M and M
[2002] FMCAfam 321
•27 September 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & M | [2002] FMCAfam 321 |
| FAMILY LAW – Child support – appeal from decision of child support registrar – departure application. Child Support (Assessment) Act 1989, ss.98X, 110, 111, 115 Reid v Reid (1999) FLC 98-007 |
| Appellant: | D P M |
| Respondent: | J L M |
| File No: | PAM103 of 2002 |
| Delivered on: | 27 September 2002 |
| Delivered at: | Parramatta |
| Hearing Date: | 13 May 2002 |
| Judgment of: | Scarlett FM |
REPRESENTATION
| Solicitors for the Appellant: | In person |
| Counsel for the Respondent: | Mr Schroder |
| Solicitors for the Respondent: | Ms Kyle Smythe and Mallam Solicitors |
ORDERS
The Appeal is allowed in respect of the decision of the Senior Case Officer on 24 February 2001 not to reduce the assessment of child support for the period 1 November 1999 to 19 January 2001.
The Child Support Registrar is to assess the Appellant’s liability for child support for the period 1 November 1999 to 30 November 2000 on the basis of the Appellant’s earning capacity of $60,000.00.
All late payment penalties imposed in respect of the Appellant’s liability for the above period are waived.
No late payment penalty in respect of the assessment in Order 2 above until the expiration of one month from the date of issue of the said assessment.
In all other respects the Appeal is dismissed.
The application to entertain an application for an order for departure from an administrative assessment of child support is refused.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM103 of 2002
| D P M |
Applicant
And
| J L M |
Respondent
REASONS FOR JUDGMENT
This is an appeal against what the Appellant describes as “all incorrect assessments made since 1 July 1999” made by the Child Support Registrar. From the material provided, it is apparent that the Appellant does not dispute the correctness of an assessment made on 9th May 1999, to take effect from 1st July 1999, but rather against two later re-assessments. The first of these is dated 2nd October 1999 and took effect from 1st November of that year. The second re-assessment is dated 2nd November 2000, and took effect from 1st December of that year.
In his Notice of Appeal, the Appellant seeks that the assessments be set aside, “thus reverting to the correct assessments”. In his affidavit affirmed on 18th February 2002, the Appellant makes a departure application, seeking the following orders:
a)that the arrears of $10,635.58 created by calculating the liable parent’s child support amount upon the superannuation payment be removed, and
b)that the annual child support assessment amount set during the review process of $6,284.00 be disregarded, and that
c)provision by way of periodic payment in the sum of $250.00 per month be the amount of child support.
The Appellant has complied with the requirement that he should object under section 98X of the Act and the Registrar has allowed the objection only in part. As the appeal is pending in this Court, it is open to the Court to consider, pursuant to s.115 that it would be in the interest of the parties to consider, at the same time as the Court considers the appeal, whether an order should be made under
Division 3.
Background
The proceedings concern child support for the child of the parties’ marriage, Alexandra Jane M, who was born on 27th August 1991. The parties were married on 18th November 1989 and separated on
20th April 1996. The child resides with the Respondent mother.
On 9th May 1999, the Deputy Child Support Registrar issued a Notice of Assessment for the period 1st July 1999 to 30th September 2000. In that assessment, based on the parties’ taxable income for 1997/1998 plus any supplementary amounts adjusted by 4%, the annual rate of child support was set at $5,436.00. It is my understanding that this assessment is not the subject of the appeal.
On 2nd October 1999, the Deputy Child Support Registrar wrote to the Appellant, advising him that his child support had been re-assessed because the Respondent’s tax assessment for the 1998/1999 tax year had become available. The letter went to say:
“As we do not have income information for the 1998/1999 year for you, we have used a provisional income amount of $20,660.00.”
The letter contained an assessment, also dated 2nd October 1999, setting an annual rate of child support payable of $1,771.00. This assessment was said to cover the period from 1st November 1999 to 31st January 2001. The monthly amount the Appellant was required to pay was therefore $147.58. He commenced to pay that amount on a regular basis.
On 9th February 2000, the Australian Taxation Office issued a Notice of Assessment to the Appellant in respect of the year ending 30th June 1999. His taxable income was shown as $78,926.00. He received a refund of $2,879.01.
