Ladd and Child Support Registrar and Anor (SSAT Appeal)
[2010] FMCAfam 23
•18 January 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LADD & CHILD SUPPORT REGISTRAR & ANOR (SSAT APPEAL) | [2010] FMCAfam 23 |
| CHILD SUPPORT – Appeal from SSAT – whether interpretation of financial resources is a question of law – determining income amounts – meaning of ‘just and equitable’ – relevant considerations. |
| Child Support (Assessment) Act 1989, ss.98K, 98L, 98S, 117 Child Support (Registration and Collection) Act 1988, ss.103X, 110B,110F |
| Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 Linnan & Linnan (SSAT Appeal) [2009] FMCAfam 353 |
| Applicant: | MR LADD |
| First Respondent: | CHILD SUPPORT REGISTRAR |
| Second Respondent: | MS QUARTERMAN |
| File Number: | SYC291 of 2009 |
| Judgment of: | Sexton FM |
| Hearing date: | 11 September 2009 |
| Date of Last Submission: | 11 September 2009 |
| Delivered at: | Sydney |
| Delivered on: | 18 January 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms Kaur-Bains |
| Solicitors for the first Respondent: | Australian Government Solicitors |
| Solicitors for the second Respondent: | In person |
THE COURT ORDERS THAT:
The decision of the Social Security Appeals Tribunal dated
17 December 2008 be set aside.
The matter be remitted to the Social Security Appeals Tribunal for re-hearing according to law.
Any application for costs and short affidavit in support be filed and served within 14 days and the matter listed before me at 10.00a.m. on 29 March 2010.
Responses and short affidavits in support be filed and served by no later than 14 days prior to hearing.
IT IS NOTED that publication of this judgment under the pseudonym Ladd & Child Support Registrar & Anor (SSAT Appeal) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC291 of 2009
| MR LADD |
Applicant
And
| CHILD SUPPORT REGISTRAR |
First Respondent
| MS QUARTERMAN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an appeal by Mr Ladd, the father of [X], aged 19 and [Y] aged 17 years, from a decision of the Social Security Appeals Tribunal dated 17 December 2008.
Mr Ladd is self-employed. He is the sole director and shareholder of the company [L] (“the company”), a company providing [omitted].
The case concerns the extent of the appellant’s capacity to pay child support.
Ms Kaur-Bains, counsel for the appellant and Mr Gouliaditis, solicitor for the Child Support Registrar, both made written and oral submissions. The payee mother, Ms Quarterman, appeared in person.
Background
The Appellant was administratively assessed to pay child support for the period 1 October 2007 to 31 December 2008 at an annual rate of $333 based on a 2007 taxable income of $6,000.
On 1 November 2007, the Child Support Registrar initiated a departure from the administrative assessment on the ground that the administrative assessment resulted in an unjust and inequitable determination of the level of child support because of the appellant’s financial circumstances.
On 9 April 2008, a Senior Case Officer changed the assessment on the basis Reason 8 had been established. The Senior Case Officer determined that for the period 1 December 2007 to 30 November 2008 the appellant’s income would be $61,231, and for the period
1 December 2008 to 30 November 2009 his income would be increased to $64,293. This decision was amended on 10 April 2008 when the Senior Case Officer determined that Mr Ladd’s annual child support income for the period 1 December 2009 until the date of a terminating event for the child [Y] would be set at $64,293.
On 20 April 2008, Mr Ladd lodged an objection to the decision of the Senior Case Officer. The Objections Officer agreed that Reason 8 had been established, and disallowed the objection by decision dated
20 June 2008. The Objections Officer stated that Mr Ladd had a significantly higher level of available income and financial resources than declared in his annual personal income tax return. The Objections Officer stated[1]:
Senior Case Officer N established that Mr Ladd operates his business [L] through a private company. Mr Ladd is the sole director and shareholder of the company. As noted in the Senior Case Officer’s decision ‘Mr Ladd controls the business and it is reasonable to attribute any income to Mr Ladd in calculating his income for child support purposes.’
