Eades & Cadell (SSAT Appeal)
[2009] FMCAfam 275
•24 April 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EADES & CADELL (SSAT APPEAL) | [2009] FMCAfam 275 |
| CHILD SUPPORT – Appeal from decision of SSAT – whether the approach taken by the SSAT constituted an error of law – whether allocation of an amount for disability expenses is an appropriate consideration. |
| Child Support (Assessment) Act 1989 Child Support (Registration and Collection) Act 1988 |
| Gyselman & Gyselman (1992) FLC92-279 Ross & McDermott (1998) FLC 98-003 Hallinan & Witynski (1999) FLC 98-009 Dwyer & McGuire (1993) FLC 92-420 Mee & Ferguson (1986) FLC 91-716 Hall & Rushton (1991) FLC 92-249 Burke & Elliott (1990) FLC 92-161 |
| Applicant: | MS EADES |
| Respondent: | MR CADELL |
| File Number: | BRC 10642 of 2008 |
| Judgment of: | Slack FM |
| Hearing date: | 20 March 2009 |
| Date of Last Submission: | 20 March 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 24 April 2009 |
REPRESENTATION
| Solicitors for the Applicant: | Legal Aid Queensland |
The Respondent appeared on his own behalf.
ORDERS
That the Appeal from the Decision of the Social Security Appeals Tribunal filed on 21 November 2008 be allowed.
That the Application be remitted to the Social Security Appeals Tribunal to be reheard by a differently constituted Tribunal.
IT IS NOTED that publication of this judgment under the pseudonym Eades & Cadell is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 10642 of 2008
| MS EADES |
Applicant
And
| MR CADELL |
Respondent
REASONS FOR JUDGMENT
In this appeal from the decision of the Social Security Appeals Tribunal (hereafter “the SSAT”) dated 23 October 2008, there are three grounds in the Notice of Appeal, namely that the SSAT erred in:
Exercise of its discretion in failing to give due consideration of relevant factors in determining the income and financial resources of the payer.
Failing to give proper consideration to the matters set out in s.117(4) in determining whether it would be just and equitable in making the order made, in particular:
a. the capacity of each parent to support the child;
b. the cost of the appellant in providing care for the child;
c. the necessary commitments of each party;
d. the hardship that would be caused to the appellant and subject children in reducing the child support payable as determined by the decision of the Objections Officer dated 20 April 2007;
e. the hardship caused to the appellant subject children in refusing to make an order.
By failing to nominate an amount payable by the payer as contribution to the disability expenses of [Y] in its consideration as to whether it was otherwise proper to make the order.
The appellant is the carer parent in the matter.
The respondent (who appeared in person) objected to the findings of the SSAT about his income. He indicated that he wanted a rehearing of the matter on the merits.
I intend to proceed on the basis that I need to be satisfied, pursuant to the provisions of s.110B of the Child Support (Registration and Collection) Act 1998 (hereafter “the Registration and Collection Act”, that there has been an error of law by the Tribunal before I can accede to the joint request of the parties to have a rehearing of the matter.
The child support assessment relates to the children [X] and [Y], born in 1998.
Assessments – History
The following summary of the history of the assessments given by the SSAT does not appear to be in dispute.
The administrative assessment of child support for the period from 1 November 2006 to 31 January 2008 was based on a child support income of $29,454 for Mr Cadell, and a median income for Ms Eades of $25,468 (she not having filed her tax return). For the period 1 November 2006 to 5 January 2008, the assessment took into consideration Mr Cadell’s liability to pay child support for another child, and his assessment was for the payment of an annual rate of $3,303 for these children. From 6 January 2008 to 31 January 2008, Mr Cadell’s other relevant child having turned 18, the assessment was for the payment of $4,177 annually.
The administrative assessment of child support for the period from 1 February 2008 to 30 April 2009 was based on a taxable income of $29,758 for Mr Cadell, and an income for Ms Eades of $13,473. Mr Cadell’s liability for the payment of child support to 30 June 2008 was an annual rate of $3,853. His liability from 1 July 2008 to 30 April 2009 was for the payment of an annual rate of child support of $2,762.
On 14 December 2006, Ms Eades made a departure application under Part 6A of the Child Support (Assessment) Act 1989 (“the Assessment Act”). A senior case officer allowed the application and fixed Mr Cadell’s monthly rate of child support at $400 ($4,800 per annum) for the period from 1 February 2007 to
5 January 2008. This was based on Ms Eades having special need for [Y] which cost $125 per month ($1,500 per annum) and Mr Cadell being found to have a capacity to meet the assessment.
Ms Eades objected to that decision on 16 February 2007. On 20 April 2007, an Objections Officer disallowed the objection.
