McColl & McColl
[2013] FCCA 736
•4 July 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| McCOLL & McCOLL | [2013] FCCA 736 |
| Catchwords: CHILD SUPPORT – Application for leave to change child support assessments for periods more than 18 months prior to application – principles applicable to the determination of such an application – late filing of tax returns – amended retrospective assessments issuing – amended assessments covering period more than 18 months before they issued – whether prima facie case exists to change assessments – no delay in seeking to change assessments – hardship to father of refusing leave and to mother of granting leave – consideration of late filing of tax returns as a relevant matter. |
| Legislation: Family Law Act 1975, s.44(3) |
| Cantrell & Jennings [2009] FMCAfam 229 Bauer & Becker [2009] FMCAfam 480, (2009) FLC ¶98-042 Jacenko & Jacenko (1986) 11 Fam LR 341, (1986) FLC ¶91-776 Gyselman & Gyselman (1991) 15 Fam LR 219, (1991) FLC ¶92-279 Child Support Registrar & Rawlings & Another [2013] FCCA 370 Hacherl & Berrios [2010] FMCAfam 668 |
| Applicant: | MR MCCOLL |
| Respondent: | MS MCCOLL |
| File Number: | PAC 40 of 2013 |
| Judgment of: | Judge Halligan |
| Hearing date: | 4 July 2013 |
| Date of Last Submission: | 4 July 2013 |
| Delivered at: | Parramatta |
| Delivered on: | 4 July 2013 |
REPRESENTATION
| Solicitors for the Applicant: | Mr McColl in Person |
| Solicitors for the Respondent: | Legal Aid Commission |
ORDERS
The father's application filed on 8 January 2013 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym McColl & McColl is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
PAC 40 of 2013
| MR MCCOLL |
Applicant
And
| MS MCCOLL |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant father, who is unrepresented, seeks an order to allow the Child Support Registrar (the Registrar) to make a departure determination reducing the amount of child support he is liable to pay for child support periods more than 18 months ago. He also seeks to stay the collection from him of amounts for child support arrears by the Registrar, pending the determination of these proceedings. The latter application became moot as the court is now determining the former application. Power to make the former order is found in s.112 of the Child Support (Assessment) Act 1989 (the Assessment Act).
The respondent mother opposes the orders the father seeks.
Background
Neither party sought to cross-examine the other, and hence I accept the evidence of each of the parties.
The father is the payer under child support assessments for the parties’ three children, all of whom are now over 18. The child support assessments ceased on 16 November 2012, when the two youngest children, twins who turned 18 earlier in the year, completed their secondary education.
The father filed his tax returns for the financial years 2005/2006 to 2011/2012 on 16 November 2012. They disclosed taxable income higher than the amounts previously used by the Registrar to calculate the father's child support. In consequence, the Registrar, as the Registrar was required to do under the Assessment Act, reassessed the father's child support for the periods from 1 January 2007 to
16 November 2012, resulting in the father's arrears of child support increasing to $30,189.54 as at the date the amended assessments issued.
The father's taxable income for the 2007/2008 and 2008/2009 years was affected by APRA approved compassionate grounds payments he received from his superannuation in each of those years, which were paid to his mortgagees. The gross distributions from his superannuation were $32,154 and $47,622 respectively, in respect of which net payments were made to his mortgagees of $18,977.05 and $25,241.50 respectively. Despite these payments, the father’s home was foreclosed and sold by his mortgagee, and the father subsequently became bankrupt on 10 September 2009.
The father wants to challenge the amended child support assessments made using his taxable income for those two years because he contends that he received no personal benefit from the superannuation distributions that are included as part of his taxable income for those, and therefore he believes they should not be taken into account as part of his income when assessing his child support.
After receiving the amended child support assessments, the father contacted the Child Support Agency (the CSA) and was advised to lodge a change of assessment application with the CSA, which would have to be refused because he was seeking to change assessments retrospectively more than 18 months and did not have an order from the court allowing it, after which he could apply to the court for leave to change the assessments retrospectively more than 18 months. He was also advised to ask the mother to agree to have the resultant child support debt removed.
The father lodged a change of assessment application around
29 November 2012. He was notified by letter dated 20 December 2012 that the Registrar had refused his application because he sought retrospective change for a period more than 18 months before his application and without a court order allowing it the Registrar could not make such a change.
On 13 December 2012, at the father's request, the mother agree to the superannuation distributions being disregarded as part of his income for child support purposes and she agreed to call the CSA. The father asked the mother on 14 December 2012 is she had done so, and she said she had rung but her case worker was not available. When the father asked the mother to ring the senior case officer he was dealing with, she refused. He contacted the senior case officer he was dealing with on 20 December 2012 and was advised the mother had not contacted the CSA.
