Hurley and Potts (Child support)

[2019] AATA 5122

Hurley and Potts (Child support) [2019] AATA 5122 (15 October 2019)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2019/SC016132 & 2019/SC016287

APPLICANT:  Mr Hurley

OTHER PARTIES:  Child Support Registrar

Ms Potts

TRIBUNAL:Member M Douglas

DECISION DATE:  15 October 2019

DECISION:

The decision under review in matter 2019/SC016132 is varied so that the annual rate of child support payable by Mr Hurley is varied:

• to $7,500 from 1 July 2019 to 25 September 2019; and

• to $5,200 from 26 September 2019 to the day on which a child support terminating event with respect to [Child 2] happens.

The application for review of the decision in matter 2019/SC016287 is dismissed pursuant to subsection 42B(1) of the Administrative Appeals Tribunal Act 1975.

CATCHWORDS

CHILD SUPPORT – departure determination – income, property and financial resources of both parents – a ground for departure established based on the income of the liable parent – decision to depart - decision under review varied

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.

REASONS FOR DECISION

BACKGROUND

1. Mr Hurley and Ms Potts are the parents of [Child 1] and [Child 2], for whom the Child Support Registrar has issued administrative assessments of child support with the initial assessment having effect from 4 February 2010.  Mr Hurley has been the parent assessed as liable to pay child support for the children under the assessments that have issued.  His liability with respect to [Child 1] ceased on 25 September 2019, that being the day preceding [Child 1]’s eighteenth birthday.

2. The Child Support Registrar acts through the Department of Human Services and I shall refer to the Registrar as the Department hereafter. 

3. Mr Hurley has applied to the Tribunal for review of two objection decisions that the Department has made. The earliest decision is dated 10 December 2018 and the second is dated 3 April 2019. Both decisions relate to applications Mr Hurley made to the Department under section 98B of the Child Support (Assessment) Act 1989 (the Act) for the Department to make a determination under section 98S to depart from the provisions of the Act with respect to the assessment of child support.  It is convenient that his applications for review of the decisions are dealt with together.

4. In his earliest change of assessment application, to which the objection decision of 10 December 2018 relates, Mr Hurley sought a change be made to the assessment of child support from 6 April 2018 because he had been “medically unfit” to engage in employment since that date.  The assessment in force, as at the time he made his application, obligated him to pay child support at an annual rate of $31,474 for both children.  That assessment was based on adjusted taxable incomes of $150,000 for him and $49,140 for Ms Potts.  The primary decision the Department made in response to that application, which is dated 12 September 2018, was to reduce Mr Hurley’s adjusted taxable income to $98,104 for the period 6 April 2018 to 30 June 2018 and to $84,954 for the period from 1 July 2018 to 30 September 2018.  That primary decision had the effect of reducing the annual rate at which Mr Hurley was required to pay child support to $20,386 from 6 April to 30 June 2018 and then to $16,998 until 30 September 2018.

5. The objection decision of 10 December 2018 was to allow “partly” Mr Hurley’s objection to the primary decision such that between 1 October 2018 and 30 June 2019 the Department varied the annual rate of child support payable by Mr Hurley to $15,600.

6. Mr Hurley’s application to the Tribunal for review of that objection decision bears review number 2019/SC016132.

7. Only days before the Department made its objection decision of 10 December 2018, Mr Hurley made a further application under section 98B for a change of assessment. On 14 January 2019 the Department refused to make a determination to depart from the provisions of the Act with respect to the assessment of child support. On 11 February 2019, Mr Hurley objected to that decision and on 3 April 2019 the Department disallowed his objection. The consequence of that, of course, was that the Department’s objection decision of 10 October 2018 remained in place.

8. Mr Hurley’s application to the Tribunal for review of the Department’s objection decision of 3 April 2019 bears review number 2019/SC016287.

THE HEARING AND THE EVIDENCE

1. The Tribunal heard Mr Hurley’s applications on 15 October 2019. He and Ms Potts participated in the hearing by telephone and both gave sworn oral evidence. The Department, as is customary, did not appear.