[1] At paragraph 14 of the Tribunal’s reasons
On 20 June 2008, Mr Ladd lodged an appeal with the Social Security Appeals Tribunal seeking a review of the Objection Officer’s decision.
The Tribunal reviewed the decision to disallow Mr Ladd’s objection to the Agency’s decision to increase the level of his child support income for the periods 1 December 2007 to 30 November 2008, and 1 December 2008 to 30 November 2009.
Mr Ladd’s appeal to the Tribunal was unsuccessful.
Social Security Appeals Tribunal decision
On 21 November 2008, the Social Security Appeals Tribunal heard the appeal. On 17 December 2008, the Tribunal decided to vary the decision of the Agency and substitute a new decision that:
a)The father’s child support income amount be set at $67,056 for the period 1 December 2007 to 30 June 2008;
b)The father’s adjusted taxable income be set at $67,056 for the period 1 July 2008 to the date of a terminating event for the child, [Y].
On 20 January 2009, the appellant filed a Notice of Appeal in this Court in relation to the Tribunal’s decision. The Notice of Appeal was amended by three further amended Notices’ filed on 14 April 2009, 27 May 2009 and 21 August 2009.
Reasons of the Social Security Appeals Tribunal
The Tribunal outlined the provisions of the legislation it intended to apply, those provisions relating to Registrar initiated departures from administrative assessments of child support in Division 3 of Part 6A of the Child Support (Assessment) Act 1989:
a)Section 98K provides for the Registrar to initiate a determination for departure if the Registrar is of the view, because of special circumstances, that there should be a departure from the administrative assessment.
b)Section 98L sets out the matters as to which the Registrar must be satisfied before making a determination, criteria similar to those in section 117(2). This is the three step process which applies in all departure applications.
c)Section 98L(1)(a) provides for one ground of departure:
…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.
d)Section 98L(2) provides that sections 117(4)-(9) apply to the Registrar as they would apply to a Court dealing with a departure application.
e)Section 98S sets out the range of determinations the Registrar may make under the departure provisions which includes varying a parent’s child support income, or the annual rate of child support payable by a parent.
Section 103X(3)(b) of the Child Support (Registration and Collection) Act1988 requires the Tribunal to set out in its reasons its findings on material questions of fact and the evidence on which those findings were based.
The Tribunal identified the practical issue for its consideration as[2]:
…whether the Registrar correctly decided to vary Mr Ladd’s assessment by using the approximated estimate of Mr Ladd’s available personal financial resources rather than his taxable income in the 2007 period as a benchmark for calculating Mr Ladd’s child support obligations for [X] and [Y].
[2] At paragraph 17 of the Tribunal’s reasons
At [64] of its Reasons, the Tribunal finds that the appellant’s assessed income of $6,000 underestimates his income, financial resources or earning capacity. It gives these reasons at paragraphs [65] – [73]:
a)Mr Ladd receives benefits from the company not reflected in his taxable income. He had more than $6,000 available to him in the 2007 tax year and some of the benefits he received from the company should be included as income. Mr Ladd’s “actual financial resources needs to include a portion of the amount earned by his company… before depreciation costs are factored in, rather than purely focussing on his taxable income which is considerably lower as a result of his business expenses.”
b)While expenses claimed by an entity may be legitimate for taxation purposes, the same deduction does not automatically apply when considering capacity to pay child support.
c)How business expenses are to be treated involves an exercise of discretion in the particular circumstances of each case.
d)Mr Ladd concedes that his assessed personal taxable income does not accurately reflect the actual personal resources available to him during the relevant income year, and does not dispute that a parent’s child support payments should be estimated on a parent’s capacity to pay, rather than on taxable income.
Appeal from decision of the Tribunal
Section 110B of the Child Support (Registration and Collection Act) 1988 provides that a party to a proceeding before the SSAT may appeal to a court having jurisdiction, on a question of law, from any decision of the Tribunal in that proceeding. This is not a review on the merits.
