affected the costs of maintaining them.  However, the objections officer did not agree with the variation made by the senior case officer.  Considering the benefits available to the Husband from his business, the objections officer considered that the Husband was more appropriately assessed upon a child support income amount of $57,905 and did not consider that the Husband could afford to pay an additional amount of child support in view of the costs of the children’s private education.  The objections officer acknowledged that the decision would place the financial burden for the majority of the children’s expenses on the Wife but found that the Husband did not have the further financial resources available to him with which to provide any additional support.

35. On 23 March 2007 both the Husband and the Wife appealed to the Tribunal against the decision of the Child Support Agency objections officer.

36. The Husband and Ms W contended that in 2007 the business was doing very badly and the Husband considered liquidating it.  The Federal Magistrate said at [34] that “[s]o that she would not lose her $30,000, Ms [W] took over the business, that is, she became the sole director and shareholder”.

37. I observe that in the reasons for decision of the Tribunal it was said at paragraph 36 that the Husband and Ms W “could not produce any written evidence of their ‘agreement’ as to the transfer of [A Pty Ltd]”. 

38. On 1 May 2007 the Husband filed an application in the Federal Magistrates Court at Dandenong. 

39. In the reasons for decision of the Tribunal it was said at paragraph 29 that according to the financial documents of A Pty Ltd supplied by the Husband with respect to the 2006/2007 financial year, the total trading income was $67,326.18.  This was generated by concreting work.  Purchases for the year total $44,698.76 leaving a gross profit from trading of $22,627.42.  It was said that expenses of $66,893.75 were deducted resulting in a loss for the business of $42,390.87.  It was also said that the expenses included accountancy costs of $6,825.08, advertising of $3,900.30, plant depreciation of $20,573 and other expenses of $1,911.89.  There were also motor vehicle related costs of approximately $11,500, telephone costs of $4,245.79 and superannuation of $1,800.

40. I also observe that in the reasons for decision of the Tribunal at paragraph 30 it was said that the profit and loss statement for K for the 2006/2007 financial year had an indicated income of $20,540.96 while the expenses for the business were $43,916 including depreciation of $11,396, motor vehicle costs including fuel, oil and repairs as well as interest on a loan of $2040.28 and interest on a truck of $6,099.40.

1. I also observe that in the reasons for decision of the Tribunal it was said at paragraph 31 that perusing the bank statements for A Pty Ltd the Tribunal was satisfied that a number of personal expenses were met “via the business”.  It was recorded that the Tribunal discussed a number of the expenses referred to in the bank statements with the Husband and Ms W being … Liquorworks, True Energy Electric, AGL Sales, South East Water and Telstra bills and even a payment to G School.  The Tribunal said that it was clearly open to the Husband and Ms W to claim a portion of some of these expenses for taxation purposes but it was apparent that a number of personal expenses have also been “met via the business”. 

2. The Tribunal also observed at paragraph 32 of its reasons that the Husband had a nil taxable income for the 2006/2007 financial year, even though “his evidence was that he did have a number of jobs during the financial year”.  The Husband gave evidence that he performed concreting work, attended a number of fetes and fairs with the equipment and performed “jobs at schools”.  In addition the Husband said that “he took on truck driving work earlier in 2007, to generate income to meet the outgoings related to the business”.  The Tribunal observed at paragraph 33 that in a written response completed by the Husband on 15 November 2006 for the purpose of the Wife’s change of assessment application, the Husband referred to an income of $30,000 per annum gross.  The Tribunal noted that the nil taxable income of the Husband for the 2006/2007 financial year was inconsistent with the income of $30,000 per annum referred to in the November 2006 statement.  Further, the Tribunal observed that the Husband’s expenditure was inconsistent with a nil taxable income.

3. The Husband and Ms W contended that as from 1 July 2007 Ms W became the sole director, secretary and shareholder of A Pty Ltd.  The Tribunal found that this was “on paper” and that “in reality [the Husband] in fact [remained] the true owner of the business”: see paragraph 56 of the reasons for decision of the Tribunal. 

4. On 7 August 2007 the Tribunal heard the appeals against the March 2007 decision of the Child Support Agency objections officer.  On 31 August 2007 the Tribunal affirmed the decision under review. 

5. It is instructive to read the reasons for decision of the Tribunal.  For the purposes of the hearing there were two members of the Tribunal presiding.  The hearing before the Tribunal was on 7 August 2007.  On 31 August 2007 the Tribunal affirmed the decision under review deeming the appeals unsuccessful.  The Tribunal appears to have provided the reasons on about 13 September 2007.  The reasons comprise 33 pages.  In my view, the reasons are comprehensive and provide a considerable amount of relevant information.  It is also apparent that the evidence before the Tribunal was comprehensive.  The process of the reasoning of the Tribunal is readily discernable. 

6. In the reasons for decision the Tribunal said at paragraph 56 that to determine the Husband’s “true income and capacity to support the children, the Tribunal may have regard to the income/benefits and financial resources available to [the Husband] via [A Pty Ltd] and [K]”.  As I have already observed, the Tribunal said that “in reality [the Husband] in fact remains the true owner of the business.  [The Husband] remains the primary income earner for the business and the effective owner of [A Pty Ltd] and [K]”.  The Tribunal also said at paragraph 58 that of the expenses claimed in the business, it was satisfied that it was appropriate

   to ‘add back’ a number of those claimed as income or financial resources available to [the Husband].  With respect to depreciation claimed, it needs to be borne in mind that such expense is, essentially a deduction allowed under the Income Tax Assessment Act for the capital cost to a taxpayer in purchasing items to be used in income producing processes, that the deduction is to be spread out over the assumed life of the item.  Amounts claimed for depreciation do not, therefore, usually represent monies physically expended by the business in the year in which they are claimed, and it is usually appropriate to add back a significant proportion of the amount clamed under this heading.

7. The Tribunal also said at paragraph 59 of its’ reasons that there was nothing in the financial statements presented by the Husband which indicated that provision had been made for the replacement of depreciated assets and consequently the Tribunal was satisfied “that funds noted in the financial documents for ‘depreciation’ were in fact available to [the Husband] for his use (ie $22,484.00 for [A Pty Ltd] and $11,396.00 for [K] in 2006/2007)”.

8. The Tribunal also said at paragraph 60 of its reasons that it noted that the Husband did not have to maintain his vehicle out of his after tax income as his vehicles were maintained out of the company income and that this was clearly a benefit to him which was not available “to Pay As You Go employees.  He does not have to supply and maintain a vehicle out of his own after tax income.  This is a benefit which is relevant for child support purposes”.

9. The Tribunal also said at paragraph 61 of its reasons that it considered it appropriate that the personal benefit to the Husband of the payment by the company of his telephone costs should be taken into account as well as payment of various other personal expenses which were detailed in the bank statements of A Pty Ltd.  The Tribunal said at paragraph 62 that it was satisfied that the Husband or others benefitted from the payment of personal expenses by A Pty Ltd and referred to the payments that it had identified in paragraph 30 of the reasons for decision.

10. In the reasons for decision the Tribunal said at paragraph 63 that on balance it was satisfied that the true income, financial resources and benefits available to the Husband as a result of the operation of his “own businesses being A Pty Ltd and [K] are not accurately reflected in a child support income amount of $30,560.00 for [the Husband], as reflected in the formula assessment for the period 3 May 2006 to 2 August 2007”.  The Tribunal was therefore satisfied that grounds for departure had been established and it then had to consider whether it was just and equitable to depart from the assessment. 

11. The Tribunal said at paragraph 73 of its’ reasons that based on the evidence presented to the Tribunal, the Husband’s true income and financial income and financial resources from his two businesses included his wage of $30,000, the adding back of depreciation of approximately $20,000, the provision of a company car attributing a value of approximately $6,000 and the contribution to the Husband’s personal expenses on both businesses for which the Tribunal attributed a value of approximately $2,000 per annum. 

12. In relation to the amount of $20,000 for depreciation, the Tribunal observed at paragraph 73 of its’ reasons that although the Husband’s financial documents for the 2006/2007 financial year may have reflected a claim for depreciation which exceeded $20,000 for both A Pty Ltd and K combined, the Tribunal “also notes that the losses associated with the businesses increased from 2005/2006 to 2006/2007.  Therefore, the Tribunal considers that it is fair to add back a figure of $20,000 for the depreciation claimed as a financial resource available to [the Husband]”.  The total amount claimed for depreciation in the 2006/2007 financial year was $33,880 being $22,484 for A Pty Ltd and $11,396 for K

13. The Tribunal also observed at paragraph 73 of its reasons, that taking into account the expenses claimed by the Husband in a statement of financial circumstances, the Tribunal was satisfied that the Husband would have the capacity to contribute a much higher rate of child support than he was assessed to pay by the administrative assessment of child support.  The Tribunal was of the view that considering all of the benefits provided to the Husband as a result of the operation of his businesses, an income of $57,905 would be fair in all the circumstances.

14. I also observe that at paragraph 64 of its reasons the Tribunal found that the Husband acknowledged that “given his skills, qualifications and experience an income of $500.00 per week gross is much less that he could potentially earn either as a truck driver or a concreter”.

