W and Z
[2002] FMCAfam 335
•10 October 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| W & Z | [2002] FMCAfam 335 |
| CHILD SUPPORT – Appeal from decision of Registrar – proof of costs of contact – assessment based on earning capacity – procedural fairness. Child Support (Assessment) Act 1989, ss.98, 98X. 110, 111 DJM and JLM [1998] FamCA 97; 23 Fam LR 396; FLC 92-816 |
| Appellant: | W J W |
| Respondent: | L M Z |
| File No: | PAM 1273 of 2002 |
| Delivered on: | 10 October 2002 |
| Delivered at: | Parramatta |
| Hearing Date: | 5 September 2002 |
| Judgment of: | Scarlett FM |
REPRESENTATION
| Solicitors for the Appellant: | In person |
| Solicitors for the Respondent: | In person |
ORDERS
The decision of the Registrar that the annual rate of child support payable by the Appellant for the period 1 July 1999 to 30 September 1999 be decreased to $1,560.00 is confirmed.
The decision of the Registrar that the annual rate of child support payable by the Appellant for the period 1 October 1999 to
31 December 2000 be increased to $1,820.00 is set aside.The decision of the Registrar that the annual rate of child support payable by the Appellant for the period 1 January 2001 to 31 March 2002 be increased to $2,009.00 is set aside.
The decision of the Registrar that the child support income amount of the Appellant for the period 1 April 2002 to 30 June 2003 be set at $25,000.00 is set aside.
The annual rate of child support payable by the Appellant for the period 1 October 1999 to 31 December 2000 is varied to $1,058.00.
The collection of arrears of child support for the periods 1 July 1999 to 30 September 1999 is stayed for one month from the date of these Orders.
The Registrar is to advise the Appellant in writing of the total child support debt owing as at 31 December 2000.
The collection of arrears of child support for the period 1 October 1999 to 31 December 2000 is stayed until the expiration of a period of one month from the date of forwarding to the Appellant of the advice of the total child support debt referred to in Order 7 hereof.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM1273 of 2002
| W J W |
Appellant
And
| L M Z |
Respondent
REASONS FOR JUDGMENT
Application
This is an appeal against the decisions of the Child Support Registrar to increase the annual rate of child support payable by the Appellant for the financial years 1999-2000, 2000-2001, and 2001-2002 (or parts of those years), and to set the Appellant’s child support income amount for the period 1 April 2002 to 30 June 2003 at $25,000.00.
The decisions the subject of the appeal were made by a Senior Case Officer on 19th October 2001. There were six decisions made on that day, but only four of those decisions are the subject of this appeal. The decisions of the Senior Case Officer to decrease the annual rate of child support payable by the Appellant for the periods:
a)4 October 1997 to 30 June 1998; and
b)1 July 1998 to 30 June 1999,
are not covered by the Notice of Appeal. The Appellant states in his affidavit of 8 July 2002 that he accepts the Senior Case Officer’s decision in respect of those periods.
There are four decisions that form the subject matter of this appeal. They are as follows:
a)that the annual rate of child support payable by the Appellant for the period 1 July 1999 to 30 September 1999 is decreased to $1,560.00;
b)that the annual rate of child support payable by the Appellant for the period 1 October 1999 to 31 December 2000 is increased to $1,820.00;
c)that the annual rate of child support payable by the Appellant for the period 1 January 2001 to 31 March 2002 is increased to $2,009.00; and
d)that the child support income amount of the Appellant for the period 1 April 2002 to 30 June 2003 is set at $25,000.00.
The Appellant seeks orders to the following effect:
a)that the assessments for the tax years 1999-2000, 2000-2001 and 2001to date be based on his actual income;
b)that the cost of collection and return of the parties’ child for contact and return “be appropriately assessed”;
c)that all late fees and penalties be dismissed; and
d)that the Appellant pay “a prescribed amount to address the remaining debt”.
Background
The Appellant and the Respondent are the parents of one child, R M H-W, who was born on 19th June 1996. The child resides with the Respondent, and the Appellant exercises contact on a regular basis. The Respondent has been employed in a café. The Respondent has since married and is now expecting a child.
The Appellant is self-employed as an electrician. He was previously employed but was retrenched in either October or November 1996. He then received unemployment benefit. He was assessed for child support after the birth of the child, based on his previous income. He commenced work in his own business in, he says, about May 1998 and has been self-employed since then.
At the heart of the Appellant’s case is his contention that his original assessment of child support was based on an artificially high financial year, when he was working 12 hour shifts before his retrenchment. As a result, he has had to deal with arrears of child support. In May, 2001, the Appellant deposed that the Child Support Agency issued him with an enforcement summons in connection with the arrears.
