CSR and STT and STT and MA
[2006] FMCAfam 651
•21 December 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| C.S.R. & STT and STT & MA | [2006] FMCAfam 651 |
| CHILD SUPPORT – Enforcement summons – departure application – applicant asset rich and income poor – assets include assets of wholly owned company. |
| Child Support (Assessment) Act 1989, ss.98K, 98L, 98M, 98N, 98P, 98Q, 98R, 98S, 117 |
| Perryman v Perryman (1993) FLC 92-433 Gyselman v Gyselman (1992) FLC 92-279 |
| Applicant (Enforcement Summons): | CSR |
| Respondent (Enforcement Summons): | STT |
| Applicant (Departure Application): | STT |
| Respondent (Departure Application): | MA |
| File number: | MLM 7253 of 2006 |
| Judgment of: | Riley FM |
| Hearing date: | 20 November 2006 |
| Date of last submission: | 20 November 2006 |
| Delivered at: | Melbourne |
| Delivered on: | 21 December 2006 |
REPRESENTATION
| Representative for the Applicant (Enforcement Summons): | Ms Goldring |
| Solicitors for the Applicant (Enforcement Summons): | Australian Government Solicitor |
| Counsel for the Respondent (Enforcement Summons): | In person |
| Counsel for the Applicant (Departure Application): | In person |
| Counsel for the Respondent (Departure Application): | In person |
ORDERS
The application for departure is dismissed.
The application for the dissolution of the injunction issued on
16 October 2006 is dismissed.
The hearing of the enforcement summons be fixed for 14 February 2007.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 7253 of 2006
| CSR |
Applicant (Enforcement Summons)
And
| STT |
Respondent (Enforcement Summons)
| STT |
Applicant (Departure Application)
And
| MA |
Respondent (Departure Application)
REASONS FOR JUDGMENT
Background
This is a child support matter in which an enforcement proceeding instituted by the Child Support Registrar (“the Registrar”) and a departure application have been consolidated. In a Registrar initiated departure from administrative assessment, the Registrar decided, on
15 September 2005, that from 1 June 2005 until the happening of a child support terminating event, the child support income of the applicant was set at $78,254, to be increased in line with inflation. Child support is payable in respect of one child, S, who is 6 years old and who is in the sole care of the payee. An objection to the Registrar’s decision was disallowed on 3 February 2006.
The enforcement summons
An enforcement summons was filed on 24 August 2006 which was returnable before the court on 16 October 2006. The enforcement summons was supported by an affidavit sworn by Ms B, an officer of the Child Support Agency (“CSA”), on 22 August 2006. In that affidavit, she deposed that STT (“the applicant”) had arrears of child support of about $15,000 and a monthly liability of about $1,000. Ms B also deposed that the records held by the CSA showed that the applicant telephoned the CSA on 6 April 2006 to dispute the information relied upon as to his income in the most recent change of assessment in relation to him. Ms B then deposed that the records of CSA showed that the applicant was advised of his right to make an application to the court. Ms B deposed that, about four months later, on 14 August 2006 she sent a letter to the applicant confirming that he had a right to apply to the court to vary his child support assessment.
No such application was forthcoming and on 24 August 2006 the enforcement summons was issued. On 18 September 2006, the applicant filed a response in which he named Ms B as the respondent. In his response, the applicant sought orders dismissing the alleged debt to the Commonwealth, cancelling or making void the assessment made by the CSA on the basis that the assessment of his income was wrong and seeking a departure order from the assessment.
The departure application
Also on 18 September 2006, the applicant filed an application for a departure order in which he named Ms B as the respondent. Additionally, the applicant filed a financial statement. It indicated that the applicant had no usual occupation and said “no financial licence”. This was a reference to the applicant’s claim that he had previously operated as an insurance or financial products adviser through his company, E Pty Ltd (“the company”), but when it recently became necessary for such advisers to obtain a licence, he did not do so and nor did the company.
The financial statement also said that the applicant had an average weekly salary of $198.07 based on his 2005 tax return. Otherwise, the financial statement stated that the applicant received $153.84 in rent and stated that the applicant had a weekly outgoing of $147.77 to his company for the private use of a motor vehicle registered to that company, namely, a 2001 BMW. The applicant claimed to have a total actual weekly income of $351.91 per week. He also said that he had mortgage payments of $170.00 per week and various other expenses totalling $351.80 per week.
The financial statement stated that the applicant owned his home in B which he valued at $250,000 and which is unencumbered. The financial statement stated that the applicant owned a unit at 17/55 H Street, E which he valued at $150,000. However, the applicant then stated in his financial statement that the registered owner of that property was actually the company and the unit was mortgaged to the extent of $67,000. The financial statement also stated that there was $2,400 in a Commonwealth Bank account in the name of the company, the BMW which was valued at $40,000, and which was also in the name of the company, and $11,000 in superannuation. In all, the financial statement disclosed that the applicant had assets of $452,400 and liabilities of $67,000, though some of those assets and liabilities were said to be the company’s.