15. The Federal Magistrate said:

    46.    The tribunal, having decided that the husband was the effective owner of the business decided that the senior case officer’s approach was the correct one.  The tribunal decided that the depreciation in [A Pty Ltd] account should be added back as money which was available to the husband.  They relied on the principle that the taxable income of a parent who is self-employed may not be an accurate reflection of the earning capacity and financial resources.  They decided that there was no evidence the husband was putting aside money for replacement of any vehicles and equipment represented by the depreciation, and so that money was available to him and added that to the $30,000 he was being paid as a salary by the business.

    47.    The tribunal relied on the [A Pty Ltd] financial documents.  The 2005/2006 year showed a gross income of $175,817, cost of sales was $87,797, depreciation $19,236, motor vehicle cost $12,888 and all other expenses $82,146.  The business made a loss of $27,004.  The husband’s taxable income was $29,700.

    48.    According to the tribunal the 2006/2007 accounts show a total trading income of $67,326.19.  Purchases for the year totalled $44,698.76.  Gross profit from trading was $22,627.42 to which the tribunal added FBT employee contributions of $1,875.46 to make a total of $24,627.42.  Expenses of $66,893.75 resulted in a loss of $42,390.97.  Expenses included accountancy costs, $6,825, advertising, $3900.30, depreciation $20,573 (plant) and $1,911.99 (other), motor vehicle related costs approximately $11,500, telephone, $4,245.79 and superannuation $1,900.

    49.    The tribunal reached its decision by adding to the husband’s salary of $30,000, $20,000 for depreciation and $6,000 for personal car expenses paid by the company.  This produced a child support assessment income of $57,905.

16. In October 2007 Ms W’s son sustained injuries in a motor vehicle accident.

17. By letter dated 20 February 2008 the Child Support Agency advised the Wife that in the period 3 January 2007 to 31 December 2007 the Husband made only one payment of child support, namely, an amount of $246.91.  Thus in this period the Husband accumulated arrears of child support of $13,354.79.

18. Although it is not entirely clear precisely when it occurred, at the beginning of 2008 a child support assessment was issued which provided that for the period 1 January 2008 to 31 December 2008 the assessment was nil.  It will be recalled that the Tribunal affirmed the decision that an income amount of $57,905 be determined for the period of 1 January 2007 to 31 December 2007. 

19. On 13 March 2008 an amended response was filed on behalf of the Mother.  On 23 April 2008 a further amended application was filed on behalf of the Father.  Both parties sought a child support assessment departure order.

20. On 7 May 2008 the hearing commenced before the Federal Magistrate.  At the commencement of the hearing counsel for the Mother informed the Federal Magistrate that the Mother sought child support based on a child support income of $58,000 increased by the CPI for the next three years commencing 1 January 2008 and withdrew her application concerning the arrears (Transcript, 8 May 2008, p 24).  Counsel for the Mother also said that given foreshadowed changes to the way the child support was calculated the Wife was only seeking that the annual child support income amount for the Husband be determined and not the rate of child support to be paid.

21. On 8 May 2008 final parenting orders were made by consent.  The children live with the Husband during school term each alternate Wednesday from the conclusion of school to commencement of school the following Monday or Tuesday if Monday is a holiday.  They spend half of holidays with the Husband and provision is made for Christmas Day, birthdays, Father’s Day and telephone communication.  Thus, during the school term in each 14 day period the children spend five nights with the Husband.

22. The hearing before the Federal Magistrate was adjourned part heard to 18 June 2008 and on that day judgment was reserved.

23. I observe that on 18 June 2008 the Husband gave evidence during cross-examination that the only source of income was the courier business and there was no income from the K business (Transcript, 18 June 2008, p 90).

24. On 17 December 2008 the Federal Magistrate delivered reasons for judgment and made the following orders:

    1.     THAT the husband is declared to have the sole interest in the shareholders loan account in the names of [Mr & Ms Casley] with [A Pty Ltd]

    2.     THAT otherwise each party is declared to have no interest in items of property in the possession of the other and superannuation in the name of the other.

    3.     THAT there is departure from administrative assessment of child support for [X] born [   ] 1997, [Y] born [   ] 1997 and [Z] born [   ] 2002 payable by the applicant [Mr Casley] to the respondent [Ms Casley];

    a)For all periods up to 17 December 2008 the child support income of the liable parent is varied so that the arrears of child support, after taking into account all amounts paid by the liable parent up to 17 December 2008 is nil;

    b)From 17 December 2008 to 31 December 2009 the child support income of the liable parent is varied to $30,000.

25. On 14 January 2009 the Wife filed a notice of appeal.  On 6 February 2009 the Wife filed an amended notice of appeal.

26. On 26 March 2009 the appeal was first listed before me and I made the following orders:

    1.     The matter be adjourned for procedural directions before me at 10:00 am on Thursday 14 May 2009.

    2.     The Respondent Husband’s costs of and incidental to these proceedings be reserved.

    3.     I note that the matter has been adjourned to enable the Appellant to obtain legal advice which she advises will be available within six weeks.

27. The matter did not proceed on the adjourned date of 14 May 2009 as the Wife had not had her application for Legal Aid processed by that date and the matter was adjourned by consent to 15 July 2009.

28. On 14 July 2009 the Wife filed a further amended notice of appeal.  The Wife attached a sworn affidavit, the reasons of the Federal Magistrate; Grounds of Appeal; and orders sought.

29. On 15 July 2009 the matter came before me for further mention and I made the following directions:

    1.     The appeal be listed before me for hearing at 10:00 am on Wednesday 26 August 2009.

    2.     It be noted that the Appellant has filed an amended Notice of Appeal.

    3.     It be noted that the Appellant has filed a list of the documents that were before the Federal Magistrate upon which the Appellant seeks to rely.

    4.     On or before 4.00 pm on Friday 31 July 2009 the Appellant obtain those parts of the transcript of evidence of the hearing before the Federal Magistrate which may be relevant to the appeal and provide copies of such transcript to the Court and to the Respondent.

    5.     On or before 4.00 pm on Friday 31 July 2009 the Appellant file and serve a written summary of argument and list of authorities (if any).

    6.     On or before 4.00 pm on Friday 31 July 2009 the Appellant file and serve any application to lead further evidence and any material in support thereof.

    7.     On or before 4.00 pm on Friday 14 August 2009 the Respondent file and serve a list of any further documents that were before the Federal Magistrate, not included in the Appellant’s list, upon which she seeks to rely, together with a written summary of argument and a list of authorities (if any).

    8.     On or before 4.00 pm on Friday 14 August 2009 the Respondent file an serve any application to lead further evidence and any material in support.

    9.     The costs of today’s proceedings be reserved.

    10.    It be noted that the Respondent proposes to make an application for summary dismissal of the appeal.

    11.    It be noted that the Respondent had also proposed to make an application for security for costs, however for reasons for which have been indicated during discussion, I have listed the matter for hearing on the date specified.

30. On 26 August 2009 the appeal came before me for hearing.  The Wife was unrepresented and the Husband was represented by counsel.

The Reasons Of The Federal Magistrate

1. The Federal Magistrate at [1] noted that the parties disagreed about property settlement, superannuation split and the assessment of the Husband’s income for child support.  At [2] the Federal Magistrate said that “[t]he specific issues” were “[t]he amount each received from sale of property and bank accounts” and the “husband’s income for child support assessment”. 

2. At [3] the Federal Magistrate made a reference to the approach to be taken in relation to the applications for property settlement and at [4] observed that both parties had applied for child support departure orders and that both parties accepted the Court’s jurisdiction under s 116(1)(b) of the Child Support (Assessment) Act 1989 (Cth).

3. The Federal Magistrate then at [5] to [12] discussed the “Background”.  In the course of doing so the Federal Magistrate made findings in relation to whether certain amounts should be included in the list of assets. 

4. As I have already observed the Federal Magistrate determined at [18] that the amount of $18,290 withdrawn by the Wife from a bank account of A Pty Ltd should not be included.

5. As I have also observed the Federal Magistrate appears to have found that he would not include the amount of $49,863.98 received by the Husband from the proceeds of sale of the former matrimonial home because the Husband owed $49,000 to his parents.

6. The Federal Magistrate then at [24] dealt with loan accounts with A Pty Ltd in the name Mr & Ms Casley of about $23,000.  It is difficult to understand what the Federal Magistrate was endeavouring to explain and thus I will simply repeat what he said:

   24.    .. The inference is that it represents dividends not payed [sic] at various times during the course of the marriage.  The wife says they should be treated as property in the hands of the husband.  The accounts of [A Pty Ltd] are described below under child support.  [A Pty Ltd] does not have the funds to pay out the loans or the ability to borrow money.  As appears below the husband’s partner, now the sole director and shareholder, believes the business will be able to pay its current obligations.  They will conclude in 2011.  She then hopes to start recovering the $30,000 she has invested.  If the $23,000 is repaid it will be well after 2011.

   25.    The loan account needs to be dealt with to achieve financial finality between the parties.  Financial finality can be achieved by a declaration that the wife have no further interest in any amount owed to the parties by the company.  That means it all becomes the property of the husband.  It needs to be valued.

   26.    The husband almost certainly will never require repayment.  That may be because the company will never be able to repay.  That is one contingency.  If the loan bears interest the rate is not known.  It must be discounted for future payment even if I assume it will be repaid.  The time of any repayment is uncertain.  I will value the loan by discounting it by 50%, so $11,500.

