Welke and CSR (SSAT Appeal)
[2011] FMCAfam 2
•20 January 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WELKE & CSR (SSAT APPEAL) | [2011] FMCAfam 2 |
| CHILD SUPPORT – Appeal from SSAT. |
| Child Support (Registration and Collection) Act 1988, ss.68, 111C Constitution of Australia |
| Baker & Green & Kettle (No. 5) [2007] FamCA 1660 Byrd & Byrd and Ors [2010] FamCA 547 Harris & Smith and Anor [2008] FamCAFC 36 Jell & Jell [2009] FamCA 960 Macri & Florio [2010] FMCAfam 340 Naughton and Naughton (1983) FLC 91-327 Re Pearson [1993] FCA 533 Simpson-Cook v Delaforce [2009] NSWSC 357 Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 Tirkel & Loebenstein [2008] FamCA 73 |
| Appellant: | MR WELKE |
| Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | MLC 13320 of 2007 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 3 September 2010 |
| Date of Last Submission: | 3 September 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 20 January 2011 |
REPRESENTATION
| Counsel for the Appellant: | Mr Bacon |
| Solicitors for the Appellant: | Manby & Scott |
| Counsel for the Respondent: | Ms Tulloch |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
The appeal be dismissed.
The applications within the Notice of Appeal filed on 1 March 2010, to the extent that they go beyond the grounds of appeal, be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Welke & CSR (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 13320 of 2007
| MR WELKE |
Appellant
And
| CHILD SUPPORT REGISTRAR |
Respondent
REASONS FOR JUDGMENT
The appellant appeals the Social Security Appeals Tribunal’s (‘SSAT’) decision to refuse to remit penalties that were payable by him to the Child Support Agency (‘CSA’) as a result of late payment of child support liabilities.
The case commenced with the birth of a child on [date omitted] 1992. The appellant did not accept that the child was his biological child, and it was not until 19 July 1994 that a child support assessment registered for collection by the CSA was in force. By this time he had an outstanding child support debt with respect to other children (and penalties) of over $10,000. On 11 May 1995 over $2,500 was paid, and on 14 March 1997 a little under $60 in late payment penalties were reduced. As the appellant had made no other payments, nor obtained any other reductions, his child support debt had reached over $88,000 by 13 March 2001. On 14 March 2001 considerable adjustments were made to the child support assessments, reducing his debt to a little over $78,000. The penalties were reduced to reflect the reduction in the child support debt, reducing his overall liability to the CSA to around $71,000. Thereafter he made payments each month. However the payments were insufficient to discharge the debt and to meet the ongoing accrual of penalties for non-payment of child support arrears.
By November 2003 the child support debt was over $83,000, and the appellant again ceased payment for a period (until May 2004). The debts and penalties continued to accrue, although adjustments were made in February 2007 and March 2008.
By 3 April 2008 the child support debt was over $133,000. In April 2008 a tax refund was intercepted, reducing the debt by nearly $26,000. In April 2009 further adjustments were made to the child support assessments, and corresponding penalties. Ultimately, as at
28 July 2009, the appellant still owed in excess of $41,000 in child support and penalties.
In addition to intercepting tax refund cheques the CSA also brought enforcement proceedings in the Federal Magistrates Court at Melbourne.
On 21 February 2008 orders were obtained from Hartnett FM, declaring the child support debt as consisting of $59,639.98 in child support arrears and $64,305.65 in late payment penalty fees. Various orders were made on that date for the lodgement of tax returns and to grant the appellant time to make any application to vary child support assessments, together with orders restraining him from dealing with a real property that he owned at [P], near Melbourne.
The SSAT accepted that the appellant’s child support account had been in arrears since August 1994, and they were aware of Hartnett FM’s orders. The SSAT went on to consider the operation of s.68 of the Child Support (Registration and Collection) Act 1988, which provides the Registrar a discretion to remit late payment penalties in limited circumstances. That section is in the following terms:
68 Remission of late payment penalty
(1) If an amount (in this section called the late payment penalty ) is payable by a person under section 67 in relation to a child support debt and:
(a) the Registrar is satisfied that:
(i) the circumstances that contributed to the delay in payment of the debt were not due to, or caused directly or indirectly by, an act or omission of the person; and
(ii) the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; or
(b) the Registrar is satisfied that:
(i) the circumstances that contributed to the delay in payment of the debt were due to, or caused directly or indirectly by, an act or omission of the person; and
(ii) the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; and
(iii) having regard to the nature of those circumstances, it would be fair and reasonable to remit the late payment penalty or part of the late payment penalty; or
(c) the Registrar is satisfied that there are special circumstances by reason of which it would be fair and reasonable to remit the late payment penalty or part of the late payment penalty;
the Registrar may remit the late payment penalty or part of the late payment penalty.
