Mabry & Mabry & Anor (SSAT Appeal)
[2010] FMCAfam 388
•23 April 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MABRY & MABRY & ANOR (SSAT Appeal) | [2010] FMCAfam 388 |
| CHILD SUPPORT – Appeal from SSAT – error of law – no matter of principle. |
| Child Support (Assessment) Act 1989, s.98C(1)(b) Child Support (Registration and Collection) Act 1988, s.110G |
| Gyselman & Gyselman[1991] FamCA 93; (1992) FLC ¶92-279; (1991) 15 Fam LR 219 Mabry & Mabry [2005] FMCAfam 656 |
| Appellant: | MR MABRY |
| First Respondent: | MS MABRY |
| Second Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | CAC 577 of 2008 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 25 August 2009 |
| Date of Last Submission: | 25 August 2009 |
| Delivered at: | Canberra |
| Delivered on: | 23 April 2010 |
REPRESENTATION
| Counsel for the Appellant: | The Applicant appearing in person |
| Counsel for the First Respondent: | The First Respondent appearing in person |
| Counsel for the Second Respondent: | Mr Orford |
| Solicitors for the Second Respondent: | Child Support Agency |
ORDERS
That the appeal be allowed in part.
That clause 1(e) of the decision of the Social Security Appeals Tribunal, appeal [omitted] be set aside.
That the first respondent’s child support assessment for the support of L for the period 1 May 2010 until she attains 18 years of age be set at $180 per week.
That the weekly rate of child support for L be increased on 1 July each year, in accordance with variations in the third quarter weighted average consumer price from the previous year.
That the orders of FM Ryan be varied to require the appellant to pay half of the school fees for the male children to attend at M College until the completion of their secondary education.
That the appellant pay half of the school fees for L (but not more than a sum equivalent to half of the fees that would be charged for her to attend M College) until the completion of her secondary education.
That the appellant attend upon L’s school within 28 days and sign all necessary documents to assume responsibility directly to the school for the fees referred to in Order 6 herein.
IT IS NOTED that publication of this judgment under the pseudonym Mabry & Mabry & Anor (SSAT Appeal) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAC 577 of 2008
| MR MABRY |
Applicant
And
| MS MABRY |
First Respondent
| CHILD SUPPORT REGISTRAR |
Second Respondent
REASONS FOR JUDGMENT
This is an appeal from a decision of the Social Securities Appeal Tribunal (SSAT) made on 17 December 2008 with respect to 3 children of the marriage, S born [in] 1990, B born [in] 1991 and L born [in] 1997.
This matter was previously before the court as an appeal from a decision of the SSAT made on 29 February 2008. On that occasion the matter was remitted to the SSAT to be re-heard.
The appellant sets out the following 5 grounds of appeal:
(i) An error of law has been made by the tribunal because it has asked wrong questions, considered matters which are irrelevant and ignored relevant material … in relation to my purchase of an additional four weeks leave.
(ii) The Tribunal has ignored relevant material in relation to the sale of the business.
(iii) The Tribunal has misinterpreted the requirements for self support commitments.
(iv) The Tribunal has ignored material provided by me as to the true cost of raising a child.
(v) The Tribunal has allowed [the first respondent] an ongoing deduction regarding vehicle allowances when a material part of these deductions were evidenced to be a once off, capital nature.
The first respondent does not challenge the SSAT decision of
17 December 2008 and seeks that the appellant’s appeal be dismissed. Having regard to the fact that the SSAT decision concerning school fees is clearly beyond its powers, the First Respondent brought an application for the appellant to pay half of the school fees for the child B to complete school at M College, and for the whole of L’s schooling at MK College.
The Child Support Agency argues that:
(1)The husband’s appeal fails to disclose a legitimate error of law; and
(2) The Tribunal made contradictory statements of its understanding and information relied on as to the school fees payable for [B] in 2009, and errors of fact in relation to those matters.
Background
The appellant and the first respondent have a long history of litigation. They separated on 17 February 2003 and divorced the following year. Between July 2003 and May 2007 they litigated in the Family Court with respect to property division.
In the Child Support arena the parties have also been active. In May 2003 a change of assessment application was made under s.98C(1)(b) of the Child Support (Assessment) Act for the period 17 April 2003 to
31 October 2003 by the Appellant. Further change of assessment decisions were made on 15 January 2004, 28 April 2004 and 2 January 2005.
The parties applied to this Court. After a hearing Federal Magistrate Ryan gave judgment on 13 December 2005 (Mabry & Mabry [2005] FMCAfam 656), allowing the appellant’s application for a departure order and making orders:
1.That for the period 1 July 2003 until 16 February 2004 the applicant [the appellant’s] child support income is set at $30,820.28.
2. For the period 17 February 2004 until 30 June 2005 the applicant [the appellant’s] child support income is set at $44,472.44.
3. For the period 1 July 2005 until 30 June 2007 the applicant [the appellant’s] child support income shall be calculated by adding to his taxable income 25% allowed deductions relating to expenses claimed in relation to [AQG] (including those repaid on his parents Westpac loan).
4. In addition to the child support payable pursuant to Order 3 commencing 1 January 2006 the applicant shall pay one half of the children’s school fees, camp fees, building fund and school excursion costs for their attendance at [M] College or any other private fee paying school (provided the later does not involve overall fees greater than those charged by [M] College).
5. That the Registrar of the Child Support Agency give effect to these departures from administrative assessment.
6. All outstanding applications are dismissed.
On 22 March 2007 the Child Support Registrar initiated a change of assessment application for the period commencing 1 July 2007 following the expiration of Federal Magistrate Ryan’s orders.