He filed his application on 8 January 2013.
The father clarified during submissions that the assessments he sought to challenge, which are based on his taxable income for 2007/2008 and 2008/2009, cover the following child support periods-
a)1 February 2009 to 31 August 2009;
b)1 September 2009 to 12 January 2010;
c)13 January 2010 to 11 April 2010;
d)12 April 2010 to 16 November 2010; and
e)17 November 2010 to 30 November 2010.
All five periods are more than 18 months before the father filed his application.
He also clarified that the sole change he sought to make was to his adjusted taxable income used for these five periods, in each case by the deduction of the gross superannuation payment made on his behalf in the relevant tax year.
The applicable law
The father's application for an order allowing a change of assessment retrospectively for more than 18 months falls to be determined under s.112 of the Assessment Act, which provides-
“112 Court may grant leave to amend administrative assessment that is more than 18 months old
(1) If an application is made to a court under section 111, the court may grant leave for:
(a) the Registrar to make a determination under section 98S; or
(b) the court to make an order under section 118.
(2) The court may grant leave for an order to be made under section 118 if the court is satisfied that it would be in the interest of the parties to the proceeding for the court to consider, at the same time as it hears the application under section 111, whether an order should be made under section 118. If the court does so, the applicant is taken to have made an application to the court under section 116 for such an order.
(3) Otherwise, the court may grant leave for the Registrar to make a determination under section 98S.
(3A) To avoid doubt, the court may grant leave for the Registrar to make a determination under section 98S, or for the court to make an order under section 118, irrespective of what the applicant applied for under section 111.
Matters to be considered
(4) In considering whether to grant leave under subsection (1), the court must have regard to:
(a) any responsibility, and reason, for the delay in:
(i) making an application under section 98B or 116; or
(ii) making a determination under section 98S;
as the case requires; and
(b) the hardship to the applicant (other than the Registrar) if leave is not granted; and
(c) the hardship to the other party or parties (other than the Registrar) if leave is granted.
(5) The court may have regard to any other relevant matter.
Orders granting leave to specify period
(6) An order granting leave under this section must specify the period in respect of which the Registrar may make a determination or the court may make an order.
(7) The period specified under subsection (6):
(a) must not include a day in a child support period if the day is more than 7 years earlier than the day on which the application under section 111 was made; and
(b) is not limited by the terms of that application.
No requirement to make determination or order
(8) The granting of leave under subsection (1) does not imply that:
(a) the Registrar is required to make a determination under section 98S; or
(b) the court is required to make an order under section 118.”
The relevant matters in determining such an application are those referred to in s.112(4) and (5).
“Hardship” in s.112(4) means “an appreciable detriment financial, personal or otherwise” (Cantrell & Jennings, [2009] FMCAfam 229 at [29]; Bauer & Becker, [2009] FMCAfam 480 at [84], (2009) FLC ¶
98-042).
In my view, an analogy may be drawn between an application for an order under s.112 and an application for an order under s.44(3), Family Law Act 1975 (extension of time to bring property settlement or spouse maintenance proceedings).
The legitimacy of drawing that analogy is confirmed in my view by reference to the report of the Ministerial Taskforce on Child Support, chaired by Mr P, which recommended the introduction of a limitation provision, as enacted in ss.98S(3B) and 118(2B) of the Assessment Act. As noted by Brown FM in Bauer & Becker, [2009] FMCAfam 480 at [22], (2009) FLC ¶98-042, in recommending a limitation period, the Ministerial Taskforce also recommended that a court be empowered to permit a change of assessment application after the limitation period had expired, reflected in ss.111 and 112 of the Assessment Act, as follows-
“(T)he Taskforce proposes that an application should be made to a court (in practice this would be the Federal Magistrates Court), to grant leave to apply out of time. This would be similar to the existing process under s.44 of the Family Law Act 1975 in relation to property and spousal maintenance applications.” (emphasis supplied)
Drawing on this analogy with s.44(3) applications, in my view in determining a s.112 application -
a)In the exercise of discretion to grant or refuse leave, the court must be satisfied that the applicant has a reasonable prima facie case to have the relevant child support assessments changed, this being a relevant matter under s.112(5);
b)In determining whether the applicant has demonstrated a reasonable prima facie case to have the assessments changed, “the court proceeds on the basis that the evidence of the applicant, unless it is inherently unbelievable or contradictory, should be accepted, and the court should therefore decide whether or not on that basis a prima facie case has been made out” (Jacenko & Jacenko, (1986) 11 Fam LR 341 at 343, (1986) FLC ¶91-776 at 75,644); and
c)While it would usually be expected that an applicant demonstrate a satisfactory explanation for any delay, “in appropriate cases the degree of hardship to be suffered by the applicant (if leave is refused) may be sufficient to outweigh an inadequate explanation of delay” (Ibid).
