Whitford and Seyler
[2008] FMCAfam 849
•12 August 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WHITFORD & SEYLER (SSAT APPEAL) | [2008] FMCAfam 849 |
| CHILD SUPPORT – Appeal from decision of SSAT – payer appealed from decision of Registrar to fix child support income amount at the cap where assets had been liquidated and significant lump sum available – no lump sum order sought be payee – principles for determination of appeal – error of law established – whether Court should embark on fact-finding exercise – whether orders should be made as consequence of finding of error of law. |
| Child Support (Assessment) Act 1989, ss.42, 98B, 98C, 117, 118, 123A & 124 Child Support (Registration and Collection) Act 1988, ss.103T, 110B, 110F, 110G & 110K |
| LDME & JMA [2007] FMCAfam 712 Gyselman & Gyselman (1992) FLC 92-279 Hampson v Lightfoot (1997) FLC 92-755 Ivanovich v Ivanovich (1996) FLC 92-689 |
| Applicant: | MS WHITFORD |
| Respondent: | MR SEYLER |
| File Number: | SYC 8801 of 2007 |
| Judgment of: | Lindsay FM |
| Hearing date: | 8 August 2008 |
| Date of last submission: | 8 August 2008 |
| Delivered at: | Adelaide |
| Delivered on: | 12 August 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Gillies |
| Solicitors for the Applicant: | Legal Aid NSW |
| Counsel for the Respondent: | Ms Rees |
| Solicitors for the Respondent: | Watts McCray Solicitors |
| Counsel for the Child Support Registrar: | Mr Gouliaditis |
| Solicitors for the Child Support Registrar: | Australian Government Solicitor |
ORDERS
The appeal be allowed.
The decision of the Social Securities Appeals Tribunal of 7 December 2007 be set aside.
The respondent’s application to review the decision of the Child Support Registrar of 23 April 2007 (dated 23 July 2007) be remitted to the Social Securities Appeals Tribunal to be heard and determined according to law.
IT IS NOTED that publication of this judgment under the pseudonym Whitford & Seyler is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 8801 of 2007
| MS WHITFORD |
Applicant
And
| MR SEYLER |
Respondent
REASONS FOR JUDGMENT
This is an Appeal by the mother (the payee under the administrative assessment of child support) from a decision of the Social Securities Appeals Tribunal (the “Tribunal”) of the 7 December 2007.
The Tribunal decision set aside a decision of the Child Support Registrar of the 23 April 2007 made under Part 6A of the Child Support (Assessment) Act 1989 (the “Assessment Act”) to fix the payer’s child support income amount at the child support income cap described in s.42 of the Assessment Act.
The mother and the father were in a relationship between 1998 and 2004. They have a child [A] now aged five and a half years and twins [B] and [C] now aged four and a half.
I heard the Appeal on 10 June 2008. At that time the Tribunal had not forwarded to me the papers which were before it pursuant to its obligation under s.110K of the Child Support (Registration and Collection) Act 1988 (the “Collection Act”). An opportunity was given for further submissions to be made once those papers were made available.
Section 110B of the Collection Act provides that a party to a proceeding before the Tribunal may appeal to this Court on a question of law.
The consideration of the relevant statutory provisions relating to these Appeals (essentially those contained in Division 3 of Part VIII of the Collection Act) by Halligan FM in LDME & JMA [2007] FMCAfam 712 at [17] - [33]; [36] - [40]; [89] - [90] and [94] - [97] was accepted by counsel for the payer and payee and counsel for the Registrar who appeared before me as correct. I do not propose to canvass in these reasons the same discussion of the legislative provisions carried out by Halligan FM. I respectfully adopt his views.
I was provided with and I read a transcript of the hearing before the Tribunal of the 24 October 2007.
Each of the parties had filed an Affidavit in these proceedings and a Statement of Financial Circumstances and I have read them.