7. I observe that no attempt was made by the Federal Magistrate to value the issued capital of A Pty Ltd or its business and assets. 

8. The Federal Magistrate provided no reasons as to why he discounted by 50 per cent the value of the debt owed to the Husband and the Wife by A Pty Ltd.  I also observe that it was not made clear how the amount of $23,000 was made up.  For example, it was not clear if it included the payments of $6,941 and $4,278 that were made for the benefit of the company from the proceeds of sale of the S property.

1. Then, under a heading “Conclusion about property” the Federal Magistrate made a finding in relation to the net assets of the parties.  He said:

   27.    The consequence is that the matrimonial property pool is the money that has been paid to the wife, the amounts the husband received from the sale of [the former matrimonial home] less the money he borrowed from his parents, the discounted loan, superannuation, cars, the husband’s boat and chattels.  The wife's superannuation is $11,000 and the husband's $51,000.  The wife has received $85,903.

   28.    The parties divided the chattels.  They differ about valuations, but there is no expert valuation.  The furniture and chattels were divided as agreed except that the wife was not given a refrigerator.  Subsequently the husband gave her $800.  The wife says that the refrigerator was purchased for $2,000.  The husband has a boat, a car, and various tools.  The parties differ about valuations, but again there is no expert valuation.

   29.    Leaving aside the cars, boat and chattels, the wife has $96,903 including superannuation.  The husband has $62,000.  The total is $158,903.  That is about a 61/39% division.

2. The Federal Magistrate never explained how he arrived at the amount of $62,000.  In fact, he never clearly explained what the net assets of the parties were.

3. The Federal Magistrate then at [30] made a finding in relation to “Contributions” and said they “are about equal, although possibly there could be a slight adjustment in favour of the husband for initial contribution”.  The Federal Magistrate provided no reasons for this finding.  For example, he made no finding in relation to the Wife’s significant contribution to the care and support of the children after the separation of the parties.

4. The Federal Magistrate at [30] also made a finding in relation to the matters in s 75(2) of the Act and said “[a]djustment for s.75(2) of the [Act] matters could be no more than 15% in the wife’s favour”. Again, the Federal Magistrate, in my opinion, gave no reason for this finding. He failed to identify any of the relevant statutory considerations and how he arrived at the percentage adjustment to be made in favour of the Wife.

5. The Federal Magistrate concluded at [31] his consideration of the property settlement applications as follows: “The wife received payment almost 4 years ago.  The husband has no capital amount.  In these circumstances the division of property which will be achieved by giving the husband sole interest in the company loan and otherwise leaving each with what they have; including superannuation is just and equitable”.

6. In summary, the Federal Magistrate made a finding that the contribution based entitlement of each party expressed as a percentage of the net assets of the parties was about equal. He then made a finding that having regard to the other matters, including the matters in s 75(2) of the Act, an adjustment in favour of the Wife could be made, although the percentage entitlement would be no more than 15 per cent in her favour. However, according to what the Federal Magistrate said at [29], on the basis that he made a finding that the parties had net assets of $158,903, then the Wife received an entitlement representing 61 per cent and the Husband received an entitlement of 39 per cent. The Wife has not appealed against the judgment of the Federal Magistrate in relation to property settlement and thus what I have said in relation to the reasons of the Federal Magistrate is only relevant to my consideration of the process of reasoning of the Federal Magistrate in both the property settlement and child support proceedings. The two proceedings were related because the Federal Magistrate, in dealing with the property settlement applications, should have taken into account his findings in relation to the child support proceedings. In my view, this is self evident because, for example, the effect of the order of the Federal Magistrate that there be no arrears paid meant that the Husband had not for a significant period made a contribution to the support of the children except during periods when they were in his care and the Wife made a significantly greater contribution. As well, in assessing the future it would be relevant to take into account that having regard to the order the Federal Magistrate made in respect of the child support variation to the administrative assessment the Wife would continue to have greater responsibility for the care and support of the children.

7. The Federal Magistrate then proceeded to deal with the Child Support applications.  At [32] to [34] the Federal Magistrate set out the very brief history of the business called K which I have already referred to and said at [35]: “The wife’s case is, both for the purpose of the property settlement and the child support departure order, that the husband is the true owner of [A Pty Ltd] and [K].  This was the conclusion reached by the Social Security Appeals Tribunal”.  I observe that the Federal Magistrate did not deal with the issue of ownership of A Pty Ltd and K when dealing with the applications for property settlement.

8. In any event, the Federal Magistrate then dealt with the truck and “[equipment]” owned by A Pty Ltd and said:

   36.    The truck owned by [A Pty Ltd] is leased.  The lease cost is $1179 a month until 2011.  The [equipment is] financed by two loans one with repayments of $592.56 until 2011 and the other with payments of $458.69 until May 2011.  The total monthly repayment is over $2,000.

   37.    Little money is made through use of the [equipment].  The truck is now used for casual cartage.  For a while it was moving poker machines, but it was not entirely suitable because it does not have a hoist.  Now it is used in the delivery of wine and spirits.

9. The Federal Magistrate then moved onto another topic and said at [38] that Ms W was employed as a hairdresser.  He said that her time is taken up in caring for her son who in October 2007 was seriously injured in a motor vehicle accident.  He concluded: “Her income consists off carers allowance from the Transport Accident Commission and Centrelink payments”.  At the time of the hearing before the Tribunal, Ms W was employed as a hairdresser: see paragraph 37 of the reasons of the Tribunal.  I also observe that in evidence in chief on 18 June 2008 Ms W gave evidence that she does do some work as a hairdresser for which she obtains some financial gain (Transcript, 18 June 2008, p 118).  This evidence was not referred to by the Federal Magistrate.

10. As to the income of the Husband the Federal Magistrate said at [39] that he is employed to drive the truck and is paid a wage of about $500 gross a week.  The Federal Magistrate observed that in his financial statement the Husband said that the wage is $494 a week.

11. The Federal Magistrate, after observing at [40] that the Tribunal considered the Husband “the sole income earner in the business and so the effective owner”, said at [41]: “Whether [Ms W] is the effective owner or the husband does not, given the conclusion I have reached, affect the result”.

12. The Federal Magistrate then at [42] to [49] set out the history of the child support proceedings, which I have already described, and the findings in relation to how the Tribunal concluded a child support assessment income of $57,905, namely, “by adding to the husband’s salary of $30,000, $20,000 for depreciation and $6,000 for personal car expenses paid by the company.” 

13. The Federal Magistrate then said:

    50.    The flaw in this assessment is that it does not take into account the losses the company suffered.  The allowance for depreciation in the accounts was not money which was available to the husband or his partner.  For the 2006/2007 year the company made a loss of $42,390.97.  If $26,000 is deducted there is still a loss of about $16,000.  The depreciation allowance is not money otherwise available to the husband or his partner.  In reality it has been spent on other expenses for the company.

    I note that the amount the Tribunal allowed for depreciation was $20,000 and not $26,000.  Further, the amounts the Federal Magistrate identified come to a total of $56,000.  In any event, the Federal Magistrate was of the view that it was wrong to include in the assessment of the Husband’s income the amount of $20,000 for depreciation.

14. The Federal Magistrate then dealt with the contention of the Wife in relation to the receipt by the Husband of undisclosed earnings.  This was a topic that was referred to at some length in the reasons of the Tribunal.  The Federal Magistrate said:

    51.    A small amount of money was earned from the use of the [equipment] at fetes.  Payment … was in cash.  The husband was challenged on whether that went into the business accounts.  He said that it did because the business needed the money to survive.  His evidence is believable.  In any event, few events were attended and little money was earned.

15. The Federal Magistrate then dealt with the amount of $6,000 for personal car expenses paid by the company and said:

    52.    [A Pty Ltd] owns a Pajero motor vehicle which had been used by the husband.  This is the vehicle for which the tribunal made the allowance of $6,000.  The vehicle has not been used by the husband for some time, and is now used by [Ms W]’s parents.  Since it is not used by the husband it is not a benefit to him.

    Thus, the Federal Magistrate was of the view that it was wrong to include in the assessment of the Husband’s income the amount of $6,000.

16. The motor vehicle was being used by the Husband at the time of the hearing before the Tribunal.  The Federal Magistrate did not explain why at the time of the hearing before him it was being used by Ms W’s parents.  In any event, in my view, it does not matter who was using the vehicle.  What was important was that expenses for the vehicle were being claimed as an expense of the company.

17. The Federal Magistrate then dealt with the Husband’s income of $500 a week and said at [53] that “[h]e works four days a week.  He says he does this because he has the children for five days in each fortnight and he wants to take them to school and pick them up rather than have them go to before and after school care”.

18. The Federal Magistrate then at [54] and [55] briefly dealt with the conduct of the business by Ms W.

19. The Federal Magistrate then turned to the situation of the Wife and said at [56] that the G School takes the time the Wife teaches as payment for the school fees and thus the fees are reduced from $27,000 to $16,000 per year.  The Federal Magistrate said that “[o]therwise the wife works part-time in a service station and receives Centrelink payments”.