On 16th October 2000, the Child Support Agency issued a re-assessment for the period 1st November 1999 to 31st January 2001. This re-assessment was based on the Appellant’s taxable income for the 1998/1999 tax year of $78,926.00. The annual rate for child support was set at $12,259.00, a monthly amount of $1,021.58. Not only was the monthly amount for October 2000 set at $1,021.58, the sum of $874.00 (the difference between the new amount of $1,021.58 and the old amount of $147.58) was added to the Appellant’s account for each of the months from November 1999 through to September 2000. As a result, the Appellant’s account, which showed a nil balance on
10th October 2000, following a payment of $147.58 the day before, turned into a debit balance of $9,614.00 on 16th October 2000. On
13th November 2000, a late payment penalty of $122.36 was applied.
On 2nd November 2000, the Child Support Registrar wrote to the Appellant, advising him that his child support assessment for the 1999/2000 period had been re-assessed because the Respondent’s income tax assessment for that year had become available. Again, a provisional income amount of $20,660.00 was used for the Appellant, as his 1999/2000 income amount was not available. Whilst no copy of the actual assessment was provided, it appears from the decision of Senior Case Officer A N dated 24th February 2001 that the Appellant was assessed to provide an annual rate of child support of $1468.00.
On 23rd November 2000, the Appellant’s Notice of Assessment from the Australian Taxation Office showed his taxable income for the year ending 30th June 2000 as $22,244.00. His income tax was assessed as $3,973.30.
The Appellant then exercised his right to object to the assessment for the period 1st November 1999 to 31st January 2001. The Respondent then made an application to change the child support assessment on the basis that there were special circumstances for doing so. Senior Case Officer N dealt with both matters at the same time in her decision made on 24th February 2001.
Senior Case Officer N found that, for the period in question, the Appellant had been assessed over and above his earning capacity. As a result, she found that the Appellant had shown that the assessment was not fair because of his income, earning capacity, property and financial resources.
Turning to the cross application by the Respondent, the Senior Case Officer found that the Respondent had shown that the costs of maintaining the child were significantly affected because she was being educated at a Catholic school rather than at a State school. This was found to be an education in the manner expected by the parents. The Senior Case Officer also found that an assessment on the basis of the Appellant having an income of only $20,000.00 was unjust and inequitable, pointing to the Appellant’s assets and lifestyle arising out of his partnership with his current wife.
In deciding whether or not it was fair to change the assessment, the Senior Case Officer found that the Appellant had been “significantly under-assessed” in the 1997/1998 period and the 1996/1997 period. Accordingly, she was not prepared to reduce the assessment for the 1998/1999 period “given the previous reduced assessments”.
In respect of the current assessment, the Senior Case Officer found that the Appellant’s taxable income was not reflective of either his earning capacity or his capacity to provide child support. She then applied the figures in the Lee Expenditure Survey, showing that it costs $240.88 per week (amounting to an annual rate of $12,568.00) to raise a child of the age of the parties’ daughter. She found that the it was just and equitable to split that cost evenly between the parties, but that the decision should be commenced from the date the Respondent’s cross application was received by the Child Support Agency. Accordingly, the Senior Case Officer decided that:
a)there should be a change to the administrative assessment of child support; and
b)that the annual rate of child support for the period 19th January 2001 to 31st December 2002 be set at $6,284.00.
Issues
The issues in this matter are whether:
a)the Child Support Agency made an appropriate reduction of the child support for the period 1st November 1999 to 31st January 2001;
b)
the Child Support Agency was correct in increasing the assessment of child support for the period 19 January 2001 to
31st December 2002; and
c)whether there should be a departure from an administrative assessment of child support so that the Appellant should pay child support at the rate of $250.00 per month.
Appeals against incorrect assessments
The right of a liable parent or a carer entitled to child support to appeal against an administrative assessment is set out in s.110 of the Child Support (Assessment) Act. The grounds include:
a)that an annual or daily rate of child support was incorrectly assessed;
b)that the assessment has incorrectly determined the days in relation to which the child support is payable; or
c)the Registrar has failed to give effect to the happening of a child support terminating event.
The grounds set out in s.110(2) are not exclusive.
The powers of a court hearing the appeal are set out in s.111. The court “may make such orders in relation to the assessment to which the appeal relates as it considers appropriate, including an order setting aside, confirming or varying the assessment.”