On 1 June 2007 a delegate made a decision under Part 6A setting the income amounts of the parties at $75,000 per annum for the appellant and $47,700 per annum for the first respondent. This resulted in a child support assessment of $18,666 per annum or around $357.73 per week.
On 21 June 2007 the appellant objected to the delegate’s decision. On 29 August 2007 the objection officer set the appellant’s income at $68,705 and the first respondent’s income at $51,920, resulting in an assessment of around $15,904 per annum.
On 11 September 2007 the appellant applied for a review of the decision by the SSAT. The review was heard on 8 January 2008 and the tribunal delivered its decision on 14 March 2008. The appellant appealed and the first respondent cross-appealed from the SSAT decision, the appeal being allowed by consent on 26 August 2008.
The SSAT heard and determined the case again, making a new decision on 17 December 2008.
The SSAT made the following changes to the assessment:
(a) [The appellant’s] annual child support income be set at $78,000 for the period 1 July 2007 to 30 June 2008; and
(b) [The appellant’s] adjusted taxable income be set at $78,000 for the period 1 July 2008 to 31 December 2009; and
(c) [The first respondent’s] annual child support income be set at $44,500 for the period 1 July 2007 to 30 June 2008;
(d) [The first respondent’s] adjusted taxable income be set at $44,500 for the period 1 July 2008 to 31 December 2009; and
(e) [The appellant] and [the first respondent] each contribute direct to [the college] one half of the 2009 school fees for B.
Error of SSAT
The appellant appealed the second SSAT decision to this Court on
20 January 2009.
It is clear that the SSAT has no power to make an order for non-periodic child support. The SSAT only has the powers available to the Registrar: s.103T, Child Support (Registration and Collection) Act 1988. The Registrar’s powers on a change of assessment application are set out in s.98S of the Child Support (Assessment) Act 1989. The powers provided in s.98S do not extend to non-periodic child support. The power to make orders for non-periodic child support are contained in Pt 7 of the Child Support (Assessment) Act 1989, and conferred only upon courts. The decision with respect to school fees is beyond the power of the SSAT and must be set aside.
Re-hearing
The SSAT has heard and determined this case twice, and on both occasions the decision has been set aside. The parties were strongly opposed to remitting the case to the SSAT and requested that I hear and determine the application.
On hearing an appeal the court may make such order as it thinks appropriate: s.110F, Child Support (Registration and Collection) Act 1988. Pursuant to s.110G of the Child Support (Registration and Collection) Act 1988 the court may make findings of fact. That section provides:
110G [Courts may make findings of fact] (1) If a party to a proceeding before the SSAT appeals to a court under this Subdivision, the court may make findings of fact if:
(a) the findings of fact are not inconsistent with findings of fact made by the SSAT (other than findings made by the SSAT as the result of an error of law); and
(b) it appears to the court that it is convenient for the court to make the findings of fact, having regard to:
(i) the extent (if any) to which it is necessary for facts to be found; and
(ii) the means by which those facts might be established; and
(iii) the expeditious and efficient resolution of the whole of the matter to which the proceeding before the SSAT relates; and
(iv) the relative expense to the parties of the court, rather than the SSAT, in making the findings of fact; and
(v) the relative delay to the parties of the court, rather than the SSAT, in making the findings of fact; and
(vi) whether any of the parties considers that it is appropriate for the court, rather than the SSAT, to make the findings of fact; and
(vii) such other matters (if any) as the court considers relevant.
(2) For the purposes of making findings of fact under subsection (1), the court may:
(a) have regard to the evidence given in the proceeding before the SSAT; and
(b) receive further evidence.
(3) Subsection (1) does not limit the court's power under paragraph 110F(2)(b) to make an order remitting the case to be heard and decided again by the SSAT.
Having regard to s.110G(1), I must identify relevant findings of fact made by the SSAT, and to that extent, determine if any of them result from an error of law. To the extent that the SSAT has made findings of fact that are not affected by an error of law, I remain bound by those findings. Conveniently, the tribunal member set out the findings of fact that were made at the hearing as follows:
[70] The tribunal has made the following findings of fact
· [The appellant] and [the first respondent] are the parents of [A], born [in] 1989; [S] born [in] 1990; [B] born [in] 1991 and [L] born [in] 1997;
· [B] and [L] are eligible children;
· [S] and [B] are in [the first respondent’s] sole care. [L] spends 109 nights in a year with [the appellant] and the remaining nights with [the first respondent];
· [The appellant] said he had purchased 4 weeks additional annual leave to care for [L];
· [S] turned 18 years [in] 2008 and has deferred tertiary studies until 2009;
· [B] is a full-time secondary student and is expected to attend [M] College in 2009;
· [L] completes year six at [SH] Primary School in 2008;
· Prior to their separation [the appellant] and [the first respondent] had agreed that their children would be educated at Catholic schools.
· [The appellant] is employed by the Commonwealth on a gross annual salary of $82,238;
· [The appellant] is still carrying the losses from the sale of the AQC business notwithstanding the business was sold in 2003 and he has obtained a further loan of approximately $51,000 which he said he used for purchasing shares and for living expenses;
· [The first respondent] is employed in a [business omitted] on a gross salary of $55,000;
· Between 1 July 2007 and November 2008, [the first respondent] has paid $6,122.90 and [the appellant] has paid $2018 in education expenses for their children.