2. Mr Hurley and Ms Potts also provided documents to the Tribunal which were received into evidence. Mr Hurley’s documents are marked A1-241 and Ms Potts’s documents are marked B1-122.

3. The Department also provided documents to the Tribunal, in accordance with its obligation under subsections 37(1) and 38AA(1) of the Administrative Appeals Tribunal Act 1975. The documents the Department provided with respect to matter 2019/SC016132 are paginated 1-495 and with respect to matter 2019/SC016287 they are paginated 1-256.These were also received into evidence.   

4. The Tribunal has had regard to this evidence.

RELEVANT LAW AND ISSUES

1. A parent liable to pay child support or the carer entitled to child support may, if there are special circumstances, apply to the Department under subsection 98B(1) of the Act for a determination to depart from the provisions of the Act relating to an assessment of child support.  As mentioned, the Department refers to such an application as a change of assessment application.

2. The Department, or the Tribunal in the Department’s place, if satisfied that the criteria of subsection 98C(1) are met can make one or more of the determinations listed in subsection 98S(1) to depart from the provisions of the Act relating to an administrative assessment of child support. The criteria specified in subsection 98C(1) are:

   i.that one, or more than one, of the grounds for departure referred to in subsection (2) exists; and

   ii.that it would be:

   a.just and equitable as regards the child, the liable parent, and the carer entitled to child support; and

   b.otherwise proper;

   to make a determination [under subsection 98S(1)].

3. The grounds for departure referred to in subsection 98C(2) are listed in subsection 117(2) of the Act.  The matters that the Department, and the Tribunal in the Department’s place, must consider in deciding whether it is just and equitable to make a determination to depart from the provisions of the Act are listed in subsection 117(4) of the Act.  The matters the Department and the Tribunal in the Department’s place must consider in deciding whether it is just and equitable to make a determination to depart from the provisions of Part 5 are listed in subsection 117(5) of the Act.

CONSIDERATION

Is a ground for departure established?

1. In both his applications to the Department Mr Hurley relied on the ground for departure provided in subparagraph 117(2)(c)(ia) of the Act.  The Department refers to that ground as Reason 8A.  That subparagraph 117(2)(c)(ia) reads as follows:

   “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.”

2. Mr Hurley is a pharmacologist by profession.  Until early April 2018 he derived his income as a medical writer using the medium of a company that was, in substance, his alter ego. 

3. Due to issues with his mental health he came under the care of both a general practitioner and a psychologist in early April 2018.  Both these practitioners wrote letters that were forwarded to the Department, advising that Mr Hurley was unfit to work.  Mr Hurley’s evidence was since April 2018 he has not worked as a medical writer and has not since then conducted any business through his company.  He did however obtain casual employment as [an Occupation] for a brief time, for which he received gross wages in the 2019 year of $1,087.  His only other income in the 2019 financial year was interest of $379 from deposits he has in bank accounts.

4. Sadly, in April this year Mr Hurley was diagnosed with stage 4 terminal metastatic cancer of the oesophageal junction.  Upon receiving this diagnosis, he ceased his casual employment as [an Occupation]. He is currently undergoing aggressive treatment in the form of twelve rounds of chemotherapy, which will end in December.  His evidence was that he had to forego one round of that chemotherapy due to accumulated toxicity.  In evidence is a letter of 1 August 2019 from his oncologist in which his oncologist advises that Mr Hurley’s prognosis is “very guarded” and that Mr Hurley will be unable to work in the foreseeable future.  Mr Hurley’s evidence to the Tribunal was that his life expectancy at the moment is measured in weeks and months.  His evidence was that whatever the result of the chemotherapy, he will not be able to work again, and the Tribunal accepts his evidence in that regard.