Grounds of Appeal
The appellant relies on the Further Amended Notice of Appeal filed on 21 August 2009 which sets out three grounds of appeal:
a)The Tribunal misinterpreted the term “financial resources” as used in section 98L(1)(a) and section 117(4) of the Child Support (Assessment) Act 1989.
b)The Tribunal, in the exercise of its discretion under section 98K and 98L of the Child Support (Assessment) Act 1989 failed to take into account a relevant consideration expressly provided by the said legislation, namely whether it would be just and equitable as regards the child and the liable parent to make a departure order having regard to the income, property and financial resources of the appellant.
c)Whether the Tribunal erred in law in making a finding as to the appellant’s financial resources which were unreasonable. In particular, the Tribunal, when considering the financial position of the company, overestimated the appellant’s financial resources by:
i)Adding to the appellant’s income of $6,000 disclosed in his tax returns the sum of $21,789 withdrawn from the appellant’s business “[L]”, without giving a credit for the $6,000 which was noted as having been withdrawn from the company and then paid back into the company and which sum was already included in the $21,789;
ii)Ignoring the actual expenses that the company had paid to earn income.
In the circumstances, the Tribunal’s decision was unreasonable as it created a greater capacity to pay than the facts warranted and the Tribunal failed to correctly determine the Appellant’s capacity to pay.
Ground 1 – interpretation of the term “financial resources”
Counsel for the appellant submits that the Tribunal misinterpreted the meaning of “financial resources” as used in sections 98L(1)(a) and 117(4) of the Child Support (Assessment) Act 1989 and that this constitutes an error of law.
Section 98L(1)(a) provides that:
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…
Section 117(4) provides that:
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; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
Ms Kaur-Bains for the appellant argues[3] that the words “income, earning capacity, property and financial resources” should be interpreted in accordance with the decision in Gyselman[4] where the Full Court said at 178:
…it would…be artificial in considering the capacity of the non-custodian to provide financial support for his children, to include his property and financial resources but necessarily to ignore his liabilities. The term “property and financial resources” normally means their net value, not their gross value.
[3] At paragraph 33 of appellant’s written submissions filed on 21 August 2009
[4] In the Marriage of Gyselman (1991) 103 FCR 156
Counsel submits that the Tribunal failed to properly analyse the facts which were relevant to Mr Ladd’s “income, earning capacity, property and financial resources” including the company’s liabilities, and therefore failed to turn its mind to the relevant question. In particular, counsel submits the Tribunal failed to consider evidence in the company’s 2007 financial statements as to the company’s income and expenses and failed to consider whether that evidence was relevant when determining the financial resources available to the appellant.
Ms Kaur-Bains submits the Tribunal was obliged to consider the expenses and liabilities of both the company and of the appellant before making its determination. Counsel submits that this error was clear from the Tribunal reasons when it failed to give consideration to the company’s expenses, disregarding the losses incurred by the company.
Ms Kaur-Bains further submits that whilst the Tribunal has a discretion to take into account some or all of the company’s expenses and liabilities when determining the financial resources available to the appellant, the Tribunal’s failure to turn its mind to evidence in the company documents reflected the Tribunal’s misinterpretation of the term “financial resources”, and this constituted an error of law. Counsel submits that the meaning of “financial resources” is determined by the subject matter and context of the use of the words in the statute and the words have, until Gyselman, given the courts a degree of difficulty in determining their meaning. It follows, therefore, that the meaning to be given to the words is a question of law.
Mr Gouliaditis for the Child Support Registrar submits the term “financial resources” should be given its ordinary meaning and that the Tribunal’s interpretation is a question of fact, not law. He relies [5] on the Federal Court decision of Collector of Customs v Pozzolanic Enterprises Pty Ltd[6] . Mr Gouliaditis submits:
…where a statute uses words according to their ordinary meaning and where it is ‘reasonably open’ to hold that the facts as found fall within those words, then the question whether they do or not is one of fact (Pozzolanic at 287-288)…
Determining a liable parent’s child support income based on financial resources is a matter of judgment and there will always be a range of answers that will be open to the Registrar or SSAT.[7]
[5] At paragraph 23 of First Respondent’s written submissions filed 9 September 2009
[6] (1993) 43 FCR 280
[7] At paragraphs 23 to 25 of First Respondent’s written submissions filed 9 September 2009
Mr Gouliaditis contends it was a matter for the Tribunal whether or not to include any liabilities of the company when deciding the personal financial resources available to the appellant. He submits that the Tribunal’s approach was consistent with the Gyselman decision, but in any event, it should be noted that Gyselman concerned the debts of an individual, not the circumstances in which it may be appropriate for liabilities of a company to be attributed to an individual.
