Waites & Lawson (SSAT Appeal)
[2011] FMCAfam 42
•21 January 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WAITES & LAWSON (SSAT APPEAL) | [2011] FMCAfam 42 |
| CHILD SUPPORT – Appeal from SSAT – error of law – assessment of earning capacity. |
| Child Support (Assessment) Act 1989, ss.98C, 98S, 117 |
| Crabbe & Crabbe (SSAT Appeal) [2011] FMCAfam 24 Gyselman & Gyselman[1991] FamCA 93; (1992) FLC ¶92-279; (1991) 15 Fam LR 219 Hides & Hatton [1997] FamCA 28; (1997) FLC 92-759 Melville & Hunt [2006] FMCAfam 238; [2006] FLC 98-032; 201 FLR 28 T & T [2004] FMCAfam 688 |
| Appellant: | MR WAITES |
| Respondent: | MS LAWSON |
| File Number: | MLC 2311 of 2008 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 20 July 2010 |
| Date of Last Submission: | 20 July 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 21 January 2011 |
REPRESENTATION
| Counsel for the Appellant: | Ms Hamill of Counsel |
| Solicitors for the Appellant: | Thomas Egan |
| Counsel for the Respondent: | The respondent appearing in person. |
ORDERS
The appeal be allowed.
The matter be remitted to the SSAT for re-hearing by a differently constituted Tribunal.
IT IS NOTED that publication of this judgment under the pseudonym Waites & Lawson (SSAT Appeal) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 2311 of 2008
| MR WAITES |
Appellant
And
| MS LAWSON |
Respondent
REASONS FOR JUDGMENT
The appellant appeals from a decision of the Social Security Appeals Tribunal (“SSAT”) made on 5 November 2009, following a hearing on 27 May 2009 in Melbourne. The appellant was the respondent in the appeal. The proceedings covered an extensive period of time from 1 April 2000 through to 21 November 2008. The child support assessment relates to one child of the parties, [T], born January 1990, who lived with the respondent to the appeal throughout his minority.
The initial decision by a senior case officer was to set the appellant’s child support income at $80,000 per annum, backdated to 1 July 2006. This decision was made on 23 November 2007. The appellant objected to the decision and the objection was disallowed on 22 April 2008. The respondent then sought leave from the Federal Magistrates Court for the Child Support Registrar to make a determination back to
13 March 2001. Leave was granted on 5 May 2008, in a consent order made by Hughes FM. Following this, a senior case officer made a decision, an objection was decided and ultimately the matter was determined by the SSAT. It is the last decision of the SSAT that is the subject of the appeal in this case. The result of the decision was to create child support liabilities for the period 13 March 2001 to
21 November 2008 of $35,188.45.
Background
The substance of the case concerns the appropriate child support income amount to be used for the appellant throughout the assessment period. In the year before the decision was made, the appellant submitted seven years of tax returns, which had resulted in the respondent receiving reassessments of child support, leading to a calculation that she had been overpaid by around $10,000. It was this event that prompted her to apply to the court for leave to backdate the child support change of assessment decision if appropriate. Her financial position is perilous; she has a Centrelink debt, earns a modest income, has credit card debts, and currently has her house on the market as a result of financial pressures.
The appellant explained that he had not lodged tax returns for many years as he said he did not have an income. He said he was forced to lodge returns as a result of pressure from the Child Support Agency, (‘CSA’) and after lodging these returns his income was reassessed.
He stated that he was forced into bankruptcy in 1992/93 and that the trustee of the estate sold his business to his current wife. A company was set up with his wife owning all the shares. The company now has 14 employees, including himself and his current wife, [employees omitted]. The appellant said that he and his current wife work 60 to
70 hours per week. His current wife is the sole director and shareholder of the company. The SSAT explored in some detail the financial position of the appellant and his current wife, their involvement in the business, and the financial records of the business. It was based upon findings in this regard that the SSAT set the income amount for the appellant.
Grounds of Appeal
The appellant sets out four grounds of appeal:
1)That the second respondent breached the rules of natural justice in connection with the making of the decision by finding that:
(a)The applicant had access to funds, other than his own, being his wife’s salary, without putting this to the applicant for comment.
(b)No allowance should be made for the years that the company incurred a net loss, without putting this to the applicant for comment.
2)That the decision to make a determination pursuant to s.98S of the Child Support (Assessment) Act 1989 involved an error of law, whether or not the error appears on the record of the decision, as:
(a)The second respondent erred in finding that “special circumstances” existed as a ground for departure for the purposes of ss.98C and 117(2)(c)(ia) of the Child Support (Assessment) Act 1989.
