Samuels and Simpson

[2007] FamCA 1482

FAMILY COURT OF AUSTRALIA

SAMUELS & SIMPSON [2007] FamCA 1482

FAMILY LAW - CHILD SUPPORT – DEPARTURE ORDER – LEAVE TO APPEAL – Federal Magistrate’s dismissal of application for a departure order – Payer operating farm – Deemed to be earning average weekly earnings (c. $53,000 p.a.) – Claimant asserted water rights associated with farm somehow available to be sold or borrowed against – Evidence before the Federal Magistrate did show the farm had increased in value since its acquisition but there was no evidence that the father could drawn down on this equity to meet increased child support payments – It was open to the Federal Magistrate to find that the father did not have a higher earning capacity and that the father would lose his farm if required to pay the amount of child support the mother sought – The Federal Magistrate did not make any errors that justify the granting of leave to appeal the orders made

Child Support (Assessment) Act 1989 (Cth)

DJM v JLM (1998) FLC 92-816; (1998) 23 Fam LR 396
Gilmour and Gilmour (1995) FLC 92-591; (1994) 18 Fam LR 646

APPLICANT: MS SAMUELS

RESPONDENT: MR SIMPSON

APPEAL NUMBER: SA 49 of 2007

FILE NUMBER: MLM 7847 of 2003

DATE DELIVERED: 11 December 2007

PLACE DELIVERED: Melbourne

JUDGMENT OF: Kay J

HEARING DATE: 11 December 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Tulloch

SOLICITOR FOR THE APPLICANT: J A Middlemis

COUNSEL FOR THE RESPONDENT: Ms Buchanan

SOLICITOR FOR THE RESPONDENT: Mal Ryan & Glen

ORDERS

1. The application for leave to appeal against the orders made by Federal Magistrate Burchardt on 21 May 2007 be dismissed.

IT IS NOTED that this judgment for all publication and reporting purposes will be referred to as SAMUELS & SIMPSON.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

APPEAL NUMBER: SA 49 of 2007
FILE NUMBER: MLM 7847 of 2003

MS SAMUELS

Applicant

And

MR SIMPSON

Respondent

REASONS FOR JUDGMENT

1. Before the Court is an application for leave to appeal against orders made by Burchardt FM on 21 May 2007 dismissing an application by the applicant mother for a departure order.  The orders made also dismissed a cross-application by the respondent father and required the respondent to pay some of the applicant’s costs but there is no cross-application seeking to cross-appeal.

2. The parties were formerly husband and wife.  They are the parents of five children:

   ·NI, born in April 1989;

   ·G, born in February 1990;

   ·M, born in May 1995;

   ·C, born in June 1997; and

   ·NA, born in January 2000. 

   All five children live with their mother and, sadly, they do not appear to spend any time with their father.

3. The parties reached a property settlement which was put into effect in December 2004.  The parties had been trading together as farmers for several years.  They wound up their farming enterprise, sold off their farm and the plant and equipment and the like, and received just over $1,600,000.

4. Under the terms of the property settlement the mother received about $1,070,000 and the father $530,000.  There were some tax obligations that arose as a result of the premature realisation of the property and the mother had to pay at least $100,000 towards her share of the tax liabilities.

5. After the property settlement the father set about re-establishing himself and he bought a new farm, borrowing heavily from the bank and borrowing about $200,000 from his mother.  He has been running the farm since early 2005.

6. The mother applied for an administrative assessment of child support around the time of the property settlement.  There was an initial assessment that came in at a minimum amount of $260 per annum that issued on 24 November 2004.  It was then amended as a result of changes of the taxable income that arose as a result of the selling off of the farm.  There were a series of assessments.  One assessment showed a child support liability of $39,091 for the period from 1 January 2005 to 31 March 2006.  It was subsequently replaced by an amended assessment reducing the annual rate down to $9,773.