Discussion
I find the Tribunal correctly identified the need to analyse the appellant’s real financial position to determine whether or not his taxable income in the 2007 financial year reflected the actual financial resources available to him to meet his child support obligations. The Tribunal appropriately referred to the authorities in support of the principle that the taxable income of a self-employed parent may not accurately reflect that parent’s actual capacity to pay child support.
The Tribunal then sought to evaluate the appellant’s financial position, referring to the company accounts, the appellant’s drawings from the company loan account and the appellant’s assessed income, to determine what funds the appellant actually had available to him personally to meet his child support obligations. The Tribunal detailed the appellant’s submissions at paragraphs [34] to [48] of its Reasons, which were in part as follows:
Mr Ladd … felt the increased child support he was required to pay… is unrealistic as it does not have any bearing on his actual financial situation during the relevant period and as a result it has resulted in adverse financial consequences for him…
…Mr Ladd claimed that the Agency has erred in how it views the company depreciation amounts in the company taxation returns and profit and loss statements…. Mr Ladd indicated that he derives no benefit at all from the depreciated amounts and that they merely relieve the company of some of its tax burden.
…Mr Ladd stated that by necessity he lives on a very low income and works seven days a week… with regard to his role as the director of [the company], Mr Ladd stated that he has a fiscal responsibility to keep the business running and to ensure it prioritises the company earnings towards this goal.
[L] as a business ‘is barely alive and struggling’. Mr Ladd stated that his business provides a [omitted] service and that the industry has recently undergone significant technological change, which requires continual upgrading of equipment and the maintenance of existing technology… this is a major ongoing company expense…
Mr Ladd stated that he pays for all of his personal expenses through the company… the personal expenses are drawn down from the company loan account, which was initially set up when Mr Ladd loaned the company a lot of technological equipment…
Mr Ladd suggests that a fair estimation of his personal income for child support purposes can be gained by referring to the information his accountant prepared regarding the amounts drawn from the company loan account… and combining this with the amount of income he has consistently declared to the ATO, namely $6,000. These amounts are … for the 2007 financial year…$21,789.55
The Tribunal then noted the following:
a)At paragraph [55], the Tribunal referred to the Capacity to Pay Report dated 13 November 2007 prepared by the Child Support Registrar. The report stated that the company’s major expenses consisted of rent and depreciation. The report noted that the appellant set up the company in 1999, sold/leased the equipment he then owned for $550,000 and that he thereafter depreciated the equipment at 10% a year. At paragraph [58], the Tribunal referred to the company tax return for the 2007 financial year which showed a trading income of $123,695, total expenses of $172,430 and a taxable loss of $48,735.[8]
b)At Paragraph 60, the Tribunal noted that while the appellant withdrew a total of $21,789.55 from the company loan account for private expenses in the 2007 financial year, the Taxation Office assessed his taxable income at $6,000.
c)The Tribunal referred to Mr Ladd’s concerns that the Agency had not sufficiently differentiated between his personal financial circumstances and those of his business. It correctly noted that a decision as to how business income and expenses are to be treated involves an exercise of discretion in the particular circumstances of the case.[9] The Tribunal then determined the Agency was wrong to include losses incurred by the company in the 2007 financial year. At paragraph [74] the Tribunal says:
Given the acknowledged differentiation between Mr Ladd’s personal financial circumstances and those of the company, the Tribunal can see no reasons to include losses incurred by [L] during the relevant income year [to] mitigate when estimating Mr Ladd’s child support.
d)The Tribunal then considered how depreciation, as a business expense of the company, should be treated for child support assessment purposes. The Tribunal noted the depreciation schedule for the 2007 year provided for a total net depreciation amount of $83,096 [A158] with an amount of $43,830 pertaining to equipment purchased during that financial year. Having reviewed the case law on depreciation, child support policies and the evidence available, the Tribunal decided an amount of $39,266 [$83,096 – $43,830] should be “viewed as funds available for Mr Ladd’s personal financial resources.”[10]
e)The Tribunal then concluded that Mr Ladd had available to him in the 2007 financial year an amount of $6,000 (taxable income), + an amount of $21,789.55 (his drawings from the company loan account) + an amount of $39,266 (depreciation expense not used for the purchase of new equipment) a total amount of $67,056.00, which the Tribunal found would be available to the appellant on an ongoing basis.