Also on 18 September 2006, the applicant filed an affidavit in support of his departure application. He said that his personal income for the past six years did not exceed $6,000 per annum and that the total income before expenses of the company, of which the applicant is the sole director, did not exceed $26,000 per annum for the last six years. The applicant exhibited to his affidavit copies of the relevant tax returns which appear to be consistent with his claims.
The applicant then explained in his affidavit that the company had been operating in the financial industry but was now required by law to carry a financial licence which it did not have and it had therefore been forced to cease all business activities. The applicant said that the CSA’s determination that the applicant had an annual income of $78,254 was completely wrong. The applicant said that the CSA had noted that the shareholder funds in the company had increased from a loss of $22,760 in 2003 to a credit of $133,748 in 2004 and made the false assumption that a “financial benefit was created by reduction of the business income.”
The applicant filed on 21 September 2006 a further affidavit which had been sworn by him on that date. To that affidavit, the applicant exhibited a letter dated 22 September 2005 from him to the CSA. In that letter, the applicant asked that he be provided with the information on which the income figure of $78,254 was based and said that the department had just plucked figures out of thin air.
As noted above, the assessment in issue in this proceeding was the result of a departure initiated by the Registrar pursuant to s.98K of the Child Support (Assessment) Act 1989. Under s.98N of that Act, the Registrar is required to notify the parties that the Registrar is considering making a determination under s.98S and must cause to be served on each of the parties a summary of the information that the Registrar used to form the view that the Registrar should make a determination under the relevant Division.
The applicant’s affidavit sworn on 21 September 2006 indicated that the assessment was made on 15 September 2005 but that he was not given the information on which it was based until about 6 April 2006. The applicant also exhibited a letter dated 26 April 2006 from him to the CSA in which he explained that the shareholder funds in his company had increased because the value of the property in H Street had inadvertently not been included in the total company assets at the time the property was acquired and a correction was made in the company’s 2004 tax return. He said that the property presently has a mortgage of $75,000. He said in an attachment to the affidavit that his BMW was worth $55,000, not the $93,000 at which CSA had valued it (or, by inference, the $40,000 that he had stated in his financial statement). He further said that the money in the bank account was used to offset the mortgage on the property in H Street.
The hearing on 16 October 2006
On 16 October 2006, the applicant filed an amended application for a departure order in which he named MA, the mother of his child, as the applicant. The enforcement summons and the departure application order were listed for hearing on that day. MA was in court on the 16 October 2006. The applicant had not served on MA prior to the hearing either of the affidavits upon which he wished to rely but did so during the course of the hearing.
In the circumstances, the departure application was adjourned to
17 November 2006. The court asked the solicitor for the Registrar, who was in court for the purposes of the enforcement summons, whether the Registrar wished to intervene in the departure application, given that it was the Registrar’s decision to depart from the administrative assessment and MA appeared to have no knowledge of the basis upon which the departure decision was made and none of the evidence upon which the departure decision was made. The solicitor advised the court that she would get instructions.
In the enforcement summons proceeding on 16 October 2006, on the application of the Registrar, the court ordered that the applicant be restrained from dealing with his residential property until further order or payment of the debt. The enforcement summons was also adjourned to 17 November 2006 on the basis that it would be heard after the departure application was determined.
The payee’s affidavit
On 8 November 2006, MA filed an affidavit in which she said that she believed the decision of the CSA was correct and was based on information which they had obtained independently through their own investigations. She deposed that the applicant had been given the opportunity to discuss the decision in detail via telephone but chose not to participate in the process. MA exhibited a copy of a letter to her advising her that the Registrar was considering changing the child support assessment by basing it on the applicant having an income of $78,254. The letter said that the information on which the proposed change was based was set out below, but it was not. MA also exhibited a copy of the letter to her advising her of a telephone conference time for her. She did not exhibit comparable documents addressed to the applicant.
MA exhibited the notice of the decision made by Registrar on 15 September 2005. That decision was as described above. The reasons for decision explained that the applicant had been administratively assessed based on his 2003/2004 taxable income of $6,000. However, the Registrar considered that the applicant’s taxable income of $6,000 did not reflect “the income and benefits available to STT as a result of his business activities.” The decision maker said:
STT was provided with an opportunity to take part in a telephone conference. However, I was not able to definitively establish the identity of the person I had called, the person who I spoke to on the phone would not identify themselves and advised me to put it in writing.
The decision maker went on to consider reason 8 and said:
The investigating officer for this case has examined STT’s financial circumstances and referred the case to me for decision making purposes.