In summary, in deciding a s.112 application -
a)The court should be satisfied that the applicant has a prima facie case to have the relevant child support assessments changed;
b)In determining whether the applicant has a prima facie case, the applicant’s evidence on that issue is accepted without cross-examination unless it is inherently unbelievable or contradictory;
c)The court must consider whether there has been any delay by the applicant in bringing the application to change the relevant assessments, and if so, the responsibility and reasons for that delay;
d)The court must consider any hardship that would be caused to the applicant if leave was refused and any hardship that would be caused to the respondent if leave was granted;
e)The court must consider any other relevant fact or circumstance; and
f)In the exercise of its discretion to grant or refuse leave, the court may grant leave despite an inadequate explanation of delay, if other considerations warrant leave being granted nonetheless.
Discussion
Is there a prima facie case to have assessments changed?
To have the assessments changed, the father must show that -
a)One or more of the grounds of departure from an administrative assessment of child support under s.117(2) of the Assessment Act exists; and
b)It would be just and equitable having regard to the provisions of s.117(4) and (6) to (9) of the Assessment Act to change the assessment; and
c)It would be otherwise proper having regard to s.117(5) and (9) that it would be otherwise proper to change the assessment (s.98C, Assessment Act, Gyselman & Gyselman, (1991) 15 Fam LR 219, (1991) FLC ¶92-279).
It was fairly conceded on behalf of the mother that taking the father's case at its highest, there was a prima facie case to have the assessments changed as the father sought.
Based on the father's evidence that he ultimately gained no benefit from the superannuation distributions he received that inflated his taxable income for the two years in question, and that the payments were not made to him but to his mortgagees to reduce debts he could not otherwise pay from his income, property or financial resources, I am satisfied it is prima facie open to the father to argue that a ground for departure exists under s.117(2)(c)(1a), that it would be just and equitable to change the assessments, and that it would be otherwise proper to change the assessments.
I must emphasise for the father's benefit that I am not expressing any opinion of the merits or strength of any case he may ultimately present to change the assessments, if I grant leave. There are strong arguments open to the mother to resist any change in the assessments, but I must disregard those in assessing whether he has a prima facie case.
Responsibility and reasons for any delay
The delay to be considered is delay in making an application to change the assessments. The father could not apply to change the assessments until they existed. They did not exist until November 2012, by which time the periods for which the father seeks to change the amount of child support were already more than 18 months old. Hence he could not successfully apply to change the assessments without leave of the court. Nonetheless, he filed an application to change the assessments within 2 weeks of receiving them.
It was conceded on behalf of the mother, again fairly, that there had been no delay in the sense contemplated by s.112(4)(a) in this case. I agree this is so. However, it was submitted on behalf of the mother that the father's delay in lodging his tax returns, which gave rise to the amended assessments being issued so long after the periods to which they relate, was a relevant matter to be considered (s.112(5)). I will deal with this issue separately.
Hardship
It was submitted by the father that the hardship to him of refusing leave was the same as the hardship to the mother of granting leave. In effect, this means on the father's case these two considerations are neutral.
It was submitted on behalf of the mother that greater hardship would fall on the mother if leave were granted than would fall on the father if leave were refused.
The father is in employment as (omitted) for his employer, earning $1682 gross per week. He lives with his parents, and pays them board of $250 per week. His total weekly commitments, including $950 per month deducted from his income for child support arrears, are $1381.23, giving him a weekly surplus of about $300. His only assets are $1900 in the bank and household contents worth $3500. He has superannuation worth $50,000. He has no liabilities.
The mother recently obtained employment as a (omitted) and earns $664 per week. In 2012, the mother was working 28 hours per week as a (omitted), but was made redundant on 9 December 2012. She was unemployed until she commenced her current job on 10 April 2013.
The eldest of the parties’ children commenced a full time traineeship in February 2013 and earns $16.50 per hour. The mother did not disclose the hours this child works or the weekly income earned. The twins are studying at university and are in casual employment, one earning $40 per week, the income of the other was not disclosed. It seems none of the adult children contributes to the mother's household expenses.
The mother and the three children live with the children’s maternal grandmother, who wishes to sell her home. The mother is therefore actively seeking accommodation suitable for herself and the three children. There is no evidence as to the level of rent the mother anticipates she may have to pay.