[8] Appeal books at Folio A27
[9] At paragraph 71 of the Tribunal’s reasons
[10] At paragraph 84 of the Tribunal’s reasons
I accept the appellant’s counsel’s submission that this conclusion was not open to the Tribunal on the evidence. I agree with counsel’s submission[11] that the Tribunal failed to understand that it needed to look at the whole of the financial evidence of the appellant, including the financial records of his company, in the context of determining what the actual personal financial resources of the appellant really were. This required a careful analysis of the personal benefits the appellant actually had available to him from the company, (such as the car, telephone, drawings and salary).
[11] At paragraph 23 of the appellant’s oral submissions
While I am satisfied it was appropriate for the Tribunal to analyse the company’s depreciation expense as it did, and I find no error in that analysis, it was also necessary for the Tribunal to have considered the financial effect of treating a portion of that depreciation expense (in this case, nearly half) as a financial resource available to the appellant. This exercise would necessarily involve a consideration of the other company expenses. It was then a matter for the Tribunal, in the exercise of its discretion, to decide which of those expenses should be regarded as reasonable for child support assessment purposes, and which (if any) should not.
The company accounts[12] for the 2007 financial year show the company made an overall loss in that year of $48,734.90[13]. It was not open to the Tribunal to simply disregard all other expenses of the company resulting in that loss, as it has done. It is clear that if an amount of $39,266 (the depreciation expense the Tribunal found was not used for the purchase of new equipment) were omitted from the Statement of Financial Performance for the company for the 2007 financial year[14], the company would still have an operating loss of $9,468.90 [a loss of ($48,734.90) plus $39,266]. In other words, that amount of $39,266 is not left in the hands of the appellant because, in the circumstances of this case, it makes no impact on the funds available to the appellant from the company. The position may have been different had the company achieved a net profit in that year. It is noteworthy that there is consistency in the company accounts in the 2006 and 2007 financial years. The company has negative equity in both the 2006 and 2007 financial years[15], and the company’s trading result in the 2006 financial year was worse than in the 2007 financial year. The Tribunal did not have regard to these facts.
[12] Appeal books at Folios A17-18
[13] Appeal books at Folio A18
[14] Appeal books at Folio A18
[15] Appeal books at Folio A16
I find the Tribunal misinterpreted the meaning of “financial resources” when it failed to examine the financial evidence before it in the context of determining what the actual personal financial resources of the appellant really were. This required an analysis of the personal benefits which actually flowed to the appellant from the company from the company’s financial records. While I accept Mr Gouliaditis’ contention that it was a matter for the Tribunal whether or not to include particular liabilities of the company when deciding the extent of the appellant’s personal financial resources, the Tribunal could not simply disregard those liabilities without explanation, and the loss incurred by the company in that year. I do not accept the submission that the Tribunal’s approach was consistent with the Gyselman decision, nor that Gyselman should be distinguished because it concerned the debts of an individual. Gyselman makes clear that the assessment of financial resources required to be undertaken must be a realistic one, based on the evidence available.
I agree with the appellant’s counsel’s submission that on the authority of Gyselman, the interpretation of “financial resources” in sections 98(1)(a) and 117(4) of the Assessment Act, is a question of law. I find the Tribunal misunderstood the task it was required to undertake to establish the true extent of the financial resources available to the appellant. This was an error of law.
It follows that the appeal must be allowed on this Ground.
Ground 2 - Did the Tribunal take into account a relevant consideration – that is, did the Tribunal consider whether the departure determination would be just and equitable as regards the child and the liable parent to make a departure order?