5. Around the time that Mr Hurley received his diagnosis of terminal cancer, he transferred all but $205,000 of his accumulated superannuation to a pension fund.  He now draws a pension from that fund of $44,500 a year.  Tax is levied from that because he is less than 60 years of age.  He transferred the amount of $205,000 to a credit union account for the children’s “inheritance”.  His statement for that account reveals a current balance of $180,378.62.  It would seem from statements he produced for an account he holds with the National Australia Bank that he otherwise used the balance of that amount for living expenses. 

6. The Tribunal observes from a Statement of Financial Circumstances Mr Hurley submitted to the Tribunal, which he signed on 31 March 2019 declaring the contents to be complete and correct, that he had very modest living expenses.  That statement was produced prior to his receiving his diagnosis of terminal cancer.  The Tribunal considers the sad likelihood is that Mr Hurley’s expenses will increase as a consequence of his now having to pay for treatment he receives and will receive for his cancer including the likelihood of palliative care.

7. His Statement of Financial Circumstances reveals that other than the amount he has on deposit with his credit union, his only asset of significance is the house in which he resides, of which he estimates the value to be $1,475,000.  He is the sole owner of that house.  It is not encumbered by any debt.  He resides there with his partner. 

8. The money that Mr Hurley deposited into an account for the purpose of his children’s inheritance is money that was available to be used by him to provide for both children’s needs in the period prior to [Child 1] reaching 18 years of age, and is presently available to be used to provide for [Child 2].  It seems to the Tribunal too, that Mr Hurley will also need to draw upon that money to meet his own expenses, given that his only other income now is a modest superannuation pension and given too the likelihood of his expenses increasing as a consequence of the cost of treatment for his cancer.

9. In the Tribunal’s view, given Mr Hurley’s present circumstances, he is unable and it would be unfair to require him to pay the currently assessed amount of child support.  In the Tribunal’s view his present circumstances are special.  The Tribunal considers that, in the context of his special circumstances, the application of the provisions of the Act with respect to the assessment of child support does result in an unfair and inequitable determination of the level of financial support to be provided by Mr Hurley for the children because of the income, property and financial resources available to Mr Hurley.    

10. Accordingly, the Tribunal is satisfied that a ground for departure is established.

Is it just and equitable to make a determination?

1. As already mentioned, the matters the Tribunal must take into account when considering whether it is just and equitable to depart from the provisions of the Act are listed in subsection 117(4) of the Act. The Tribunal is not required to go slavishly through each of those matters but have regard to those that are relevant to the particular circumstances of this case. Rather than dealing separately with each matter that is relevant, insofar as the matters have relevance it is convenient for the Tribunal to group the matters and consider them by a reference to the following headings.

Ms Potts’ circumstances

1. Ms Potts held permanent part-time employment until the start of December 2018.  At that time she relocated to Queensland.  She said that was due to issues relating to domestic violence.  The evidence of both parties was that the Family Court made relocation orders recently, permitting the children to relocate to their present residence. 

2. Ms Potts has been without employment since December 2018. 

3. She is leasing out the house in which she and the children resided prior to their relocation to Queensland.  Her tax return for the most recent financial year revealed that in the seven months from 1 December 2018 to the end of the year she received a net rent of $15,611, which extrapolates to an annual figure of $26,761.  Her only other income is benefits and allowances from the Commonwealth Government.

4. Her only asset of significance is the house that she is currently leasing out.  She has a modest mortgage loan relating to that house.

5. At a directions hearing held some time before the hearing, Ms Potts was required to submit copies of her bank and credit card statements.  All odd pages of her bank statements that she produced were missing.  Further, numerous pages from her credit card statements were missing.  Ms Potts was unaware of that until that was drawn to her attention during the hearing.  Mr Hurley submitted, to the effect, that the Tribunal ought to draw an adverse inference regarding Ms Potts’ failure to produce all her bank statements and credit card statements.  Essentially, the inference Mr Hurley suggested the Tribunal should draw is that the missing pages would disclose income that Ms Potts seeks to hide from the Tribunal.