(b)The second respondent erred in finding that it was satisfied that it was “just and equitable” to depart from the administrative assessment for the purposes of ss.98C and 117(5) of the Child Support (Assessment) Act 1989.
(c)The second respondent erred in finding that it was satisfied that it was “otherwise proper” to depart from the administrative assessment for the purposes of ss.98C and 117(5) of the Child Support (Assessment) Act 1989.
3)That the second respondent erred by finding that fifty percent of the net profit of the company after tax should be attributed to the applicant with no allowance for the years that the company incurred a net loss, as it was an improper exercise of its power.
4)The second respondent erred as there was no evidence or other material to justify the making of the second respondent’s findings that:
(a)Fifty percent share of the combined wages paid to the applicant and his wife should be included to calculate the total income available to the applicant.
(b)The applicant’s wife’s income was not supported by the roles that she has in the company.
(c)The applicant had access to funds other than his own, being his wife’s salary and the availability of loans.
Ground 1
The appellant did not pursue the first ground of appeal, which related to procedural fairness, following receipt of the transcript of the hearing before the SSAT.
Ground 2(a)
Ground 2 alleges that the SSAT erred in finding that there were “special circumstances”, finding that it was “just and equitable” to depart from the assessment, and in finding that it was “otherwise proper” to apart from the assessment.
The substantive argument under ground 2 is that the SSAT were required to consider each of the three elements identified in s.98C as explained in Gyselman & Gyselman[1991] FamCA 93; (1992) FLC ¶92-279; (1991) 15 Fam LR 219 with respect to each of the child support years under consideration. The appellant accepts that the SSAT identified the correct test at paragraphs 15 to 17 of the decision, however says that the Tribunal conducted “what appears to be an in globo assessment of the three stage test for the period 2001 to 2008”. The appellant argues that the SSAT’s error was apparent from the structure of the reasons, saying that the tests that are described in Gyselman’s case were considered only once with respect to the totality of the period rather than with respect to each child support period to which the departure determination relates. Similarly, it is argued that during the course of the hearing, questions relating to capacity to earn and hardship were put to the appellant with respect to the arrears as a whole (see transcript page 43).
As a matter of principle, it is appropriate that a tribunal or court consider each of the child support assessment periods: Hides & Hatton [1997] FamCA 28; (1997) FLC 92-759; T & T [2004] FMCAfam 688. This is no mere technical rule but a requirement that serves an important practical purpose: the requirement ensures that that a proper determination is made with respect to each period, or year having regard to the actual financial circumstances of the parties, compared to the assessment that was issued by the CSA
In this case, however, it is important to note that the husband has been involved in the one business throughout the period of time, and that the facts and circumstances surrounding his involvement in, and operation of, the business were in many respects the same throughout the period. To the extent that there were relevant variations in the period, this is discussed by the SSAT, for example, noting variations of the number of employees in the business (see paragraph.32), different loans taken in different years (see paragraph.37), changes in assets in the business (see paragraph.39) and variations in the amount of business received (see paragraph 38). The Tribunal have approached their task of considering the appellant’s income in a way that addresses the issues the principle or rule is in place to ensure.
The father’s income
The SSAT concluded that they did not accept that the appellant should “be considered to be just an employee of the company, working on a full-time basis for a wage between $0 and $23,400 during the financial years 2001 to 2008”. The SSAT identified that the company and the appellant’s current wife are separate legal entities, but concluded that the appellant is in a different position from an arm’s length employee (see paragraph 50). The SSAT noted that the appellant was listed on the internet, on the company’s website, as the founder and general manager of the business and that he runs the day-to-day operations of the business. The SSAT also found that he “could generally be regarded as the brains of the business”.
Ultimately, the SSAT concluded that the appellant shared equally in the decision-making and day-to-day operations of the business and that his involvement in the business was more akin to that of a co-director and shareholder than simply an employee. Their ultimate findings as to income could have been on the basis that:
1)the shareholding and payments from the company were simply a sham; or
2)the appellant’s financial resources from which he could meet a child support assessment were better reflected by one half of the overall income of the business; or
3)that the appellant had a greater income and earning capacity, which was reasonably assessed as being half of the business income before payment to his current wife (rather than the market rate for a person carrying out his duties within the company).