It is clear from the statute, and acknowledged by the Tribunal, that it was required, after making its own departure determination, to consider whether it would be just and equitable as regards the child, the payee and the liable parent to make the departure determination under Part 6A, and as part of that exercise, have regard to the financial resources of the appellant. Section 98L(2) provides that subsections 117(4) to (9) inclusive apply to the Registrar in the exercise of his/her discretion under section 98L(1).
The appellant’s counsel highlights section117(4)(d) which provides that “in determining whether it would be just and equitable as regards the child… the liable parent to make a particular determination… [the Tribunal] must have regard to the income, earning capacity, property and financial resources of each parent.” The “must” means compliance is mandatory. Counsel claims the Tribunal was therefore bound to consider the assets, liabilities, income and expenses of the appellant when undertaking that exercise, which the appellant claims it failed to do.
In considering the meaning of “must have regard to” Ms Kaur-Bains referred to authorities on the meaning of ‘taking a matter into account’. Counsel relied on the Federal Court decision of Elias[16] where Justice Hely, at paragraph [62], cited with approval the comments of Wilcox J in Nestle Australia Ltd v Commissioner of Taxation[17]:
To take the matter into account means to evaluate it and to give it due weight, having regard to all other relevant factors. A matter is not taken into account by being noticed and erroneously discarded as irrelevant.
[16] Elias v Commissioner of Taxation [2002] FCA 845
[17] (1987)16 FCR 167
Ms Kaur-Bains refers to the High Court decision of Minister for Aboriginal Affairs v Peko-Wallsend Ltd[18] as to the relevant principles applicable when determining whether a decision maker in exercising a statutory discretion has failed to take into account a relevant consideration. Counsel agrees with the Child Support Registrar that, in assessing the appellant’s financial resources, the Tribunal was not required to take each liability of the company into account. Counsel contends, however, that the Tribunal was required to at least consider whether or not the company liabilities should be taken into account. Counsel contends the Tribunal failed to do this. Counsel submits[19]:
It is the failure to take into account the mandatory consideration that renders the failure an error of law.
[18] (1986) 162 CLR 24
[19] At paragraph 34 of the appellant’s oral submissions
Mr Gouliaditis submits there is nothing in the Assessment Act to suggest that a failure by the Registrar or the Tribunal to take into account the liabilities of a company, where regard was had to some personal benefits enjoyed from the company, should lead to a departure determination being invalid. In any event, Mr Gouliaditis agrees compliance is mandatory but contends the Tribunal complied with the provision. Mr Gouliaditis refers in particular to paragraphs 99, 100, 103 and 104 of the Tribunal’s reasons. Mr Gouliaditis further submits that the Tribunal analysed the evidence relating to the expenses and liabilities and the net position of the company at paragraphs 37, 43, 44, 45 and 57 to 61 of its reasons. He contends that the Tribunal did have regard to the company’s liabilities, but decided to exclude them when setting a child support income for the payer. He submits that “This does not amount to a failure to have regard to a relevant consideration in the Peko-Wallsend sense.”
Discussion
Each party’s submissions related to the Tribunal’s consideration of the appellant’s income, earning capacity, property and financial resources. Neither party addressed the wider issue of whether the Tribunal adopted the correct approach to the question of whether the outcome of its departure decision was just and equitable within the meaning of section 117(4).
On a number of grounds, I am not satisfied the Tribunal did so, including the ground on which the appellant relies.
The Tribunal was required to decide whether the particular outcome was ‘just and equitable’ as regards the child, the carer entitled to child support and the liable parent by considering the matters set out in subparagraphs (a) to (g) of section 117(4). I adopt Federal Magistrate Riethmuller’s remarks[20] in Tyagi & Meares[21] where his Honour says at paragraph [16]:
Whilst the section need not be slavishly followed, each of the relevant factors listed in s.117(4) should be considered.