The Appellant lodged an application for review of his child support on 20th August 2001. The parties had separate telephone conferences with the Senior Case Officer, and a decision was handed down on 19th October 2001. As has been shown, the Appellant was partly successful, and the rate of child support payable between 4th October 1997 to 30th June 1999 was decreased. The Senior Case Officer also decided, however, that apart from the period from 1 July to 30 September 1999, the Appellant’s rate of child support should be increased, and that the Appellant’s child support income amount for the period commencing on 1st April 2002 should be set at $25,000.00 per annum.
The Appellant made a formal objection to the Notice of Decision on 14th December 2001. The objection was considered by the Regional Child Support Registrar and disallowed. The Notice of Decision on Objection is undated, other than showing that the objection was received on 2nd January 2002, but the Appellant deposes in an affidavit dated 8th July 2002[i] that he received the Notice in March of this year. The Notice of Decision on Objection states:
“Mr W’s objection is disallowed. This means that Mr W’s ongoing payment is $2009 per annum. In addition, he currently has a child support debt of $7476.51 to pay.”
The Appellant then lodged his appeal on 11th April 2002. He sought to file the documents in the Family Court, but, due to that Court’s 2001 Practice Direction, the appeal was filed in the Federal Magistrates Court.
The Respondent filed an affidavit in reply on the day of the hearing, opposing the orders sought by the Appellant and expressing the opinion that the Appellant has structured his business as a means of reducing his taxable income and thereby reduce his child support liability. She seeks that the appeal be dismissed.
Issues
The issues before the court are whether the Senior Case Officer was wrong in his decisions, failed to consider relevant facts and failed to give proper weight to the information provided by the Appellant in respect of the application for review of the relevant periods. In addition, the Appellant claims that his assertion that his costs of exercising contact exceed 5% of his child support income amount have not been properly considered.
Evidence and submissions
Both the Appellant and the Respondent gave oral evidence. The evidence given concentrated mainly on the Appellant’s claim that the cost of his contact with R exceeds more than 5%. The Appellant lives at Lidcombe and the Respondent lives in the lower Blue Mountains. The changeover point for contact is at Woodcroft, which the Appellant says is about 35 kilometres from his home. He says that he uses the motorway and has to pay a toll each way. He also claims that telephone calls for the purpose of exercising contact cost on average $1.00 per week, a total of $52.00 per year. He said that he could produce his telephone records.
The Respondent challenged the distance of 35 kilometre from Lidcombe to Woodcroft, claiming it to closer to 15 kilometres. She also denied that the Appellant telephoned every week and asserted that the claim of $52.00 per year for telephone calls should not be accepted.
The Respondent submitted that that the appeal should not be allowed. Child support should be paid from the date of birth of the child, with the exception of one time when a tax refund cheque was intercepted by the Child Support Agency, presumably pursuant to s.72A of the Child Support (Registration and Collection) Act 1988. She went on to say that the provision for child support to be reduced because of the high costs of contact was intended to apply to parents who lived a fair distance from their children, not for people who lived in and around the Sydney Metropolitan Area.
The Appellant submitted that he had started with a child support liability and that the ongoing debt has been a burden on him. He rejected the allegation that he did not wish to pay child support and said that he wished to be involved with his daughter. He wanted to be treated fairly.
The review by the Senior Case Officer
The review was conducted by the Senior Case Officer after a telephone conference with each party. The calls took place separately. The Senior Case Officer described the issues in this way:
“Mr W applied for a decrease in the annual rate of child support to an unspecified amount from 1996 to 2001. Mrs Z asked that the amount of the current child support be increased to $3,600.00 per annum. However, Mrs Z did not specify any reasons in her response form upon which such an increase may be based.”[ii]
The Notice of Decision refers to two reasons given by the Appellant for a review. The first is his claim that it costs him more than 5% of his child support income amount to have contact with the child.
The Senior Case Officer referred to the evidence given by the Appellant, which was basically the same as was given in the appeal proceedings – the cost of using a motor car, the cost of mobile telephone calls, and the cost of motorway tolls. He noted that the Respondent challenged the distance claimed for the travel, pointed out that the Appellant could use an alternative route without incurring motorway tolls, and denied that the Appellant rang every week to confirm the contact arrangements.
The Senior Case Officer found that this reason had not been established.
The other reason for review given by the Appellant was that the relevant assessments were not fair because of his income, earning capacity, property and financial resources. The Senior Case Officer examined the Appellant’s tax returns for the 1996/1997, 1997/1998, 1998/1999 and 1999/2000 financial years, and concluded that the Appellant’s income “was considerably lower than that upon which he was assessed as liable to provide support but only for the period from 4 October 1997 to 30 September 1999.”[iii]
Accordingly, the Senior Case Officer found that this reason had been established.