I have examined the information presented by the investigating officer and available to me through the Australian Taxation Office (ATO). The law is that if evidence is credible and not disputed then it should be accepted. That is the case here.
I therefore accept what the Registrar said about STT’s capacity to provide support for S.
The decision maker went on to say that she believed the administrative assessment to be unjust and inequitable and decided that it was fair to change the assessment. The information presented by the investigating officer was not set out in the reasons for decision.
MA also exhibited to her affidavit a copy of a notice of decision on objection dated 3 February 2006. In the objection decision, the reviewing officer said:
STT noted that S.C.O Little referred to information provided by the tax office and indicated that in 2003/2004 the company did not make a profit and his taxable income was only $6,000. This is correct, but the basis of the SCO’s decision was that his taxable income was not an accurate reflection of his capacity to pay child support.
The objections officer went on to say, in relation to the fairness question:
The available evidence points to STT having financial resources to pay child support at a higher level than the figure of $260.00 a year required by the current assessment.
After consideration of the relevant issues, in particular S’s proper needs and MA’s reliance on social security payments, I agree with SCO Little’s decision.
Ms B’s affidavit
On 15 November 2006, the Registrar filed an affidavit sworn by Ms B on that date in the enforcement proceedings. Ms B deposed that she had conducted various enquiries relating to the applicant’s financial circumstances which revealed the following:
a)the applicant is the sole proprietor of his home in B;
b)a council rates notice for the year ended 30 June 2006 indicated that the capital improved value of the property is $410,000;
c)the B property is unencumbered;
d)the applicant’s personal tax income returns stated that he had taxable incomes as follows:
i)for the year ended 30 June 2000: $2,308;
ii)for the year ended 30 June 2002: $3,460;
iii)for the year ended 30 June 2003: $5,700;
iv)for the year ended 30 June 2004: $6,000;
v)for the year ended 30 June 2005: $6,000;
e)the applicant is the director, secretary and sole shareholder of the company;
f)records of the Australian Business Register show that the company has the trading name R, that it is has been active since 5 April 2004 and that it was not currently registered for GST;
g)the records of the ATO show that the company:
i)for the year ended 30 June 2004, had a loss of $100.00, shareholder funds of $133,748 and total assets of $156,514;
ii)for the year ended 30 June 2005, had a loss of $6,469, shareholder funds of $127,279 and total assets of $211,805.
h)the records of the ATO show that the company has not lodged a business activity statement since the quarter ended 30 June 2002 and that in that quarter the company did not declare any instalments or payments;
i)the applicant is the sole proprietor of units 17 and 59 at 55-57 H Street, E; (actually, the searches exhibited to the affidavit show that the two properties are not registered in the name of the applicant but in the name of the company and that unit 59 is a car park);
j)a rates notice for the period ended 30 June 2006 in relation to unit 17 shows that its capital improved value is $280,000;
k)the units are encumbered by a mortgage to the Commonwealth Bank with an outstanding balance on the loan of $66,754.03 as at 30 June 2006;
l)there are no vehicles registered in the applicant’s name but the company is the registered owner of a black 2001 BMW X5 Wagon which, if it is a five speed automatic that has done between 50,000 and 90,000 kilometres, would be worth, according to the red book, approximately $42,000 to $48,300 in a private sale;
m)an application was made by the company for a loan of $80,000 secured on the unit at 17/55 H Street, E;
n)the loan application was signed by the applicant on 18 August 2004;
o)the loan application discloses that the applicant’s occupation is financial adviser and that his annual income is $45,000;
p)the loan application also discloses that in 2004 the applicant’s net profit had been $40,000 to $45,000 and in 2003 it had been $15,000 to $20,000 with the notation “only worked four months, been away”.
The hearing on 17 November 2006
When the matter returned to court on 17 November 2006, the representative of the Registrar told the court that the Registrar did not wish to intervene in the departure application and would simply abide the order of the court. An order was made that the enforcement proceeding and the departure application be formally consolidated. They had both had the same court number since inception.
MA relied on the affidavit sworn by Ms B on l5 November 2006.
At the hearing on 17 November 2006, the applicant called his accountant, Mr C. Mr C said, on oath, that the letter contained as exhibit 4 to the affidavit sworn by the applicant on 18 September 2006 was a letter that Mr C had sent to the CSA. He said that the balance sheet of the company up until 2004 had contained an error being the omission of the cost price of a rental property. Mr C said that the omission had been made by the applicant’s previous accountant and was rectified by Mr C in the 2004 income tax return. He said that the effect was to give the appearance of a sudden increase in shareholder funds in the 2004 year when in fact the property had been owned by the company since 1992. There was no cross-examination of Mr C.