Since the mother first sought a child support assessment in 2006 and until the decision of the Registrar under Part 6A referred to above in April 2007 the father had been assessed on the statutory minimum rate of child support.
The delegate of the Registrar conducting the Part 6A review considered a number of documents relating to the father’s financial position for the years 2003 to 2007, including taxation returns and BAS statements. They were summarised by the delegate as indicating that the father’s business - a farm - had not run at a profit for some time. However, his BAS statement for the first quarter of the 2006 financial year showed a significant spike in income and activity. The mother alleged that he had sold his farm. At the hearing before the delegate the father conceded that he had but contended that he was precluded by the confidential terms of the sale agreement from revealing details of the sale. He said that he was leasing back the property he had formerly owned.
He provided little further information. The delegate was satisfied that he has the capacity to meet an assessment based upon the child support income cap. The assessment was backdated to the receipt of the review application from the mother which was February 2007. The father’s objection to the delegate’s decision was disallowed by an objection officer on 11 July 2007.
The father was rather more forthcoming about the state of his finances when he brought his Appeal to the Tribunal. He acknowledged that he sold his property on 19 September 2006. The sale price was
$1.32 million inclusive of GST. The Memorandum of Transfer was produced to the Tribunal. The father then gave evidence to the Tribunal about certain debts that he had discharged and some that were yet to be discharged. The Tribunal’s summary of his evidence in that regard is set out at [9] of its Statement of Reasons. A reading of the transcript suggests that all of the findings in that paragraph may not be accurate. Certainly the father claims to have paid a mortgage to the NAB in the amount of $150,000. He said there was a second mortgage granted to his father. He did not have documents evidencing the payment to the NAB or the amount owing on the mortgage to his father. The Tribunal appears to have thought he was contending the mortgage to his father was in the amount of $150,000 and then added further sums to that but a reading of pages 6 and 7 of the transcript suggests that that might not be an accurate summary of what he was saying. It seems that the father’s father has met certain debts incurred by the father when he was a transport operator. One debt amounted to $70,000. At the bottom of page 7 of the transcript the father appears to concede that the $70,000 is part of the total mortgage debt to his father. The latter is mistakenly assumed by the Tribunal to be $150,000. On the next page of the transcript the father contends that the $70,000 is in addition to the mortgage amount of $150,000. To those two sums he then adds two other amounts of $20,000 and $30,000 as owing to his father. The total the Tribunal accepts as owing to his father is $220,000. It reached that conclusion on the basis of a total absence of documentary evidence and in circumstances where the father had a history before the Registrar of revealing very little of his financial circumstances.
Section 103T of the Collection Act gives the Tribunal all the powers conferred on the Registrar when conducting a review.
It is difficult to see how the Tribunal would have satisfied itself of the indebtedness of the father to his own father on the basis of the generalised and uncorroborated material put before it by the father on this topic.
The Tribunal similarly accepted his indebtedness to the NAB in respect of a credit card on his say so.
Similarly, the Tribunal simply accepted at face value the father’s assertions as to the monies held in his name with his bank. He did not even bring a bank statement to substantiate his assertions. He asserted he had $800,000 in a term deposit and $100,000 in “available deposit”. Later in the hearing he asserts that the $800,000 is held with the [omitted] Credit Union and attracting interest at the rate of 6.8%.
The $100,000 is with the same credit union and attracting “three and a half or four percent”.
All of these assertions simply make their way into the Tribunal’s Findings of Fact at [19] of the Statement of Reasons. So does the father’s assertions that apart from “exceptional circumstances” drought assistance he was not presently earning any income from his farm activity.
Before the Tribunal and before this Court the mother did not agitate a matter originally promoted by her before the review officer relating to the special needs of the children, or one of them in particular.
She resisted the father’s review in the Tribunal and promoted her Appeal in this Court on the basis of his financial resources and in particular the funds available to him from the sale of the farm.