On 14 March 2008, Ms Eades made a further departure application under Part 6A of the Act. A senior case officer also allowed that application and fixed Mr Cadell’s rates of child support for the periods from 6 January 2008 to 30 June 2008 to be based on an income for him of $60,000 per annum, and at a rate of 32%; and for the period from 1 July 2008 to 30 June 2010 to be based on an adjusted taxable income for Mr Cadell of $65,000 annually, and on an increased cost for both children of $20,719 per annum. This was based on [Y] having monthly special needs of $718 ($8,616 per annum), and [X] having special needs of $50 per month ($600 per annum); and also on Mr Cadell’s income from his business being $60,000 annually, adjusted upwards for inflation to $65,000.
Ms Eades objected to that decision on 12 June 2008. On 11 August 2008, an Objections Officer disallowed has objection.
Mr Eades also objected to that decision on 6 June 2008. His objection has not yet been determined.
The SSAT were dealing with an appeal from Ms Eades filed on
4 March 2008relating to the first objection decision (dated 20 April 2007). No appeal was filed in relation to the second objection decision although it appears the SSAT dealt with the child support period covering both objections. Neither party appears to raise any objection to the way in which the SSAT dealt with the appeal.
In essence, the appeal relates to the approach taken by the SSAT in the determination of the matter.
The Full Court of the Family Court has long recognised that in applications for departure from the Administrative assessment, the Court is entitled to take a practical and flexible approach (Ross & McDermott (1998) FLC98-003 @ 95.131). It is unnecessary to make any reference to those matters that have no real relevance (Ross & McDermott @ 95,131). It is permissible to group together provisions that have regard to similar facts [for example and in particular s.117(4)(b) and (f)] [see Hallinan & Witynski (1999) FLC 98-009 @ 95.323].
The same principles would be applicable to the SSAT.
Nevertheless it should be recognised that the SSAT is the last merit based review of applications to change assessments and the reasons should reflect findings of relevant facts and the application of the legislative pathway to those facts in making any determination.
Approach to be applied in determining the application to change the assessment
Before the SSAT can determine to vary a child support assessment, the SSAT must be satisfied [s.98(c) of the Child Support (Assessment) Act 1989 (“the Assessment Act”)]:
a)that a ground for departure exists;
b)that it is just and equitable as regards to the child, his/her carer and the liable parent;
c)that it is otherwise proper;
d)to make a particular determination.
Ground for departure
The first step in that process to determine whether a ground for departure set out in s.117(2) has been established, is as was said by the Full Court in Gyselman & Gyselman (1992) FLC92-279 @ 79.065:
Each of those grounds is prefaced by the words, ‘in the special circumstances of the case’. Whilst it is not possible to define this precision the meaning of that term as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary. That is the intention of the legislature that the Court will not interfere with the administrative formula result in the ordinary run of cases. In Savery’s case (p77,897), Kay J adopting the view in Phillippee (1978) FLC90-443 @ 77.202, in a different context, said ‘that special circumstances’ were ‘facts peculiar to that particular case which set it apart from other cases’. The approach to the interpretation and application of the particular grounds in s.117(2) must be guided by that qualification.
If the SSAT concludes that a ground for departure from the child support assessment does not exist, then the application must be dismissed.
In this matter, having set out the legislative framework for dealing with the appeal, the SSAT found:
a)that pursuant to s.117(2)(b)(ia) of the Assessment Act that there was a ground for departure (in relation to [Y]’s special needs);
b)that there was a ground for departure pursuant to s.117(2)(b)(ia) in relation to [X]’s tennis expenses;
c)that there was a ground for departure pursuant to s.117(2)(c)(ia) and 117(2)(c)(ib) in relation to Mr Cadell’s income;
d)that there was no ground for departure based upon the expenses incurred by Mr Cadell in having contact with the children;
e)that there was not a ground for departure established because of payments made between the parents.
Neither the appellant nor the respondent seemed to challenge those findings made by the SSAT although the respondent would challenge the findings made about the amount of his income.
Upon reaching the conclusion that a ground for departure exists, then the SSAT must have regard to the specific matters listed in s.117(4) and s.117(5) [see Ross & McDermott (1998) FLC98-003 @ 95.130].
After considering the facts relevant to those particular provisions, the SSAT:
a)may refuse to vary the assessment;
b)may make a particular “determination” varying the assessment based upon the relevant findings in the enquiry.
Just and equitable
In relation to the question whether it would be just and equitable as regards the child, the mother, and the father to make a determination, the first matter referred to in s.117(4) is the nature of the duty of the parent to maintain a child.