STT then gave oral evidence. He said on oath that he had been an insurance broker, but he no longer had a licence so he now had no occupation. He said he lived on rental income. He said that in the last six years he had paid child support of $850.00 in total, all of which was paid earlier this year. He said that the company had bought the BMW outright in 2003 or 2004 with money borrowed against the property in H Street. He said that he would bring to court on the next occasion the contract for the purchase of the car. However, he did not do so.
The applicant said under cross-examination by MA that he had opened an account for their son which had about $4,400 in it. He said it was opened in 2003 and that the money came from his family, not from his own income.
In answer to some questions from the court, the applicant said that the signature on the loan application at exhibit CJB15 to the affidavit sworn by Ms B on 15 November 2006 was his signature and that he had signed the document on 18 August 2004. He said that the handwriting on the loan application (at page 114 of the affidavit and exhibits) was his. When asked about the handwritten statement that his net profit for the 2004 year was $40,000 to $45,000, he said “that is wrong”. When asked whether he had made a false statement to the bank in a loan application he said that his actual income had been $15,000 to $18,000 for the 2003/2004 income year. He said then that the handwriting looked like his handwriting but it was not and that the statement in the application was wrong. He then said, “this could have been a false statement to get a loan”. When asked whether he had made a false statement to the bank for that purpose he said, “I take that back”. The applicant again said that the handwriting looked like his handwriting but was not.
As it was quite late by this time, the court indicated that the matter would need to be adjourned for further hearing and proposed
20 November 2006 at 2:15pm. MA indicated that she could not come back to court on that day as she is a hairdresser and was committed to doing some hair for a wedding. When it was indicated that the alternative was a date in April 2007, MA sought leave to withdraw from the proceeding and said that she did not wish to attend any more. She told the court that it was the Registrar who had arrived at the figure that the applicant sought to depart from and she could not add anything.
The court advised MA that it was not the responsibility of the court to run the case and that if she withdrew from the proceeding there was no guarantee that the court would uphold the assessment in whole or in part. She accepted that and maintained her wish to be excused from further attendance. In the circumstances, MA was not required to attend the further hearing of the proceedings.
Although the enforcement summons and the departure application were formally consolidated, the Registrar took no part in the hearing of the departure application. More particularly, the Registrar stated that he did not seek to cross-examine the applicant or Mr C and did not seek to make submissions.
The hearing on 20 November 2006
When the matter resumed on 20 November 2006, the applicant had filed a further affidavit sworn by him on 20 November 2006. In that affidavit, he said that the loan application was signed on 18 August 2004, two months into the 2004 financial year. He said that the $40,000 to $45,000 was a speculative income only and was based on the prospective approval of a financial licence from the Australian Securities and Investment Commission (“ASIC”). He said that the 2003 statement of income of $15,000 to $20,000 was merely a conservative estimate. He said that the comment “only worked four months” referred to the last commissions received, and that they ceased in 2003.
The applicant exhibited to his affidavit a letter from ASIC to himself dated 21 October 2004. It stated that ASIC was concerned that the applicant may be providing financial services through R or the company without a licence and asked him to provide certain books and records. The applicant also exhibited a letter dated 2 November 2006 from him to ASIC in which he stated that the company no longer intended to pursue a financial licence and was withdrawing its application. The applicant also exhibited a letter dated 16 November 2006 from ASIC to himself indicating that ASIC had concluded its investigations and intended to take no further action in respect of the matter. The letter also stated:
The use of this letter as a bar to, or defence in, any civil, criminal or disciplinary proceedings is neither intended nor appropriate. This letter merely reflects that as of this date ASIC did not elect to take enforcement action based on the information it held at that time.
At the hearing on 20 November 2006, Ms B was cross-examined by the applicant. She was asked if she or the CSA or the Registrar or his solicitors had any concrete evidence that the applicant or the company had the income for which he had been assessed. Ms B replied that the CSA only had the tax returns. Ms B was asked whether there were any other paragraphs in her affidavit that indicated that the applicant had any other income. She said “no”.
The applicant submitted that he had provided tax returns and the accountant had explained the increase in the assets of the company disclosed in the balance sheet. He submitted that the $45,000 mentioned in the loan application was only speculative and that there was no factual evidence of his income. He said that he was unable to work in insurance anymore but that the CSA could assess him in the future if he started working again.
There were no submissions in reply in relation to the departure application. However, the Registrar’s representative in relation to the enforcement summons said that the applicant in his financial statement filed in court had valued his residential property at $250,000 whereas the loan application signed by the applicant stated that his residential property was worth $450,000.
The applicant said in reply that his application for a financial licence was not approved and he was unable to carry on business. He said that without a licence, he had no potential to earn any income. He said he could not work in insurance any more.