The father said in his evidence before the Tribunal that he was considering the purchase of another farm and that the properties he was looking at purchasing “ranged in the vicinity of $700,000 to
$2 million”. His capacity to fund the borrowings necessary to acquire a property for a price substantially higher than the value of his investments or the question as to whether he was purchasing the property in company with some other person and what the terms of such arrangement were, were never put to him by the Tribunal.
Given the terms of s.103T of the Collection Act it is appropriate to consider the powers and discretions conferred on the Registrar when conducting a review. The relevant provisions as set out in s.98B and s.98C of the Assessment Act:
98B(1) If, at any time when an administrative assessment is in force in relation to a child:
(a) the liable parent concerned; or
(b) the carer entitled to child support concerned;
is of the view that, because of special circumstances that exist, the provisions of this Act relating to administrative assessment of child support should be departed from in relation to the child, the liable parent or carer may, by written application, ask the Registrar to make a determination under this Part.
(2) The parties to the proceedings under this Division are the liable parent and the carer entitled to child support.
98C (1) Subject to this Part, if:
(a) an application is made to the Registrar under section 98B; and
(b) the Registrar is satisfied:
(i)that one, or more than one, of the grounds for departure referred to in subsection (2) exists; and
(ii)that it would be:
(A)just and equitable as regards the child, the liable parent, and the carer entitled to child support; and
(B)otherwise proper;
to make a particular determination under this Part;
the Registrar may make the determination.
(2) For the purposes of subparagraph (1)(b)(i):
(a) the grounds for departure from the provisions of this Act relating to administrative assessment of child support in relation to the child are the same as the grounds for departure set out in subsection 117(2); and
(b) subparagraph 117(2)(b)(ib) has effect subject to subsections 117(3A) and (3B).
(3)Subsections 117(4) to (9) (inclusive) apply to the Registrar in the exercise of his or her powers under this Division as if:
(a) any reference in those subsections to the court were a reference to the Registrar; and
(b) any reference to an order were a reference to a determination.
It will be noted that the grounds for departure referred to in s.98C are identical to those specified in s.117(2) of the Assessment Act which deals with the powers of the Court on the departure application. Similarly, the provisions of s.117(4) to (9) are picked up by s.98C.
The Tribunal begins its discussion of the application of the law at [20] of the Statement of Reasons by stating:
The issue in this case is whether it is appropriate to apply the formula contained in s.42 of the Assessment Act to work out [Mr Seyler’s] child support income amount.
That statement gives rise to the first ground of appeal.
Of course, the Tribunal did not identify the task before it accurately. The task before it was to determine whether having regard to the legislative criteria specified in s.98C (picking up s.117) there should be a departure from the administrative assessment of child support of the father which, it will be remembered, at the point of the review application was resulting in the minimum annual rate of child support being payable. In particular, it was to determine those matters in the light of the payer’s liquidation of his farm asset resulting in him having available savings in an amount approaching one million dollars.
Ms Rees, for the father, acknowledged that the Tribunal might have expressed itself more carefully on this point but said that in reality the Tribunal was aware of its responsibility to apply s.117 of the Assessment Act.
Certainly, there is reference to the grounds for departure from administrative assessment at [24] of the Tribunal’s Reasons.
The Tribunal goes on to refer specifically to s.117(7A) of the Assessment Act.
The decision of the Full Court of the Family Court in Gyselman & Gyselman (1992) FLC 92-279 has long been authority for the proposition that the departure order hearing involves a three step process of:
a)establishing whether a ground of departure under s.117(2) is made out;
b)if so, whether it is just and equitable having regard to the matters to which s.117(4) refer to make the order sought; and
c)whether, if it is, it is otherwise proper to make the order sought (that obligation arises from s.117(5)).
