Yan and Orwell

[2007] FamCA 1259

FAMILY COURT OF AUSTRALIA

YAN & ORWELL [2007] FamCA 1259

FAMILY LAW – APPEAL – Leave to – Dismissed

Family Law Act 1975 (Cth)

APPLICANT: Mr Yan

RESPONDENT: Ms Orwell

FILE NUMBER: SYF 4562 of 2006

DATE DELIVERED: 24 October 2007

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Justice Cohen

HEARING DATE: 26 July 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Anderson

SOLICITOR FOR THE APPLICANT: Patricia White & Associates

COUNSEL FOR THE RESPONDENT: Mr Sweet

SOLICITOR FOR THE RESPONDENT: Gordon & Johnstone

Orders

1.That the husband’s Application in a Case filed 22 December 2006 for leave to appeal from the judgement of Magistrate Wynhousen in the Local Court Family Matters St. James delivered on 28 November 2006 is hereby refused and dismissed.

2.My reasons for judgement are reserved to a date to be fixed.

3.Costs are reserved for one month after publication of my reasons. 

IT IS NOTED that publication of this judgment under the pseudonym Yan & Orwell is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 4562 OF 2006

MR YAN

Applicant

And

MS ORWELL

Respondent

REASONS FOR JUDGMENT

1.Before me is an application by the husband for leave to appeal from a NSW Local Court Magistrate’s refusal by her judgement of 28 November 2006 to grant his application for departure orders from administrative assessments of his child support liability from 1 April 2001 to 30 June 2007. I have been informed by his counsel that, in all, $90,000.00 is owing if the current administrative assessment is to stand, whereas he would have no indebtedness for child support if he is granted leave to appeal and the appeal is wholly successful. If leave is granted, the appeal itself will have to be listed for hearing. Time constraints when the matter came before me limited the hearing to the leave application. Leave is required for an appeal to the Family Court of Australia from a decree of a court of summary jurisdiction of a state (s65(1) and (2) Child Support (Assessment) Act 1989 as amended (Assessment Act)).

2.On my understanding, for leave to be granted the applicant must demonstrate that the decision sought to be appealed from is compromised by an error of law and has resulted in a substantial injustice to one of the parties. Any claimed error of significant fact must be sufficient for it to be said that the evidence does not support the finding of fact and that, accordingly, an error of law has been made. This view is supported by what was said by the Full Court of the Family Court of Australia in Wild & Ballard 22 FamLR 291-297 about the view of the Full Court expressed in Gilmour & Gilmour 18 FamLR 918. What was said in Wild & Ballard is “The Court said that if a party’s substantive rights have been significantly effected by an error at first instance, then it would be appropriate to grant leave to appeal under the section.” The Court went on to say “It is appropriate then to examine whether the appellant has had his substantive right significantly affected by any error of principle made by the trial judge.” It is only an error of principle which creates substantial injustice which will give the right to a grant of leave to appeal. An error, whether of fact or of law, which does not result in substantial injustice; that is, does not effect any decision or finding in a way which results in substantial injustice, is not sufficient to give the right to a grant of leave to appeal.

3.With the assistance and enlightenment of both counsel who appeared in this application, I have had the opportunity to examine the magistrate’s decision very carefully. I am left in little doubt that her Honour paid considerable attention to the wife’s assertion that the husband lacked credit in his claim about his financial circumstances. The husband is a chartered accountant. The wife’s counsel had cross-examined the husband and Ms C, his defacto wife, about the inconsistencies in his evidence of his financial situation and documents, including tax returns. The wife’s defence was based on the assertion that the husband had not declared his true position and had falsely minimised his income, earning capacity and resources. Her Honour clearly found that the husband had not fulfilled the onus the husband had to satisfy her, on balance, that his financial situation was as he said it was. She said of the 5 separate periods for which the husband sought a departure from the administrative assessment:

“looking at these separately, the Court was not able to accurately or confidently discern the father’s income or earning incapacity or financial resources because of the nature of this [sic: “his”] income earning activities and the way in which his personal and business affairs have been structured.”

In effect, she found that he had deliberately misstated and misrepresented his financial situation and had, also deliberately, mixed his finances with the finances and affairs of others to aid his attempt to deceive. She was thereby unable to find that special circumstances existed for any period to permit a departure order to be made.