20. The Federal Magistrate then said at [57] that in this case the ground for departure:

    is the earning capacity of the husband.  His earning capacity is not as found by the tribunal.  Special circumstances exist in this case for that reason.  He cannot pay child support based on the determined income, because he does not have that income.  Therefore it is just and equitable as regards the children, the husband and wife and otherwise proper to make a different order. (emphasis added)

21. The Federal Magistrate then said at [58] that it remained to assess the Husband’s income earning ability.  He said:

    58.    … I consider that it must be assessed on the basis that he will continue in his current employment.  It is unrealistic to assess it on the basis of some notional employment that he could obtain.  The [K] investment may have been misguided, but it has been made and the financial commitments which come with it have to be met.  By operating in the way [Ms W] describes, the business is meeting its commitments and paying the husband a wage.  It could not do this without the husband.  The husband's employment, for the next term, has to be as it is.

    59.    Hiring rates for the truck are $39 per hour.  The wife submits that the husband could work longer hours and that his income should be assessed on the basis of that rate and a reasonable allowance for the expenses.  That is unrealistic.  Even if he is treated as the owner of the business, the evidence shows that he could not draw a higher wage and still meet the business commitments.  The evidence shows that it has taken [Ms W]’s business skills to stabilize the company's finances.  To suggest that the business could be operated in some other way which would enable the husband to have a higher income is unrealistic.

    60.    However, I cannot accept that his working only four days a week is realistic.  I consider that his income should be assessed on the basis that he works five days a week.  That means his gross income should be $625 a week.  A 48 week working year gives a child-support income of $30,000.

    61.    The wife does not seek arrears.  The husband does not seek an order that might mean a repayment.  About a third of the husband's wage is being garnished which means he is paying at a higher rate than with a child support income of $30,000. 

    62.    The husband submitted that assessment from 1 January 2008 should be left to administrative assessment by the Child Support Agency. That is not appropriate given that I have made a finding about his current income.  The father’s income may change and so I will not fix it beyond 31 December 2009.

    63.    The just and equitable result is departure orders which fix the child-support income at $30,000 per year from the date of this reasons to 31 December 2009, and for all previous periods at an amount which means that from the date of this reasons there will be no arrears.

Grounds Of Appeal

Introduction

1. As I have observed a further amended notice of appeal was filed by the Wife on 14 July 2009.  The Wife is appealing against orders 3(a) and 3(b) being the orders in relation to departure from administrative assessment of child support for the three children.  The first order provided that for all periods up to 17 December 2008 the child support income of the liable parent is varied so that the arrears of child support, after taking into account all amounts paid by the liable parent up to 17 December 2008 is nil.  The second order was that from 17 December 2008 to 31 December 2009 the child support income of the liable parent is varied to $30,000.

2. In a written summary of argument filed on behalf of the Wife on 29 July 2009 it was stated that in the event that the appeal is successful the Wife seeks:

   1.     From 1 January 2007 to 31 December 2007 that the assessment variation as prescribed by the SSAT Decision stand at $57,905.00 for the paying parent [Mr Casley] and that arrears be left with CSA for collection on [Ms Casley]’s behalf.

   2.     From 1 January 2008 through to 31 December 2010 that the child support income be set at a minimum of $80,000 for [Mr Casley].

   Or

   From 1 January 2008 through until the children turn 18 years of age or finish year 12, whichever is the later, that the Father pay $100 per week per child to the Mother.  This figure to be indexed to inflation every subsequent year form 2010.  Collection is to be through CSA on [Ms Casley]’s behalf.

   3.     That one half of Orthodontic ($1882) E22 and optometrist bills ($285) E23 be reimbursed to [Ms Casley] by [Mr Casley] as per Reason 2 (Does it cost you extra to cover the children's special needs? CSA change of assessment). Total $1083.50

   4.     That one half of ABC Learning Centre bill of $1080 be paid by [Mr Casley], being $540 to ABC Learning Centre [address omitted]. Affidavit sworn on 30 April 2007, Annexure "B"

   5.     Legal costs for the appeal to be covered by [Mr Casley], including [Ms Casley]’s costs, due to failure to comply with full and frank disclosure. (Bold in original)

3. Attached to the further amended notice of appeal is a document which purports to set out the grounds of appeal.  It comprises 10 pages and 26 numbered paragraphs.  The document does not articulate in a concise way the grounds of appeal.  The written summary of argument of the Wife filed on 29 July 2009 comprises 38 paragraphs which are said to indentify factual errors (paragraphs 1 to 12), discretionary errors (paragraphs 13 to 32) and legal errors (paragraphs 33 to 38).  On 14 August 2009 the Husband filed a written summary of argument that replied to what was in the Wife’s written summary.

4. The Wife appeared before me without legal representation and the Husband was represented by counsel.  Given the situation of the Wife, I accept that she had some difficulty understanding precisely what was required when articulating an appealable error by the Federal Magistrate.  In the circumstances I propose to first set out in full what the Wife contended for in her written summary of argument and the response of the Husband.  I may also refer to some of what is in Annexure A to the further amended notice of appeal of the Wife in which the grounds of appeal are set out.

5. I am sympathetic to the complaints of the Husband in relation to how the Wife articulated her complaints in the further amended notice of appeal and written summary of argument.  However, notwithstanding the difficulties, in my view it is clear that the Wife complains that the Federal Magistrate was in error in relation to his findings as to the income and earning capacity of the Husband.  This complaint is articulated in different ways in each of the grounds of appeal.  The grounds of appeal are in effect particulars of the complaint.

6. I accept that there may be some overlapping of issues raised in the particulars.  Further, there may be some particulars that should have priority in order to make sense of others.  I also accept that in some instances it is difficult to know what is being contended for.

7. There is an important preliminary matter.  In relation to a number of the particulars it will be recalled that the Tribunal made a finding that the Husband remained the owner of A Pty Ltd or at least its business and that it should be treated as his: see paragraphs 37, 38, 56, 57, 58, 69 of the reasons of the Tribunal.  This remained the contention of the Wife and it was an issue that the Federal Magistrate did not directly deal with.  As I have already observed, when dealing with the property settlement proceedings the Federal Magistrate made no finding as to the ownership of the company and its business.  What the Federal Magistrate said was:

   40.    The wife’s submission is that the tribunal’s approach is the correct one.  It considered the husband the sole income earner in the business and so the effective owner.

   41.    Whether [Ms W] is the effective owner or the husband does not, given the conclusion I have reached, affect the result.

8. With respect to the Federal Magistrate it is difficult to see how his failure to deal with the issue of ownership of A Pty Ltd would not affect the result and thus he fell into error by failing to make a finding.  For example, it will be seen shortly that during the hearing before the Federal Magistrate the Husband contended that certain documents were not produced by him because he was not the owner of the business.  On the other hand, given the reasons of the Federal Magistrate as to why, when considering the Husband’s income for child support purposes the amounts of $20,000 and $6,000 should be disregarded, it may be inferred that he accepted and adopted the findings of the Tribunal as to ownership. 

Ground 1

1. The Wife submitted that the Federal Magistrate failed to take into account the Husband’s fully maintained company car as a significant benefit and financial resource.

2. On behalf of the Husband it was submitted that as to ground 1 of the Wife’s summary of argument the Federal Magistrate addressed the company car at [52] of his reasons and found that “since it is not used by the husband it is not a benefit to him.”

Ground 2

1. The Wife submitted that the Federal Magistrate failed to take into account the phone bills and other benefits available to a self employed/business owner as a significant benefit and financial resource available.

2. On behalf of the Husband it was submitted that as to ground 2 “the phone bills and other benefits (whatever that may mean) was not a significant benefit to [the Husband] and were matters payable by the business”. It was submitted that the Husband “denies that they added any significant benefit to his financial resources and were not needed [sic] to be taken into account” by the Federal Magistrate. It was submitted that even so the Federal Magistrate took these matters into consideration in paragraphs [40], [41] [46], [47], [48], and [49].

Grounds 3 and 4

1. The Wife submitted that the Federal Magistrate failed to take into account the well established practice of adding back depreciation costs for child support purposes.  The Wife submitted that the Federal Magistrate failed to take into account and acknowledge that depreciation costs and company losses are a paper cost and not an actual cost and that adds tax free cash into company resources for the following tax year.

2. On behalf of the Husband it was submitted that as to grounds 3 and 4, the Federal Magistrate at [50] took into consideration depreciation costs in that he said “the depreciation allowance is not money otherwise available to the husband or his partner.  In reality it has been spent on other expenses for the company”.

Ground 5

1. The Wife submitted that the Child Support Agency did not assess the Husband’s income as nil.

2. On behalf of the Husband it was submitted that as to ground 5 the Federal Magistrate stated at [45] that the Tribunal on 31 August 2007 affirmed the decision under review.  The Child Support Agency assessed the Husband’s child support income from 1 January 2008 as nil.  It was submitted that the Federal Magistrate discussed the reasons for his decision from [32] to [63].  It was submitted that this was agreed by the Wife and reference was made to what the Wife said at the hearing on 8 May 2008 (Transcript, 8 May 2008, p 24).

Grounds 6 and 7

1. In paragraph 6 of the Wife’s written summary she said: “He works four days a week.”  Phipps.  [The Husband]’s work history and his verbal report to [Ms D] show otherwise”.  In paragraph 7 the Wife submitted:

   Even if he is treated as the owner of the business, the evidence shows that he could not draw a higher wage and still meet the business commitments” Phipps. ($3228 average weekly income of company over five weeks more than adequately covers the $2000 a month in tax deductable benefits in the leasing of the company vehicles, all other expenses and a $1600 weekly wage for [the Husband]'s 80 hour week.)