With respect to s.117(2) the Full Court say this at [39]:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words, "in the special circumstances of the case". Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasize that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases. In Savery's case (p.77-897), Kay J., adopting the view in Philippe (1978) FLC 90-433 at p.77-202 in a different context, said that "special circumstances" were "facts peculiar to the particular case which set it apart from other cases". The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
The facts of this case patently called for a consideration of the grounds specified in s.117(2)(c)(ia) of the Assessment Act, which provides:
(2)For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a) …
(b) …
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) …
(ia) because of the income, property and financial resources of either parent;
(ib) …
(ii) …
(ii) …
(iv) …
Section 117(7A) provides:
In having regard to the income, property and financial resources of a parent of the child, the court must:
(a)have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing, income; and
(b) …
So the legislation provides as a ground for departure the special circumstances arising from the property and financial resources of a parent. In this case, one parent had just liquidated an asset and had approximately one million dollars in his control. The other parent had negligible assets.
True it is, as Ms Rees pointed out, that the cases do not throw up a decision where a capital sum per se has been utilised to warrant a departure order other than by reference to the interest income which the investment is or is capable of yielding. But the legislation is quite clear in contemplating the property and financial resources of a parent as in themselves constituting the ground for departure if special circumstances are found.
I do not think that s.117(7A) should be interpreted as modifying or limiting property or financial resources as a ground of departure.
The section is a reminder of the principle applied in many cases that the Court is entitled to consider the use to which a parent has put his or her capital in determining whether the ground for departure is made out. In other words it is a section which creates an imperative duty on the part of the Court to have regard to this aspect of the matter without in any way de-limiting the operation of the ground for departure set out in sub-section (2)(c)(ia) of s.117.
The mother was squarely asking the Tribunal and had asked the Registrar to have regard to the significant capital sum available to the father as a result of the sale of the farm as the special circumstance enabling reliance upon this ground. It was the dimension of the asset and inferentially the disparity between the assets in the hands of the father and in the hands of the mother which was the special circumstance alleged.
Now, there are obvious logical and practical difficulties in using a capital sum to create an obligation to pay a periodic amount of child support. How long is the capital going to be available? Is it appropriate to denude a capital sum over an extended period of time to meet an obligation usually met from income? Why would the child support income be fixed at one level for one year and not another? It is because of such issues and others besides that, presumably, such a course of action is not frequently encountered. The Tribunal might have found any number of reasons to reject the argument being advanced by the mother but they were obliged to consider it in the first instance and I am not satisfied that they did so. There is simply no discussion at all under the heading of “Application of the Law” of these sorts of issues. Instead, following the reference to s.117, and sub-section (7A) in particular, there is a further recitation of the earlier findings followed by a reference to s.3 of the Assessment Act and then a critical concluding paragraph which simply announcements that the Tribunal regards it as just and equitable to fix the child support income amount by reference to the income anticipated to be earned on the two investments plus an additional ten per cent to “take account of the full extent of assets available for Mr Seyler’s disposal”.
Furthermore, there is simply no indication that the Tribunal understood the obligation to undertake the further two steps referred in Gyselman (supra). They may not have thought it necessary to undertake these steps because they found that special circumstances did not exist or a ground of departure had not been made out but that only emphasises the need for the Tribunal to have clearly reached the stage of making such findings in the first place and they did not. As noted above, there may be compelling reasons in most cases as to why it would be wrong in principle to utilise capital, albeit significant capital, instead of income as the basis for the calculation of a child support income amount for a specific period but that does not mean that the task can simply be eschewed or overlooked by the Tribunal.
I have expressed by reservations already as to the way in which the Tribunal simply accepted assertions by the father as to debts paid by him from the sale proceeds and monies owing to his father. It was this unsatisfactory process which enabled the Tribunal to make its finding at [26] of its Reasons that, whereas the Registrar had been unclear about the extent of the father’s assets, the Tribunal was satisfied that they were “substantially lower” than the figure upon the Child Support Agency had relied. Whether these concerns would enable the appeal to succeed “on a question of law” (see s.110B of the Collection Act) is another matter but it is unnecessary for me to determine this issue in the light of the error of law identified in the Tribunal’s failure to evaluate the application that was before the Registrar in accordance with the legislative criteria and the principles enunciated in Gyselman (supra).