In Hallinan & Witynski (1999) FLC 98-009 @ 95.322, the Full Court of the Family Court of Australia said:
Although that statement of a parent’s duty contains no statement about the relativity about the duties of each parent, it is a clear statement of legislative intent that both parents of any child are under primary duty to maintain their child. In looking at the relativity of the parents’ duties we think it is legitimate to look both at the ‘objects of the Act’ as defined in s.4 and the additional particular objects of Division 4 (which contain s.117 as set out in s.114). The latter section states those particular objects to including ensuring:
a. that the children have their proper needs met from reasonable and adequate shares in income, earning capacity, property and financial resources of both of their parents; and
b. the parents share equitably in the support of their children.
When considering the proper needs of the child [as required by s.117(4)(b)], it may be appropriate to consider that paragraph in conjunction with s.117(4)(f), namely the direct and indirect costs incurred by the carer entitled to child support in providing care for the child (see Hallinan & Witynski @ 95.323).
In considering the proper needs of the child [s.117(4)(b)], the SSAT:
a)would ordinarily consider the evidence of the parties about the needs of the children to assess the reasonableness and quantum of those needs;
b)may have regard to publish guidelines as to the needs of the children (see Hallinan & Witynski @ 94.323).
c)may also have regard to the costs of children used in the assessment of child support under the existing formula arrangements [although it is not sufficient or appropriate to rely upon the formula to perform that task, Lindenmayer J in Dwyer & McGuire (1993) FLC92-420 (and see also Gyselman (supra) @ 79.078)].
The SSAT found, in relation to the children’s needs:
84. These expenses appear reasonable to the Tribunal. It would mean that the children have expenses of $29,432 annually inclusive of [Y]’s special needs. The Tribunal has also found that [X] has expenses in relation to his tennis of $4,639 annually. Consequently, the total expenses for the children are approximately $34,000 per year. The children have a need for all of the financial assistance which each of their parents can reasonably give.
There would appear to be no challenge to that finding.
In considering the income, earning capacity, property and financial resources of each parent, it is unnecessary to repeat those considerations if they have been done with respect to the consideration of s.117(2)(c)(ii).
In this matter it was the unchallenged finding of the SSAT that the Cadell Children’s Trust was the alter ego of the respondent and attributed the income of the trust to the respondent.
The SSAT determined that $55,855 represents a fair approximation of Mr Cadell’s pre-tax income for the 2007/2008 year on the basis of the available evidence.
The applicant challenges, in Ground 1 of the Appeal, that in reaching that finding the SSAT, in particular, did not add back the depreciation costs of the company [R] Pty Ltd to the respondent’s income and failed to conduct sufficient enquiry into the claimed expenses of the Company.
I do not agree that the enquiry should necessarily have proceeded in that way. The SSAT considered the income of the respondent both from his earnings with the company and via the trust. The SSAT was entitled to consider, as the Act requires, under a separate heading, the expenses for the respondent that should be taken into account to determine his capacity to meet his child support obligations. Consequently, I am not satisfied that Ground 1 of the Appeal is made out.
It is clear though that after having reached a conclusion about the income and earning capacity of both parents, the SSAT must then consider the matters referred to in s.117(4)(e) of the Assessment Act.
In looking at the expenses claimed, it is legitimate in the exercise of that discretion to have regard to the compulsory and discretionary expenditure made by the carer or liable parent both in earning their income and in respect of their reasonable weekly living expenses.
The Full Court in Gyselman & Gyselman (supra) adopted the analysis of this particular issue of the Full Court in Mee & Ferguson (1986) FLC91-716 where the Full Court said (pages 75.197-75.198):
The important aspect in most cases and a matter of major contention in this case is the extent to which the expenditure of a party is to be deducted from his or her income before the maintenance contribution is ascertained. That is, where on the scale of priorities does child maintenance fit?
There appears to be three possible approaches, namely:
a. Having regard to the nature of the obligation, his liability to contribute to the support of his children is the nature of a pre-eminent obligation to be calculated from his income after the deduction only of unavoidable commitments such as taxation, Medibank levy, compulsory superannuation and the like.
b. The opposite view – that a party is entitled to meet all but clearly unreasonable expenses and maintenance is to be met out of any surplus.
c. The intermediate view which allows for the deduction only of necessary living expenses in addition to those in a. above.
But unfortunately the legislation itself does not provide the answer to this problem. In practice, it appears to us that the Court have tended to vary between b. and c. above.
To adopt b. is to allow the respondent to deduct from his income all of his expenditure except the extravagant or inappropriate and assess maintenance from what is left. The problem about that is that there is very little left and the consequences of that is that the amount of maintenance which is assessed in usually quite out of kilter with the actual needs of the child with further consequence that a disproportionate financial burden is placed on the shoulders of the custodian.
