Hacherl & Berrios
[2010] FMCAfam 668
•30 June 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HACHERL & BERRIOS | [2010] FMCAfam 668 |
| CHILD SUPPORT – Father seeks variation to assessed child support – grandmother as carer for the child – some payable for a period more than 18 months prior to filing application – Court’s leave required – tax returns not lodged – “clean hands” – father’s earning capacity. |
| Child Support (Assessment) Act 1989 (Cth) ss.111, 112, 117, 118 |
| Gilmour and Gilmour (1995) FLC 92-591 Liesert v Nutsch (1996) FLC 92-665 Bryant and Bryant (1996) FLC 92-690 Savery and Savery (1990) FLC 92-131 Gyselman and Gyselman (1992) FLC 92-279 Bauer & Becker (2009) FLC 98-042 Cawthorn v Cawthorn (1998) FLC 92-805 |
| Applicant: | MR HACHERL |
| Respondent: | MS BERRIOS |
| File Number: | HBC1199 of 2008 |
| Judgment of: | Roberts FM |
| Hearing date: | 29 March 2010 |
| Date of Last Submission: | 29 March 2010 |
| Delivered at: | Launceston |
| Delivered on: | 30 June 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr S Bishop |
| Solicitors for the Applicant: | Bishops |
| Counsel for the Respondent: | Mr P Briffa |
| Solicitors for the Respondent: | Legal Aid Commission of Tasmania |
ORDERS
That the Application filed 17 February 2009 by MR HACHERL is dismissed.
That the Enforcement Summons issued 24 November 2008 is listed for mention in Launceston on Thursday 5 August 2010 at 2.15 p.m. with leave granted to the legal representative of the Child Support Registrar to appear by telephone.
IT IS NOTED that publication of this judgment under the pseudonym Hacherl & Berrios is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT LAUNCESTON |
HBC1199 of 2008
| MR HACHERL |
Applicant
And
| MS BERRIOS |
Respondent
REASONS FOR JUDGMENT
The issues
The applicant is MR HACHERL (“the father”) and the respondent is MS BERRIOS (“the grandmother”).
The dispute between the parties is whether or not there should be any variation of the child support that the father was assessed to pay for his daughter, [X] during the period between 20 March 2006 and
[date omitted] 2009 (“the relevant period”). [X] turned eighteen on [date omitted] 2009 and is now an adult, but she was legally a child throughout the relevant period, so I shall refer to her as “the child” for convenience.
The father is applying to have the applicable child support assessments retrospectively varied so that he would only be liable to pay $5,708 per annum throughout the relevant period. However, the father needs the Court’s leave to seek a variation of any child support that was payable more than 18 months prior to the date on which he filed his application.[1]
[1] See sub-section 118(2B) and sections 111 and 112 of the Child Support (Assessment) Act 1989
The Orders sought by the father in his Application filed 17 February 2009 were as follows:
1. THAT the periodic rate of child support payable by Mr Hacherl for [X] born [in] 1991 to Ms H in respect of all periods between the 20th March 2006 to the termination of eligibility be varied by setting the annual rate of child support at $5,078.00 per year.
2. THAT further and in the alternative, pursuant to Section 111 of the Child Support (Assessment) Act 1989 the Court grant leave to amend the administrative assessment made the 24th May 2006 of liability to child support payable by Mr Hacherl for [X] born [in] 1991 by setting the annual rate of child support at $5,708.00 per year.
3. THAT pursuant to Section 111 of the Child Support (Assessment) Act1989 the Court amend the administrative assessment made the 24th May 2006 of liability to child support payable by Mr Hacherl for [X] born [in] 1991 by setting the annual rate of child support at $5,708.00 per year.
4. THAT further and in the alternative, pursuant to Section 111 of the Child Support (Assessment) Act 1989 the Court grant leave to amend the administrative assessment made the 11th August, 2008 of liability to child support payable by Mr Hacherl for [X] born [in] 1991 by setting the annual rate of child support at $5,708.00 per year.
5. THAT pursuant to Section 111 of the Child Support (Assessment) Act 1989 the Court amend the administrative assessment made the 11th August, 2008 of liability to child support payable by Mr Hacherl for [X] born [in] 1991 by setting the annual rate of child support at $5,708.00 per year.
6. Such other or further orders as may be appropriate to set the annual rate of child support at a reasonable level in the circumstances.
The grandmother, who was the child’s primary carer for the relevant period, opposes the father’s application.
The evidence
The father relied upon his financial statement, three affidavits sworn by him and one affidavit sworn by his wife.