7. There were then a series of other assessments which both parties were unhappy with, particularly the mother, and she applied for a departure order to be made internally under the processes of the Child Support (Assessment) Act 1989 (Cth). A Senior Case Officer dealt with that assessment and ultimately the Registrar made an administrative departure order under s 98S the effect of which was to provide the father to be deemed to be earning average weekly earnings for the period from 17 November 2005 until 31 December 2007. The administrative officer set the father’s income for that period at $53,206, which created a liability of about $14,000 per annum. As there were five children to be supported it can be seen that the support for any one child is modest indeed, it is less than $60 per week per child.

8. Both parties were aggrieved with that decision and sought to have it internally reviewed under Part 6A of the Child Support (Assessment) Act 1989 (Cth). The internal review indicated that the parties’ financial position was too complicated to justify the internal review officer departing from the outcome suggested by the Senior Case Officer and suggested that if either party was still aggrieved with the outcome then the courts were the appropriate venue for the matter to be dealt with.

9. That led to competing applications for departure from the new figures, the mother asking that the departure be increased to what is known as the cap amount, the maximum possible payment under the administrative formula based on the limits of income to which the formula applies.  The mother asked that that be the position from November 2004 through to June 2008, a longer period than was covered by the challenged assessment.  The father cross-applied, asking that the figure be reduced.  He was prepared to concede an income of $35,000 per annum for the purposes of child support although his actual taxable income was significantly less than that.

THE HEARING

1. They were the competing applications that came on before Burchardt FM.  The matter was heard over some months, adjournments being brought about, it would appear, through lack of cooperation in terms of procedural steps and discovery and the like.  There was a hearing on 11 October 2006, another on 15 November 2006 and a final day on 20 April 2007.

2. The parties each gave evidence and were cross-examined.  There was also evidence from the agribusiness manager of the father’s bank.  He was a friend of the father’s but he was also a person who was in charge, it would appear, of the father’s portfolio at the bank.

3. The mother endeavoured to run an each-way case at trial, saying that it was irresponsible of the father to have entered into the farming venture and that he would have been far better off taking on employment as a farm manager for somebody else and investing the capital that he had in interest-bearing deposits and the like and thus generating a larger income than average weekly earnings to help provide for child support.  In the alternative, if it was reasonable of him to have gone into his farming business, then the farm was likely to be more lucrative than the father was admitting to, or ought to have been more lucrative than the father was admitting to.

4. Finally, there was no doubt a well-intentioned and indeed justified cri de coeur that the cost of supporting these children was such that it would be reasonable for the father to be making a more significant contribution towards the support than he was prepared to make. 

5. The Federal Magistrate heard all of the evidence and determined that if any part of the case was strong it was the father’s claim for a decrease rather than the mother’s claim for an increase.  But having regard to the fact that the father had in the two years or so before the hearing been able to retire some $65,000 worth of debt, being part of the moneys he had borrowed from his mother, the Federal Magistrate concluded that the father could continue to meet his child support obligations as set by the Senior Case Officer, although the apparent source of how he would do that based on the accounting figures that were before the Court was not immediately obvious.

6. So the Federal Magistrate dismissed the claim on the basis that he was not satisfied that a ground for departure had been established under s 117(2) of the Child Support (Assessment) Act 1989 (Cth) by the mother and if one had been established by the father then even so, having regard to the capital position of the parties and the capacity of the father to retire debt, then there was a capacity to continue to meet payment.

7. As to the suggestion that the father might have gone down another path and not acquired the farm in the first place and gone and worked for somebody else in a managerial position, the Federal Magistrate took the view that the course of conduct by the father was a reasonable one in the circumstances.  He had always been a farmer and on the breakdown of his marriage it was reasonable for him to try to re-establish himself on a farm which he owned.