In the absence of any clearer legislative direction it appears to us that the present state of the law requires the Courts to approach the matter by adopting c. above, ie, in determining the financial capacity of the respondent to meet the claim for child maintenance, there is to be deducted from his income unavoidable or compulsory expenses together with necessary living expenses.
The Full Court in Gyselman said (@ 79.075):
It appears to us most likely that the legislature intended that the term “commitments of the parent necessary to enable the parent to support ‘himself’” should have the same meaning and approach. This gives consistency of interpretation of the whole of this area. There is, we think, nothing in the Assessment Act which should lead to a contrary view. The statement of the priorities of duty of parent to maintain a child compared with the other commitments of the parent set out in s.3 of the Assessment Act is in the same terms as s.66(B) of the Family Law Act. Although the objects of the Assessment Act in s.4 are stated somewhat more expansively than are those in Division 6 of Part VII of the Family Law Act (s.66A), there is no inconsistency in the two provisions. The same words appear in s.75(2)(d) relating to property and spousal maintenance and they have always been understood in the sense referred in Tucks case.
In determining the commitments of each parent, the SSAT should consider (and the reasons should provide some analysis of):
a)the level of the parties’ income compared to their claimed expenses;
b)what actual capacity they have to contribute out of income to the support of the children;
c)a consideration of the various items of expenditure (including that expenditure incurred to earn income) and consideration of:
i)the reasonableness both in nature and quantum of that expenditure;
ii)whether the expenditure should have priority over their child support obligation (having regard to the test referred to above);
iii)the nature of the expenditure (eg, depreciation allowances) may or may not be taken into account depending on the circumstances of the operation of the business and the need to renew equipment in order to maintain an income producing capacity.
The SSAT can have regard to the operation of the formula as a convenient starting point but is not entitled to simply do so without further and proper regard to the actual capacity of a parent to contribute to the support of the children [see Ross & McDermott (supra) @ 95.132].
In this matter, the SSAT found that the respondent and his wife had expenses (apart from housing costs/mortgage repayments) of $524 per week and that the respondent’s wife had the capacity, due to her income, to contribute to those expenses.
The SSAT found that:
Mr Cadell does have a surplus of income over expenses and does have financial resources from which he is able to provide for the proper needs of his children.
The SSAT then went on to conclude:
….The Tribunal will fix Mr Cadell’s adjustable taxable income at $55,855. This income was, before 1 July 2008, termed ‘child support income’. To take account of Ms Eades’ high costs for the special needs of [Y] and [X] the Tribunal will need to consider how these additional costs should be shared between the parents.
90. Mr Cadell is in his own business and does receive income and benefits from it. However the business has very large debts as a result of acquiring trucks with which to carry out the work, although for tax purposes he is able to claim interest component of the repayments he is not able to claim the principle. This means that Mr Cadell will have very little capacity in addition to an assessment based on his adjusted taxable income to contribute further to the support of the children despite their obvious needs. Given his age Mr Cadell would have a limited earning capacity outside his business. The Tribunal is of the view that Mr Cadell only has the capacity to pay child support on the income it has found for him of $55,855. His capacity to contribute to these children increased after the other child for whom he has a liability turned 18.
It would appear, in rough terms, that the child support assessment based on an income of $55,000 per annum is around $300 per week.
The tax payable by the respondent, because of the way in which he managed his financial affairs, was less than that payable on $55,000 per annum. His taxable income was approximately $29,000 per annum.
The respondent did have to meet through his business the payments on the principle for the loans to purchase his trucks but there was a substantial depreciation for those items in the company accounts.
Apart from his mortgage repayments the respondent and his wife had expenses of $524 per week and his wife was able to contribute to those expenses.
Thus on the SSAT’s findings, the respondent had a capacity to contribute more than $300 per week for the support of the children (which, in the circumstances, is still less than half of what it costs to maintain the children).
To simply arrive at a figure for child support based on an income amount may be an appropriate approach if that is the basis upon which the special circumstances are said to arise, but in cases such as this, where there have been findings of special circumstances due to the special needs of the children, and a conclusion reached that these children need all the support they can get from their parents, then a proper consideration of the reasonable weekly needs of the payer would have been appropriate in the circumstances.