[20] FM Riethmuller is author of the CCH Australian Family Law Child Support Handbook
[21] [2008] FMCAfam 886; (2008) 39 Fam LR 604
Federal Magistrate Riethmuller[22] has expressed concern about “the manner by which the Tribunal determined whether or not the outcome of its decision was just and equitable within the meaning of s.117(4) of the Assessment Act.” In the 2009 decision of Linnan & Linnan[23], his Honour said at paragraph [56] that:
… nowhere on the face of decision is it apparent what weekly rate of child support would actually follow from the determinations made by the Tribunal. Without identifying the weekly or monthly rate of child support that would flow from their determination it is difficult to understand how the Tribunal could properly determine whether or not the assessment would be just and equitable with the meaning of s.117(4). Rather it is indicative of the Tribunal approaching the matter on the basis of attempting to adjust the income amount component of the formula assessment… rather than being satisfied that the particular outcome was ‘just and equitable’ as regards the child carer and liable parent, as required under s.98L.
[22] See PJ & Child Support Registrar (SSAT Appeal) [2007] FMCAfam 829 and Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886; (2008) 39 Fam LR 604
[23] [2009] FMCAfam 353
The Tribunal addresses the question of whether its decision as to
Mr Ladd’s child support income would be ‘just and equitable’ at paragraphs [88] to [105] of its Reasons. The Tribunal reiterates the appellant’s case that his business is barely afloat, he lives a thrifty personal lifestyle and does not have funds available for his personal use beyond his modest drawings from the company loan account. The Tribunal notes the appellant’s contention that he has not considered changing his employment situation as he enjoys his work, does little else outside working 7 days a week, and has no transferable skills.
In relation to the payee’s financial position, the Tribunal states that the payee’s Income Tax Return Estimate identifies her taxable income for the 2007 year as $45,256. The Tribunal notes that the payee works full time. The Tribunal finds the payee has no capacity to increase her earnings. It is not clear on what basis the Tribunal makes that finding.
In relation to the children’s needs, the Tribunal notes the payee reports that the children require ongoing orthodontic treatment at a cost of $400 a month. The Tribunal notes both children have part-time jobs “to support the family finances.” However, the Tribunal then finds neither child has any current capacity to support themselves. It is not clear on what basis the Tribunal makes that finding, given both children are earning to some extent.
The Tribunal relies on its earlier finding that the appellant had an amount of $67,056 available to him for his personal use in the 2007 financial year without further analysis.
The Tribunal finds each parent has the usual expenses. It does not refer to the basis for this finding.
In relation to hardship, the Tribunal says at paragraph [102] of its Reasons:
…in considering the overall situation the Tribunal was unable to identify any factors or features of the circumstances of the two parents that would constitute a degree of hardship warranting consideration.
In his discussion of the case law in Tyagi & Meares[24] on the extent of reasons required with respect to s.117(4) matters, Federal Magistrate Riethmuller refers to the Full Court decision of Ross & McDermott[25] and to a decision of this Court of PJ & Child Support Registrar[26]. In the latter case, the Court analysed a number of Full Court decisions on the extent of reasons required in family law cases and concluded that the same principles apply to child support decisions. The Court held that:
…it is important for the Tribunal to provide appropriate reasons. This will usually entail careful findings of fact and clear explanations of the reasons for any decision, particularly where it involves the exercise of a discretion such as altering a child support amount.
[24] [2008] FMCAfam 886; (2008) 39 Fam LR 604
[25] [1998] FamCA 134; (1998) FLC 98-003, (1998) 147 FLR 235; (1998) 23 Fam LR 613
[26] [2007] FMCAfam 829
I find the Tribunal’s consideration of the factors in section 117(4) falls short of what is required by the legislation. In particular:
a)The Tribunal does not consider the proper needs of the children as required by subparagraph (b). Apart from a reference to their orthodontic expenses, the Tribunal does not consider the children’s other expenses.
b)The Tribunal does not consider the income or earning capacity of the children, apart from noting both children earn an income (subparagraph c)
c)The Tribunal does not consider the income, earning capacity property or financial resources of the payee beyond referring to her annual income of $45,256 and making an assertion that she cannot earn more. The Tribunal makes no reference to the payee’s assets, liabilities or overall expenses nor to her capacity to contribute to the children’s expenses (subparagraph d).