4.Mr Anderson, who appeared for the husband, submitted that, in saying what I have quoted above, her Honour was finding that she was simply too confused by the evidence and was unable to unravel his business affairs and activities to come to a conclusion about them, but was not making any finding that he had misrepresented them. I do not agree with this interpretation of her conclusion. Her Honour’s judgement specifically deals with a variety of factual situations which indicates she was weighing the degree of lack of credit about his business affairs and activities and financial affairs rather than any complexity of his situation. Her judgement concentrates on the evidence suggesting dishonest non-disclosure rather than honest disclosure.

5.Mr Anderson’s case otherwise essentially consists of two arguments. One is that the Magistrate did not consider s117 of the Assessment Act in the form which applied at all relevant times. This section was significantly amended in 2006. The amendments came into force on 1 July 2006. It is the amended s117 which applied at all relevant times here. It is submitted on behalf of the husband that her Honour considered s117 in the form it had before it was amended.

6.It is said as part of this argument that her Honour is shown to have made this error by a reference to s117(2)(c)(i) as relating to the income earning capacity, property and financial resources of the parents whereas, under the section which applied at the time, subsection (2)(c)(i) related to those attributes of the child. As part of the same argument, it is submitted that her Honour failed to refer to s117(7B) of the Assessment Act, a subsection which was first inserted into the Act by the amendments which took effect on 1 July 2006.

7.These subsections prescribe what the Court must find before it can decide that it is just and equitable to make an order. To be able to make a decision on these matters it must be satisfied it knows what they are. Included in the matters the Court must consider to decide whether or not it would be just and equitable with regards to each parent and the child are the income and earning capacity of the father (s117(4)(d) and (da)).

8.The basis for the submission the husband makes about the magistrate’s treatment of the application of s117 is that the husband’s application for departure was initiated by the administrative assessment of his child support liability by calculating it on assessed incomes for each relevant period which are roughly 2½ times or more greater than his actual taxable income. It is argued that her Honour should have made the starting point of her consideration the husband’s taxable income, which, it was submitted, was not suggested by the wife to be other than his actual income. It is agreed that her Honour’s assessment could only have been based on the assumption in the administrative assessment that his earnings were roughly 2½ times those stated in his income tax returns. Her Honour, it is said, could not make this assumption and should have made a finding, in effect, that his earnings and earning capacity was as refected in his tax returns.

9.I am quite satisfied that there is an essential fault in the husband’s argument on this aspect. It is based on an error in the transcript in the placing of quotation marks in reporting something Mr Sweet, who appeared for the wife, said to her Honour about the wife’s case. This misplacement of the quotation marks makes it appear that the wife was not questioning the husband’s claims about the extent of his income whereas it is clear from the whole transcript, and I have been informed by Mr Sweet who still appears for the wife, and accept that he was referring to what the husband’s case about his income was and was rhetorically questioning it. Neither Mr Anderson nor his instructing solicitor appeared in the proceedings in the Local Court, so it is quite understandable that Mr Anderson has been mislead by a literal reading of the erroneous transcript. I do not regard her Honour as having been in error in finding that she could not determine the husband’s income or income earning capacity but was not satisfied that his income was as stated in his tax returns.

10.Before further analysing her Honour’s approach to s117 to decide whether or not she made an error of law, it is necessary to attempt to understand s117. At first sight the section may seem to mean something different from its actual meaning.

11.The essence of s117 is in subsection (1). The other subsections amount to what is in effect a code for deciding whether the principle elements which must exist before a departure order can be made have been established.

12.S117(1) is:

Where:

(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and

(b)the court is satisfied:

(i)  that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and

(ii)  that it would be:

(a)  just and equitable as regards the child, the carer entitled to child support and the liable parent; and

(b)  otherwise proper;

to make a particular order under this Division;

the court may make the order.

13.There are 3 elements which need to be established before a departure order “may” be made by a court. They are cumulative, not alternatives. The elements are:

a)There must be an application for an order for departure for each particular child “in the special circumstances of the case.” The phrase “in the special circumstances of the case” is not defined in the Act. It has long been established that one must be an element which makes the existing circumstances special or out of the ordinary. It is not enough that the facts in the particular case are “within the ordinary run of cases” (In the marriage of Gyselman 15 FamLR 219).