For the relevant period Mr Cadell was taxed on an income of around $29,000 per annum. At no point did the SSAT seem to consider, having regard to its own findings of the respondent’s own expenses, what actual capacity he had to contribute out of his income for the support of the children. Rather, what the SSAT appears to have done, having determined the respondent’s adjusted taxable income, was to go straight to the amount payable on the income according to the formula which is used for the administrative assessment of child support. Whilst the SSAT was entitled to have some regard to the operation of the formula as a convenient guide, the SSAT, having determined the respondent’s income, was not entitled then to go straight to the formula. To do so without regard to the respondent’s expenses or liabilities or without regard to the level of hardship that such variation would cause to each party and the child, does, in my consideration, constitute an error of law.
I consider that the approach adopted by the SSAT was in error and in that regard, Ground 2 of the Appeal has been successful.
Otherwise proper
In Ground 3 of the Appeal the applicant argues that the SSAT erred by failing to nominate an amount payable by the payer as a contribution to the disability expenses of [Y].
In this regard, the applicant submits:
44. Child support received by the carer parent will reduce that parent’s family tax benefits by 50 cents in the dollar – after an allowance of the threshold amount.
45. Child support that is paid as a contribution to disability expenses is treated differently from ordinary child support payments – such payments to not reduce family tax benefits.
In was submitted that in considering what is otherwise proper the SSAT should have considered whether an amount should be paid to the payee as a contribution to disability expenses and if so, how much.
Given that I have already satisfied myself that there has been an error and ultimately I consider that the matter should be returned to the SSAT for rehearing, I do not consider it necessary to consider this issue extensively and I do not consider it necessary to come to a concluded view.
Having regard to the provisions of s.117(5), the Court (and in this case the SSAT) must have regard to:
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.
There is nothing in that section that seems to require the SSAT to allocate an amount for disability expenses.
Similarly, there is nothing in the Act that would prevent the SSAT making a determination of that nature.
In Hall & Rushton (1991) FLC92-249 @ 78.680, Kay J rejected a consent order, the effect of which was to create a nil assessment of child support concluding that:
It seems to me I cannot accede to the request for a consent order at nil. If the wife is able to withdraw herself from the child support scheme then the parties are free to make such arrangements as they like.
She is dependant upon social services, she is in the child support scheme, she is bound by the operation of the Act which is there to protect not only the parties but also the taxpayers of Australia, and to make sure that people who are on social services do not get more than they would otherwise be entitled to if their spouses were paying appropriate maintenance and they were in a position to do so.
However, in Burke & Elliott (1990) FLC92-161 @ 78.120, Kay J said further on this issue:
Finally I have to be satisfied under s.117(1) that it is otherwise proper to make an order under Division 4. The criteria I am to take into consideration is set out in s.117(5). Once again that sub-section refers me back to s.117(3) as well as drawing my attention to the effect that the making of an order will have on any income tested pension, allowance or benefit payable. As I have said in order to maintain the integrity of the formula, the husband in this case would be required to pay $84.50 per week. He wants to pay $70.00 per week. That will effectively mean that the supporting parent’s benefit payable to the wife will increase by one half of the difference of those amounts (that is $7.25 per week if I accede to the husband’s application). There is no express provision in the objects of the Child Support Assessment Act that requires me to act as a protector of the revenue. My obligation is to have regard to the effect any orders I make will have on the pension. In this case I am conscious that the order that I make will have such an effect, but in my view it is proper in the circumstances of this case that I make the order.
The clear intent of s117(5) is to ensure that parents rather than the community are primarily responsible for the financial support of their children and where necessary a proper balance can be met between the contribution of the parents and the financial contribution from the community.
In this matter, the particular determination the carer parent seeks will increase the family tax benefit that she would receive.
The Assessment Act does not seem to preclude a determination that isolates specific financial contributions for the needs of children. Indeed, determinations can be made for specific expenditures such as the payment of school fees and specific medical procedure expenses for children. There would not appear to be any reason why a determination should not consider payments towards particular disability expenses.
It would seem to me that the applicant is entitled to have that aspect of her application properly considered in coming to a particular determination of the application.
Re-exercise of discretion or remit the matter to the SSAT
Both parties seem to agree that, if I am satisfied that there was an error of law and the decision is set aside, that the matter should then be remitted to the SSAT.
The respondent contends that he has had a change in circumstances since the SSAT hearing and wishes to be reassessed.
Whilst the SSAT did consider something of the respondent’s expenses and his actual capacity to support the children, I am not certain that, in the light of the approach they adopted, that they considered all of his reasonable expenses and it is appropriate that that be assessed and tested.
In the circumstances, I consider it appropriate to remit the matter to the SSAT to be reheard by a differently constituted Tribunal.
I certify that the preceding sixty three (63) paragraphs are a true copy of the reasons for judgment of Slack FM
Associate: Karen Smith
Date: 24 April 2009
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