The grandmother relied upon her financial statement and one affidavit sworn by her.
The father, his wife and the grandmother were all cross-examined.
In addition, an affidavit by an employee of the Child Support Agency (Ms A) was before the court. She was not cross-examined.
Background
Where I make any statement of fact in these Reasons, it should be regarded as a finding of fact unless a contrary intention is clear from the context.
The father and the child’s mother were married, but they separated in or about 1997. The child and her mother then lived with the grandmother until the child’s mother moved out in approximately March 2006. The child continued to live with the grandmother and the grandmother then sought an assessment of child support as an eligible carer. The grandmother’s entitlement to receive child support payments from the father commenced on 20 March 2006.
At that time the father was assessed to pay at the rate of $2,050 per annum. The grandmother sought a variation to that assessment and on 24 May 2006 a Senior Case Officer within the Child Support Agency (“the first SCO”) determined that the father should pay child support on the following basis:
(a)at an annual rate of $9,000 for the period 20 March 2006 to 19 March 2007;
(b)at an annual rate of $9,500 for the period 20 March 2007 to 19 March 2008;
(c)at an annual rate of $10,000 for the period 20 March 2008 to 19 March 2009; and
(d)at an annual rate of $10,500 for the period 20 March 2009 to 13 October 2009.
In her Notice of Decision given on 24 May 2006 the first SCO noted that tax returns and financial statement of the father’s business were unavailable. To arrive at a reasonable earning capacity for the father she concluded that it was appropriate to:
a)add the median income of all payer parents to the father’s [D] pension to arrive at an income of $50,838 per annum; and
b)then add “the value of benefits including the provision of the car which would amount to at least $10,000 per annum including loan payments, insurance, registration, services and fuel”.
The first SCO also stated that, if the father wished to make his own application, he would need to provide all financial documentation relating to his business, Family Trust and his domestic income and expenses. (Although the first SCO incorrectly named the father in the relevant paragraph, it is quite clear that she was directing her comments to him).
On 16 June 2006 the father objected to the first SCO’s decision. On 12 August 2006 his objection was disallowed and the SCO making that decision (“the second SCO”) noted that either party could apply to a Court for a change of the assessment if he or she believed that the decision did not provide for a fair assessment of child support.
On 13 August 2007 the Australian Taxation Office issued assessments of the father’s income for the seven years ended 30 June 2000 to 2006 inclusive.[2]
[2] Copies are attached to the father’s affidavit filed 17 February 2009.
On 24 April 2008 the father made an application to the Child Support Agency for a change of assessment for the whole of the relevant period seeking a decrease in the annual rate of child support to $4,560. At that time there were arrears of child support of approximately $9,353. Another SCO (“the third SCO”) rejected the father’s application in a decision given on 8 July 2008. In her decision the third SCO noted that the Child Support legislation prevented her from making any retrospective changes to an assessment for any period more than
18 months prior to receipt of the application (i.e. prior to November 2006).
The third SCO stated in her decision that, as a self employed person, the father “is in a position to legitimately arrange his affairs in such a manner as to minimise his tax and coincidently his child support income based on his taxable income” and went on to say that the Child Support Agency was not limited to considering only the amount of his taxable income in relation to his change of assessment application.
The third SCO determined that the father has the capacity to provide child support at a level commensurate with an employee parent earning around $55,000, and she was not satisfied that there had been any significant change in circumstances that would establish a basis for a change to the assessments.
The father objected to that decision without success. The copy of a subsequent decision made by the CSA objections officer (“the objections officer”) that is annexed to his affidavit is undated and appears to be incomplete, but the father says that he objected on
23 July 2008 and he received the decision in relation to that objection on 16 September 2008. I have no reason to doubt his evidence about that.
An Enforcement Summons was issued on behalf of the Child Support Registrar on 24 November 2008 (“the Enforcement Summons”). It was supported by an affidavit of Ms A, stating that the father then owed $11,469.48 in arrears of child support and $2,185.42 in late payment penalties.
The further hearing of the Enforcement Summons was adjourned by consent to a date to be fixed, approximately 14 days after the determination of the application filed by the father on 17 February 2009.
Relevant law
Since October 1989, the Child Support Agency (the CSA”) has had responsibility in Australia for a formulaic assessment of child support. The relevant formulae and the various mechanisms for review, objection or appeal have each changed over time.
Most applications for formulaic child support assessment remain purely administrative and do not involve applications to a court. However, in a certain limited circumstances parties can apply to a court for a variation of an assessment under the Child Support (Assessment) Act 1989 (“the Act”).