The SSAT concluded that the failure to pay the child support on time was due to the appellant’s conscious decision not to pay, as he did not initially believe the child to be his biological child, and that he did not agree with the CSA’s assessment of the payable child support and penalties. The SSAT’s conclusion that the appellant had not satisfied s.68(1)(a) to enliven the discretion to remit late payment penalties is therefore unsurprising.
The SSAT also turned to consider whether or not the appellant had taken reasonable action to mitigate the effects of the circumstances and, as such, whether it would be reasonable to remit the late payment penalties or part of them. The SSAT noted that some 13 years passed before the appellant took active steps to clarify his paternity. The SSAT also had regard to the terms of a notation to an order of Hartnett FM on 29 July 2009, which is in the following terms:
B. Mr Welke’s position is as follows:
The Respondent understands the Court has no jurisdiction to remit late payment penalties (‘LPP’s) which have accrued in this case and therefore accepts he is prima facie liable for same as outlined in the above orders.
However, in proceedings numbered MLC1794/08 on 12 March 2009, Hartnett FM requested the Applicant in this case remit all such LPP’s.
The Respondent notes that he intends to raise the issue of the Applicant’s refusal to remit all LPP’s with the Commonwealth Ombudsman and the Agency.
The Respondent notes that he will pursue this issue in all due haste.
This refers to a notation with respect to a previous enforcement order on 13 March 2009 in the following terms:
AND THE COURT NOTES THAT:
2. The above figure of $33,000 is to be paid partly by release of monies held in trust by the Australian Government Solicitor in the associated enforcement proceedings herein and partly by payment of the excess by the applicant within 60 days of today’s date.
3. The Court requests the Child Support Registrar remit any late payment and other penalties in the associated enforcement case herein.
Significantly, the appellant did not pay the child support debt within the 60 days provided for in Hartnett FM’s orders of 12 March. Rather the CSA intercepted the tax refund for around two-thirds of the amount owing, and further Court orders were required.
The final area for the SSAT to consider was the effect of s.68(1)(c), namely whether there are ‘special circumstances’ by which it would be ‘fair and reasonable’ to remit the late payment penalties or part of them. The SSAT stated that, at the hearing, the appellant said he was not aware of any special circumstances in his case. The SSAT referred to Hartnett FM’s orders, and the appellant’s argument that he was not satisfied the child would benefit if he pays the penalty amount. Neither of these matters persuaded the SSAT that it would be fair and reasonable to remit the penalty amount. As a result, the SSAT refused the application.
The appellant argues that the SSAT ignored relevant material on the basis that the case had run for some 20 years, and the appellant had, by the time of the SSAT decision, paid the child support debt. The appellant also argued that the SSAT failed to properly consider and give weight to Hartnett FM’s notations on the question that late payment penalties be waived
The effect of notations on court orders has been considered in a number of cases. In Naughton and Naughton (1983) FLC 91-327 the Full Court did not accept that a notation took effect as an order of the court. In Jell & Jell [2009] FamCA 960 Rose J at [39] stated that notations ‘do not have the force and effect of an order,’ but are likely to represent compelling evidence of an agreement recounted in a notation. Indeed, in Tirkel & Loebenstein [2008] FamCA 73, the agreement recorded in the notation was sufficient to show that circumstances arising after the orders were contemplated at the time and therefore not a proper basis for reconsidering the terms of the order. Similarly, in Simpson-Cook v Delaforce [2009] NSWSC 357 Bergin CJ in Eq found the contents of a notation good evidence of an agreement, later relied upon in a claim for estoppel.
In Byrd & Byrd and Ors [2010] FamCA 547 Murphy J stated clearly that ‘a notation to an order has no operative effect as an order of the court.’ (at [27]). In that case, the terms of the notation did not even evidence an agreement, only a general intent, Murphy J finding that:
[35] … the notation [in this case] is nothing more than a notation indicating future intent with respect to an issue erstwhile live between the parties, but separate and distinct from the s 79 orders that were made by the court
A further example of a notation showing only a future intent can be found in Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93.
In Re Pearson [1993] FCA 533 Wilcox J found that a notation embodying a maintenance agreement was not a court order, nor a registered agreement under the Family Law Act. Indeed, the difficulties that can follow if parties lose sight of the limited effect of a notation to a court order can be seen in convoluted interactions that lead to the decision in Macri & Florio [2010] FMCAfam 340.
Whilst not an order, it appears that a notation can be amended under the slip rule (Baker & Green & Kettle (No. 5) [2007] FamCA 1660), and may be appealable (Harris & Smith and Anor [2008] FamCAFC 36: although this was assumed by the Full Court and not actually decided).