The appellant’s written submission
The Appellant annexed to his affidavit affirmed on 6th February 2002 a document headed “Summary of Argument. Provisional Submission by Applicant – D M.” This submission is, to say the least, a most extraordinary document. The Appellant admitted, during the course of the hearing, that the submission had been written for him by a third party, although he agreed that he was responsible for the document being annexed to his affidavit. The Appellant, quite properly, apologised to the Court for the contents of the submission and expressed regret that he had included it in his affidavit.
The submission was apparently prepared by a person from one of those groups in the community who believe that the provisions of the Child Support (Assessment) Act or the operations of the Child Support Agency operate unfairly against fathers who have an obligation to pay child support. There is no doubt that individuals are entitled to hold such views and to put them forward in appropriate ways. Indeed, they are entitled to offer assistance to people who find themselves in disagreement with the Child Support Agency, but the methods used to express that disagreement need to be appropriate.
It should be made quite clear that an appeal against an assessment of child support is not to be used as a vehicle for espousing political views or for making scandalous or vexatious allegations against the Child Support Agency or its staff. Rule 15.29 of the Federal Magistrates Court Rules permits the Court to order that material may be struck out of an affidavit if it is “inadmissible, unnecessary, irrelevant, prolix, scandalous or argumentative.”
The contents of the submission clearly fall foul of that rule in many instances. The document is written in a flippant style, referring to an increase being “bumped up 4% via the Hestia/uplift factor” (presumably a reference to brassieres) and descriptions of what the writer believes to be mistakes by the Child Support Agency as “unforced errors”. More objectionable than the schoolboy humour referred to are the numerous descriptions of actions by the Child Support Registrar as “rorts”. The word ‘rort’ is a pejorative term defined in The Macquarie Dictionary as “a trick; lurk; scheme”.
Paragraph 1.6.2. of the submission is, to my mind, scandalous, in that it refers to certain sections of the Act as being interpreted by the Child Support Registrar as
“a licence to kill, which “allow” him to inflict terrorism on the male citizens of Australia (even by the official figures of 3 fathers suiciding per day because of CSA harassment), by anyone’s mathematics including that of a fair minded person, amount to double the number of deaths during the CS Reich as were witnessed in September 2001 in USA by more “conventional” terrorists.”
The submission contains numerous references to an alleged policy by the Child Support Registrar of deliberately breaking the law and attempting to hoodwink liable parents. A continued reference to the Child Support Registrar as the “CS Reich” (in an apparent reference to Nazi Germany” is another objectionable feature of the document.
Two other passages are particularly offensive:
“1.11.1 The Part 6A Kangaroo Court. It is well known to victims of CSA rorting that if the victim gets too close to the truth about the rorting and the CSA Registrar is unable to explain the rorting administratively under Part 5 of the CSA Act, he calls in the kangaroo court under Part 6A to cover over the nasty deeds.
1.11.2. In February 2001 I was so totally confused by the sudden phantom debt that I foolishly applied to the kangaroo court presided over by a Ms N, apparently in Wollongong. Because at that time I had not been made aware of how the rorting took place, I did not present as any threat to the CSA Registrar and Ms N did not need to cover up any evidence.”
Again, paragraph 1.12.1 contains the statement:
“In conclusion, I will just summarise at this point the philosophy behind this rort, explaining why it is not just a simple mistake but part of the terrorist strategies of the CSA, who consider it to be their duty to do a Fred and Ginger around the meticulously planned legislation of the parliament.”
As I have indicated, the submission is replete with such objectionable material, much of it quite preposterous. The underlying tone is that of an allegation that the Child Support Registrar has embarked on a deliberate and dishonest campaign to persecute liable fathers in general and the Appellant in particular. The reference to Senior Case Officer N is offensive and, I should point out, not supported by any evidence whatsoever.
The Respondent apologised to the Court for including this document and expressed regret that he had done so. Even so, it is hard to see how a person like the Appellant, who has had the benefit of a tertiary education, could have failed to see how offensive this document was. Noting the apology, however, I propose to take no further action other than to strike out the submission pursuant to Rule 15.29. It should be made clear to litigants, however, that documents filed in the Court that are scandalous will be struck out.