6. Ms Potts evidence was that she went to her bank and got it to provide her with copies of her credit card statements and bank statements and submitted what it produced to her.  She said she does not use her credit card other than to pay a modest amount each month so as to reduce the balance.  The Tribunal observes from what Ms Potts did produce with respect to her credit card statements, which included the front summary page for each month, that she is not using her credit card extensively.  This is apparent because it was only in the months of May, June, October, December 2018 and January and May 2019 that the transactions tallied to a significant amount.  With respect of those months, December 2018, being the month in which Ms Potts relocated with the children to Queensland, was the month with the largest amount for all transactions.  The summary page for that month revealed her transactions for the month tallied to $2,785.75.

7. The Tribunal considers that Ms Potts’ failure to produce all pages from her credit card statements was an honest mistake. 

8. The Tribunal also notes that it is the odd pages only from Ms Potts’ bank statements that are missing.  The even pages that she did produce do not reveal any expenditures out of the ordinary.  The Tribunal also considers that Ms Potts’ failure to produce the odd pages from her bank statements was also an honest mistake.  Based upon what is disclosed, it seems to the Tribunal unlikely that on the odd pages there would be entries for expenditures or income inconsistent or of a different character from what is disclosed on the even pages.

9. The Tribunal does not draw any adverse inference from Ms Potts’ failure to produce all the pages of the statement relating to her bank account and credit card.

10. Ms Potts’ evidence was to the effect that all her resources at the moment are going on living and household expenditures and supporting herself and the children.  The Tribunal accepts that is the case.

11. Mr Hurley also submitted that Ms Potts’ receives gifts of money from a friend, named Ms [A].  Ms Potts confirmed that Ms [A], who she described as a close friend and a godmother to the children, does from time to time lend her money, and indeed advanced her around $150,000 to pay for legal fees.  Ms Potts said Ms [A] does so to ensure that she and the children are not in a dire situation.  She has not repaid the money Ms [A] advanced to her for her legal fees.  When Ms [A] advances small amounts of around $1,000, Ms Potts repays her by drawing against the mortgage on the house that she is now leasing out.

12. Ms Potts’ evidence was to the effect that she is struggling to make ends meet and the Tribunal accepts that is the case and that this circumstance arises largely a consequence of the financial burden she has in having to provide for the children. 

The children’s circumstances

1. There is no evidence indicating that the children have any special needs or property of significance.  The evidence in the form of Ms Potts’s Statement of Financial Circumstances indicates that [Child 2] has a part-time job, from which he earns a very modest income. It is not near sufficient to cover the cost of his needs. As mentioned, [Child 1] attained eighteen years of age on 26 September 2019 and is no longer a child eligible to be assessed for child support.

Mr Hurley’s circumstances

1. The Tribunal has set out Mr Hurley’s circumstances with respect to his property and income above.  The Tribunal takes that into account when considering whether it is just and equitable to make a determination to depart from the assessment of child support.

2. In summary, Mr Hurley’s situation with respect to his income, assets and financial resources is such that, in the Tribunal’s view, he would in his current circumstances have difficulty meeting his necessary commitment, including the cost of medical treatment, as well as paying child support at the presently assessed rate. 

3. His only financial resource is his pension fund.  His only income is the pension he draws from the fund and the interest he would receive from the credit union with which he has deposited in excess of $180,000.  His only asset of significance is his house, in which he and his partner reside.  Whilst he has relatively modest expenditures to meet for his support it is to be expected, as the Tribunal has indicated above, that his commitments will increase as a consequence of the dire situation regarding his health. 

4. Whilst it is Mr Hurley’s desire that the amount he has deposited with the credit union be left to the children as an inheritance, it can be used by him now to meet his obligation to provide for [Child 2].  He also had the ability to draw that money earlier than he did, so as to be able to provide financially for both children.  However, it seems to the Tribunal, as was mentioned above, given Mr Hurley’s present circumstances, he will also in all likelihood need to draw upon that money to ensure he can meet his own commitments, given that his only income now is a modest pension and modest interest and given too that his expenditure is likely to increase because of the needs related to his illness.