The Agency was correct to note that the Court has no power to order the remittal of penalties, although ultimately the Court does have a discretion as to whether or not to enforce the payment of penalties.
It is important to understand the purpose of the imposition of penalties in the legislative scheme. The penalties are imposed as an incentive to ensure that those liable to pay child support pay the correct amount on time. The greatest benefit of child support to a child is receiving it in a timely fashion so that it can be applied to the child’s welfare and upbringing from month to month, rather than experiencing a lesser standard of living for a considerable period and then receiving a significant sum. The failure to make appropriate and timely child support payments not only impacts upon the child’s standard of living, but has a significant impact upon the carer. The carer’s own standard of living inevitably suffers, as they must provide for the child as best they can without the financial support that the child is entitled to from the other parent.
The penalties are calculated under the Act, based on the amount of child support overdue. That the child support amount may have been modest on a weekly basis is no argument, as even a modest amount can make a significant difference in a single parent household, particularly those reliant upon social security.
There are many administrative processes, which require no fees or filing fees, and do not require a lawyer’s assistance, to enable people to challenge the child support assessment and penalties. The CSA spends considerable sums attempting to enforce child support debts for the benefit of the children to which they relate.
In some cases the CSA will agree with a child support debtor that if the debt is fully paid by a particular date the Agency will remit all or part of the penalties. It remains open to the Registrar to negotiate with debtors on that basis, relying upon the powers in s.68(1)(c) of the Act, when the Registrar is confronted with circumstances where the Registrar concludes, on a practical or commercial basis, that such an arrangement is the most effective method to affect a timely recovery of the debt. This flexibility is an important tool in a debt collection process. However, it could not be concluded that simply paying the child support debt would, of itself, amount to a special circumstance leading to a conclusion that it would be fair and reasonable to remit the late payment penalties. To interpret the provision in this fashion would undermine its very effectiveness. Rather, payment, or a reliable payment arrangement would usually be a necessary factor before exercising the power to remit penalties.
Thus, it is not unusual for the Court to record agreements with respect to penalties if payments are made by particular times. In rare cases the Court may also, based upon the facts and circumstances put before it, make a request that the Registrar exercise the power under s.68 in limited circumstances. This appears to be what occurred before Hartnett FM. Unfortunately, a transcript is not available of this hearing and, therefore, there is no evidence before the Court as to precisely what transpired before her Honour. Notation 3 of the orders of
12 March 2009, no doubt drafted in a busy list is sufficiently clear: the intention of the notation is that the Court has requested the Registrar to consider remitting the late payment penalties in the circumstances of the case (in particular, a payment within 60 days, as contemplated by the previous notation) under s.68. It does not record an agreement between the CSA and the parties. Indeed the notation could not record an agreement as the order was made in proceedings between the mother and the father, and not in the proceedings where the CSA was a party.
The appellant did not make the payment within the time provided. In these circumstances I cannot see how the notation as to penalties assists the applicant at all.
In the next set of orders the notation simply records the appellant’s ‘position’. It does not record a request by Hartnett FM, nor an agreed fact. The notation does not record any agreement. There is no doubt that this position was also put by the appellant to the SSAT, and that the SSAT considered the same. In these circumstances it is difficult to find that the SSAT failed to have regard to the notations in her Honour’s orders.
The appellant also argued that the notation itself would amount to a ‘special circumstance’ under s.68. I do not accept that a notation in these terms would, of itself, amount to a ‘special circumstance’ under the Act. To elevate the notation to such a level would effectively convert the notation into a declaration that was made in the absence of the CSA. The first notation does no more than request that the CSA consider exercising its power under s.68 if timely payment (as described in the previous notation) was made. One would ordinarily expect that the CSA would give careful consideration to such a request from the Court and, in particular, carefully consider the facts and circumstances that led to the notation. As timely payment was not made the first notation does not assist. The second merely records the appellant’s ‘position’.
It appears clear that the significant circumstance was the expectation that the appellant would discharge all of his child support debts within 60 days, without the need for any further proceedings. This simply did not occur and, therefore, the underlying basis for Hartnett FM’s request was a condition that was unfulfilled. In the circumstances I do not find that the SSAT’s consideration of her Honour’s order is in error, nor that they failed to have regard to the terms of the order.
The second ground of appeal is on the basis of an allegation that the SSAT’s decision is ‘so perverse and unreasonable as to offend logic’.
It was argued that the penalties that have accrued over the last 20 years are out of proportion to the child support debt. This argument is made on the basis that the penalties had come to a figure in the order of $35,000 with respect to a debt of a little over $41,000. The penalties in this case are in the precise statutory formula set by government policy in enacting the legislation.