The findings in paragraph 58 are not critically clear as to which of the first two paths was taken, the Tribunal saying:
The Tribunal found above that Mr Waites’ true income and financial resources from his employment in the relevant financial years is not reflected in his personal taxation returns. Having considered the documentary and other evidence, the Tribunal is of the view that as a result of the benefits that Ms Waites’ company structure provides to Mr Waites, and the fact that the value of these resources are not properly reflected by his taxable income, there are special circumstances in this case that makes the administrative assessment unjust and inequitable. The ground for departure in sub paragraph 117(2)(c)(ia) does exist in this case.
A finding of a sham would require a clear statement, given the seriousness of such a finding. The reference in paragraph 58 of the reasons to ‘financial resources’ indicates that the Tribunal probably took the second path. How it was his ‘financial resource’ is difficult to state: he did not actually receive additional income or profit, nor is he the potential beneficiary of a trust. I have considerable misgivings about categorising the company and its earnings as a financial resource of the applicant.
I note that the Tribunal found that the appellant could not be assessed upon his ‘earning capacity’ on the basis that s.117(7B)(a) was not satisfied in this case. The relevant part of the section provides that to make an earning capacity decision, the decision maker must be 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;
At first blush the section is not satisfied in this case as the appellant is continuing to work full time, managing substantially the same business that he ran when the parties were together. However, it is difficult to conclude that this is the interpretation that was contemplated by the Parliament.
Careful consideration needs to be given to the use of the terms ‘work’ and ‘working pattern’ in the section. In the context of this section work cannot simply mean application of labour or effort, such as working on one’s golf swing or in one’s flower bed. Rather the term refers to the application of one’s labour or efforts toward generating an income. The pattern of work must therefore sound both in the time spent in the performance of tasks and in the bargains struck for the exchange of that labour or effort for remuneration or profit. In this case the appellant still applies his labour or efforts toward generating income, however the pattern of that work has altered. Here the bargains struck have changed in pattern from the appellant receiving a commercial share of profits to one where he receives minimal financial returns in exchange for his labour or efforts.
The other important issue is a temporal one: when is the relevant time for the change. It can not be the case that the change has to have occurred in the particular child support period, otherwise an assessment on earning capacity would only last, at most, for 15 months. To restrict the change to the commencement of the child support assessment would mean that those who did not immediately seek a CSA assessment may be locked out by s.117(7B) because the payer changed their working pattern between separation and assessment. Indeed, even to limit the time to a time after the birth of the child would mean that in some cases, where children are born to parents not in a relationship, a payer could avoid their responsibilities by changing their working pattern before the birth.
The section must be viewed in context. It does not set out a code for earning capacity decisions, rather it simply imposes restrictions on cases that would otherwise come within the meaning of ‘income earning capacity’. Had parliament wished to add a temporal limit to the restrictions it could easily have done so. When one recognises that reasonable temporal limits, judged by the circumstances of the particular case, are implicit in the way in which the concept of ‘income earning capacity’ has developed it is not surprising that parliament would not have legislated any artificial limit in the section.
It seems that on the facts of this case the appellant’s earning capacity should have been assessed by reference to the market and the particular business. It could well be that this is a sum greater than a 50% share of the profits or it may be less. This is a matter for evidence and fact finding.
Assessment of the appellant’s financial resources
The SSAT analysed the profit and loss statements and income of the appellant and his current wife from the business through each of the financial years from 2001. In paragraph 53 of their decision, they set out a table identifying the relevant figures for each of those years. In this regard, the SSAT has clearly considered each of the relevant child support periods (at least when child support was assessed for financial year periods) and, to the extent that in the circumstances materially altered for the appellant, did so in respect of other periods. In the context of this particular case, I am not persuaded that approaching the income question on the basis of an analysis of financial year by financial year demonstrated an error of law. Had there been events of significance other than financial years a more orthodox approach would be required. That is not alleged here.
Indirect benefits
With respect to indirect benefits received from the company for motor vehicle and telephone expenses, the SSAT identified an estimate of $3900 per annum as the reasonable adjustment for those benefits (see paragraph 56 of the decision). In cases where lengthy periods of time must be considered, for which detailed records are often no longer available, it is not unreasonable for a tribunal to make findings in a more general way. In this case, the appellant accepted that this was a reasonable adjustment for benefits received from the company, as recounted in paragraph 56. Ultimately, the SSAT identified income amounts that it proposed would form the basis of a child support income amount from the various financial years throughout the period, and identified them in a table at paragraph 57. In this regard, I find that the appellant’s complaints as to the SSAT’s decision-making process should not be upheld.