It was submitted on behalf of the husband that her Honour should have held that the mere fact that the administrative assessment was based on something other than the husband’s taxable income establishes that the application for departure was made in special circumstances; that is, circumstances which are out of the ordinary in that it was not the result of an unexceptional calculation which applied the statutory formula to the husband’s taxable income. If this is correct, the magistrate’s unwillingness to accept the husband’s taxable income as being his actual income destroys his case in any event.

b)The Court must be satisfied that a specified ground exists. The available grounds are prescribed in s117(2)(a)(b) and (c). The only grounds which are relevant here are those stated in s117(2)(c). Paragraph (c) repeats the “special circumstances of the case” formula. This repetition appears to me to mean that the grounds listed in s117(2)(c) must involve somewhat extraordinary facts. S117(2)(c) also provides that a ground for departure exists if the administrative assessment is unjust and inequitable. I regard this part of s117 to mean that where an application is made for departure, in the particular circumstances or in the out of the ordinary situation the parties and child are in, a ground for departure is that the administrative assessment would create a level of financial support which makes the assessment unjust and inequitable. This highlights the error in the husband’s argument that one must start by considering the husband’s taxable income. One must start with the administrative assessment; that is, ask what, if anything, is unjust and inequitable in view of it and the other circumstances. One cannot say that it is unjust and inequitable where the husband’s income and earning capacity is not known as a result of his fault. It must be emphasised that the onus was on him to make a frank, meaningful and proper disclosure.  

Here, the assessment is not based on taxable income. One can usually, if it is appropriate, compare the income amount which has been used in the formula or otherwise with actual income or earning capacity. Because the magistrate found that she could not accept the husband’s evidence about his financial circumstances including his income, earning capacity and his true taxable income, she could not do this. The husband had not discharged the onus on him to put her in a position so she could. The husband relies on the difference between the income which was assessed and was therefore the basis of the administrative assessment and his taxable income as set out in his tax returns. His case is that the latter ought to have been the proper basis for his child support liability. As her Honour did not accept that the husband’s taxable income was a true reflection of his actual income it cannot be said that she was in error, as a matter of law, in not commencing her consideration by using it as a basis for comparison. The husband’s argument which is really that, if a party has not made a sufficient disclosure to enable the Court to know his actual income or earning capacity, the Court must rely on his income stated in his tax returns even though the Court does not accept its accuracy. This approach would be like the grant of a licence for non-disclosure.

As I have already said, it was argued before me that there was an error of law on her Honour’s finding that she did not accept the husband’s taxable income. This argument was founded only on the erroneous understanding that the wife’s counsel had not, before her Honour, challenged the accuracy of the tax returns. He had. The transcript reveals that the wife’s case was essentially based on that challenge. Counsel for the husband, before me, put forward no other ground for suggesting that her Honour’s finding that she did not accept the husband’s financial evidence was erroneous. It is quite clear that, in the circumstances of this case, the issue created by the husband’s application for departure was whether, in view of his income, property and financial resources, the assessed child support he was liable to pay was unjust and inequitable. He said this was so because the assessment was based on assessed incomes which were much higher than the taxable income he declared for taxation purposes and that his assets and financial resources and earning capacity did not make it appropriate to set his assessed child support at a level higher than that which would result from a calculation of it using the statutory formula and his declared taxable income. S117(2)(c)(ia) and (ib) are therefore relevant. It is equally clear that, however the magistrate named the paragraphs she relied on, she made her decision based on the grounds stated in s117(c)(ia) and (ib). Her decision was, involving these grounds, that the husband had failed to prove his case because she did not accept his evidence and he did not discharge his onus of proof of the matters which comprise these grounds.

c)The third element to s117(2) is that, before there can be a departure from an administrative assessment, the Court must be satisfied that it is just and equitable in respect of each parent and the  child in question (s117(1)(b)(ii)(a)) and otherwise proper (s117(1)(b)(ii)(b)) to make the order for departure. As this element is cumulative with the first and second elements, the grounds (s117(1)(b)(i) and s117(2)(c)) had not been established, so it was unnecessary for her Honour to consider this aspect, as she said. That she did not do so does not constitute an error. It was also, for the same reason, not necessary for her Honour to have considered s117(4), (7A), (7B) or s117(5). Therefore, there has been no error of law shown to have affected her Honour’s decision.    

14.If, for a grant of leave, it is merely necessary to demonstrate that there has been substantial injustice and it is not also necessary to demonstrate an error of law or other error of law, there is nothing in the matters put before me to allow the Court to conclude that there has been any injustice in the magistrate’s decision.

15.I have, accordingly, refused and dismissed the husband’s application for leave. The husband’s whole case for departure was dependant on a ground and no ground which was relied on could be established once her Honour did not accept his evidence as sufficient to prove what his financial circumstances, income, resources and income earning capacity were.           

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen.

Associate

Date:   24 October 2007