2. On behalf of the Husband it was submitted that as to ground 6 the Federal Magistrate at [60] stated: “I cannot accept that his working only four days a week is realistic.  I considered that his income should be assessed on the basis that he works five days per week.  That means his gross income should be $625 per week”.  It was submitted that this is contrary to the Wife’s assertions.  

3. On behalf of the Husband it was submitted that as to ground 7, “[t]his appears to be a statement and not a ground for appeal”.  The Federal Magistrate discussed the Husband's wages at [39], [40], [41], [42], [43], [44], [45] to [62].  It was submitted that the Wife has taken the highest week of earnings and made this the company’s weekly payment for the year which is wrong.

4. During oral submissions the Wife said that this complaint related to what the Federal Magistrate said at [53] namely that the Husband’s income was $500 a week paid to him as a wage and he works four days a week. 

Ground 8

1. In paragraph 8 the Wife submitted that the Federal Magistrate failed to acknowledge the documented inconsistencies around the working and financial positioning of A Pty Ltd; the date the company was transferred on paper to Ms W; the dates worked and not on the “Paymaster” listing provided by the company; and reason for the company ownership being transferred.

2. On behalf of the Husband it was submitted that as to ground 8 the Federal Magistrate addressed all the points and found that the business was not successful.  It was submitted that whether Ms W is the effective owner or the Husband does not matter given the conclusion at [41] that the business was not successful.  It was submitted that the Federal Magistrate addressed the reasons for the company being transferred in [54] and [55].

Ground 9

1. In paragraph 9 the Wife said that she “does seek arrears. Amended Response 13 March 2008, Afidavit [sic] sworn 25 March 2008”.  On behalf of the Husband it was submitted that as to ground 9 on page 24 of the transcript at lines 34 to 40 the Wife said she withdrew her application concerning arrears. 

Ground 10

1. In paragraph 10 of the Wife’s written summary it is simply said “[G School] fees – when and how they were paid”.

2. On behalf of the Husband it was submitted that as to ground 10 the Federal Magistrate addressed this issue at [56]. They were also addressed during cross-examination. The children now attend F School.

Ground 11

1. In paragraph 11 of the Wife’s written summary it is simply said “Documented compliance by wife for full and frank disclosure”.  On behalf of the Husband it was submitted that ground 11 is not a ground of appeal and does not make sense. 

Ground 12

1. In paragraph 12 the Wife submitted that the Federal Magistrate failed to address the deliberate non-disclosure, obfuscation and evasion in the non production of the company bank statements and the company ledger showing all individual inputs and expenses.

2. On behalf of the Husband it was submitted that as to ground 12 the Federal Magistrate made findings concerning the company bank statements and addressed these issues during the trial and in his reasons at [22] and found: “I see no reason to disbelieve the husband.”

Ground 13

1. In paragraph 13 the Wife submitted that the Federal Magistrate failed to notice the significant increase in depreciation claims from a few thousand dollars pre-separation to over $30,000 post separation. She submitted that noting “the applicable law pursuant to section 3 of the Child Support Act, that the parents of children have the primary duty to maintain their children”.

2. On behalf of the Husband it was submitted that as to ground 13 the Federal Magistrate “spent considerable time in his reasons dealing with depreciation, see especially [50] and stated that the flow in the SSAT assessment is that it does not take into account the losses the company suffered.  The allowance for depreciation in the accounts was not money which was available to the husband or his partner”.

Ground 14

1. In paragraph 14 the Wife submitted that the Federal Magistrate failed to note the actual child support paid in 2007 of $246.91 leaving arrears of $13,354.79.

2. On behalf of the Husband it was submitted that as to paragraph 14 the Federal Magistrate comprehensively dealt with child support paid by the Husband in [32] to [61].

Ground 15

1. In paragraph 15 the Wife submitted that the Federal Magistrate failed to note the actual child support paid in 2008 of $2648.32 “(no arrears being added due to the Husband’s $0.00 tax estimate for 2007 put into CSA for the 2008 year and discredited by SSAT and Change of Assessment withdrawn due to these legal proceedings)”.

2. On behalf of the Husband it was submitted that as to ground 15 the Federal Magistrate comprehensively dealt with child support paid by the Husband in [32] to [61].

Ground 16

1. In paragraph 16 the Wife submitted that the Federal Magistrate “failed to take note of the deliberate disregard to the financial well being of his [sic] children in 2007 and 2008”.

2. On behalf of the Husband it was submitted that as to ground 16 the Husband objected to this paragraph as not being a ground for appeal but stated that the Federal Magistrate set out in [50] to [61] the financial position of the Husband.

Ground 17

1. In paragraph 17 the Wife submitted that the Federal Magistrate failed to take note of the certainly unjust and inequitable position he left the Wife in with regards to financially supporting three children.

2. On behalf of the Husband it was submitted that as to paragraph 17 he objected to this paragraph as not being a ground for appeal but stated that the Federal Magistrate set out in [50] to [61] the financial position of the Husband.

Ground 18

1. In paragraph 18 the Wife submitted that the Federal Magistrate failed to acknowledge that almost $1000.00 a day cash income from fairs and fetes is a significant amount of money when put in the context of a $0.00 income and even a $30,000 income.

2. On behalf of the Husband it was submitted that as to paragraph 18 the Federal Magistrate addressed this very issue at [51] of his reasons and said in any event few events were “altered” [sic] and little money was earned.

Ground 19

1. In paragraph 19 the Wife submitted that the Federal Magistrate “failed to take note of the incongruence of [the Husband]’s verbal claim that one third of his income was being garnished and the Afidavit [sic] claim 23 April 2008 Part f by [the Husband] that since September 2007 Centrelink had been deducting $304.50 a fortnight for child support and paying it to the wife”.  It was submitted “[n]one of which is supported by the CSA collection document showing clearly $246.91 collected in 2007 and $2648.32 in 2008”.

2. On behalf of the Husband it was submitted that as to paragraph 19 the Federal Magistrate addressed this issue at [60] and [61] where he stated “About a third of the husband’s wages is being garnished which means he is paying a higher rate than with a child support income of $30,000.”

Ground 20

1. In paragraph 20 the Wife submitted that the Federal Magistrate failed to take note of the suspicious nature of continuing to trade a company that since 2000 has operated at a $10,000 to $30,000 paper loss each year.

2. On behalf of the Husband it was submitted that as to paragraph 20 the Federal Magistrate “addresses the relevant nature of the business in [his reasons] and deals with depreciation as previously referred to in [the reply] that depreciation was not money otherwise available to the husband or his partner (50)”.

Ground 21

1. In paragraph 21 the Wife submitted that the Federal Magistrate “failed to take note of the $100,000 income and lifestyle well established pre-separation and the duty to provide for the children post-separation re- DJM v JLM (1998) FLC /P92-595”.

2. On behalf of the Husband it was submitted that as to paragraph 21 this “is not evidence and is contrary to the evidence at trial”.  It was submitted the Husband “stated that the gross was about $100,000 the net closer to $50,000, see pages 73-74 transcript”.

Ground 22

1. In paragraph 22 the Wife submitted that the Federal Magistrate “failed to take note of ‘If the finance repayment figure is not a one off payment but recurrent, it is none the less a profit.’ [2005] FMCAfam 185”.

2. On behalf of the Husband it was submitted that as to paragraph 22 the Husband objected to this ground as it did not appear to make sense.

Ground 23

1. In paragraph 23 the Wife submitted that the Federal Magistrate “failed to take note of the SSAT finding that ‘in reality the Husband remains the true owner of the business.’”

2. On behalf of the Husband it was submitted that as to ground 23 the Federal Magistrate addressed this issue in detail in [50] to [61] and says that at [59] of the reasons “the evidence shows that it has taken [Ms W]’s business skills to stabilise the company’s finances.  To suggest that the business could be operated in some other way which would enable the Husband to have a higher income is unrealistic”.

Ground 24

1. In paragraph 24 the Wife submitted that the Federal Magistrate “failed to take note of and acknowledge the SSAT's findings of [the Husband]’s several inconsistencies involving his claimed incomes and expenditure resulting in the Tribunal is satisfied that it is inappropriate to refer to [the Husband]’s taxable income alone as a measure of his capacity to support the children.”

2. On behalf of the Husband it was submitted that as to ground 24 the Federal Magistrate addressed these issues at [45] to [50] and “sets out the flaws in the Tribunal’s assessment was [sic] the losses the company suffered”.

Ground 25

1. In paragraph 25 the Wife submitted that the Federal Magistrate failed to take note of Husband’s “financial statement dated 27 July 2007 E21 page 4 Part E showing his expenses of $505.00 a week expended on [Ms W] and her children and only $47.00 a week on his three biological children (adding only $246.91 in child support for the entire 2007 year)” (bold in original).

2. On behalf of the Husband it was submitted that as to ground 25 the Federal Magistrate stated the Husband had a gross income of $494 per week.  It was said that “[Ms W]’s two children who have cystic fibrosis and [the child L] requires daily care after being involved in a serious accident.  See 117 and 118 of transcript.  [The Federal Magistrate] addressed the fact that $494 does not go far when you are supplying two families and paying credit card debts.  [The child L] has had 16 operations on his leg and [the child B] was involved in a serious motor bike accident in July 2008”.