8. The Federal Magistrate made reference to cases discussed in DJM v JLM (1998) FLC 92-816; (1998) 23 Fam LR 396 on the issue of under-employment and lifestyle choices of payers and concluded that it was reasonable for the father to have embarked upon the course that he had. He also indicated, in paragraph 94 of his judgment, that even if the father were to seek employment there was no compelling evidence that he would necessarily easily be able to obtain work as a farm manager at the sort of levels indicated by the mother’s researches. The Federal Magistrate expressed concern about the effects of the drought on the farming industry in particular and the lack of evidence as to what work was now available.

OUTCOME

1. As I have said, the proceeding before me is an application for leave to appeal. Section 102A of the Child Support (Assessment) Act1989 (Cth) provides that an appeal from a single judge of the Court exercising jurisdiction under that Act lies only with the leave of the Full Court.

2. In Gilmour and Gilmour (1995) FLC 92-591; (1994) 18 Fam LR 646 the Full Court endorsed suggestions made in earlier reported cases that leave applications under this legislation ought to be approached less restrictively than applications from interlocutory orders. The Court said that if a party’s substantive rights had been significantly affected by an error at first instance, it would be appropriate to grant leave to appeal. There is thus no appeal as of right in child support matters. However, the test of the need to show an error of principle or a substantial hardship as a result of the decision has been ameliorated in these cases. The test has been expressed to be something less than the test that one applies in other areas where leave is required such as for an interlocutory order. Nonetheless, it is important to note that there is no right of appeal without first meeting the leave requirement. Basically, I think that that preliminary step requires there to be some clear indication of error on behalf of the tribunal against whom the appeal is sought to be advanced.

3. Having heard the earnest endeavours of counsel on behalf of the wife this morning I am not so persuaded there are bases upon which the Federal Magistrate’s judgment is capable of being appropriately attacked. 

4. The grounds of appeal, the written summary of argument and the oral argument advanced all vary in their emphasis.

5. It was suggested in the written argument and to some degree in the oral argument that the Federal Magistrate should have paid attention to a portion of the evidence that indicated that the father had some ability to deal with his water allocations and he perhaps had available, as a result, a greater asset than might otherwise be thought to have had.  However, the evidence that was before the Federal Magistrate did not support the basis upon which the argument was advanced before me.

6. The evidence as to the father’s water rights came a little from the father and a little bit more from his bank manager.  The father indicated that he had sold some water rights in the course of the hearing for $27,000.  The exact nature of the water rights that he sold was not explored nor his capacity to sell any further water rights nor the effect that the sale of water rights might have on the viability of the farm.  At its highest the evidence came from the bank manager in a series of passages that begin at page 59 of the transcript. 

7. Mr Devries, who was appearing as counsel for the mother before the Federal Magistrate, asked the bank manager about the farm and its value:

   Leaving aside water rights for a moment, how much did you value the land at? --- In our valuation system the land and the water go together.

   …

   What was the combined value of the land and the water rights? --- I think it was $1,240,000 but that is off memory.

8. Then there was some discussion about some notes where the bank put their own value on it, being $1.57 million rather than the husband’s $1.25 million:

   MR DEVRIES: If I could have that document back for a moment.  Before you give it back, have you attributed anything towards water rights? --- That’s included in that $1,570,000.

   The transaction was done separately, wasn’t it?  There was a separate transaction for the purchase of water rights as distinct from the land?    --- No, it was one contract.

   One contract, was it? --- One walk-in walk-out contract for the lot.

   Water rights are still being actively traded in your area, aren’t they? --- That is correct, although there is a …

   You’ve answered the question, thank you.

   HIS HONOUR: No, he hadn’t finished.  He said, “That’s correct, although …” then he stopped? --- There is a cap on the ability to trade the water outside of the area at the moment that’s restricting the value.

   MR DEVRIES: But the permanent water rights are still quite valuable, aren’t they? --- Correct.

   What do you say that the water rights are going for in that area? --- They could go for anywhere at the moment between $2,200 a megalitre and $2,800 a megalitre, although at the date of this document here they probably would have been closer to 13 or $1,400.

   So they’ve gone up in value? --- Correct.