The mother's total income, including child support arrears from the father, is $883 per week. Her total expenses are $755 per week. This does not include any board paid to her mother, but includes $15 per week against the item “rates, unit levies” in her financial statement. Including the $15 rates or unit levies, the mother has a surplus of about $143 per week with which to meet her accommodation costs.
The mother owns a car worth $19,000, in relation to which she owes a finance company $19,795. She has household contents worth $5000, and superannuation worth $43,503. She has no debts other than the car loan.
The father relied on a certificate dated 1 November 2012 from a psychiatrist that stated the father suffered from depression that has required treatment since 2007, he has been under regular review since then, over that period his depressive symptoms were exacerbated by stress that required “more intensive”, albeit unspecified, treatment, and that 2010 was a very stressful time for the father.
There is no evidence that the father’s ability to attend to his affairs was at any time affected by his depression. There is no evidence the father's ability to work and derive an income was at any time adversely affected by his depression. The level of the father's stress in 2010, and any impact on his depression then, seems to be irrelevant, as the relevant years of income are 2007/2008 and 2008/2009, and the father's obligation to lodge his tax returns arose in the period July to October 2008 and July to October 2009, respectively.
Nor does the psychiatrist’s certificate seem relevant in assessing hardship to the father. There is no indication whether the stress of not being able to pursue an application to change the father's child support assessments would be greater or less than the stress of having to pursue applications to change the assessments. In any event, there is no evidence by which the court could qualitatively assess the impact on the father’s depression of refusing him the leave he seeks.
On balance I am satisfied that there would be greater hardship to the mother in granting the father the leave he seeks than would be caused to the father by refusing leave.
The mother's financial position, I am satisfied, is worse than the father's, even allowing for the fact that the mother's financial disclosure was less than complete or consistent in relation to the income of the children, and even allowing for the fact that the children, albeit on meagre incomes, might reasonably be expected as adults to make some contribution to the household expenses.
The father's income, and inferentially earning capacity, is significantly greater than the mother’s. The mother and the children had to move to live with the maternal grandmother out of financial need in October 2006, and have had to live there ever since. The mother has had to rely on her mother for other financial assistance to meet her and the children’s expenses. While the father lives with his parents, I am not satisfied this is through financial necessity, as it is for the mother. Allowing for the board he pays and his weekly surplus, he has $550 per week available to meet his accommodation costs, even after the $950 per month payment of child support arrears is made. The mother's surplus for accommodation, after allowing for her receiving that $950 per month, is a meagre $143 per week.
Another matter adverse to the father on the issue of hardship is that the effect on the parties of leave being granted and the father succeeding in his change of assessment has not been established.
The parties agreed that the current level of arrears, excluding late payment penalties, is $17,118.61. It is unclear what arrears arose on the issuing of the amended assessments in November 2012 for the periods the father seeks to have changed. They may have been in the sum of $16,354.41 or $16,927.22, although this is somewhat uncertain.
The assessments replaced by the relevant assessments issued in November 2012 are not in evidence, and it is not possible to see whether, if the father's adjusted taxable income is reduced by the amount of the gross superannuation distributions as he would seek, his resultant adjusted taxable income would be more than, less than, or the same as, the figure used for his adjusted taxable income in the assessments that were amended in November 2012.
If the result of a successful application by the father to change the assessments in the way he seeks was to create a debt the mother had to repay the father, it would be a significant matter to consider. But even if that were not the result, where it is not possible to determine the level of any reduction in the amount of child support the father would have to pay for the relevant child support periods if he succeeded in having the assessments changed, the hardship to him of refusing to grant leave is uncertain.
The father bears the onus of proving why the order he seeks should be granted. In those circumstances, these doubts and uncertainties about the financial impact on the parties of what he seeks leave to do must be adverse to his case.
Any other relevant matter
It was submitted on behalf of the mother that the father's late filing of his tax returns was a relevant consideration, citing Bauer & Becker, [2009] FMCAfam 480, (2009) FLC ¶98-042 and Child Support Registrar & Rawlings & Another, [2013] FCCA 370.
Those cases involved applications for leave under s.112 to challenge child support assessments made years earlier. Unlike in this case, in those cases there had been very significant delay in bringing an application to change the assessments.
In CSR & Rawlings the applicant for leave under s.112 had very belatedly filed tax returns for periods relevant to those assessments. There was a similar scenario in Hacherl & Berrios, [2010] FMCAfam 668.