Ground 26

1. In paragraph 26 the Wife submitted that the Federal Magistrate failed to take into account the fact that the Husband does not have a legal duty to support his domestic partner or her children.

2. On behalf of the Husband it was submitted that as to ground 26 the Federal Magistrate dealt with the Husband’s income earning capacity in his reasons.  It was submitted that “[s]ave as to [13] to [62] and [31] the amount each received from sale of property and bank accounts”.  It was submitted that the Wife has not sought spousal maintenance and the Wife’s greater earning capacity as a teacher.

Ground 27

1. In paragraph 27 the Wife submitted that the Federal Magistrate failed to address “the orders being sought in relation to Reason 8 of the CSA Change of Assessment —orthodontic and optometry costs of the children to be shared by both parents”.

2. On behalf of the Husband it was submitted that as to paragraph 27 the Federal Magistrate dealt with the Husband's income earning capacity in his reasons.  It was submitted that save as to [13] to [62] and [31] “the amount each received from sale of property and bank accounts”.  It was submitted that “[the Wife] has not sought spousal maintenance (see paragraph 31 of the judgment) and the wife's greater earning capacity as a teacher”.

Ground 28

1. In paragraph 28 the Wife submitted that the Federal Magistrate failed to address the orders being sought in relation to the payment to ABC Learning Centre.

2. On behalf of the Husband it was submitted that as to paragraph 28 the Federal Magistrate dealt with the Husband’s income earning capacity in his reasons.  It was submitted that save as to [13] to [62] and [31] the amount each received from sale of property and bank accounts.  It was submitted that the Wife has not sought spousal maintenance (see paragraph 31 of the Reasons) and the Wife’s greater earning capacity as a teacher.

Ground 29

1. In paragraph 29 the Wife submitted that the Federal Magistrate “failed to take note of the established work history of long hours acknowledged and accepted at the SSAT hearing and the Husband’s work hour claims with [Ms D]”.

2. On behalf of the Husband it was submitted that the Wife gave no evidence concerning the ABC Learning Centre, nor was the Husband cross-examined concerning this matter.

Ground 30

1. In paragraph 30 the Wife submitted that the Federal Magistrate “failed to take into account the Husband’s voluntary change of occupation as a concreter.

2. On behalf of the Husband it was submitted that as to paragraph 30 this ground is irrelevant.

Ground 31

1. In paragraph 31 the Wife submitted that the Federal Magistrate failed to take into account ongoing cash income.

2. On behalf of the Husband it was submitted that as to paragraph 32 there was no evidence to indicate an ongoing cash income.

Ground 32

1. In paragraph 32 the Wife submitted that the Federal Magistrate “failed to take into account the discrepancies/mistakes put forward and the avoiding of answering questions indicating the Husband as an ‘unreliable witness’”.

2. On behalf of the Husband it was submitted that as to paragraph 32 the Federal Magistrate’ reasons took into consideration the reliability of witnesses and stated on numerous occasions that he accepted the evidence of the Husband, see [23] for example.

Grounds 33 to 38

1. In paragraph 33 the Wife submitted that the Federal Magistrate “failed to link the income, earning capacity and financial resources of [the Husband] and his alter ego [A Pty Ltd]”.  No submissions were made in reply by the Husband.

2. In paragraph 34 the Wife submitted that the Federal Magistrate “failed to lift the company veil and demand full and frank disclosure, even after the repeated request by the wife, which has resulted in an escalation of legal costs”.

3. In paragraph 35 the Wife submitted that the Federal Magistrate “failed to apply depreciation, and other financial benefits to this child support matter”.

4. In paragraph 36 the Wife submitted that the Federal Magistrate:

   failed to apply the objects of the Child Support Act as described in section 4(2) c) that persons who provide ongoing daily care for the children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; having been made aware of the numerous Child Support Agency Appeals, the SSAT hearing, [Mr Casley]’s discredited $0.00 tax income form submitted to the CSA for the 2007 year and then the matter before him in court, he failed to address the issue of ongoing appeals and their cost emotionally and financially to the mother. (italics in original)

5. In paragraph 37 the Wife submitted that the Federal Magistrate “failed in being ‘just and equitable’ within the meaning of s 117(4) when he did not look to the Child Support Collection Agency document showing [the Husband] as having paid $246.91 in child support in 2007 and $2648.32 in 2008 leaving the full financial burden on the wife”.

6. In paragraph 38 the Wife submitted that the Federal Magistrate:

   failed to ask for legal costs to be applied to the husband and award findings in the wife's favour as in Gilmour and Gilmour (1995) FLC 92-591 (Ellis, Finn and Maxwell JJ} applied these principles to child support, saying; that a party to proceedings under the Assessment Act has the same duty to make a full disclosure of his or her financial affairs as does a party to financial proceedings under the Family Law Act, and that where in such proceedings the court is satisfied that there has been a deliberate non-disclosure by one party, it is open to the court to make findings in favour of the other party (see Weir particularly at page 79, 593). (italics in original)

7. In relation to what was submitted by the Wife in paragraphs 33 to 38 of her written summary, on behalf of the Husband it was submitted that he denied the legal errors and accepted the reasons and orders made by the Federal Magistrate on 17 December 2008.

Discussion

Introduction

1. As I have already observed, in my view it is clear that the Wife complains that the Federal Magistrate was in error in relation to his findings as to the income and earning capacity of the Husband.  This complaint is articulated in different ways in each of the grounds of appeal.  There was an issue as to whether the Husband fulfilled his obligation to make a full and frank disclosure of his income and earning capacity such as to enable the Court to safely reach a concluded view about such matters.  The obligation imposed on the Husband also required him to produce documents that would corroborate his contentions.

2. I do not propose to deal seriatim with each of the paragraphs of the Wife’s summary of argument.

Motor Vehicle Expenses

1. As I have already observed the motor vehicle was being used by the Husband at the time of the hearing before the Tribunal and this was admitted by the Husband (Transcript, 18 June 2008, p 68).  The Federal Magistrate did not explain why at the time of the hearing before him it was purportedly being used by Ms W’s parents. 

2. Before the Federal Magistrate the Husband gave evidence that Ms W had lent the vehicle to “somebody” (Transcript, 18 June 2008, p 94).  The Husband gave evidence that he drives Ms W’s vehicle (Transcript, 18 June 2008, p 105).  In fact what the Federal Magistrate said was wrong because Ms W then gave evidence that the vehicle was being used by the Husband’s parents: (Transcript, 18 June 2008, p 123). 

3. As I have also observed it does not matter who was using the vehicle.  What was important was that expenses for the vehicle were being claimed as an expense of the company.  In the result, in my view, this complaint by the Wife has been established.  This has the consequence that the Federal Magistrate should have found that the Husband’s child-support income was $36,000.  For this reason alone the appeal will be allowed.

1. I also observe that the evidence would be relevant if a finding was made as to how the company and its’ assets should be treated.

Telephone and Other Expenses

1. The Wife submitted that the Federal Magistrate failed to take into account the phone bills and other benefits available to a self employed/business owner as a significant benefit and financial resource available.

2. It will be recalled that in determining the child support income of the Husband of $57,905 the Tribunal also at paragraph 72 of its reasons attributed a value of $2,000 per annum being what it identified as “the contribution to [the Husband]’s personal expenses by both businesses”.  The Tribunal had explained these expenses at paragraph 31 of its reasons.  These amounts were not dealt with by the Federal Magistrate and thus he fell into error.  This has the consequence that the Federal Magistrate should have found that the Husband’s child-support income was $38,000. 

3. The amounts were not dealt with by the Federal Magistrate in the paragraphs of his reasons referred to in the written summary of the Husband and I reject those submissions.

Depreciation Expenses

1. As I have already observed the Tribunal at paragraph 73 of its reasons added back an amount of $20,000 for the depreciation expense of the businesses being an amount discounted from $33,880 because the “losses associated with the businesses increased from 2005/2006 to 2006/2007”.  The Federal Magistrate gave a reason for why he came to a different outcome.  He said at [50] that the allowance for depreciation in the accounts was not money which was available to the Husband or Ms W because for the 2006/2007 financial year A Pty Ltd made a loss of $42,390.97 and if $26,000 is deducted there is still a loss of about $16,000.  Thus the depreciation allowance was spent on other expenses of the company.

2. In the financial year ended 30 June 2007 the accounts of the two businesses revealed a loss of $42,390.97 for the cartage business and a loss of perhaps $23,375.04 for K: see paragraph 30 of the reasons of the Tribunal.  The total loss was therefore $65,766.01.  If the depreciation expense of $33,880 is deducted then the total loss would be $31,886.01.  The assumption was made by the Federal Magistrate that because there would still be a loss even if the depreciation expense was excluded then the amount claimed for this expense was used to pay other expenses and did not result in a profit.

3. What the Federal Magistrate said is understandable but not a complete answer.  To reach such a conclusion it would be necessary to investigate the accounts because, for example, there may be an increase in borrowings and if there was, then this may be the explanation for the source of funds to pay other expenses.