The SSAT said it was only able to make limited findings of fact with respect to the appellant’s loans and shareholding, saying:
[71] … The Tribunal is satisfied, on balance, that [the appellant] has had the capacity to repay some of his loans and has also increased his borrowings without apparent justification. Although the information he provided about his shareholding was grossly inadequate he owns some shares which are capable of being sold and the income being used by him to either reduce his loans or to supplement his child support income. The Tribunal notes that in [the appellant’s] outline of argument he attributes $2000 in income to share dividends
The SSAT noted that there were findings of FM Ryan with respect to debts in the decision Mabry & Mabry [2005] FMCAfam 656. To the extent that her Honour made findings of fact the parties are estopped from challenging those findings of fact. In this regard it was entirely appropriate for the SSAT to have regard to her Honour’s findings. Relevantly, Ryan FM found:
a)That the appellant received $37,500 from the property settlement pursuant to consent orders made in August 2003 (at [18]), which he could have applied to the discharge of his debts: at [46];
b)That ‘that post separation [the appellant] did not work the business at its true capacity.’: at [44];
c)That at the time he sold the business it was a viable business: at [50];
d)That the appellant ‘left a viable business in favour of unemployment’: at [49].
e)That he sold the business on 9 September 2003 for $34,000: at [25];
f)‘On the sale of the business, [the appellant] remained liable for his V8 utility lease (approximately $44,000), truck (approximately $44,000), computers (approximately $6,000) and a second [equipment omitted] ($10,000 rental agreement). The second [equipment omitted] was sold in October 2003 and it appears the associated lease was paid out’, a total of $92,000 of liabilities: at [26].
Whilst not specifically referred to in FM Ryan’s judgment, the appellant also had a debt to his parents, from when the business was purchased. Notably there was even a period when the appellant went to Queensland and did not work in the business for a number of weeks. FM Ryan’s findings are certainly not surprising.
I therefore heard further evidence of the parties in order to be seized of the necessary facts to make a decision on the merits of the case.
There are six child support periods that I am asked to consider between 1 July 2007 and 31 December 2009. Prior to 1 July 2007 the child support was calculated in accordance with the decision of Federal Magistrate Ryan in Mabry & Mabry [2005] FMCAfam 656. The first respondent also seeks orders varying the future assessments. The appellant did not oppose this course before the tribunal, but now submits that a formula assessment is appropriate for the future.
The appellant seeks orders setting child support at around $100-$125 per week. The first respondent is content with the current assessment until 12 August 2009 and then seeks child support at $250-$300 per week thereafter. The first respondent also seeks orders that the appellant pay half the school fees.
The Law
In determining whether or not to depart from the Child Support Assessment, it is clear that the law requires a 3 step process, that is:
i)To determine whether or not a special circumstance has been established under s.117(2);
ii)To consider what would be a ‘just and equitable’ child support assessment; and
iii)To consider whether the proposed assessment would be ‘otherwise proper’.
The Full Court has made it clear that this must be undertaken with respect to each period of the child support assessment that is sought to be altered because, as is apparent in this case, the assessments will change from time to time and therefore a consideration is required with respect to each assessment period as to whether or not a ‘special circumstance’ has been established, and then what alteration, if any, is ‘just and equitable’ and ‘otherwise proper’: see Gyselman & Gyselman[1991] FamCA 93; (1992) FLC ¶92-279; (1991) 15 Fam LR 219. The actual assessments in force are in Exhibit 1, under cover of a letter from the Child Support Agency.
The Assessments
Period 1 - The period 1 July 2007 to 23 March 2008
In this period the appellant was assessed to pay child support at $384.56 per week for the 3 children of the parties, who were living with the wife. This assessment was based on an income on the part of the appellant of $48,048 (based on his 2006 taxable income) and the first respondent of $41,701 (based on her 2006 taxable income). This resulted in a formula assessment of around $10,901 per annum or $200 per week. The period appears to have ended as a result of s.7A of the Child Support (Assessment) Act.
Period 2 - The period 24 March 2008 to 23 May 2008
For the period 24 March 2008 to 23 May 2008 the materials from the SSAT contain no calculation of the formula assessment. This is because decisions departing from the formula had been made prior to 24 March 2008. Had the assessment for this period been based upon the formula it would have used the parties’ respective taxable income amounts for the 2007 year of $57,466 for the appellant and $48,678 for the first respondent. The exempt amount on 24 March 2008 was $15,378 and the disregarded amount was $45,505. A formula assessment would have come to around $248.38 per week or $12,960 per annum. This period ended as a result of the eldest child attaining 18 years.
Period 3 - The period 24 May 2008 to 30 June 2008
As with period 2, for the period 24 May 2008 to 30 June 2008 the materials from the SSAT contain no calculation of the formula assessment. This is because decisions departing from the formula had been made prior to 24 March 2008. Had the assessment for this period been based upon the formula it would have used the parties’ respective taxable income amounts for the 2007 year of $57,466 for the appellant and $48,678 for the first respondent. The exempt amount on 24 March 2008 was $15,378 and the disregarded amount was $45,505. A formula assessment would have come to around $209.58 per week or $10,935.41 per annum. This period ended as a result of legislative amendments changing the formula.
Period 4 - The period 1 July 2008 to 23 June 2009.
Whilst directions were made for the CSA to provide details of all of the assessments, the only details provided for this period covered the total assessment and the income amounts and percentages. Nothing was provided for this period onwards to show how the care percentages or costs were calculated. Nothing appears in the court book, leading to the view that the tribunal was not seized of this information either.
On the basis of the limited information available it appears that the formula assessment would be in the vicinity of $900 per month, if neither income amount were altered form the relevant taxable income amounts.
Period 5 - The period 24 June 2009 to 11 August 2009
The same difficulty, as with period 4, arises in this period, however I estimate that a formula assessment would be in the vicinity of $900 per month.
Period 6 – The period 12 August 2009 to 31 December 2009
The same difficulty, as with periods 4 and 5, arises in this period. However, from this point onwards there is only one child under
18 years, therefore I estimate that a formula assessment would be around ¾ of the current assessment of $474 per month.