The applicable legislation
Division 3 of Part 6A of the Child Support (Assessment) Act 1989 (“CSAA”) provides for departures initiated by the Registrar. That Division provides as follows:
SECT 98K
Registrar may initiate a determination under this Part
(1)If, at any time when an administrative assessment is in force in relation to a child, the Registrar is of the view that, because of special circumstances that exist, the provisions of this Act relating to administrative assessment of child support should be departed from in relation to the child, the Registrar may make a determination under this Part.
Note: For the determinations that the Registrar may make under this Part see section 98S.
(2)The parties to the proceedings under this Division are the liable parent and the carer entitled to child support.
SECT 98L
Matters as to which Registrar must be satisfied before making determination
(1)Subject to this Part, the Registrar may make the determination if:
(a)the Registrar is satisfied that, in the special circumstances of the case, application in relation to a child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child because of the income, earning capacity, property and financial resources of either parent; and
(b) that it would be:
(i) just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(ii) otherwise proper;
to make a particular determination under this Part.
(2)Subsections 117 (4) to (9) (inclusive) apply to the Registrar in the exercise of his or her powers under this section as if:
(a)any reference in those subsections to the court were a reference to the Registrar; and
(b)any reference to an order were a reference to a determination.
SECT 98M
Parties to be notified
(1)The Registrar must, in writing, notify the parties to the proceedings that the Registrar is considering the making of a determination under section 98S in relation to the child concerned.
(2)The Registrar must also cause to be served on each of the parties to the proceedings a summary of the information that the Registrar used to form the view that the Registrar should make a determination under this Division.
(3)At the same time, the Registrar must inform each party to the proceedings in writing that the party may make any representation (a reply ) regarding the application that the party considers relevant.
SECT 98N
Replies
(1)Any reply made by a party to proceedings under this Division must:
(a) be in the manner specified by the Registrar; and
(b) be made to the Registrar.
Note: Section 150A provides for the Registrar to specify the manner in [which] a reply may be made.
(2)If a party to the proceedings makes a reply, the Registrar must serve a copy of the reply and any accompanying documents on the other party to the proceedings.
SECT 98P
Parties may jointly elect that Registrar discontinue proceedings
(1)In respect of proceedings under this Division, the liable parent and the carer entitled to child support may jointly elect that the Registrar discontinue the proceedings if the carer is not in receipt of an income tested pension, benefit or allowance.
(2) The election must be:
(a) in the manner specified by the Registrar; and
(b) given to the Registrar.
(3)If the parties to the proceedings make an election as set out in subsection (1), the Registrar must:
(a) discontinue the proceedings; and
(b)notify the parties to the proceedings that the Registrar has discontinued them because of the election under subsection (1).
SECT 98Q
Procedure
(1) In making a decision under this Division, the Registrar:
(a) may act on the basis of:
(i) the information that the Registrar used to form the view that because of special circumstances that exist, the provisions of this Act relating to administrative assessment of child support should be departed from in relation to the child concerned; and
(ii) if action has been taken under section 98N–the replies (if any) and the documents (if any) accompanying them; and
(b)may, but is not required to, conduct any inquiry or investigation into the matter.
(2)Except where the Registrar refuses to make a determination under section 98R in respect of proceedings, the Registrar must give an opportunity to parties to the proceedings to appear before the Registrar, and be heard by him or her, if they so wish.
Note: Section 98R provides that the Registrar may refuse to make a determination in the circumstances set out in that provision without taking any further action under this Part.
(3)Nothing in subsection (2) empowers the Registrar to compel the parties to the proceedings to appear before the Registrar in the presence of the other party.
(4)Any hearing before the Registrar, and any inquiry or investigation carried out by the Registrar, is to be carried out as the Registrar thinks fit and the Registrar is not bound by any rules of evidence.
(5)A party must not be represented by another person before the Registrar.
SECT 98R
Registrar may refuse to make determination because issues too complex
If the Registrar is satisfied, after considering the information before him or her and the representations (if any), that the issues involved are too complex to be dealt with under this Part, the Registrar may:
(a)decide not to make the determination, without taking any further action under this Part; and
(b)recommend that application be made to a court having jurisdiction under this Act for an order under Division 4 of Part 7.
Division 4 of Part 6A of the CSAA provides for the determinations that may be made under that Part. Division 4 is as follows:
SECT 98S
Determinations that may be made under Part
(1) Subject to section 98A, the determinations that the Registrar may make under this Part are as follows:
(a)a determination varying the rate of child support payable by the liable parent concerned;
(b)a determination varying the child support percentage, adjusted income amount, child support income amount or exempted income amount of the liable parent;
(c)a determination making provision of a kind permitted under the regulations with respect to the calculation of any such amount in relation to the liable parent;
(d)a determination varying the child support income amount or disregarded income amount of the carer entitled to child support concerned;
(e)a determination making provision of a kind permitted under the regulations with respect to the calculation of any such amount in relation to the carer entitled to child support;
(f)a determination directing that one or more of the following provisions is not to apply:
(i) section 42 (Cap on child support if child support income amount exceeds 2.5 times yearly equivalent of AWE amount);
(ii) section 52 (Cap on combined child support liabilities of 2 liable parents);
(g)a determination varying a factor ascertained under paragraph 54(1)(b).