4. I observe that in her affidavit sworn on 12 May 2008 Ms W deposed at paragraph 5 that in 2006 the Husband was experiencing difficulty obtaining funds to finance the equipment and she lent him a total of $30,000 to support K.  Ms W said that she paid the money made out to K by bank cheque.  Ms W deposed that she was able to locate the receipts and she annexed copies to the affidavit.  Annexed to her affidavit are three copies of bank cheque receipts.  The first is dated 6 March 2006 and the payee is “[CFS Ltd]” for the amount $4,951.30.  The second is dated 18 April 2006 and the payee is “[K]” for the amount of $10,000.  The third is dated 7 August 2006 and the payee is “[K]” for the amount of $10,000.  These funds would also have to be considered when looking at the source of funds to enable A Pty Ltd to pay expenses.

5. In my view, there is merit in the complaint by the Wife.

6. I also observe that in ground 13 the Wife complained that the Federal Magistrate failed to consider the significant increase in the depreciation expense “from a few thousand dollars pre-separation to over $30,000 post separation”. 

7. What the Wife was referring to was that in the financial year ended 30 June 2005 the profit and loss statement of A Pty Ltd reveals a depreciation expense of $3,595.  Consistent with what was in the profit and loss statement the income tax return of A Pty Ltd for the financial year ended 30 June 2005 reveals a depreciation expense of $3,595. 

8. In the financial year ended 30 June 2006 the income tax return of A Pty Ltd reveals depreciation expenses of $19,236.  The profit and loss statement of A Pty Ltd for the financial year ended 30 June 2006 reveals a depreciation expense of a total of $4,230.  The balance sheet of the company reveals an increase in total assets from $18,868 as at 30 June 2005 to $117,045 as at 30 June 2006.  There was a significant increase in the value of plant and equipment.  The profit and loss statement of K for the financial year ended 30 June 2006 reveals a depreciation expense of $2,368 for plant and equipment of a value of $35,809. 

9. I was unable to locate a copy of the income tax return and financial statements of A Pty Ltd for the financial year ended 30 June 2007 and thus can only, as the Federal Magistrate did at [48], rely on what the Tribunal said at paragraph 29 of its reasons, namely, that the depreciation expense was a total of $22,484.89 ($20,573 + $1,911.89) for the company and $11,396 for K being a total of $33,880.89.  Assuming that the depreciation expense for the company and K for the year ended 30 June 2006 was a total of $19,236 then there was an increase of $14,644.89 in the year ended 30 June 2007.

10. I can understand that the significant increase in the depreciation expense in the year ended 30 June 2006 may have been because of the acquisition in that year of plant and equipment.  However, the increase in the year ended 30 June 2007 must mean that capital acquisitions continued.  What it demonstrates is that there was a paucity of evidence available to assist in understanding the financial position of A Pty Ltd.

Income and Earning Capacity of the Husband

1. The Husband contended that he was only working four days a week and earning $500 a week (4 × $125).  The Husband also told the Tribunal that “since becoming an employee of the business only” he has been in receipt of $500 per week gross: see paragraph 35 of the reasons for decision of the Tribunal.

2. The Federal Magistrate said at [60] that on the basis that the Husband works five days a week his gross income should be $625 a week.  The Federal Magistrate said that a 48 week working year gives a child support income of $30,000 (48 × $625). 

3. The Wife contended that the Husband’s income was greater than $500 per week and she relied upon a number of matters to support this contention.  For example, the Tribunal, for reasons I have dealt with, added the amount of $26,000 to the disclosed income of the Husband.

4. The taxable income of the Husband for the year ended 30 June 2005 was $30,560.  The Tribunal said at paragraph 28 of its reasons, that the Husband’s taxable income for the year ended 30 June 2006 was $29,700.  The profit and loss statement of A Pty Ltd for the years ended 30 June 2005 and 30 June 2006 disclosed “Wages” and “Directors salaries” of $30,442 and $30,031 respectively.  I observe that the profit and loss statement of A Pty Ltd for the year ended 30 June 2004 revealed “Wages” of $30,000.

5. As I have already observed the Husband had a nil taxable income for the year ended 30 June 2007 and presumably this resulted in the nil child support assessment in early 2008.  However, as the Tribunal observed, the disclosed nil taxable income was inconsistent with the admission the Husband made in his 15 November 2006 statement that his income was $30,000 gross per annum.  The amount of $30,000 per annum disclosed in this statement was consistent with what had been disclosed for a number of years as the Husband’s taxable income.  In summary, the Husband had a disclosed income of approximately $30,000 per annum for each of the financial years ended 30 June 2004 to 30 June 2007 inclusive. 

6. In the year ended 30 June 2008 the Husband’s income was estimated to be $26,000 ($500 × 52).  The Federal Magistrate found that it should be $30,000.  In fact the Wife contended, and it was not controversial, that the Husband had disclosed a taxable income of $30,000 per annum since A Pty Ltd commenced operation.  The Husband had disclosed a consistent taxable income of $30,000 per annum for a number of years.  As it transpired, this was the amount the Federal Magistrate determined should be the Husband’s child support income.  In my view, the above evidence clearly raised an issue as to the extent of the Husband’s income and opened up a chain of enquiry.

7. The Wife put some evidence before the Federal Magistrate to assist in making a finding as to the income of the Husband at the date of the hearing.  The Wife demonstrated that their were deposits of income to a bank account in the name of K of a total of $16,140.63 in the period 18 April 2008 to 26 May 2008 being a period of about five weeks (Exhibit W7).  This is an average of $3,228 a week. 

8. During cross-examination Ms W was asked questions about the receipt by K of the amount of $16,140.63.  Ms W contended that the funds were received from an entity called BC and that, in fact, it related to a period of approximately nine weeks although she admitted that she had no documents to corroborate her contention as to the period for which the payments were received (Transcript, 18 June 2008, p 126).  In any event allowing for a salary to the Husband of $500 per week this leaves $2,728 per week to be explained ($3,228 less $500).

9. I observe that in her evidence in chief on 18 June 2008 when asked if A Pty Ltd had any debts, Ms W gave evidence that it has an overdraft of $7,000 and a lease of a truck (Transcript, 18 June 2008, p 119).  The Federal Magistrate said at [36] that the lease cost of the truck owned by the Company is $1179 a month until 2011 or $272.08 per week.  The Federal Magistrate was referring to what Ms W deposed in paragraphs 3 and 9 of her affidavit sworn 12 May 2008.  In any event, this leaves $2,455.92 ($2,728 less $272.08) to be explained.

10. Although the debts were not referred to in the oral evidence of Ms W the Federal Magistrate also said at [36] that the equipment is financed by two loans, one with repayments of $592.56 until 2011 and the other with payments of $458.69 until May 2011.  Again, the Federal Magistrate was referring to what Ms W deposed in paragraphs 3 and 9 of her affidavit sworn 12 May 2008.  This is an expense of $242.60 per week ($592.56 + $458.69 = $1,051.25 per month).  This leaves $2,213.32 ($2,455.92 less $242.60) to be explained. 

11. Obviously, there would be other expenses such as petrol and oil, insurance, repairs and maintenance.  However, the Husband had the obligation to deal with such issues.  It was not the Wife’s obligation to undertake an audit inquiry of the business.

12. If a working year of 52 weeks is taken then the receipt of $3,228 per week results in a total of $167,856 per annum.  Taking, as the Federal Magistrate did, a working year of 48 weeks this results in a total of $154,944 per annum.  This evidence was not considered by the Federal Magistrate.  I observe that for the year ended 30 June 2007 the gross business turnover was $67,326.18 which is totally inconsistent with an averaging of the amounts which the Wife referred to.

13. Before proceeding, I have looked at the two bank statements (Exhibit W7) and between 4 April 2008 and 26 May 2008 there were eight deposits of a total of $18,528.60

14. Another matter that should have been considered is why, if the company was sustaining continued losses over a period of in excess of three years, it was still trading. 

15. In cross-examination it was put to Ms W: “Why are you running the business?” and her response was that she lent the Husband $30,000 to start K and that he was supposed to start paying her back and that did not happen.  She went on to say that the Husband told her that “when I make some money” you can have 30 per cent. (Transcript, 18 June 2008, p 129)

16. The Federal Magistrate did not consider how the company was able to sustain the disclosed trading losses even allowing for the payment of $30,000 by Ms W and the significant depreciation expenses.

17. Next, there was a contention of undisclosed earnings which the Federal Magistrate dealt with at [51]. What the Federal Magistrate said was that a small amount of money was earned for the use of equipment at fetes and that payment for use was in cash. The Federal Magistrate observed that the Husband was challenged on whether that went into the business accounts and he said it did, because the business needed money to survive. The Federal Magistrate was of the view that the Husband’s evidence was “believable” and in any event “few events were attended and little money was earned”. However, the evidence about undisclosed earnings was far more extensive and this was referred to by the Tribunal at paragraph 24 of its reasons for decision. As I have already observed in paragraph 24 of its reasons, the Tribunal said that the Wife’s evidence, which was not disputed by the Husband, was that cash income was used by the parties to pay for holidays or other expenses incurred by the family.

18. Then there was the controversy in relation to the production of documents.  One of the difficulties at the hearing was that there was no evidence as to the financial position of A Pty Ltd and K in the financial year ended 30 June 2008.  There were no financial statements for the period 1 July 2007 to shortly before the commencement of the hearing on 7 May 2008.  There were no draft accounts, management accounts or primary records that would enable an inquiry to be undertaken as to the financial position at the date of the hearing in 2008. 