Period 7 – The period 1 January 2010 to 26 March 2010
The formula assessment applied in this period, produced a rate of $87.37 per week based upon the 2007/08 tax assessments of each party.
Period 8 – The period 27 March 2010 to 23 September 2010
In this period the formula assessment increased to $112.46 per week (as a result of L attaining 13 years), again based upon the 2007/2008 taxable income amounts.
Future periods and non-periodic child support
The first respondent seeks child support departures into the future to avoid further litigation. She also seeks orders for the appellant to contribute to school fees.
Current Assessments
The assessments currently in force are as follows:
Period
Weekly Rate
No. of children
01/07/2008 – 23/03/2008
$385.56
3
24/03/2008 – 12/05/2008
$384.04
3
24/05/2008 – 30/06/2008
$209.58
2
01/07/2008 – 23/06/2008
$232.78
2
24/06/2008 – 11/08/2009
$233.08
2
12/08/2009 – 31/12/2009
$109.01
1
01/01/2010 – 26/03/2010
$87.37
1
27/03/2010 – 23/09/2010
$112.46
1
The Evidence of the parties
I found the appellant a less than impressive witness in the witness box. Whilst he had large volumes of material it was clearly focused on demonstrating that his child support obligations were the cause of his financial difficulties. Some documents were not produced. I am not satisfied that the account of all of the circumstances was frank and open.
The First respondent was clearly frustrated by the processes, the costs and the level of financial support she had received. Whilst her demeanour was not impressive from the bar table on the first day, as the trial progressed and she became focussed upon the issues she was ultimately presented as an impressive witness. I accept her evidence.
Special circumstances
In this case the issues said to give rise to ‘special circumstances’ relate to the income and earning capacity of each party (s.117(2)(c)(ia)), and school fees (s.117(2)(b)(ii)).
The appellant’s income, earning capacity and financial resources
Whilst the appellant prepared a large number of documents in support of his claim it was difficult to identify the source information. It appears clear that for some time he has lived beyond his means. I doubt that he has a clear perspective of the course of his financial affairs over the last 5 to 10 years.
The appellant’s gross income from employment was $78,082 in 2006/07 and $80,122 in 2007/08. He said that his net taxable income for the 2007/2008 period was $71,460. This amount was calculated after adding dividends from share investments, and deducting $10,168 in fees and interest for his Aussie business loan, $2,068 for margin loan interest and $697 in gifts and/or donations from his gross taxable income of $84,403. His salary income is from a public service position, and there is no reason to doubt that it will continue into the future. The tribunal found that his income was $82,238 per annum from his employment.
Mowing business debts
The appellant stated that the deduction for $10,168 in fees and interest for his Aussie business loan was a result of net losses he was still carrying as a result of the sale of his business. Whether this falls within s.117(2)(a)(iii)(A) or s.117(2)(c)(ia) makes little difference if it is appropriate to take it into account. It appears to me, however, that once a debt is no longer associated with a profitable business or investment it would usually cease to be a matter relevant to determining the income of a person, but become relevant to their necessary commitments in supporting themselves. The particular ground under s.117 is not the key issue, the real question is whether it is a ‘special circumstance’ under the section.
The appellant stated that he purchased the business in mid 2001 with a loan from his parents of $70,000, of which $46,000 was for the purchase and $14,900 was for running expenses. The appellant then sold the business in October 2003, at a loss, for $34,000.
The original business loan is secured by the appellant’s parents and has been redrawn upon by the appellant a number of times. The debt was $103,000 at the time of the hearing.
The appellant also has a loan with Citibank of approximately $28,000, a loan with GE of approximately $14,000 and credit card debts totalling approximately $21,800.
The appellant has a debt to Centrelink of approximately $7000, a debt to the Child Support Agency of almost $2000 and approximately $3500 outstanding in school fees for the child L.
In the financial statements the appellant attached to his affidavit, the business debt, as at 30 June 2002 was only $46,000 (in the statement submitted with his tax return). In his own spreadsheet he says the debt was then $60,481.88. In his 2003/04 returns the debts of the business are shown at $40,404.90 in 2003 and $55,000.90 in 2004. In the balance sheet he prepared for the hearing he shows the debt in 2004 at $60,481.88.
In the appellant’s financial statement of September 2005 (annexed to his affidavit for these proceedings) he lists the business as having a value of $112,908 and lists a debt he describes as ‘Business Loan – Loss on sale’ as $113,888. Earlier, in his financial statement of
6 August 2008, he listed the lease liabilities identified by Ryan FM, and also the business loan, at $65,000.
At the hearing before me he explained that he sold the car at a loss of $21,000 and the [equipment omitted] at a loss of $9,500 (although a letter he tendered from the Canberra [omitted] dealer said that the [equipment] was sold on the basis that the finance company was paid out). These losses, coupled with the computer lease liability come to around $36,500. In the balance sheet used in his tax return for 2004 his business debt was $40,404.90. At best it appears that the business debt and liabilities were around $76,904.90, less the sale price of the business of $34,000, leaving a net position on the business of around $42,904.90. In accordance with FM Ryan’s findings, he could have applied the monies he received in the property settlement to this debt, reducing it by $37,500. Thus, the net position could have been a debt of around $5,404.90, assuming that the business was sold appropriately (that is, that it was reasonable to sell the business without all of the equipment). If the [equipment] dealer’s letter of 24 April 2004 is correct, the net result was a surplus after taking into account the property settlement monies.