Division 4 of the Act provides for the making of orders for departure from administrative assessment (“departure orders”) in special circumstances.
Section 118(2B) of the Act provides that a court may only make a departure order in relation to child support payable for any period that is more than 18 months earlier than the date on which the application is made if the court has granted leave under section 112 for such an order to be made.
In considering whether to grant such leave, the court must have regard to:
a)any responsibility and reason for the delay in making the application;
b)the hardship to the applicant if leave is not granted; and
c)the hardship to the other party if the leave is granted.[3]
[3] Sub-section 112(4)
The court may also have regard to any other relevant matter.[4]
[4] Sub-section 112(5)
In relation to departure orders, the approach that the court must adopt has been well settled by decisions of the Full Court of the Family Court of Australia[5]. It is clear that the court must apply the three-stage process that is required under Section 117 of the Act and satisfied that:
a)in the special circumstances of the case, one or more of the grounds for departure in sub-section 117(2) is established;
b)it is “just and equitable” within the meaning of sub-section 117(4) to make a particular order; and
c)it is “otherwise proper” within the meaning of sub-section 117(5) to make a particular order.
[5] See Gilmour and Gilmour (1995) FLC 92-591, Liesert v Nutsch (1996) FLC 92-665 and Bryant and Bryant (1996) FLC 92-690.
In Savery and Savery,[6] Kay J said that “special circumstances” were “facts peculiar to the particular case which set it apart from other cases”.
[6] (1990) FLC 92-131
In Gyselman and Gyselman,[7] the Full Court of the Family Court said the following in relation to the phrase “special circumstances”:
Whilst it is not possible to find with precision the meaning of that term, as a generality it is intended to emphasise that the facts of the case must establish something that is special or out of the ordinary. That is, the intention of the legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases.[8]
[7] (1992) FLC 92-279
[8] At page 79,065
After considering these various bases for departure and whether or not in the special circumstances of the case it is appropriate for a departure order to be made, the court must then consider subsection 117(4) of the Act which deals with the circumstances in which it is just and equitable to make the departure order sought.
Finally, it is necessary for the court to consider subsection 117(5) and determine whether or not it is proper to make the departure order.
Should leave be granted under section 112?
In relation to the reasons for delay, based upon the evidence of the father, his counsel said that the father had “realised that if he was going to get anywhere he had to come up with some real evidence about at least what his taxable income was” and it seemed to me that his counsel attempted to make a virtue of the effort that the father made to get his tax affairs in order. For example, in his closing submissions he said that father “expended money and effort on getting the tax returns together” and even referred to the father as an “Aussie battler” and as an “ordinary Joe” at times.
I see the matter somewhat differently. The law obliges all of us to keep our taxation affairs in order and to lodge income tax returns on time on an annual basis, so it should not be seen as a virtue to lodge income tax returns simultaneously for seven separate years.[9] In my view, the father must be seen as the author of his own misfortune in relation any difficulties that the CSA may have had in assessing child support prior to the time that his tax assessments were available.
[9] See paragraph 15 above.
Counsel for the grandmother sought to draw parallels between this case and the reported decision of Bauer & Becker[10] in relation to delay. While there are some similarities, it is clear to me that the father did not just sit on his hands until he received an enforcement summons (like Mr Bauer). In this regard, I accept the father’s evidence that he had instructed his solicitor to take court action prior to receiving that summons. However, it is clear from Ms A’s unchallenged affidavit that the CSA had warned him in conversations on 7 February and
16 September 2008 that enforcement action was likely. In addition such action was made clear by a letter from the Australian Government Solicitor dated 12 September 2008.
[10] (2009) FLC 98-042
In relation to hardship, it is clear that the father will be disadvantaged if he is not allowed to argue for a departure order. However, it is equally clear that the grandmother will be similarly disadvantaged if he is allowed to mount such an argument in relation to the period prior to lodging his tax returns. The delay in relation to lodging those returns must lie solely at the feet of the father.
The father filed his application in this court on 17 February 2009, so the leave that he is seeking relates to any time more than 18 months prior to that date (i.e. prior to 17 August 2007). Coincidentally, the father had received his tax assessments for seven years on 13 August 2007, which is only four days earlier than 18 months prior to the filing of his application.
The father is seeking an outcome that must be just and equitable[11], so it is quite clear that equitable principles must apply.