The relative hardship

1. Having regard to the matters stated above, the Tribunal considers that hardship would be caused to Mr Hurley were he to be required to pay child support at the rate at which he has been assessed beyond 30 June 2019.  The Tribunal observes that he was in arrears in the payment of his child support obligation by an amount of $6,932 as at 30 September 2019.  As far as the Tribunal can tell, the bulk of that has accumulated since 30 June 2019.  In other words, Mr Hurley was able to meet his child support obligation in the main, as assessed, up until that point. 

1. The Tribunal observes that any reduction in the child support payable to Ms Potts would add to her hardship, given that she is without employment and her income in the main is limited to rental income for the property in which she and the children previously resided.  Her hardship would be all the more, were the Tribunal to make a determination that put Mr Hurley in advance of his payments. 

2. Whilst hardship would be caused to Ms Potts by making a determination lessening Mr Hurley’s child support obligation, having regard to Mr Hurley’s circumstances, the Tribunal considers that it would be just and equitable to make a determination lessening his child support obligation. 

3. In terms of providing a point of reference, the Tribunal notes that were the assessment to be calculated based upon an income amount for Mr Hurley of $44,500 and an income amount for Ms Potts of $26,700, Mr Hurley would be required to pay child support at an annual rate of around $6,500 for two children and $3,700 for one child.  The Tribunal considers that as a consequence of the money Mr Hurley drew from his superannuation fund in April this year, and as a consequence of the fact that that money was available to be drawn by him earlier, he ought to be required to pay child support at a rate greater than this. 

4. In all  the circumstances therefore the Tribunal considers that a just and equitable departure to make from the provisions of the Act with respect to the assessment of child support would be to vary the decision of 10 October 2018 such that from 1 July 2019 to 25 September 2019 the annual rate at which Mr Hurley is required to pay child support is varied to $7,500 (which should result in the bulk of the arrears being cleared from his account) and from 26 September 2019 until the day upon which a child support terminating event for [Child 2] occurs it is varied to $5,200.

Is it otherwise proper to change the assessment?

1. In deciding whether it is otherwise proper to depart from the administrative assessment, the Tribunal must have regard to the fact that the primary obligation to support the children rests with Mr Hurley and Ms Potts, and also have regard to whether, and if so how, any determination it makes would affect the entitlement of Ms Potts or the children to an income tested pension, allowance or benefit. 

2. The Tribunal understands that neither child receives an income tested pension, allowance or benefit and, also, that circumstance will not change whatever determination the Tribunal makes. 

3. The Tribunal understands that there will be little if any effect on the benefits and allowance Ms Potts receives from the Commonwealth Government by making the determination the Tribunal considers it is just and equitable to make.

4. In the circumstances outlined, the Tribunal considers that the determination it considers it is just and equitable to make is also otherwise proper to make.

5. The determination that the Tribunal considers just, equitable and otherwise proper to make is best made in the application for review with respect to the decision made on 10 October 2018, being that the subject of matter 2019/SC016132.  With respect to the other application of Mr Hurley relating to the decision of 3 April 2019, given that the Tribunal will make the determination just set out in matter 2019/SC016132, Mr Hurley’s application for review of the decision in matter 2019/SC016287 has no likelihood of success and ought to be dismissed therefore under section 42B of the Administrative Appeals Act 1975.

6. For clarity, the child support assessments, as issued following the objection decision of 10 December 2018, will remain as they are for the period until 30 June 2019 but from 1 July 2019 the annual rate of child support payable by Mr Hurley will reduce to $7,500 until 25 September 2019, being the day preceding [Child 1]’s eighteenth birthday, and then to $5,200 for [Child 2] only.

DECISION

The decision under review in matter 2019/SC016132 is varied so that the annual rate of child support payable by Mr Hurley is varied:

• to $7,500 from 1 July 2019 to 25 September 2019; and

• to $5,200 from 26 September 2019 to the day on which a child support terminating event with respect to [Child 2] happens.

The application for review of the decision in matter 2019/SC016287 is dismissed pursuant to subsection 42B(1) of the Administrative Appeals Tribunal Act 1975.