   Almost by a hundred per cent? --- That’s right.

   How many megalitres has he got there? --- 460 megs water right on the Goulburn system, 842 megs of bore water and there’s a drainage diversion licence of 463 megs.

   When you gave us a figure for the water rights, were you talking about the Goulburn system? --- Only the Goulburn water. 

   On current figures that just about puts the value of the water rights at about the same value as the purchase price of the land, doesn’t it? --- That’s correct.

   HIS HONOUR: Can I just ask, did I understand you to say that the Prime Minister’s announcements in very recent times about the future of the water supply in the area, would that impact on to the Goulburn 460 megalitres or on to all of those three? --- All of the above.

   MR DEVRIES: But we’ve been talking about permanent water rights, haven’t we?

   HIS HONOUR: I understand that’s right, but I mean, I’m just going on what I’ve read in the press and what the witness said.  What I’d understood was that the announcement by the Prime Minister is suggesting that the water rights that may have obtained in the past are simply going to cease to obtain if the Murray doesn’t get water fairly promptly? --- Only allocation of the water will cease.  The water right will still be retained.

   MR DEVRIES: It’s only the water for this year at this stage.

   HIS HONOUR: Yes, I understand.

9. So what that evidence disclosed is that the value of the water rights that attached to the land had risen dramatically since the land had been acquired.  The evidence did not explore the tradeability of the water rights, whether the sale of the water rights would have affected the viability of the farm and particularly, whether the existence of the increased value as a result of the water rights would have increased the father’s borrowing capacity based upon additional security available to the lending authority.

10. The bank manager had indicated that he thought the farm was in a parlous position and that withdrawing any moneys out to meet the mother’s claims for child support, which at their highest were seen at $45,000 per annum as compared to $14,000 per annum that was being paid, would lead to the loss of the farm.  That was the position put by the only accounting expert who gave evidence.  Whilst it was sceptically treated by counsel there was no conflicting evidence and it was, in my view, clearly open to the Federal Magistrate to make findings accepting that evidence.

11. Once that evidence was accepted and there being no serious challenge to the other evidence of the father’s financial position which was represented by exhibit A14, namely that the farm was being run at a trading loss, it is difficult then to see what error the Federal Magistrate fell into in dismissing the applicant’s claim for a departure order that had itself been based on an artificially high income amount. You can only get an entitlement to a departure order if you meet the requirements of s 117(2) of the Child Support (Assessment) Act 1989 (Cth), namely that, in this case, the administrative assessment of child support would result in an unjust and inequitable determination in the level of financial support to be provided by the liable parent for the child because of the income, property or financial resources of either parent or because of the earning capacity of either parent.

12. The earning capacity of the father was said to be artificially created by the review officer but accepted by the Federal Magistrate for the purposes of the departure application.  He was not satisfied that he had any higher earning capacity.  That finding was clearly open to him.  Although there had been evidence of a significant increase in the capital position of the father’s farm as a result of the rise in the value of water rights, there was no evidence to suggest that that capital could be drawn upon in any meaningful way to assist in providing of the child support in the short period that this assessment related to.

13. It should be noted that this assessment expires as at the end of this month and whether next year the position is different, whether the mother will be able to demonstrate the father has now got income, property and financial resources which will enable him to provide something towards the real needs of the support of these five children is a matter to concern both the parties and those judicial or administrative officers who have to look at this file in the future. 

14. But there is no finding of Federal Magistrate Burchardt that in my view is capable of giving leave to a sustainable ground of appeal.  There are some errors by the Federal Magistrate towards the end of his judgment when he is dealing with the cross-application and his concern with matters to be given consideration under ss 117(4) and 117(5), but those errors in my view, do not assist the applicant in her application for leave to appeal before me today.

15. Accordingly, the application for leave to appeal against the orders made by Federal Magistrate Burchardt will be dismissed.

I certify that the preceding thirty two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kay

Associate:

Date: 13 December 2007