In addressing the issue of delay in CSR & Rawlings, Judge Scarlett said (at [71] – [75])-
“71. Unwarrantable delay justifies the withholding of relief. The exercise of the Courts’ discretion to deny relief for delay has been considered in a number of decisions of the High Court, including The King v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd, (1949) 78 CLR 389, and Re Commonwealth of Australia; Ex parte Marks, (2000) 177 ALR 491.
72. The predicament in which the First Respondent finds himself is entirely of his own making. Whilst the Court can accept that the sudden death of his father in 2008 and the serious illness leading to surgery of his de facto partner in 2009 placed a considerable strain on the First Respondent, these unfortunate events and their aftermath are far from a complete explanation for the First Respondent’s delay in lodging his income tax returns for a period of four years from 2008 to 2012.
73. It should by now be clear to people with an obligation to pay child support under an administrative assessment that it is essential that they lodge their income tax returns within the time required. That is an obligation that applies to taxpayers generally. In cases of hardship, a taxpayer may be granted an extension within which to lodge a return. However, repeated and continuing failure to lodge income tax returns will lead to adverse consequences, for which parties can expect to receive little sympathy from the Court.
74. In Hacherl & Berrios, [2010] FMCAfam 668, Roberts FM, as his Honour then was, considered an application for leave under s.112 where an applicant had previously failed to file income tax assessments for a period of seven years. His Honour refused leave and dismissed the application, holding at [37]:
‘The delay in relation to lodging those returns must lie solely at the feet of the father.’
75. His Honour went on to say at [41]:
‘In this particular matter, the father does not come to court with clean hands in relation to the lodgement of his tax returns. He should not therefore be allowed to rely upon his own dilatory behaviour to obtain relief in relation to a period when the Child Support Agency was hampered by his failure to lodge tax returns for a number of years.’”
I am satisfied this case may be distinguished from the cases referred to above on the basis that they involved applications for leave to challenge assessments that had been open to challenge for many years, or, as in Hacherl & Berrios, the applicant delayed in seeking to change the assessments for a significant period after amended assessments consequent on him belatedly filing his tax returns had issued.
Nonetheless, I am satisfied the father's delay in filing his tax returns is a relevant matter under s.112(5).
Had the father lodged his tax returns when he was obliged to, the assessments he seeks to challenge would have issued proximate to the child support periods to which they relate, and he could have then pursued his remedies to challenge them, as he now seeks to do, unburdened by the limitation period for retrospective changes of assessments that now restricts his ability to challenge the assessments. It might also be observed that had he lodged his tax returns when he was obliged to, the objects of the Assessment Act set out in s.4 would have been better served, in that a proper level of support payable for the children by the father could then have been determined and the children's material needs better met at the time those needs had to be met.
I am satisfied this is a relevant consideration adverse to the father, although not in the way it was in Bauer & Becker, Hacherl & Berrios, and Child Support Registrar & Rawlings.
I am not satisfied there are any other relevant matters.
Decision
The father seeks leave for the Registrar to change child support assessments covering the period 1 February 2009 to 30 November 2010, being more than 18 months ago.
I am satisfied he has a reasonably arguable, that is a prima facie, case to have the assessments changed. He has not delayed in seeking to have the assessments changed. The mother would be caused significant hardship if leave were granted, more that the hardship the father would suffer if leave were refused, in circumstances where the father has failed to show what the financial consequences would be of a successful application by him to change the assessments, if leave were granted. The assessments he seeks to change were issued long after the periods they cover because the father failed to lodge his tax returns on time, and there is no explanation for his failure to do so, the psychiatrist’s certificate not suggesting his depression prevented him from attending to his affairs. It is the father's failure to lodge his tax returns on time that has resulted in the issue of child support assessments for periods that the father could not have challenged without the leave he now seeks.
No one matter can automatically result in the grant or refusal of leave. The court’s discretion is unfettered, subject to it properly considering and giving appropriate weight to all relevant matters. The late filing of tax returns cannot result in the automatic refusal of leave, in the same way as the absence of a satisfactory explanation of delay cannot automatically result in the refusal of leave.
Bearing in mind that the father bears the onus of proving that it is appropriate to grant the leave he seeks, I am not satisfied the father has discharged that onus in this case. Despite the demonstration of a prima facie case and the absence of any delay in seeking to change the assessments, the uncertainty about the effect of the change to the assessments he seeks, and the uncertainty therefore of its relative impact on each of the parties, together with the greater hardship the mother would suffer if leave were granted and the fact the father to a large extent is the author of his own difficulties, having filed his tax returns so late and having failed to provide any satisfactory explanation for that failure, leaves me unsatisfied that in the exercise of my discretion I should grant the leave the father seeks.
I will therefore dismiss his application.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Judge Halligan
Date: 5 July 2013
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