The appellant pointed out that he had legal expenses of $10,000, which he paid from this amount. However, the first respondent would also have had similar legal expenses. The appellant also spent money on a holiday in Queensland and for living expenses. Even if these expenses are accounted for, the debt is less than $20,000.
FM Ryan made findings allowing for an adjustment to his income amount of 75% of the lease payments over the period she set the child support rate. The effect of FM Ryan’s decision was to put the first respondent into a position where she had been overpaid. She had to repay significant child support at that time (over $10,000). To the extent that the business debt and liabilities were relevant, they were accounted for in the decision made by FM Ryan, resulting in a significant reduction in child support evidenced by the first respondent having to repay over $10,000 of child support. In cross-examination the appellant was unable to produce a bank statement showing where this refund was deposited.
It is clear that FM Ryan made significant deductions to the child support payable when one compares the assessments that issued with the income of the appellant. The result of the orders was that from
1 July 2005 to 30 June 2007 the appellant’s child support income amount was set at $53,053 per annum, and the first respondent’s calculated in the usual way under the formula. The appellant’s taxable income in 2005/06 was $48,048 (as a result of tax deductions of $23,723 from his group certificate income of around $71,771, the majority of which were continuing expenses of the equipment from the business he sold in September 2003). In 2006/07 the appellant’s taxable income was $57,467 (again, somewhat less than his group certificate income of around $76,103 as a result of ongoing deductions relating to the business).
It is not for this court to review FM Ryan’s decision. I note that the effect of that decision was child support assessments significantly less than those that had issued from the CSA – around $12,000 less for the relevant periods.
In substance, the appellant’s case is really a sustained attack upon the judgment of FM Ryan and the consequential assessments. Much of his material relates to periods before that judgment. I am not reviewing her Honour’s judgment and, as stated above (at [20]), the parties are bound by the findings FM Ryan made in those proceedings.
On all of the material I am not persuaded that the appellant can rely upon the business debts as a basis for a special circumstance in the child support periods, on or after 1 July 2007, on the facts of the case. Even if I were persuaded, it appears that this issue has been the subject of an adjustment to take it into account in the alterations to the assessment by FM Ryan, and therefore the subject of a judicial decision finalising the issues.
Share Portfolio debts
The appellant has significant assets in his share portfolio, with a market valuation of $117,124 as at the date of hearing. The appellant has been undertaking share investing since separation. The appellant stated in his evidence that 980 CBA shares in his portfolio are owned by the appellant’s parents as security for the appellant’s shares. The appellant states that the market value of these shares is $54,145, leaving him with a market value of $62,979 for his portion of the portfolio. As the loan account was $73,381, the appellant says that this puts him in a negative position.
When queried as to why the appellant would retain a share trading account which places him in debt, the appellant stated that he uses the account as an additional loan account to fund his day to day expenses.
It is difficult to determine whether his parents own a large number of the shares in his portfolio on the basis of the evidence given. If his parents own a large proportion of the shares, his margin loan now exceeds the value of his own shares. However, for the purposes of the decision in this case it is sufficient to rely upon the appellant’s evidence about the cash flow effect of his margin loan:
Now, also your margin loan to the extent that it exceeds what you say are your shares?---Yes, I regard the margin loan – it seems to be working for me almost revenue neutrally. (T53.31)
I therefore find that the share loan and dividend yields are as set out in his own tax summary for 07/08: dividends (and franking credits) of $4,003.00, less margin loan interest of $1,773. Thus, a net income of around $2,230.
Centrelink Debt
On 17 October 2007 Centrelink raised a debt against the appellant for overpayments made in past periods. That debt was $5,876.36. He was also prosecuted with respect to the circumstances leading to the overpayment. However, the overpayment was included in his taxable income in previous years, and therefore included as income for the assessment of child support. In these circumstances it is a debt that it is appropriate to take into account for current child support assessments. The repayment arrangement is for the sum of $50 per week from
16 November 2007. As a result, it will take around 2 years and 3 and 1/2 months to repay, thus around the end of Feb 2010.
Other debts
The appellant has significant other debts, to expensive credit providers. For example, he has been borrowing money from GE Finance at interest rates between 29.45% and 33.45%. He also has debts to Citibank, Commonwealth MasterCard and Virgin MasterCard. These debts appear to be the result of selling his business before having a job to go to, and the consequential financial stress of an assessment based upon earning capacity (pursuant to the orders of FM Ryan) and living beyond his means. Whilst the appellant argued that his financial position was also impacted upon by the rates of child support he had to pay before the mother refunded him over $10,000 as a consequence of FM Ryan’s orders, I am not persuaded that these events were causative of the appellant’s financial difficulties in 2007 and onwards.
By 2007 the Virgin debt was $11,420.80 and the GE debt was $15,236.43 (taken out in August 2007). Yet at the same time the appellant had a margin loan for $84,799 with a limit of $250,000 secured over shares then valued at $129,839.70.
The credit providers, in total, require $1,600 per month in repayments, according to the appellant. He has no assets other than his shares, which he says are of lower value than his margin loan.
The real question is whether, when taking into account the circumstances that have led to these debts, they should be taken into account in determining the appropriate rate of child support.
It is not the law that a person incurring significant debts, as a result of conduct that led to child support being assessed upon their earning capacity, or living beyond their means (at least in a case where they earn more than average weekly earnings), then rely upon the repayments on those debts for a reduction in their rate of child support. The children are entitled to financial support and should not be converted into a lender of last resort.