The setting aside of the Tribunal’s decision does not necessarily follow from the finding of the error of law. Section 110F(1) of the Collection Act provides:
The court must hear and determine an appeal under this Subdivision and may make such order as it thinks appropriate by reason of its decision.
The orders that should be made on the hearing of the appeal are discretionary, confined only by the fact that the orders must be made by reason of the Court’s decision. This means that the orders made on appeal must be a function of the error identified.
The Court’s consideration of the orders it should make should have regard, too, to the power the Court has to make findings of fact. These powers are described in s.110G of the Collection Act.
It is now some eighteen months since the mother applied for a change of assessment and approaching two years since the father sold the property. The evidence that has been available in relation to that sale and the proceeds of sale has been limited and uncertain.
From 1 July 2008 (see Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006), s.123A of the Assessment Act has been in operation. That section and related amending provisions provide statutory powers which appear to have the effect of rendering unnecessary or otiose the usual analysis in lump sum application cases of what were said to be inconsistent decisions of the Full Court of the Family Court relating to the power to make orders for lump sum child support. The argument related to whether the lump sum power in s.124 was truly a power to make an order in substitution of a departure order or whether it was a power that could only be used where the departure provisions of s.117 had already established the terms in which the assessment was being departed from (see Hampson v Lightfoot (1997) FLC 92-755 and Ivanovich v Ivanovich (1996) FLC 92-689). The legislation now provides that a lump sum order can be made whether or not it is intended to be credited against a liability under any relevant administrative assessment of child support. I raised with the mother’s counsel during the hearing of this appeal my query as to why the mother had not sought any lump sum order but do not have any understanding as to whether her reluctance to seek such an order arose from the uncertainties heretofore arising in relation to such applications.
If a lump sum application were before the Court the issues arising from the facts of their case could have been more straightforwardly confronted than was possible in the Tribunal and before the Registrar when the only options were in the form of departure orders.
The uses to which the father has put his capital - whether it has been used to purchase another farm or whether it has been dissipated for other purposes, for example - would plainly be a factual matter capable of having some bearing upon any decision of the Court to embark upon a fact-finding exercise. I have noted the length of time this dispute has been before the Registrar, the Tribunal and the Court. The inconvenience and expense to the parties arising from a bare remitter to the Tribunal would have to be considered, too, in the light of that information. The effect of setting aside the decision of the Tribunal would act, if left unmodified, to revive the assessment that operated as a result of the Registrar’s decision and would create an immediate arrears component.
In summary, if the mother intends to bring a lump sum application then there is no utility in embarking on a hearing on this application of the matter before the Tribunal pursuant to the Court’s fact-finding powers. The application can only be brought to the Court. The question of relative delay would not arise.
If the mother does not intend to do so, then the consequential hearing in this Court would be extensive in the light of the information that is required as outlined above. I agree with Halligan FM that the existing arrangements in the Collection Act for comprehensive review procedures indicate a legislative intention that questions of the level of periodic child support are to be dealt with administratively. Simply because the Tribunal has failed to determine the matter according to law is no reason for this Court to accept the responsibility for the conduct of such a hearing. The mother’s application, as noted above, is an ambitious one in the context of a departure order only but she is entitled to have it determined in accordance with the legislative criteria.
The appeal is allowed and the matter will be remitted for hearing in the Tribunal.
I have given consideration as to whether specific directions should be made as to the evidence that the Tribunal should insist on being adduced so as to have some degree of clarity about the father’s asset position (see s.110F(2)(b) of the Collection Act) but have decided not to so order in the expectation that the Tribunal will approach this issue with greater caution than was evident in the first hearing.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Lindsay FM
Associate: Ms N. Julius
Date: 12 August 2008