Yanda & Jacome
[2023] FedCFamC1A 116
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Yanda & Jacome [2023] FedCFamC1A 116
Appeal from: Jacome &Yanda [2022] FedCFamC2F 1791 Appeal number(s): NAA 15 of 2023 File number(s): BRC 7039 of 2022 Judgment of: RIETHMULLER J Date of judgment: 18 July 2023 Catchwords: FAMILY LAW – APPEAL – LEAVE TO APPEAL –CHILD SUPPORT – Whether the Court has the power to make a non-periodic child support order under s 124 of the Child Support (Assessment) Act 1989 (Cth) to increase the overall amount of a child support obligation beyond the amount of an existing periodic assessment – Where the appellant was ordered to pay private school fees – Where appellant had significant tax debt – Whether tax debt taken into account when considering whether to order non-periodic child support pursuant to the Child Support (Assessment) Act 1989 (Cth) Legislation: Child Support (Assessment) Act 1989 (Cth) ss 117, 124, 125, Div 5 of Pt 7
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 28
Federal Proceedings (Costs) Act 1981 (Cth) ss 6, 9
Cases cited: Ivanovic v Ivanovic (1996) FLC 92-689; [1996] FamCA 41
Lightfoot v Hampson (1996) FLC 92-663; [1996] FamCA 8
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Ryan & Ryan [1994] FamCA 175
Number of paragraphs: 23 Date of hearing: 4 July 2023 Place: Heard in Brisbane, delivered in Parramatta Counsel for the Appellant: Mr Shoebridge Solicitor for the Appellant: Cooper Family Law Counsel for the Respondent: Mr Linklater-Steele Solicitor for the Respondent: Rostron Carlyle Rojas Lawyers ORDERS
NAA 15 of 2023
BRC 7039 of 2022FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR YANDA
Appellant
AND: MS JACOME
Respondent
order made by:
RIETHMULLER J
DATE OF ORDER:
18 JULY 2023
THE COURT ORDERS THAT:
1.The husband be granted leave to appeal and the appeal be allowed.
2.The Orders made on 23 December 2022 be set aside.
3.The matter be remitted for re-hearing by a judge of the Federal Circuit and Family Court of Australia (Division 2).
4.The husband be granted a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the husband in respect of the costs incurred by the husband in relation to the application for leave to appeal and the appeal.
5.That the wife be granted a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the husband in respect of the costs incurred by the wife in relation to the application for leave to appeal and the appeal.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Yanda & Jacome has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
RIETHMULLER J:
INTRODUCTION
The husband seeks leave to appeal against orders of the primary judge (made on 23 December 2022) that affirmed orders of a registrar (made on 4 October 2022) requiring him to pay private school fees of around $1,044 per week, without crediting all or part of those payments against the existing child support assessment of $481 per week. The grounds of the proposed appeal are set out in the husband’s Notice of Appeal filed 24 March 2023.
As the husband seeks leave to appeal from a judgment exercising original jurisdiction pursuant to the Child Support (Assessment) Act 1989 (Cth) (“the Act”), the husband requires leave to appeal: see s 28(1)(a)(i) of the Federal Circuit and Family Court of Australia Act 2021 (Cth). To obtain leave to appeal, the husband must demonstrate that the decision of the primary judge was “attended by sufficient doubt to warrant it being reconsidered by the Full Court and [that] substantial injustice would result if leave were refused, supposing the decision to be wrong”: see Medlow & Medlow (2016) FLC 93-692 at [57].
BACKGROUND
The husband and wife have two children, aged 13 and 14 years, respectively. They were married for 15 years, separating in November 2021. The husband is a medical professional and the wife works in administration. The children have been attending private school throughout their education. The issue before the primary judge was whether the husband has the financial capacity to meet the private school fees. The primary judge affirmed orders made by a Judicial Registrar for the husband to meet the entirety of the private school fees in addition to his existing periodic child support assessment.
THE PROPOSED GROUNDS OF APPEAL
The husband’s primary argument is that there is no power to make a non-periodic child support order that increases the overall obligation of the husband beyond the periodic rate of the child support assessment. That is, that the non-periodic support is limited to a sum that can be fully credited against the periodic rate. Whilst this argument was set out in Ground 4 of the husband’s Amended Notice of Appeal, it is convenient to deal with this ground first.
Ground 4
4. That the Learned trial Judge erred by making an Order pursuant to s.124 of the Child Support (Assessment) Act when the effect of that Order was to increase the child support obligation of the Appellant over and above the obligation created by the existing assessment when there was no [application] before the Court under Division 4 of the Child Support (Assessment) Act 1991 to depart from the existing assessment.