Purchased leave
The appellant has the option of purchasing an additional 4 weeks leave each year. He takes up this option in order to be available when the youngest child is in his care. The tribunal concluded:
[58] [The appellant’s] evidence is that he purchased four weeks leave. It would appear then that he was paid $76,103 for working 44 weeks and an additional four weeks paid leave i.e. $1585 per week. Had he not purchased four weeks leave his gross earnings would have been about 482,420 ($1585 for 52 weeks). In his Outline of Argument [the appellant] calculates his gross pay before purchase of leave as $82,238 and the Tribunal accepts this figure as that which [the appellant] would have earned in salary had he not purchased leave.
[59] The question for the Tribunal is whether it was reasonable in the circumstances for [the appellant] to purchase four weeks leave thereby reducing the income figure on which his child support is calculated. He says that this was necessary and otherwise he would have to pay for childminding. [The first respondent] makes the point that she has [L] for twice the period that [the appellant] has her and is able to balance that without ‘purchasing leave’. On balance, the Tribunal is not satisfied that [the appellant] cannot arrange his affairs in such a way that he could have care of [L] for 109 nights in a year without the need to ‘purchase’ four weeks leave.
When considering purchased leave the case should be approached on the basis of considering whether a person has a greater income earning capacity – that is the income that could be earned without purchasing leave. Purchasing leave is conceptually little different to choosing to work part time or on reduced hours. As a result the appropriate considerations are those set out in s.117(7B):
(7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a) one or more of the following applies:
(i) the parent does not work despite ample opportunity to do so;
(ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or working pattern; and
(b) the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i) the parent's caring responsibilities; or
(ii) the parent's state of health; and
(c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
A person who purchases leave by choice has ‘ample opportunity to work’, as referred to in s.117(7B)(a).
In considering whether a parent’s decision not to work is justified on the basis of caring responsibilities, s.117(7B)(b)(i) requires a consideration of the whole of the circumstances of the case. It is not sufficient answer to this consideration to conclude that a parent could arrange their affairs to enable them to work. To limit considerations to the availability of alternative care would mean that any parent with a child old enough to be placed in day care could not satisfy s.117(7B)(b)(i). The reality is that families desire to spend time together and that, for many in the community, care by parents is considered the best option for children. For other families balances must be struck depending upon their particular needs and circumstances. In limiting consideration solely to the question of whether alternative care could be arranged, the tribunal have erred in its consideration of s.117(7B)(b)(i).
The child is 12 years of age. One would not expect a parent to leave a child of this age unattended. As the appellant has only 109 nights per annum with the child, it is not unrealistic that he would choose to arrange his affairs to maximise his time with her. He clearly has caring responsibilities, as does the first respondent. The balance between work and care responsibilities of purchasing up to 4 weeks per annum appears to me to be entirely justified in the context of this case. That the first respondent may not have this option in her work place (a factor considered in the previous SSAT decision) does not appear to me to be relevant.
However, on the actual evidence before me the appellant appears to have only needed 17 days recreation leave for caring responsibilities in 2006/07 and 19 days in 2007/08. As a result, caring responsibilities could have been fulfilled on the basis of the leave the appellant had (20 days recreation leave per annum) without purchasing more leave. He also has some capacity to take carer’s leave. Therefore the ultimate outcome in the SSAT appears correct and this issue does not give rise to a special circumstance under the Act. However, I do not take into account that in some years the appellant may need to take a small number of additional leave days to care for L.
The first respondent’s income
The tribunal found that the first respondent earns around $55,000 per annum from her work for an estate agent. The SSAT also accepted that her reasonable motor vehicle expenses were around $8,500 per annum, which would leave her with a taxable income of around $46,500, however, her 2007/08 taxable income was $54,369. The higher rate is the real reflection of her income.
The appellant challenged the motor vehicle expenses of the first respondent. The evidence produced substantiated the expenses. I accept that she needs a recent model car for her work. The car she bought is not extravagant, a small Nissan sedan. I also accept that she made a loss on the sale of her previous car and that it was not sold at an undervalue.
Ultimately, I accept that the first respondent would need a car whether she required it for work or not. For this reason not all motor vehicle expenses should be deducted. In this case she only claims a proportion of the expenses as a tax deduction. It does not appear to me to be a special consideration on its own, but one of the many considerations appropriate in determining a just and equitable rate of child support in a departure case.
The school fees
The tribunal’s findings with respect to school fees are set out in paras.83 and 84:
[83] Both [the appellant] and [the first respondent] have a continuing primary duty to maintain [B] and [L] and had a primary duty to maintain [S] between 1 July 2007 and [date omitted] 2008, when he turned 18 years of age. In considering their proper needs, the Tribunal notes that [B] appears to have one year left at [M] College whether or not he completes his secondary education there. The parties had agreed that their children would be educated at Catholic schools. However, [the appellant] has stated that they can no longer afford private education. In light of the fact that [B] has only 12 months left at [M] and there was an agreement between the parties that he should go there, the Tribunal is of the view that it would be just and equitable that both parties contribute to him finishing his secondary schooling there.
[84][L] is in a somewhat different category given that she is finishing primary school this year. It appears to the Tribunal that it is [L’s] wish to continue her schooling at a Catholic school and; if that occurred, it would be ideal for both parents to contribute half of the costs of her schooling directly to her school. However, given [the appellant’s] view and in the absence of agreement between the parties, the number of school years ahead and the lack of past co-operation between the parties, the Tribunal does not believe it is appropriate to make an order as to contributions by the parties to [L’s] future education. It is to be hoped that, assuming her enrolment in a Catholic secondary school goes ahead, the parties are both willing to contribute to [L’s] fees outside of the child support assessment process.