It is submitted that the SSAT failed to consider that some of the penalties were nearly 20 years old and that the CSA ‘had remained largely inactive as regards this issue’. The appellant has since remarried and is providing some support for a new wife and three children. It is argued that this, coupled with the fact that the late payment penalties will be retained by Commonwealth Treasury (and not passed on to any of the children) also undermines the SSATs decision. To accept this argument would be tantamount to accepting the proposition that if one neglected or refused to pay child support for long enough, then the penalties ought to be remitted. The reality is that the terrible impact of a failure or refusal to pay child support grows over time, and the seriousness of the matter becomes greater.
It is also argued that it was unreasonable for CSA to have ‘sat upon its hands for such a period of time’. However, no estoppel can be properly raised in this case. There is no suggestion that the Agency did not continuously write to the appellant seeking payment of the amount, and ultimately take court action to sell his real property. It is not suggested that the appellant was not aware of the circumstances, nor of the liability. It is disingenuous to complain that the CSA ought to have been more ‘hardline’ or litigious against him in earlier years in order to force him to pay a debt of which he was well aware.
The appellant also argued that the SSAT failed to consider his capacity to pay the penalties that had been imposed. If a special circumstance is raised, then the capacity to meet the debt would, no doubt, be a relevant consideration in many cases. However, failure to pay child support for a lengthy period, coupled with limited financial resources, is unlikely, in all but the rarest of cases, to be sufficient on its own to amount to a special circumstance for the remission of late payment penalties.
Finally, it was argued that the notation to Hartnett FMs orders was a ‘quasi-judicial finding that it would be inappropriate to enforce the penalties’. Firstly, her Honour was sitting as a judicial officer under Chapter III of the Constitution and, therefore, there was nothing ‘quasi-judicial’ about any of the steps taken by her Honour. Hartnett FM’s actions were clearly an exercise of judicial power under Chapter III of the Constitution. To the extent that they involved court orders, they are orders of a Chapter III Justice that are enforceable. To the extent that the orders contained notations, then those notations recorded and provided evidence of the facts or circumstances surrounding the making of the orders. The notations do not amount to orders, nor are they judicial findings. To attempt to characterise them as ‘quasi-judicial’ utilises a term which is difficult to understand in the context of this case, lacking any real meaning or precision.
The appellant also argues that the enforcement of late payment penalties is at the Court’s discretion. To the extent that penalties are sought to be enforced pursuant to the provisions of the Family Law Act, that Act provides a general discretion to the Court with respect to making enforcement orders. The precise circumstances in which that discretion may be exercised is not relevant to the SSAT, who must determine whether or not the penalties should be remitted in accordance with s.68 of Child Support (Registration and Collection) Act 1988. Indeed, the precise circumstances in which a court may decline to exercise the power to enforce remains the subject of considerable uncertainty, based upon the existing decisions in other areas under the Family Law Act. Whether, in the particular circumstances of any given case, the Court would decline to exercise the discretion to enforce, or where possibly the facts and circumstances mean an argument could be raised that the proceedings were an abuse of process, is not a matter that I should consider in determining this appeal. Nor do the facts and circumstances of the case, as is apparent from the SSAT’s documents supporting the Tribunal’s decision, set out circumstances which could be seen as a prima facie case in this regard. This is an issue best left to be determined if it arises on any subsequent enforcement applications.
In the circumstances, I therefore dismiss the appeal.
To the extent that the appellant seeks orders for ‘a permanent stay with respect to payment of late payment penalties’, there are no reasons to stay the enforcement under s.111C of the Child Support (Registration and Collection) Act, given that there are no further proceedings pending. Nothing has been placed before the Court to demonstrate the basis of any jurisdiction to stay or injunct a government department from carrying out its statutory mandate, on the basis of common law or some form of general jurisdiction of the Court. The Court’s inherent jurisdiction in this regard relates to proceedings brought before the Court, not to the conduct of the Executive generally. If, at the heart of this argument, is some form of constitutional challenge (which has not been articulated, nor is it apparent on the face of the material) then proceedings ought to be brought in the appropriate form.
I therefore dismiss the applications within the notice of appeal to the extent that they go beyond the grounds of appeal.
Conclusion
This case is a poignant reminder that failure to meet child support liabilities, in the expectation that if one avoids long enough they will never be enforced (an unfortunate consequence of the so-called
12 months rule with respect to child maintenance prior to the child support scheme) is not only a futile endeavour, but likely to result in liability for substantial penalties. This is an important underlying policy consequence of the child support scheme, which has at its heart the purpose of assessing a reasonable rate of child support and ensuring that it is paid in a timely manner.
I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Date: 12 January 2011
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