(Amended Notice of Appeal filed 24 March 2023)
The majority of the Full Court in Lightfoot v Hampson (1996) FLC 92-663 (as followed in Ivanovic v Ivanovic (1996) FLC 92-689) found that orders can be made for non-periodic child support even if there is no corresponding credit against the periodic rate of child support. It is not disputed that the primary judge applied the reasoning of the Full Court in Lightfoot v Hampson, as her Honour was obliged to do. Rather, this ground turns upon the question of whether the decision in Lightfoot v Hampson should be followed.
The husband argues that there are difficulties in the reasoning of the majority in Lightfoot v Hampson such that it should not be followed, and that the decision of Gee J in Ryan & Ryan [1994] FamCA 175 ought to be preferred.
This is not the first occasion upon which the decision in Lightfoot v Hampson has been challenged on appeal. In Ivanovic, the Full Court considered Lightfoot v Hampson but declined to depart from the findings of the majority, although expressing concern as to the narrowness of the majority’s interpretation of the provisions, compared to the broader interpretation preferred by Kay J (who dissented in Lightfoot v Hampson).
The husband argues that the form of the legislative scheme requires that any change to the overall rate of child support must be undertaken through the periodic assessment process (with such departures as are appropriate pursuant to s 117 of the Act) and that any non-periodic payments must be in substitution for all or part of the periodic rate, relying upon the narrow interpretation set out in Ryan. The effect of this interpretation would be to limit a non-periodic order to an amount no greater than an amount that could be credited against the periodic rate. However, s 125 of the Act expressly provides for a discretion to determine “whether” the non-periodic child support should “be credited against” the periodic child support obligation. When this discretion is exercised in a way that does not result in crediting of the non-periodic support against the periodic amount, the total child support is necessarily greater than the periodic rate alone. Thus, the interpretation set out in Ryan, as pressed by the husband in the present appeal, is inconsistent with the discretion in s 125 of the Act (not to credit the non-periodic support against the periodic support in appropriate cases) and must be rejected.
The husband also argues, relying upon the reasoning in Lightfoot v Hampson (at [80]), that Div 5 of Pt 7 of the Act is “not an independent source of power to make a child support order”, and thus there is no power to make an order that is not credited against the periodic child support (effectively limiting the provisions to purely substitution orders). However, it is apparent from the wording of s 125 of the Act that Div 5 of Pt 7 of the Act does provide a power to make a non-periodic child support order that goes beyond the periodic amount, as was accepted by the Court in both Lightfoot v Hampson and Ivanovic.
The statement in Lightfoot v Hampson that the provision is “not an independent source of power” must be understood in the context of the facts of that case. There the trial judge had declined to increase the periodic rate of child support (pursuant to s 117 of the Act) despite the differing asset positions of the parties, but then made a lump sum order based upon that asset disparity. In Lightfoot v Hampson, the trial judge had, in substance, exercised the power to make a non-periodic child support order inconsistently with his findings with respect to the periodic rate of child support pursuant to s 117 of the Act. It is in this sense that the power to make non-periodic child support orders is not a power that can be exercised ‘independently’, that is, independently of any consideration of the periodic child support rate.
Rather than being too broad, it is arguable that the decision in Lightfoot v Hampson may be too narrow with respect to the conclusion of Fogarty J at [80], however that is not an issue that arises in this appeal.
I am not persuaded that Lightfoot v Hampson should be departed from in favour of the narrow approach in Ryan. As a result, Ground 4 is without merit.
Ground 1
1. The Learned Judge failed to properly assess the Appellant’s capacity to pay the order made pursuant to section 124 of the Child Support (Assessment) Act 1991, specifically
a. Conflating the amount the Appellant must pay by way of ongoing income tax, and an amount the Appellant must pay by way of previously assessed income tax; and/or
b. Failing to attribute to the Appellant’s weekly expenses an amount to pay his previously assessed income tax, and thereby fell into error in the affirming of an order pursuant to section 124 of the Child Support (Assessment) Act 1991.
(Amended Notice of Appeal filed 24 March 2023)
At the outset it should be noted that the material before the Court with respect to the husband’s tax debt was less than detailed and the submissions made to the primary judge did little to assist her Honour in this regard.