The Senior Case Officer proceeded to examine the Respondent’s circumstances and found that she required as much support as the Appellant could provide to assist her to meet the needs of the child. He then made the decision to increase the Appellant’s child support liability by using the 1983 Lovering Tables. The reasons he gave were:
“Normally I would not make a determination to increase the child support liability of Mr W without a formal cross application by Mrs Z. However, under changes to the law effective from 1 July 1999, a decision can now be made to increase a child support assessment when the applicant has applied for a reduction (or vice versa).” [iv]
The Senior Case Officer noted that the Appellant’s current assessment of child support was based on his taxable income from the 1999/2000 year, which only required him to pay the minimum rate of child support. As it would be difficult to assess the Appellant’s capacity to support the child during the current period, he proposed to adjust the child support liability by reference to the academic studies into the cost of raising children. As he found he could not be sure that the Appellant had the ability to pay child support based on the 1989 Lee Costs of Children Expenditure Survey, he adjusted the Appellant’s child support liability by reference to the 1983 Lovering Tables.
The Senior Case Officer then decided that it was just and equitable and otherwise proper to apportion the estimated weekly costs of maintaining the child as to 65% to the Appellant and 35% to the Respondent. This came to $2009.00 per annum. He advised that this was the rate payable on an income of around $22, 400.00 which he said he believed to be “a conservative estimate of Mr W’s earning capacity during the current period.”[v]
As a result, the Senior Case Officer increased the annual rate of child support payable by the Appellant to $2009.00 for the period 1 January 2001 to 31 March 2002. He then went on to increase the Appellant’s child support income for the period 1 April 2002 to 30 June 2003 to $25,000.00. He gave as his reasons for this decision:
“I do not consider that it is beyond the realms of possibility that an electrician would be able to earn an income of this magnitude.”[vi]
The Notice of Decision on Objection
The Regional Child Support Registrar considered the Appellant’s objection. The Registrar found no error in the reasons and conclusions of the Senior Case Officer’s determination of the Appellant’s claim for a change to the assessment by reason of the costs incurred in exercising contact. The Registrar gave the following reason:
“The available evidence was a claim made by Mr W, which was disputed by Ms Z. Without documentary evidence, this claim was not proved”.
The Registrar noted that the onus was on the applicant (now the Appellant) to supply proof to substantiate the claim.
The Registrar also found that there was no error by the Senior Case Officer in making a decision based on the Appellant’s earning capacity rather than his actual income. The Registrar referred to “previous court judgments” which supported an assessment based on an on-going earning capacity.
As the Registrar found no error by the Senior Case Officer in making the determinations, the objection was disallowed.
Principles to be applied
The Court has jurisdiction to hear an appeal against an assessment said to be incorrect by virtue of the provisions of s.110 of the Child Support (Assessment) Act. An appeal to the Court only applies if the Appellant has already objected under s.98X of the Act and the Registrar has either disallowed the objection or only partly allowed it.
The Court hearing the appeal is given wide powers by s.111. The Court may make such orders as it considers appropriate, including setting aside, confirming or varying the assessment.
Conclusions
The Court has jurisdiction to hear the appeal, as the Appellant has objected under the provisions of s.98X and the objection has been disallowed.
The Senior Case Officer considered the Appellant’s claim that the costs of exercising contact exceeded 5% of the Appellant’s child support income and dismissed it on the basis of a lack of proof. The Appellant did not lead any evidence to support his contentions. He claimed in his affidavit affirmed on 8th July 2002 that his costs of contact are $780.00 per annum. In order for his claim to succeed in respect of the period from 1 July to 30 September 1999, he would have had to show that these costs amounted to $1401.10.
The Appellant provided no proof, apart from a document from the NRMA setting a rate of costs of running a motor vehicle per kilometre. He was aware that the Respondent disputed the following facts:
a)the cost of his telephone calls;
b)the number of his telephone calls;
c)the actual number of kilometres travelled;
d)the actual cost to him in fuel and other expenses;
e)the necessity for him to pay motorway toll whilst travelling in each direction; and
f)the actual amounts of toll paid.
The Appellant produced no documentary evidence to support those contentions.
The Senior Case Officer did not allow the Appellant’s claim for costs of contact for the same reason, that the Appellant had not produced any corroborative proof. I am satisfied that the Senior Case Officer was correct.
The Senior Case Officer found that the Appellant’s income from
4th October 1997 was considerably lower than that upon which he was assessed for the period from 4 October 1997 to 30 September 1999. He decreased the rate of child support for the period 1 July 1998 to
30 June 1999 from $4,483.00 to $1,300.00 (which was not the subject of this appeal) and for the period 1 July to 30 September 1999 from $3,205.00 to $1,560.00.