It appears to me that FM Ryan’s orders covered the issue until the children completed their schooling. If the order did not cover this whole time, then when considering private school fees the case must be approached through the prism of s.117(2)(b)(ii):
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
…
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
Unfortunately the tribunal did not approach school fees in the manner provided in the Act. The first step is to determine whether the child is ‘being … educated … in the manner that was expected by his or her parents.’ The simplest method of proof of the parent’s expectations is to look to the past conduct of the parents, often evidenced by the child attending a particular school before separation. However, this is not the only method of proof of the expectations of the parents.
Significantly, lack of agreement as to the specific school does not mean that the parents lack the expectation that the child will attend a private school of a particular category, for example a Catholic school. In this case the first three children did attend Catholic schools, and the youngest was attending a Catholic primary school. It is clear that the parents expected their children to receive a Catholic education. In this case it is clear that the parties intended their children to have a private education at Catholic schools whose fees are at the modest end of the range of fees for private schools. As the first three children attended a boy’s school, a different school had to be chosen for the youngest child as a result of differences in gender. Quite rightly, no one suggested that differences in gender are in any way relevant whether the youngest child should receive an equivalent education.
Whether the fees can be met (and the proportions in which the parents must contribute), must be determined having regard to the parents’ actual financial positions, is a matter to consider under ‘just and equitable’.
I therefore find that the tribunal erred in its approach to the school fees for the youngest child. I find that the youngest child, in attending [M] College, is being educated in the manner expected by the parties for their children, as was the case with the boys attending the boys’ school.
The first respondent stated in her evidence that the school fees increase each year, commencing with $4000 for the child L in 2009 and 2010. The fees then increase to $4500 for 2010 and 2011. The first respondent, not unreasonably, was unable to indicate what the fees would be for 2012 and 2013, which would account for the child’s year 11 and year 12 fees.
School supplies
The first respondent also sought an adjustment for the child’s uniform and school books, indicating that the cost of those, for 2009, was $1000. It is difficult to categorize these as special circumstances in the years covered by the old formula as they form part of the day to day needs of the child who was assessed as living with the first respondent in the relevant years. The previous formula simply required the appellant to contribute a fixed percentage of his income.
However, these costs present a different issue under the current formula. Under the current formula, the costs of the child are assessed on a table and apportioned between the parents having regard to their respective income and the amount of time the child is with each. Thus, for a case where the parents have the same income and equal shared care there would be no child support payable. If, however, the payer has care for 30% of the time, the adjustment would be such that he contributed around 20% of the costs to the payee to make up his half share of the obligation based upon their equal incomes. In this later scenario, if the payer fails to meet 30% of the costs of caring for the child, such as 30% of the school supplies and the like, then the underlying basis for the formula is being thwarted: the payer’s level of care is being relied upon to reduced the formula rate, but he is not meeting the relevant share of outgoings referable to the proportion of time the child is with him.
In most cases the parents will not keep a ledger of these smaller day to day expenses and hopefully would not feel the need to do so. However, in some areas, the amount may be significant and the contribution out of proportion. For example, back to school costs for uniforms, books and transport passes can easily cost well over $1,000, for which a person with 30% care would be expected to contribute their 30% or $300. For many families this is a significant sum.
For an adjustment to be made for expenses such as school supplies, the issue must be capable of falling within one of the special circumstances in s.117(2). It appears to me that these issues fall within s.117(2)(c)(ia), being:
(c) 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:
(i) …
(ia) because of the income, property and financial resources of either parent;…
That is, the parent not meeting their proportion of obligations of the financial needs of the child (contrary to an assumption implicit in the formula) would have greater financial resources. This may be a basis for concluding that the assessment is unjust and inequitable.
As I said in W & W [2005] FMCAfam 295:
7. It is clear that this provision cannot be read simply by comparing the income or earnings of the payer to the child support income amount income figure struck by the Child Support Agency. Rather, one must have regard to the extended definition of ‘just and equitable’ in order to determine whether or not the administrative assessment produces a ‘just and equitable’ determination of the child support to be paid by the liable parent having regard to the income earning capacity, property and financial resources of that parent.
8. That [s.117(2)(c)(ia)] is not limited to changes in income amounts in isolation is apparent from the open ended nature of the concept of a ‘special circumstance’ and the many factors that are relevant when determining what is ‘just and equitable’ in each particular case. For example, in Portillo and Portillo (1994) FLC ¶92-484 and S and C (1997) FLC ¶92-750 lack of notice of a child support liability was a ‘special circumstance’ in the context of the particular cases even though there was no significant difference in the payer’s child support income amounts and actual earnings. Whilst these cases did not specifically identify which sub-section of sec 117 was relied upon it appears clear that it was [s.117(2)(c)(ia]).
In this case the amounts involved, compared to the total child support payable, make it difficult to conclude that this is a ‘special circumstance’ under the Act, if viewed in isolation. However, as there are other ‘special circumstances’ it will remain a relevant consideration at the next step.
Just and equitable
I have regard to the nature of the parents’ duties as set out s.3 of the Act, in determining a ‘just and equitable’ child support assessment.