The assessment for the period 1 November 1999 to 31 January 2001
The Appellant sought a variation of the child support assessment for the period from 1st November 1999 to 31st January 2001 on the basis that the taxable income used in the assessment period consists of termination payments “of a specific and unique nature”. These were payments which included his accrued long service and recreation leave, and a payout of his superannuation as a result of his leaving his employment. As he pointed out, he would not be receiving such payments in the future. This meant that his income for the year in question was artificially inflated. He referred to the fact that his superannuation had been taken into account in his property settlement in the Family Court in 1998. He used the money from his ETP to purchase a utility, pay down a second mortgage and establish a new business.
Senior Case Officer N considered the Appellant’s argument about the superannuation in her decision of 24th February 2001. She described the issue of the treatment of superannuation for child support as “unsettled” and referred to conflicting authority from the Family Court.[i] The particular decisions she referred to are Carey and Carey (1994) FLC 92-489 and Grejsen and Grejsen (1994) FLC 92-472.
Carey and Carey is a decision where Kay J held that it would be unjust and inequitable to require a father to pay child support for a particular year based on his actual taxable income for that year, as he had received a significant amount of money on his resignation from his employment by way of cashing in his superannuation. The Court also held, however, that it would be inequitable not to assess him for child support based on his earning capacity, as the father had chosen to leave his employment.
Against this, Rourke J held in Grejsen and Grejsen that there was no element of “double dipping” because the husband’s liability for child support was fixed by statute, and it was irrelevant to his liability to support his children that part of his income in the relevant tax year was related to a lump sum superannuation payout.
The authors of the commentary in the Australian Family Law Child Support Handbook published by CCH submit that the approach taken by Kay J in Carey is to be preferred. They suggest that
“Where capital accounted for in the property settlement (or the result of savings from income from which child support has been paid) is converted from one form of capital to another (such as the draw-down of superannuation to pay for a home) it ought to be quarantined for the purpose of excluding it from the child support assessment.”[ii]
Clearly, this is the argument made by the Appellant, when he submits that because the superannuation was taken into account for the purpose of the property settlement between the parties, and he used the moneys for expenses of a capital nature, it would be inappropriate for it to be taken as income during that tax year. It appears that this is the approach that was in fact taken by Senior Case Officer N. She accepted that the Appellant’s superannuation was taken into account in the property settlement.
What the Senior Case Officer then went on to do was to consider the Appellant’s earning capacity. She noted that he had voluntarily resigned from his employment “because he no longer enjoyed his job”[iii] and there was no medical condition preventing him from working, nor was his employer no longer willing to employ him. Taking into account the Appellant’s previous salary package, she found that he had an earning capacity of at least $60,000.00. The assessment had been based on a taxable income of $78,926.00. The Senior Case Officer, therefore, found that the Appellant had been assessed over and above his earning capacity. Thus, she accepted that the Appellant had shown that the relevant assessment was not fair because of his earning capacity.
The Senior Case Officer did not, however, reduce the assessment that she had found to be unfair. She proceeded to apply the test of whether it would be fair to change the assessment, and decided that it would not be. Her reasoning was as follows:
“Under the just and equitable criteria, I must look as not only what happened in one particular year but take a global approach…In the 1997/98 period Mr M was assessed to provide an annual rate of child support of $2444 based upon his 1995/96 taxable income adjusted for inflation to $22582. However, in that year his tax return shows that he earned income from employment of $56669, the farming losses resulted in him having a taxable income of $38864. That is, if Mr M had been appropriately assessed during the period he would have been required to provide an annual rate of child support of $8579. A similar result would happen in the 1996/97 assessment. That is, Mr M has been significantly under assessed in the past. I am not satisfied that it is just and equitable and otherwise proper that I reduce the assessment for the 1998/99 period in respect of the over-assessment given the previous reduced assessments.”[iv]
I am not satisfied that the Appellant was accorded procedural fairness in this decision. It would appear that the under-assessment for earlier years was never the subject of any objection or appeal. There is no evidence that this issue was ever raised with the Appellant or the Respondent, or that they were given any opportunity to make any submissions about the matter. The Appellant exercised his right to object to an assessment for the 1998/1999 period and the Respondent made a cross application in respect of the assessment for the following year. The Senior Case Officer found that the Appellant had been wrongly assessed for the 1998/1999 period, but declined to rectify the situation because of an earlier under-assessment of which neither party was aware.
I am satisfied that the Appellant was denied natural justice in respect of this issue. The appropriate procedure would be for his assessment for the 1998/1999 period to be adjusted so that he is assessed on the basis of his earning capacity for that period, as found by the Senior Case Officer. I am also satisfied that the late payment penalties should be waived, and no further late payment penalty should be levied until one month has elapsed after the date of issue of the fresh assessment.