(2)In proceedings under Division 2, the determinations under subsection (1) that the Registrar may make are not limited by the terms of the application.
(3)A determination under this Division may make different provision in relation to different child support periods and in relation to different parts of a child support period.
(3A)A determination under this Part varying the child support income amount of a liable parent or a carer entitled to child support must not reduce the child support income amount worked out under Part 5 by more than 30%, to the extent that the reduction is attributable to a ground mentioned in subparagraph 117(2)(c)(iii) or (iv).
(4)The Registrar must give, in writing, the reasons for making the determination (including the reasons for which the Registrar is satisfied as required by paragraph 117(1)(b)).
(5)A contravention of subsection (4) in relation to a determination does not affect the validity of the determination.
The relevant provisions of s.117 of the CSAA are as follows:
Matters as to which court must be satisfied before making order
Court may make departure order
(1) Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b) the court is satisfied:
(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:
(A)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this Division;
the court may make the order.
Grounds for departure order
(2)For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
…
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
…
Matters to consider for purposes of subparagraph (1)(b)(ii)
(4)In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b)the proper needs of the child; and
(c)the income, earning capacity, property and financial resources of the child; and
(d)the income, property and financial resources of each parent who is a party to the proceeding; and
(da)the earning capacity of each parent who is a party to the proceeding; and
(e)the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(f)the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g)any hardship that would be caused:
(i) to:
(A)the child; or
(B)the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A)the liable parent; or
(B)any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order.
(5)In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the effect that the making of the order would have on:
(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
Matters to consider for purposes of paragraph (4)(b)
(6)In having regard to the proper needs of the child, the court must have regard to:
(a)the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b)any special needs of the child.
Matters to consider for purposes of paragraph (4)(c)
(7)In having regard to the income, earning capacity, property and financial resources of the child, the court must:
(a)have regard to the capacity of the child to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child that do not produce, but are capable of producing, income; and
(b)disregard:
(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
Matters to consider for purposes of paragraph (4)(d)
(7A)In having regard to the income, property and financial resources of a parent of the child, the court must:
(a)have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing, income; and
(b)disregard:
(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.
Determinations in respect of paragraph (4)(da)
(7B)In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a) one or more of the following applies:
(i) the parent does not work despite ample opportunity to do so;
(ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or working pattern; and
(b)the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i) the parent’s caring responsibilities; or
(ii) the parent’s state of health; and
(c)the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
Matters to consider for purposes of paragraph (4)(f)
(8)In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care.
Subsections not to limit consideration of other matters
(9)Subsections (4) to (8) (inclusive) do not limit other matters to which the court may have regard.
Grounds of application
The applicant suggested that the Registrar had followed the wrong procedure in this case by failing to provide to the applicant the information on which the proposed departure was based and by failing to give the applicant a proper hearing. These grounds may have sustained an application for judicial review. However, the application that was before the court was a departure application and it was dealt with accordingly.
The applicant’s departure application indicated that he was relying on his claim that his income had been set at the wrong figure. That is a claim under s.117(2)(c)(ia).
Applicable law
The applicant suggested that the Registrar had followed the wrong procedure in this case by failing to provide to the applicant the information in which the proposed departure was based and by failing to give the applicant a proper hearing. Those grounds may have sustained an application for judicial review. However, the application that was before the court was a departure application and it was dealt with accordingly.
The orders sought in this case ostensibly include orders for departure from administrative assessment. In fact, the applicant appears to be seeking orders that his liability be assessed based on a strict application of the statutory formula, rather that by reference to the decision of the Registrar. The decision, in itself, was a departure from administrative assessment.
In Perryman v Perryman (1993) FLC 92-433, Kay J considered this issue. His Honour said at 80,420:
[26] …It was the submission of the Registrar supported by Counsel for the wife, that the document which issues as a result of the recommendations of the child support review officer is merely an amended "administrative assessment" which has been made by an exercise of the Registrar of his power under s.75.
[27] I have some difficulty with the concept that one can make an administrative assessment by determining to depart from the provisions of the Act relating to an administrative assessment which it is determined to depart from. The matter is perhaps saved by the provisions of s.75(5). It seems unfortunate that s.75(3) has not been amended to include specific reference to a determination made under Part 6A.