d)The Tribunal adopts its finding that the appellant has $67,056 available to him with no reference to the overall position of his company, including the pattern over 2 financial years of negative equity and a trading loss as set out in the company’s financial statements. I do not accept Mr Gouliaditis’ submission that these matters have been addressed in the paragraphs he refers to. Apart from the company’s depreciation expenses, I find no specific reference to the company’s other expenses. As earlier noted, I find the Tribunal misunderstood the task it was required to undertake in relation to an assessment of the actual financial resources available to the appellant. (subparagraph d).
e)The Tribunal does not refer to the actual rate of child support which flows from its decision to enable it to evaluate whether the result is just and equitable.
f)While the Tribunal does consider the hardship on the payee of the present assessment, the Tribunal does not have regard to any hardship the order would impose on the appellant. (subparagraph g)
g)The Tribunal does not consider the extent to which the appellant and the payee could contribute to the costs of caring for the children. The Tribunal does not consider the extent of the children’s needs nor the capacity of each parent (and of the children) to meet those needs.
Ground 2 has been made out.
Ground 3 – Was the Tribunal’s finding as to the appellant’s financial resources unreasonable?
The appellant’s counsel submits that when, at paragraph 85 of its reasons, the Tribunal added the $6,000 (the appellant’s assessed income) to the sum of $21,789 drawn by him from the company in the 2007 year, it overestimated his income by $6,000. Counsel submits the Tribunal failed to take into account that the analysis of withdrawals/movements in the company loan account in the 2007 year[27] shows that the $6,000 in salary had been paid by the appellant to the company and was therefore already included in the $21,789.
[27] Appeal books at Folios A79 to 80
Mr Gouliaditis contends there was no evidence before the Tribunal that the $21,789 drawn from the company included the $6,000 of disclosed income in the appellant’s tax return. The Tribunal noted at paragraph 47 that in his submissions to the Tribunal, the appellant says:
…a fair estimation of his personal income for child support purposes can be gained by referring to the information his accountant prepared regarding the amounts drawn from the company loan account during the relevant income years and combining this with the amount of income he has consistently declared to the ATO, namely $6,000.
Mr Gouliaditis submits the documentary evidence supports his submission. Folio A79 notes that $6,000 has been loaned by the appellant to the company, however it does not appear in the drawings on the company loan. He submits the standard for unreasonableness is very high and there was nothing unreasonable in the Tribunal’s approach of treating the 2 amounts as distinct financial resources.
The appellant made no further submissions in relation to the second particular relied on under Ground 3. The question of whether the Tribunal was in error in ignoring actual expenses the company had paid to earn income was addressed in relation to the first two grounds of appeal. I therefore find it unnecessary to deal further with this particular.
Discussion
I agree with the submissions on behalf of the Registrar. The appellant told the Tribunal it would be appropriate to add his drawings from the loan account to his assessed income to quantify the financial resources available to him in the 2007 year. Folio 79 does not disclose receipt of $6,000 by the appellant from the loan account in the 2007 year. The source of the funds lent to the company is not clear to me from that document. I can therefore find no error in the Tribunal’s finding on this issue.
The appeal on the basis of Ground 3 fails.
Determination
As I have determined to uphold the appeal on the basis of Grounds 1 and 2 of the Amended Notice of Appeal, the appeal will be allowed.
Section 110F of the Registration and Collection Act sets out the powers of courts when determining an appeal from the Tribunal. It provides that:
The court… may make such order as it thinks appropriate by reason of its decision.
Mr Gouliaditis submits that if the appeal is allowed, the proper order would be for the matter to be remitted to the Tribunal for further consideration. Given the extent of the findings that will need to be made, I agree that this is the appropriate course to take. The Tribunal’s decision will be set aside and the matter remitted to the Tribunal for re-hearing in accordance with law.
In oral submissions the appellant seeks an order for costs against the Respondent. The appellant does not specify whether he seeks costs against both or one of the two Respondents. I will list the matter on the question of costs and set a timetable for the filing of material.
I certify that the preceding 64 (sixty-four) paragraphs are a true copy of the reasons for judgment of Sexton FM
Associate: Skye Owen
Date: 18 January 2010
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