The respondent’s cross application
The respondent submitted that the assessment for the 1999/2000 period should be increased from the annual rate of $1468.00 based upon a default income of $20,660.00. The Senior Case Officer found that it was the intention of the parties that the child would be educated at a religious school rather than a State school and found that the school fees of $875.60 required by the Catholic school attended by the school raised special circumstances, and that these fees significantly affected the costs of maintaining the child.
The Senior Case Officer went on to find that the Appellant’s lifestyle was incompatible with someone on the default income of $20,660. She pointed out that the Appellant had voluntarily resigned from his employment and that she had found that he had an earning capacity of $60,000.00.
The Appellant conceded that the child’s school fees amounted to $875.60. He claimed that the Senior Case Officer had wrongly assessed his income, and that depreciation was not a “paper loss” at all, but a real loss. He disputed the Senior Case Officer’s reliance on the Lee Expenditure Survey, and submitted that the Court should consider a figure from the ABS household expenditure survey instead. The difference between the figures is significant. The figure from the Lee Expenditure Survey shows the cost of maintaining a child of the age of the parties’ daughter is $240.88 per week, whilst the ABS figure submitted by the Appellant is only $107.00 per week.
The Senior Case Officer found that the annual rate of raising a child in these circumstances was $12,568.00 (based on $240.88 per week) and found that it was just and equitable for this cost to be split evenly between the parties. Thus, the annual rate of child support should be set at $6284.00. She further decided, correctly, in my view, that this decision should commence from the date that the Respondent’s cross application was received by the Child Support Agency, namely the 19th January 2001.
I am satisfied that the Senior Case Officer applied the correct principles in determining the cross application. The question of earning capacity was considered by the Full Court of the Family Court in DJM and JLM (1998) FLC 92-816. In this case, it is significant that the Appellant voluntarily left his employment and has now arranged his affairs in such a way that he and his new wife share equally in the profits of the business they run. The fact that both parties can lease motor vehicles and charge them to the business is noteworthy, especially as the Appellant gave evidence that his current wife ceased working in the café that they ran and is now employed as an office manager/secretary. I am of the view that it is just and equitable that, in the circumstances of this case, the Appellant’s earning capacity of $60,000.00 should be taken into account rather than his taxable income.
In the circumstances, the decision of the Senior Case Officer to set the annual rate of child support at $6284.00 should be upheld.
Departure application
The Appellant also seeks that there be a departure from administrative assessment of child support on the following grounds:
a)under section 117(2)(c)(I) that the income, earning capacity, property and financial resources of both parents would result in an unjust and inequitable determination;
b)any payments and transfer of property was (sic) not considered as to provide maintenance;
c)Child Support Registrar did not act or do all acts as required by the legislation;
d)Section 117(6)(a) was erroneously applied by the Senior Case Officer in finding for Reason 3;
e)That it would be otherwise proper to make orders for child maintenance after reviewing and considering all the facts of this case; and
f)This case makes it appropriate to use Cost of Children studies recently published by the Australian Institute of Family Studies.
Section 117(1) sets out the matters as to which the Court must be satisfied before making an order. They are:
“the court is satisfied:
(i)that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii)that it would be:
(A) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;
to make a particular order under this division.”
Of the grounds set out by the Appellant, those set out in (b), (c),
(d) and (e) are not matters that are covered by section 117(2). The Appellant did not present any evidence about the property settlement between the parties. Grounds (c) and (d) relate to the appeal and have already been dealt with.
The difficulty about this application is that it has been, in effect, “tacked on” to an appeal. There is a paucity of affidavit evidence from either side as to the nature of the issues which should be considered. There is no affidavit evidence from the Respondent at all. The Appellant’s affidavit evidence (including the submission which was struck out) concentrates almost exclusively on the appeal. The lack of evidence makes it, in my view, virtually impossible for the Court to do justice to the parties in determining a departure application. It would be more appropriate for the Appellant to make an application to the Registrar under Part 6A. Accordingly, I decline to entertain the application for departure from administrative assessment of child support.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Scarlett FM
Associate: A. Coutman
Date: 19 September
[i] At page 2 of the decision
[ii] at 20,553
[iii] At page 3 of the decision
[iv] At pages 5 and 6 of the decision
0