[28] It would seem that by operation of s.75 the process of applying a formula and then departing from the formula by a Child Support Review Officer still creates an "administrative assessment". Thus, where such process has been undertaken and either party is aggrieved by the amended assessment, the provisions of s.115(b) of the Child Support (Assessment) Act apply. This Court is then seized with power to hear an application for an order for departure from the administrative assessment as so amended. It would appear that the process and findings of the Review Officers will not of itself be subject to any scrutiny by the Court.
Accordingly, I accept that, in this case, the departure process is applicable.
In Gyselman v Gyselman (1992) FLC 92-279 at 79,064, the Full Court of the Family Court explained that section 117 of the CSAA is the critical section in departure applications. The Full Court then explained that:
The structure of that section is that s.117(1)(b) identifies concisely the matters about which the court must be satisfied and those components are then expanded in subss (2)-(9). Section 117(1)(b) identifies a clear three step process.
1. Whether one or more grounds of departure in s.117(2) is established.
If so:
2. Whether it is “just and equitable” within the meaning of s.117(4) to make a particular order.
3. Whether it is “otherwise proper” within the meaning of s.117(5) to make a particular order. It is clear from the careful way in which s.117 has been structured that the court must address each of those three separate issues.
Findings
I find that the applicant is the sole proprietor of his home in B and that his property is unencumbered. The applicant claimed in his statement of financial circumstances that his home was worth $250,000. However, the rates notice for the year ended 30 June 2006 stated that it had a capital improved value of $410,000. The applicant valued it at $450,000 in the loan application signed by him on
18 August 2004. While acknowledging that the value of the property may have changed since that date, in the absence of better evidence, I find that the applicant’s property in B is valued at $450,000 based, on the statement in the loan application, and that it is unencumbered.In his financial statement, the applicant treated the assets and liabilities of the company as his own. In the circumstances of this case, where the applicant controls that company entirely, I consider that it is appropriate to treat the assets and liabilities of the company as the assets and liabilities of the applicant, and I find accordingly.
The searches exhibited to the affidavit sworn by Ms B on 15 November 2006 do not indicate when the company acquired the unit in H Street but the searches do indicate that the units were mortgaged to the Commonwealth Bank on 19 September 1997. I find that the units were owned by the company from no later than that date. I also accept that the unit had not been brought to account in the company’s accounts until 2004.
I find that the applicant has at his disposal units 17 and 59/55 H Street, E. The rates notice for unit 17 states that its capital improved value as at 30 June 2006 was $280,000. However the loan application signed by the applicant on 18 August 2004 stated that the value of the unit was $320,000. While the value of the unit may have changed since that date, in the absence of better evidence, I find that the value of the unit is $320,000, in accordance with the statement in the loan application.
The applicant said in his financial statement that the unit was encumbered to the extent of $67,000. However, he said in his affidavit sworn on 21 September 2006 that it was mortgaged to the extent of $75,000. Bank statements exhibited to the affidavit of Ms B sworn on 15 November 2006 indicate that as at 30 June 2006 the amount outstanding on the loan was $66,754.03. I do not accept the applicant’s claim that the mortgage stands at $75,000. He has produced no records to substantiate that figure although it was obviously in his power to obtain an up to date statement from the bank.
Accordingly, I find that the unit in H Street is encumbered to the extent of $67,000. That leaves an equity of $253,000. I find that the applicant has at his disposal equity in the unit to the value of $253,000.
Additionally, the company owns the Black 2001 BMW driven by the applicant. Ms B in her affidavit of 15 November 2006 gave evidence that, depending on various matters, the car would be worth between $42,000 and $48,300 in a private sale. In his financial statement, the applicant said that it was worth $40,000. In an attachment to his affidavit sworn on 21 September 2006, he said that it was worth $55,000. I find that the BMW registration number R has a value of $55,000 and is an asset at the disposal of the applicant.
All in all, I find that the applicant has at his disposal assets to the value of $758,000 being his unencumbered home worth $450,000 and the assets of his company being the unit with equity of $253,000 and the BMW valued at $55,000.
The only income that the applicant admitted to was rent of $153.84 per week or $7,999.68 per annum from the unit in H Street and $198.07 per week or $10,299.64 which he said was based on his 2005 tax return. The applicant did not disclose the source of that weekly income and it is inconsistent with his claim to not be working. The financial statement did not require him to state his past income but only his current income. The applicant’s financial statement was dated 18 September 2006. I suspect that the applicant as at that date did have another source of income and that it was a good deal more than the $198.07 per week that he alleged. However, there was no evidence to that effect.
The applicant’s evidence is that he is in receipt of a total income of $351.91 per week or $18,299.33 per year and that he spends $147.77 per week reimbursing his company for the private use of the BMW. It is beyond belief that a person with such a low income would spend so much per week on a motor vehicle.