Assessment of the appellant’s share of company resources
It was argued that the SSAT were in error in considering the earnings of the company as part of the financial resources of the appellant. The appellant argued that:
The effect of the tribunal’s determination is that [the appellant and his current wife] are effectively in partnership in respect of the company – in assessing the income and financial resources of [the appellant], the tribunal found that 50 per cent of the net profit, after tax of the company, and 50 per cent of the total wages paid to [the appellant and his current wife] (by the company) are to be taken into account.
To the extent that the allegation is that the SSAT found that 50 per cent of the net profit after tax of the company, and of the total wages, is to be taken into account, it is an accurate description of the decision. It is also an accurate description of the decision to say that the SSAT viewed the appellant and his current wife as being equally involved in the business, and that, in substance, the financial resources of the business should be treated as one half available to the appellant. Where he is the general manager and ‘brains of the business’ and she provided capital to buy the business and contributes her labour, a 50/50 split of profit does not appear to be outside the reasonable range of arrangements business people may enter into, however there was no evidence this was the arrangement. However this was not a partnership nor had the Tribunal found it to be a sham, nor that the appellant’s current wife held shares on trust for him. These types of issues are discussed in some detail in Crabbe & Crabbe (SSAT Appeal) [2011] FMCAfam 24.
Assessment of company resources
The appellant complains that in the years 2002, 2003 and 2008, the company made losses, yet these losses were not taken into account by the SSAT. The Tribunal set out at paragraph.53 that it looked through the tax returns of the company and individual tax returns, PAYG summaries, and agency information of the appellant and his current wife before drawing its conclusions. The SSAT made no allowance for those years which the company incurred a net loss. The SSAT also concluded that the depreciation expenses (which are significant in the financial statements) related to equipment that was a necessary component of the business, which would ultimately need to be replaced or refinanced for the business to continue. The SSAT concluded that it was satisfied that the proportion of repayments, attributed to capital repayments, is reasonably reflected in the depreciation figures and therefore the Tribunal did not propose to make any adjustment in relation to depreciation.
The balance sheets showed that the assets of the business reduced over the period.
In the 2003 financial year the hire purchase expenses of the business jumped from a little under $30,000 to over $103,000, and interest payments almost doubled. Similarly, depreciation increased from a little under $80,000 to over $118,000. At the end of 2003 there was a deficit in assets of around $12,000, although future hire purchase of liabilities are recorded at $1.035 million.
By the end of 2004, future hire purchase creditors were assessed at $1.173 million. Importantly, one of the items contained within the depreciation’s schedule, described as “[omitted]”, has an original cost of $153,000 as at its acquisition date of 5 February 2002, and the depreciation amount in the 2002/2003 year was $82,950. In March 2004, a [equipment omitted] was purchased for $223,722 and depreciated at 20 per cent per annum.
There are no cash flow analyses provided by the appellant to the SSAT (in the Tribunal documents).
In this case the SSAT appear to have turned their mind to the details of the company’s profit and loss statement, and analysed it in some detail. However, the SSAT has made no allowance for the fact that in three of the years the company made a significant loss. Either the loss was artificial or had to be recouped from future profits. The SSAT did not find the loss was artificial, and made no allowance for recoupment from future profits. This appears to be an error on the part of the Tribunal as they have assumed monies earned in the future would be available as dividends when they would need to be applied to past losses to restore the asset base of the business.