[11] Sub-section 117(4)
In Cawthorn v Cawthorn[12] the Full Court of the Family Court of Australia said:
To obtain the relief that he seeks, the husband must establish to the Court that his cause is one which is just and equitable. One of the principal maxims of equity is “he who comes into equity must come with clean hands”. The husband’s hands are, in our view in the circumstances of this case, very far from clean. We would accordingly decline to grant relief….
[12] (1998) FLC 92-805 at page 85,062
In this particular matter, the father does not come to court with clean hands in relation to the lodgement of his tax returns. He should not therefore be allowed to rely upon his own dilatory behaviour to obtain relief in relation to a period when the Child support agency was hampered by his failure to lodge tax returns for a number of years.
I further note that:
·
the father was told by the second SCO, in her decision of
12 August 2006, that he could apply to a Court for a change of the assessment if he believed that the assessment was not fair; and
·sections 111 and 112 have been in force since 1 January 2007.
I therefore conclude that the father should not be allowed to seek a variation of child support in relation to any period more than 18 months prior to filing his application. Consequently, leave under section 112 of the Act should not be granted.
The balance of the application
The case summary prepared by the father’s lawyer states:
The applicant has been assessed to an amount of child support in excess of the formula for a period of 3 years 8 months which assessment cannot be corrected by the Child Support Agency because it is more than 18 months old.
If that is correct, I need go no further with these Reasons. However, it is my view that that is not a correct statement of the law, but rather that the 18 month time limit referred to in sub-section 118(2B) relates to the time that child support is due to be paid, and not to the date of the assessment as suggested in the quotation at paragraph 44 above.
Consequently, it is my opinion that the father does not need the court’s leave under section 112 to apply for a departure order in relation to any child support assessed to be paid at any time less than 18 months prior to the date on which he filed his application. It follows therefore that I must now consider whether a departure order should be granted in relation to the period from 17 August 2007 to 13 October 2009.
It is clear from the father’s evidence that he is relying upon his earning capacity as a ground for a departure order.[13] In this regard, it is clearly his case that the CSA have assessed his earning capacity at unrealistically high levels.
[13] See section 117(2)(c)(ib)
The decision of the objections officer (received by the father in September 2008) was based upon financial information provided by the father that related to periods before 1 July 2007, because he said that later information was not available at that time. The father's tax return for the year ended the 30 June 2008 that is now available shows that his income for taxation purposes was as follows:
Wages from [omitted]
$11,440
[D] pension
$27,546
Trust distribution
$7,776
Interest
$85
Total
$46,805
His income for taxation purposes had been $42,857 the previous year, and the objections officer found that he had “access to financial resources no less than $63,927 per annum from 1 July 2005 to 30 June 2006”. I must admit that I find the objections officer’s reasoning and her mathematics a little hard to follow, but she made various notional additions to the father’s income to arrive at that figure of $63,927. Because I have the more up-to-date income tax figure of $46,805 for the year ended 30 June 2008, I will also consider what should be notionally added to that in order to arrive at a realistic notional income.
The objections officer noted that the father paid his wife considerably more than he paid himself from his [omitted] business even though they worked similar hours in that business. It was very clear from the evidence, especially that of the father’s wife, that the father is still doing that. She is paid $650 per week, whereas he is only $250.
Even if the father and his wife were only to “split the difference” and pay themselves equal amounts of $450 per week, that would add a further $10,400 per annum to the father’s taxable income.
It was also the evidence of the father’s wife that the father has been trying to scale his work down a bit. That may be desirable from a lifestyle perspective, but child support should be assessed on the basis of a realistic earning capacity, and not simply on the basis of what one actually works and is paid (especially if one is completely in control of one’s own rate of pay). In short, I find that:
·the father chooses to work fewer hours than he could; and
·he also chooses to pay himself less than a realistic rate of pay for the hours that he actually works.
Further, the father and his wife gain some benefits from the business that are not accounted for in the father’s taxable income. They include, but are not limited to, the use of a business vehicle to drive between home and work, and servicing and fuel for vehicles.
When I consider all of these factors, I find that it is not unreasonable to conclude that, during the period 17 August 2007 to 13 October 2009, the father did have an earning capacity in the vicinity of $64,000 per annum. Consequently, I find that the father has been assessed to pay an appropriate level of child support and there are no special circumstances that would justify an order for departure.
The father’s application will be dismissed and the Enforcement Summons issued on behalf of the Child Support Registrar will be listed for mention in Launceston on 5 August 2010. Because the Child Support Registrar is represented in relation to the Enforcement Summons by the Australian Government Solicitor’s Hobart office, I will grant leave for a representative from that office to appear by telephone at that mention.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Roberts FM
Date: 30 June 2010
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