I find that the applicant signed the loan application dated 18 August 2004. I find that he wrote the handwritten figures on that application stating that his net profit for 2004 was $40,000 to $45,000 and that his net profit for 2003 was $15,000 to $20,000. I also find that the applicant wrote the words “only worked four months been away”. I do not accept the applicant’s claims that that handwriting merely looked like his handwriting but was not his handwriting. I also find that those figures accurately stated the applicant’s net profit for 2003 and 2004.
I find that the applicant would have earned about $45,000 to $60,000 in 2003 if he had worked for the full year.
However, I accept that neither the applicant nor his company holds the licence necessary for a person to operate as a financial adviser.
I accept that the applicant can no longer work on his own account in precisely the same field as he did previously.
There was minimal evidence about the applicant’s current income. His own evidence included a fact which was not disputed that he had paid $850.00 in child support earlier this year. Otherwise, there was the evidence elicited by MA that the applicant had opened an account for their son which had about $4,400 in it. The applicant said that it was opened in 2003 and that the money came from his family rather than from his own income. There was no independent evidence about that account and in particular no evidence about when amounts were deposited to it. As it is not known when the deposits were made to the account in S’s name, the evidence about the $4,400 does not assist.
In all the circumstances, I am satisfied that in the past the applicant was able to earn at least $45,000 per annum from his business as a financial adviser. However, I accept that the applicant is no longer able to do that work on his own account. It may be that he is working as an employee for another entity or is otherwise using his undoubted skills to earn a reasonable income. However, there was no evidence to that effect and nothing was put to the applicant along those lines. It is unfortunate that the Registrar was not actively involved in the departure application.
In the circumstances, I am not able to find that the applicant has an earning capacity at any particular level above the $18,299.33 per annum that he has admitted.
Grounds for departure
The first question is whether one or more of the grounds for departure set out in s.117(2) of the CSAA is established. In my view, if the only issue concerned the actual income of the applicant, a ground would be made out, as his income appears to be only $18,299.33 per annum.
However, another issue is whether the applicant has a greater earning capacity than his actual present income level. If so, in certain circumstances, the applicant’s child support amount could be based on his earning capacity, or the amount he could earn, rather than his actual present income. However, there is no evidence before the court from which it could be found that the applicant has any particular earning capacity, now that financial advisers need to be licensed.
But it does not end there. The ground under s.117(2)(c)(ia) of the CSAA requires the court to consider not only the income and earning capacity of the applicant but also his property and financial resources. The amount of child support payable may be fixed not only by reference to the applicant’s actual income earned in a year. The amount of child support payable may also be based on his notional income. The applicant’s notional income may be based on either his earning capacity or on his property and financial resources.
By any standards, the applicant has substantial amounts of property and financial resources at his disposal. The property in the applicant’s own name is unencumbered and worth $450,000. Additionally, in his financial statement and loan application, the applicant has treated the assets of the company as his own. Given that the applicant is the sole director and shareholder of the company, he is clearly able to control it and use its resources as he sees fit. In fact, he owns the company, and thus, its assets. Accordingly, I find that the assets of the company are a financial resource of the applicant. The assets of the company and the assets in the applicant’s own name have a value in excess of $700,000.
While those assets may be insufficient to produce an income of $78,254 per annum, that is not the question. Those assets and resources could be liquidated, in part, to provide for the adequate support of the child. For example, the BMW could be sold very readily.
The applicant’s annual rate of child support under the current assessment is $11,663. If that amount, adjusted for inflation, is paid for the next 12 years, the total amount of child support paid by the applicant would be in the vicinity of $150,000, in today’s money. That is not an excessive amount for a man who has assets of $753,000 at his disposal to pay for the support of his child.
In view of the very substantial amounts of property and financial resources at the disposal of the applicant, I do not consider that there is a ground for departure from the assessment in this case.
Other matters
In Gyselman, it is said that the court need only consider steps two and three outlined above if it is considered that a ground for departure is established. As no such ground has been established, it is unnecessary to consider steps two and three.
However, for completeness, I would emphasise that the applicant has both a legal and a moral obligation to maintain his child. There was no evidence of any hardship that the applicant might suffer if the existing assessment was not altered. As the matter stands, I do not consider that the sale of a significant portion of the assets within the control of the applicant would amount to hardship. By the standards of our community, the applicant is moderately wealthy, even if his present income is minimal. In the circumstances, I consider that the order that I propose to make in this matter to be just and equitable and otherwise proper in the terms of the CSAA.
Orders
In all the circumstances, the order of the court will be that the application for departure is dismissed.
The effect of this order is that the applicant will continue to have arrears of child support in excess of $15,000. Accordingly, it is not appropriate to dissolve the injunction restraining the applicant from disposing of his residential property pending the satisfaction of the child support debt. To enable the outstanding child support debt to be properly dealt with, the enforcement summons will be listed for a hearing on a later date.
I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate: Melissa Gangemi
Date: 21 December 2006
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