I am satisfied that these substantial reductions, which had the effect of reducing some of the arrears, indicate that the appellant’s contentions were considered and given adequate weight. I consider that there should be no change to the rate of child support for that period.
On the other hand, I am not satisfied that the decision to increase the annual rate of child support payable by the Appellant for the period
1 October 1999 to 31 December 2000 should be allowed to stand. The Appellant’s annual rate of child support for that period had originally been set at $1,058.00, based on a taxable income of $16,099.00. In his reasons, the Senior Case Officer referred to the fact that the Registrar may make a determination “to increase a child support assessment when the applicant has applied for a reduction (or vice versa).” The Senior Case Officer took the decision to increase the annual rate of child support from $1,058.00 to $1,820.00, based on the Appellant’s earning capacity. Unfortunately, he gives no details whatsoever about how he arrived at that particular figure. It appears that he relied on the Lovering Tables for adjusting the Appellant’s child support liability for the current period[vii], but the period for which the increased rate
was set was a period that had already expired – 1 October 1999 to
31 December 2000.
There are no figures provided to show how that annual rate of child support of $1,820.00 was calculated. There is certainly authority for child support to be calculated on the basis of earning capacity rather than actual income (DJM and JLM [1998] FamCA 97; 23 Fam LR 396; FLC 92-816), but there should have been some indication of what this earning capacity was determined to be and the method by which it was determined. The decision is silent as to how this amount was calculated, and that of itself is reason for varying the determination.
The Senior Case Officer decided to increase the Appellant’s child support income amount for the period 1 April 2002 to 30 June 2003 to $25,000.00. The reason given for this was that the Senior Case Officer considered that “It is not beyond the realms of possibility that an electrician would be able to earn an income of this nature”.[viii] With respect, this is simply not sufficient. The Full Court of the Family Court made it clear in DJM and JLM that the question of assessing earning capacity must be seen and must be measured on a case by case basis. It is not sufficient for a decision-maker to make an assessment of earning capacity on the basis that it is “not beyond the realms of possibility”.
There is, however, another reason why the decisions to increase the rate of child support for the period 1 October 1999 to 31 December 2000, to increase the rate of child support for the period 1 January 2001 to 31 March 2002, and to set the child support income amount for the period 1 April 2002 to 30 June 2003 at $25,000.00 should be set aside. The Registrar is given power by s.98S to make a determination in a way that is not bound by what either of the parties actually seeks:
“98S(2) [Determinations not limited] In proceedings under Division 2, the determinations under subsection (1) that the Registrar may make are not limited by the terms of the application.”
The Registrar is still bound by the requirement to give the parties procedural fairness in exercising the powers given by s. 98S. The application of the principles of procedural fairness, as set out by the High Court of Australia in Neal v The Queen (1982) 149 CLR 305, was referred to by Kay J in Perryman v Perryman (1993) 17 Fam LR 200; FLC 92-433.
The Child Support Agency’s Policy Guideline PG 15/99 ‘Contrary Determinations – Registrar’s power to increase or decrease a child support assessment’ covers the issue of procedural fairness. Paragraph 13 of that Guideline states as follows:
“The Registrar must also observe the principles of procedural fairness when considering making a contrary determination. If the Registrar is of the view that a contrary should be made, the applicant or respondent should be provided with an opportunity to discuss the issues.”
There is no evidence in the Notice of Decision that the Appellant was ever given the opportunity to consider the possibility that the earlier assessments could be retrospectively increased. The Appellant does admit that he estimated his gross income at $40,000.00, but it does not appear that he was warned that his future liability could increase. I am of a view that procedural fairness requires that:
a)he should have been warned of that possibility;
b)he should have been given the opportunity to withdraw his application for review; and
c)he should have been offered the opportunity of an adjournment in order to provide evidence to enable him to argue a state of affairs that was not contemplated in his original application.
It is for these reasons that I consider that the decisions of the Senior Case officer in respect of the annual rate of child support for the periods 1 October 1999 to 31 December 2000 and 1 January 2000, and the decision to set the Appellant’s child support income amount for the period 1 April 2002 to 30 June 2002 must be set aside. The annual rate for the period 1 October 1999 to 31 December 2000 should revert to the original figure of $1,058.00. The assessment for the period 1 July to 30 September 1999 will be confirmed.
It follows that the arrears must be re-calculated, and that the collection of arrears must be stayed until fresh assessments issue for the relevant periods.
I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Scarlett FM
Associate: A. Coutman
Date: 3 October 2002
[i] He actually filed two separate affidavits on that date.
[ii] Notice of Decision 19 October 2001 page 2
[iii] Notice of Decision page 5
[iv] Notice of Decision page 6
[v] Notice of Decision page 7
[vi] ibid.
[vii] ibid, page 6
[viii] ibid, page 7
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