19. The Wife submitted to me that “it’s a ridiculous evasion of supplying paper evidence”.  The Wife contended that the difficulty she experienced at the hearing was that there was a paucity of primary records that would enable an investigation to be undertaken and an assessment made as to the reliability of the disclosure by the Husband as to the extent of earnings.  There were no financial records with the exception of some bank statements in relation to the conduct of the businesses.  There was no opportunity to be able to corroborate the Husband’s contention that all cash received from the conduct of the businesses was banked given that there was an established history of cash being received.

20. As so often occurs one party alleged that there had been a failure to produce documents and the other party contended that the documents were produced or were not asked for.  At the hearing of 8 May 2008 a complaint was made on behalf of the Wife about the non-production of documents by the Husband (Transcript, 8 May 2008, p 23).  On behalf of the Husband it was contended that he had provided all documents that were asked for (Transcript, 8 May 2008, p 25).  I observe that the Federal Magistrate said “you both want to look at some documents.  I won’t get involved in an argument.  I think its’ futile getting involved in an argument about whether they have been sent previously or not” (Transcript, 8 May 2008, p 26).

21. On 18 June 2008 the controversy about the Husband’s failure to produce documents persisted and he was cross-examined about it (Transcript, 18 June 2008, pp 75 to 78).  At one point in his cross-examination the Husband gave an unsatisfactory explanation when he said: “I couldn’t very well supply bank statements for a company that I have nothing to do with” (Transcript 18 June 2008, p 78). 

22. I observe that in the cross-examination of Ms W she gave evidence that she does not work “on the company books at all” and that a bookkeeper is employed (Transcript, 18 June 2008, pp 123 – 124).  The following evidence was given:

    You’re aware that [the Husband] had to provide all the documents requested to the court today and one of them was the company’s ledger.  Are you able to say why the ledger’s haven’t been provided? --- I’m sorry, I don’t understand what you mean by “ledger”.

    You must have a book that show’s every purchase, every amount received, every amount spent? --- We have an MYOB disk.  The bookkeeper has it on an MYOB disk.  I can’t …

    Do you know why that hasn’t been provided? --- An MYOB disk?  Because I assumed that-, being in court today, you wouldn’t have the software to look at an MYOB disk.  That’s why I asked to have a profit and loss statement.

23. In his reasons the Federal Magistrate said nothing about the inadequacy of the production of documents or other material by the Husband.

24. In passing I also observe that the Wife submitted that what the Federal Magistrate said about the role of Ms W was in error.  The Wife submitted that there was no evidence to support the findings of the Federal Magistrate as to the role of Ms W.  For example the Federal Magistrate said at [59] that the evidence showed that it had taken Ms W’s “business skills to stabilize the company's finances”.  The Federal Magistrate did not identify the evidence he was referring to.  The Federal Magistrate had earlier said at [55] that Ms W “now has the company organized so that the leases will be paid off by 2011, and the business is paying the husband a wage”.  The Wife contended that these 2011 leases were organised before the involvement of Ms W. 

25. As to the earning capacity of the Husband in his reasons at [57] the Federal Magistrate said that “[the Husband’s] earning capacity is not as found by the Tribunal”.  The Federal Magistrate did not elaborate on what he was referring to. 

26. As I have already observed, the Tribunal also found at paragraph 64 of its reasons that it had “not specifically dealt with the issue of [the Husband]’s earning capacity” because it was satisfied that the relevant ground in s 117(2)(c)(ib) of the Assessment Act “was established by reference to [the Husband]’s true income, property and financial resources”.  The Tribunal, however, said “in passing, the Tribunal notes [the Husband]’s acknowledgment during the hearing that given his skills, qualifications and experience, an income of $500.00 per week gross is much less than he could potentially earn either as a truck driver or a concreter.  This decision may be explored more fully by future decision makers”. 

27. I observe that the financial statements of A Pty Ltd reveal gross income of $230,050 for the year ended 30 June 2004; $100,840 for the year ended 30 June 2005 and $173,918 for the year ended 30 June 2006.  There was no income for K in these years.  The Tribunal said at paragraphs 29 and 30 of its reasons that the income for the year ended 30 June 2007 was $67,326.18 for the company from concreting work and $20,540.96 for K.  Hence, there may be support for the view that the Husband could potentially earn more either as a truck driver or a concreter. 

28. I observe that the Federal Magistrate said at [58], referring to the Husband’s income earning ability, “it is unrealistic to assess it on the basis on some notional employment that he could obtain”.  The Federal Magistrate provided no reasons for this finding.  In my opinion, this was an error.  The Federal Magistrate in my view failed to adequately consider the earning capacity of the Husband.

29. I also observe that during cross-examination Ms W said that the Husband was not working five days a week.  Although the Husband told the Tribunal and a Family Consultant who prepared a family report for the purposes of the parenting proceedings that he was working five days a week, Ms W said “no, he generally does – he doesn’t work on a Monday generally”. (Transcript, 18 June 2008, p 131).

30. In conclusion, I am of the view that the Federal Magistrate was in error in relation to his findings as to the income of the Husband.  The Federal Magistrate failed to adequately consider the evidence in relation to undisclosed earnings, the financial position of the Company, the evidence as to the earnings in April / May 2008 and the failure of the Husband to produce relevant documentary or other evidence.  The Federal Magistrate also failed to adequately consider whether in the circumstances the Husband had failed to satisfy his obligation to make a full and frank disclosure of his financial circumstances.

1. I am also of the view that the Federal Magistrate was in error in relation to his finding as to the earning capacity of the Husband.  He failed to give adequate reasons as to why he was of the view that the Husband did not have the skills, qualifications and experience to earn a much greater income than $125 per day gross either as a truck driver or a concreter. 

2. I also observed that in his reasons at [61] the Federal Magistrate said that the Wife did not seek arrears and the Husband did not seek an order that “might mean a repayment”.  The Federal Magistrate however said “about a third of the Husband’s wage is being garnished [sic] which means that he is paying at a higher rate than with the child support income of $30,000”.  The Wife submitted, and I agree, that this was an error.  The Child Support Agency material showed a payment of only $246 for child support in 2007 and $600 in 2008.

Assessment of Income at Nil

1. As seen, in ground 5 the Wife submitted that the Child Support Agency did not assess the Husband’s income as nil.

2. The complaint by the Wife is difficult to understand and the assumption is made by the Husband that the Wife was referring to the administrative assessment.  However, the Wife is seeking that from 1 January 2007 to 31 December 2007 the assessment variation as prescribed by the Tribunal stand at $57,905.00 for the Husband and that arrears be left with the Child Support Agency for collection on her behalf.

3. As I have already observed the Tribunal affirmed the decision that an income amount of $57,905 be determined for the period of 1 January 2007 to 31 December 2007.  By letter dated 20 February 2008 the Child Support Agency advised the Wife that in the period 3 January 2007 to 31 December 2007 the Husband made only one payment of child support, namely, an amount of $246.91.  The Husband accumulated arrears of child support of $13,354.79.  Then, at the beginning of 2008 a child support assessment was issued which provided that for the period 1 January 2008 to 31 December 2008 the assessment was nil. 

4. As I have also observed at the commencement of the hearing before the Federal Magistrate counsel for the Wife said that the Wife would withdraw her application for arrears but would seek a departure as from 1 January 2008 for the next three years.  Counsel for the Mother informed the Federal Magistrate that the Mother sought child support based on a child support income of $58,000 increased by the CPI for the next three years commencing 1 January 2008 and withdrew her application concerning the arrears (Transcript, 8 May 2008, p 22 to 24). 

5. The Federal Magistrate said at [62] that the Husband sought that the assessment from 1 January 2008 should be left to administrative assessment by the Child Support Agency.  The Federal Magistrate thought that was not appropriate given that he had made a finding about the Husband’s current income.  However, the Federal Magistrate said that the Husband’s income may change and so he would not fix it beyond 31 December 2009.  The Federal Magistrate then said at [62] that it was a just and equitable result to make departure orders which fixed the child-support income at $30,000 per year from the date of the judgment (16 December 2008) to 31 December 2009 “and for all previous periods at an amount which means that from the date of this judgment there will be no arrears”.

6. The Federal Magistrate then made an order that for all periods up to 17 December 2008 the child support income of the Husband was varied so that the arrears of child support, after taking into account all amounts paid by him up to 17 December 2008 was nil and that from 17 December 2008 to 31 December 2009 the child support income of the Husband was varied to $30,000.

7. The result was that the Wife effectively received no child support for 2007 and 2008 and would receive child support based on a child support income of $30,000 as from 16 December 2008.

8. In my view, the Federal Magistrate gave no adequate reasons as to why he decided that the Husband had no child support income for the period 1 January 2007 to 16 December 2008 and thus he was in error. 

Conclusion

1. For reasons I have given I am of the view that the appeal should be allowed. 

2. It was accepted by the Wife and counsel for the Husband that in the event that the appeal was successful that the matter would have to be remitted for redetermination.  I agree.  Unfortunately, it is not possible for me, on the evidence that is available to re-exercise the discretion and thus the child support departure applications will have to be remitted for redetermination by a Federal Magistrate other than Federal Magistrate Phipps.  The rehearing will have to determine the child support income of the Husband as from 1 January 2007.

I certify that the preceding two-hundred and thirty-eight (238) paragraphs are a true copy of the reasons for reasons of the Honourable Full Court Justice O’Ryan

Associate:

Date:18 June 2010