It is appropriate that I have regard to the actual expenses of the parties. The parties have not filed a financial statement for some time and there was little other evidence to indicate the parties’ current financial expenses. However, the parties did file financial statements in 2007. Those statements show their weekly expenses for 2007. Whilst not complete, for example the appellant clearly had some water costs etc, they indicate the expenses of the parties at that time. The debts, whilst listed, are discussed above.
| Weekly Expenses | The Appellant | The First Respondent |
| Rent | $ 235.00 | $ 370.00 |
| Food/household | $ 160.00 | $ 250.00 |
| Electricity | $ 15.00 | $ 35.00 |
| Gas | $ - | $ 10.00 |
| Water | $ - | $ 5.00 |
| Telephone | $ 12.50 | $ 47.50 |
| Car hire purchase | $ - | $ 125.00 |
| Petrol | $ 30.00 | $ 40.00 |
| Car repairs | $ 10.00 | $ - |
| Car rego & insurance | $ 17.50 | $ 30.00 |
| Fares | $ - | $ 14.00 |
| School fees | $ 162.50 | $ 107.50 |
| Household insurance | $ 5.00 | $ 20.00 |
| Medical/dental/optical | $ - | $ 20.00 |
| Super | $ 72.50 | $ 95.00 |
| Child Support | $ 130.00 | $ 39.00 |
| Credit Card | $ 97.50 | $ 75.00 |
| Hire purchase repayments | $ - | $ 125.00 |
| Loan Repayments | $ 197.50 | $ - |
| Business Loan | $ 172.50 | $ - |
| Internet | $ - | $ 12.50 |
| TOTAL | $1,317.50 | $1,408.00 |
During cross-examination the first respondent provided up-to-date weekly costs for the care of L. The first respondent set out her weekly expenses for the care of L as follows:
| Expenses for L | Cost |
| Uniform & pack | $ 19.23 |
| food | $ 66.67 |
| lunch money | $ 20.00 |
| internet | $ 6.92 |
| mobile | $ 6.92 |
| landline & calls | $ 4.62 |
| Rent | $ 140.00 |
| Electricity bills | $ 10.26 |
| Gas bills | $ 7.69 |
| Water bills | $ 7.69 |
| clothes | $ 7.69 |
| Hair cuts | $ 6.92 |
| shoes | $ 5.77 |
| gifts | $ 0.77 |
| videos | $ 10.00 |
| bus fares | $ 10.00 |
| dental | $ - |
| ambulance | $ 0.90 |
| chemist | $ 3.85 |
| laptop | $ 11.54 |
| Christmas presents | $ - |
| babysitter | $ 56.25 |
| TOTALS | $ 403.69 |
The first respondent also provided a figure of $250 per year for the provision of Christmas presents and birthday presents for L and her brother. This figure was not applied in the table as the first respondent indicated that the laptop was given to L as her Christmas present. The first respondent also said that the water bill was excessive and that she expected the bills to decrease after B moved out, and that the services of a babysitter for school holiday care were no longer required. The adjusted figure is approximately $325 per week; however I note that a number of the expenses are bare minimums, constrained by the first respondent’s income. Clearly there will be some dental costs and Christmas presents in the ordinary course of caring for L. Accordingly, I find that the costs for the care of L by the mother are approximately $350 per week. Whilst there are obviously some costs of the care of L when she visits the appellant, they are not particularised. In addition, there are school fees as set out above.
If no adjustment is made for the carry over debts from the mowing business, the appellant had an income in 2007/08 equivalent to $81,363.00. This is substantially more than the income that would be used for a formula assessment. The initial departure application was brought by the Registrar based upon a greater income of the appellant: there was clearly a special circumstance demonstrated by the Registrar, in this respect alone. The earnings of the parties are discussed above. Neither appears to have any significant resources beyond their salary. The children have no capacity for self support at the relevant time beyond employment for pocket money as they reached teenage years. Having regard to the parents’ incomes, one would not expect the children to contribute financially.
The case of the appellant is that the result of the past orders and assessments has caused him considerable hardship. The financial costs of children are always a heavy burden on families who, in our society, are usually generous in putting their children’s needs to the forefront.
I accept that the first respondent has consistently done this. It appears to me that the appellant lost perspective during the separation and property case. This led to the orders of FM Ryan carefully balancing debts, earning capacity and the needs of the children. Whilst I recognise that the appellant has debts (other than the social security debt), they are not such that should prejudice the proper support of the children. The hardship the appellant finds in his overall circumstances are not the product of circumstances justifying a reduction of child support.
Ultimately, there is no mathematical method or precise calculation that can be made to determine the perfect child support rate. It is a discretion that must be exercised judicially having regard to all of the circumstances of the case and the practical results. Importantly, I must also have regard to the hardship that would result in any retrospective change in the rate of child support. As with many cases the evidence is imperfect, and the court must do the best it can on the material before it.
I am not ultimately persuaded that a reduction from the current rates is warranted for past periods. The first respondent’s documents do not seek an increase for the past and therefore I do not make findings of higher rates that may be appropriate. With respect to the future it appears to me that a contribution by the appellant of $180 per week commencing from 1 May 2010 is ‘just and equitable’. My findings as to periodic child support are based upon the appellant meeting half of the school fees for the children over the periods. In making this finding I have considered the overall costs including school fees and then struck an appropriate periodic rate on the basis of the parents sharing school fees equally (even though their incomes and circumstances differ). I note the recent rates are low, but I am not satisfied that creating a retrospective debt is ‘just and equitable’ in the particular circumstances of this case. This rate should increase with CPI on the 1st of July each year and continue until the later of L attaining 18 years of age or completing year 12. The benefits of avoiding further litigation clearly outweigh the benefits of re-assessing each year or child support period on the exact circumstances of the day.
I find that it is just and equitable in the special circumstances of this case that the appellant pay half of the school fees (if FM Ryan’s order was not intended to continue). Whilst FM Ryan’s order provides sufficient machinery to cover L, it is appropriate to vary it to provide for the appellant to pay the school fees for L directly. This allows each parent to negotiate with the bursar at the school, based upon their own financial circumstances if they seek that the school provide some accommodation for the payment of school fees.
Other wise Proper
There is no evidence that these orders will impact upon the public purse. I am satisfied that the orders I propose are otherwise proper within the meaning of the Act.
I therefore make orders accordingly.
I certify that the preceding ninety-nine (99) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Acting Associate: Katherine Sudholz
Date: 22 April 2010
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