The SSAT also appear to have used the after tax profit figures for the company, ignoring the franking credits that would be available if the company paid a dividend. Of course, if the company paid this money as wages to the Waites there would be no company tax payable on the money. The difficulty is apparent when looking at the two tables produced by the SSAT. The first table shows the company profit, company tax, income of the appellant and his current wife and the income after tax of the appellant:
| Financial year | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
| Net Profit/ (Loss) of [G] Pty Ltd | 912 | (68,895) | (168,619) | 66,050 | 64,422 | 202,563 | 125,807 | (39,666) |
| Tax Payable | 0 | 0 | 0 | 0 | 0 | (31,034) | (37,526) | 0 |
| Net Profit After tax of [G] Pty Ltd | 912 | (65,895) | (168,619) | 66,050 | 64,422 | 171,529 | 88,281 | (39,666) |
| Total wages paid to Mr Waites and Ms Waites from [G] Pty Ltd | 75,782 | 58,750 | 19,462 | 0 | 0 | 29,628 | 34,793 | 92,304 |
| Taxable income of Mr Waites | 21,067 | 6,348 | 5,969 | 3,513 | 6,019 | 14,316 | 14,499 | 24,709 |
| Wages paid to Mr Waites from [G] Pty Ltd | 23,400 | 6,750 | 0 | 0 | 0 | 10,0000 | 8,653 | 22,596 |
At paragraph 57 the SSAT explain how they reached the figures for the income amounts for the appellant, saying:
[57] Overall the Tribunal calculated the income and benefits received by Mr Waites to consist of 50% of the net profit after tax of the Company, 50% of the total wages paid to Mr Waites and Ms Waites from the Company, $3,900 per annum in benefits received from the Company and all other income sources as declared on Mr Waites’ income tax returns, resulting in the following amounts:
| Financial year | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
| Mr Waites’ total income, benefits and resources | 39,914 | 32,873 | 19,600 | 40,438 | 42,130 | 108,794 | 71,283 | 52,165 |
This method has serious difficulties. First, it ignores losses entirely. Unless the figures are not representative of the financial position of the company, losses must either deplete the working capital of the business, or be replaced by later profits. The only other explanation is that there are other aspects of the business that need to be considered, however nothing is set out in the decision. Secondly, it is difficult to understand why company tax would be taken into account. If the trading surplus of the company were paid in salary or director’s fees, then there would no longer be a profit to tax. If the company profit is distributed as a dividend, then franking credits would also be provided allowing the shareholder to obtain a credit for the tax the company had paid.
However, on a practical level the business accounting figures do not appear to provide a clear reflection of the financial resources of the appellant and his current wife. This can be seen from two factors:
1)In the 2004 and 2005 years it appears that the appellant lived on a taxable income of less than $3,600 in 2004 and $6,100 in 2005, whilst the company made significant profits.
2)Over the years since 1997 the company has lent over $446,000 to the appellant’s current wife. Whilst this is taken up in the business accounts as an asset of the company, clearly the company has been able to continue to operate without this amount available as working capital.
Whilst these matters indicate that the depreciation figures may be significantly greater than capital repayments, and an explanation for the approach of the SSAT in their calculations, the SSAT did not make such a finding. Rather, the SSAT said:
[54] …The Tribunal considered the depreciation expense shown in the financial statement and concluded that the equipment is a necessary component of the business operations, which would need to be replaced or refinanced in order for the business to continue. … The Tribunal is satisfied that the proportion of the repayments attributed to capital repayments is reasonable reflected in the depreciation. Therefore the Tribunal does not propose to make any adjustment in relation to depreciation.
The result is that the Tribunal has failed to have regard to relevant facts and circumstances (the company’s losses), or at least provide adequate reasons to explain the decision. As a result the appellant must succeed on this ground.
The mother’s income
The appellant also complains that the SSAT erred in considering the respondent’s income, property and financial resources, as it failed to consider the benefits to the respondent from her husband’s business. The SSAT dealt with this at paragraph 59, and following, of the decision. The SSAT found that the respondent was qualified as an [occupation omitted], but, following injury, this [qualification] lapsed some 12 years ago. It also found that in the 2007, 2008 years that, as a result of some hours of work in her current husband’s company, she earned around $27,000. The SSAT also accepted that she would have had some advantage of, and had some benefits from, her current husband’s business as did the appellant from the business of his wife. I pause here to note that the amount of those benefits was said to be around $3900 per annum with respect to the appellant and his wife.
At paragraph 60, the SSAT noted that the respondent suffered from depression for many years and a review of the CSA file showed that the last income she earned from employment was in the 1994/95 financial year, and that she had relied upon Centrelink benefits or her husband’s financial support over the period under review. In these circumstances it is reasonable that the SSAT ultimately concluded that she had no or extremely limited capacity to contribute to the financial support of the child. The SSAT reviewed the amounts used by the Agency throughout the period, at paragraph 62 of the decision, and ultimately concluded that there was no special circumstance relating to her income through the relevant period (see paragraph 63).
In the circumstances, I do not accept that the Tribunal failed to have regard to any relevant circumstances of the respondent in making their decision as to the income and financial resources of the parties.