When considering the husband’s capacity to meet the private school fees, the primary judge considered the husband’s claim that he had an existing tax debt which required repayments at a rate that left him with a weekly deficit: at [20]. At [43], the primary judge identifies the relevant paragraphs in the husband’s affidavit (noted as being “yet untested evidence”) where he details that he is paying off a tax debt:
Current Tax Debt and Savings
31) My Financial Statement sets out that I have a tax bill of $174,626.
32) I have incurred that bill for the following reasons:
a) My income traditionally was deposited into an offset account, which was attached to the loan secured by the former matrimonial home;
b) Once deposited there, I would use the funds in the offset account to pay my tax;
c) However, on 23 November 2021, after [the wife] transferred $50,000 from the offset account to her personal account, [the wife] made representations to the ANZ Bank to require all future transaction from that account to be dual authority only; and
d) [The wife] has since refused me access to those funds to pay my tax bill.
33) As a consequence, I have had to pay part of the outstanding tax bill from my personal savings. I have paid $60,000 in October 2022. Now shown to me marked with the letters MY6 and annexed hereto is a true copy of my current income tax account with the ATO.
34) I am told by my accountant, and believe, that he has negotiated until March next year for me to pay out the balance of that tax bill before the ATO start charging general interest and penalties. In addition, from that date, 1 am required to make $10,000 payments per month to meet the bill.
(Husband’s affidavit filed 1 December 2022)
The primary judge made findings that the husband’s reasonable and necessary weekly expenses are $5,422 per week (at [47]), exclusive of the existing tax debt. The primary judge then turned to the husband’s tax debt and made findings that the tax debt must be considered, saying:
48. I reject the submission by the Wife’s counsel that the Husband’s evidence, about repayment of the tax liability being unnecessary. The tax liability plainly relates to past earnings and is to be paid by April 2023. Whether part repayments are made or not, provision needs to be made for payment of the tax, unless the Wife concedes that the liability when due is paid from joint savings or the offset account. I do not understand that concession to have been made.
49. I note that when I suggested the school fees be paid from the mortgage offset account, this was not agreed, so I can fairly infer that there would not be agreement about payment of the tax liability from those funds.
(Footnotes omitted)
The primary judge considered the husband’s income, finding that he had an income of around $7,000 per week, and thus a surplus of income over expenses of $1,600: at [61]. In this analysis, the primary judge did not take into account the husband’s obligation to pay the remaining taxation debt of $118,896.65 when assessing his capacity to meet the private school fees: see balance of taxation debt set out in Annexure “MY6” to the husband’s affidavit filed 1 December 2022, Australian Taxation Office account statement.
The primary judge’s reasons do not disclose why the husband’s tax debt was not taken into account. If the tax debt is taken into account, it appears that the husband has no present capacity to meet the school fees.
As a result, the husband has established that the primary judge failed to take into account a relevant consideration pursuant to s 124 of the Act.
Grounds 2 and 3
The husband’s arguments with respect to Ground 2 and Ground 3 were also founded upon the primary judge not taking into account the husband’s tax debt, and therefore do not need to be separately addressed.
CONCLUSION
The husband has established an error of law on the part of the primary judge. When one has regard to the size of the tax debt, in the context of the husband’s income and expenses, the failure to take it into account results in a significant injustice. As a result, I grant the husband leave to appeal and allow the appeal.
Both parties submitted that if the appeal were to be allowed it would be appropriate to remit the matter for a rehearing, given the limited material before the Court on the relevant issues. Importantly, there was little before the Court as to what part of the debt arose before or after separation (the parties having separated in November of the relevant financial year), whether funds sufficient to meet the debt had been deposited into the parties’ mortgage offset account by the husband prior to separation, or what other provision (if any) the husband had made to meet his tax liabilities. If the husband has no financial capacity of to meet the private school fees until the tax debt is met, consideration may be required as to whether the fees should be paid from the capital resources of the parties (which appear to be in excess of $4 million). I accept the parties’ submissions that in the circumstances of this case it is appropriate to make orders remitting the matter for re-hearing.
As the appeal is allowed as a result of an error of law by the primary judge, the parties submitted that the appropriate costs orders were for certificates to issue under the Federal Proceedings (Costs) Act 1981 (Cth) with respect to the costs of the appeal. I accept these submissions. As the parties propose filing further material for the purpose of the re-hearing, which could have been filed for the hearing before the primary judge, I am not persuaded that it is appropriate to order that certificates issue with respect to the costs of the re-hearing.
I make orders accordingly.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Riethmuller. Associate:
Dated: 18 July 2023
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