Grounds 2(b) and (c)
In this case the SSAT had regard to the lengthy period of time involved in this case. In this regard the SSAT also had regard to published figures with respect to the costs of children. It must be expected that when considering a period of time suddenly the subject of an assessment placing the payee in arrears (in accordance with leave granted by the court) that the SSAT will not be able to make a specific factual finding as to the precise costs of the child for each of the years based upon evidence of precise expense amounts. In this case the SSAT ultimately concluded that the costs of caring for the child were in the order of $228 to $364 per week. The highest rate resulting from the change to the assessment, around $330 for a period of 46 days was a figure within the range accepted by the SSAT at paragraph 74 of their decision. I also note that for the majority of the period under review, the rates were far less, ranging from as little as $27 per week. In the context of this case the SSAT had to proceed to make findings on the limited evidence before it (the delay was not caused by the respondent).
There were similar difficulties confronting the SSAT, with respect to the finances of the parties. Having regard to my findings with respect to ground 2(a) I need not explore this issue further.
Backdating of the decision
The SSAT had regard to the impacts of child support and in particular, the comments of FM Walters in Melville & Hunt [2006] FMCAfam 238; (2006) FLC ¶98-032; 201 FLR 28 at paragraph 266 where his Honour said:
226. As for the suggestion that child support arrears should be ignored because the wife might no longer have any current need for them, or because a relevant child is now self supporting or over the age of 18 years, I find the reasoning in cases such as Milankov, Hamilton v Nowak and Abdilla v Darmo compelling. As Coleman J said in Abdilla v Darmo, it would be "offensive to anything remotely resembling justice" were I to determine that departure orders should not be made in the circumstances of this case. I recognise that I am not presently dealing with the enforcement proceedings (which have been adjourned pending my decision in this matter), but the fact remains that it would be neither just nor equitable to effectively discharge all arrears (by whatever form of order might be considered appropriate) simply because the payer of child support has managed to avoid or delay the making of payments for which he or she is clearly liable for an extended period of time. Irrespective of whether the payee might have been able to support the children by some other means, it is inevitably the case that the liable parent in such circumstances will have enjoyed a better standard of living, will have accumulated more assets or will have found himself or herself in less straightened financial circumstances than if the required child support had been paid. The exact opposite applies to the payee. The advantages that the liable parent enjoys in such circumstances, and the disadvantages which the residence parent suffers, can – and frequently do – last a lifetime. As the Full Court said in Clauson (1995) FLC ¶92-595 [at 81,911]
... it should not be forgotten that the payment of Child Support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on an independent lifestyle which the obligation to care for children usually entails.
The SSAT then went on to consider whether or not it was appropriate to backdate the child support assessment for such a lengthy period, relying upon factors relevant to whether or not enforcement of arrears for such a period would be allowed by the courts. There are a number of features of this case that place it outside of the ordinary case, in that:
1)the appellant’s child support assessment was based on his estimates of income as he did not lodge tax returns for many of the years until very recently;
2)the appellant’s tax returns were only lodged in 2007 at the CSA’s insistence;
3)the appellant was aware of his circumstances with respect to his current wife and his involvement in the business;
4)the business arrangements which, on their surface, indicated little or no income to the appellant (particularly prior to his lodgement of any tax returns), and gave the appellant the appearance of having little financial capacity. As a consequence of this conduct the respondent was dissuaded from pursuing review applications in 2002, on advice from the Agency that she would need proof that the appellant had other income available to him; and
5)the respondent had an expectation that the CSA would collect any arrears due to her over the period, once appropriate assessments were in place.
The SSAT concluded that the appellant did have the resources to pay the child support at the time, and, on analysis of his current financial circumstances, that he has accumulated assets that, for the period since his bankruptcies, are more than sufficient to pay the child support arrears.
If this is, in substance, a case where the payer had obtained inappropriately low assessments over many years, and been able to accumulate assets, it is difficult to conclude that justice is served by a result where a carer without significant assets or income is left in that state, whilst a payer who has obtained inappropriately low assessments (as a result of his own conduct and arrangements) retains assets accumulated during the period.
In such circumstances it would be open to the SSAT to make a determination with respect to child support arrears for an extended period and conclude that the result was just and equitable and otherwise proper. However, as I must allow the appeal with respect to the findings relating to income and earning capacity, the underpinnings for these findings fall.
Ground 3
This has been addressed above.
Ground 4
This ground of appeal was not pressed in the appeal before me, beyond the issues addressed under ground 2.
Conclusion
Ultimately, I am persuaded that the appellant has established an error of law in this matter and, therefore, I must allow the appeal. As the matter does require an assessment of complex financial materials it is appropriate to remit the matter to the SSAT for re-hearing.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Date: 15 December 2010
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