Zammit and Taffey and Anor
[2016] FCCA 211
•9 February 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ZAMMIT & TAFFEY & ANOR | [2016] FCCA 211 |
| Catchwords: CHILD SUPPORT – Administrative Appeals Tribunal – whether the Tribunal failed to apply the correct test – whether the Tribunal’s findings were against the weight of the evidence – no jurisdictional error – application dismissed. |
| Legislation: Child Support (Registration and Collection Act) 1988, ss.110K, 111F Child Support (Assessment) Act 1989, s.117(2) |
| Sagal & Child Support Registrar & Anor (SSAT Appeal) [2013] FCCA 51 Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409 |
| Appellant: | MR ZAMMIT |
| First Respondent: | MS TAFFEY |
| Second Respondent: | CHILD SUPPORT REGISTRAR |
| File Number: | ADC 1844 of 2013 |
| Judgment of: | Judge Kelly |
| Hearing date: | 13 April 2015 |
| Date of Last Submission: | 13 April 2015 |
| Delivered at: | Adelaide |
| Delivered on: | 9 February 2016 |
REPRESENTATION
| Counsel for the Appellant: | Dr R Gray |
| Solicitors for the Appellant: | Robert Chrzaszcz & Associates |
| Counsel for the First Respondent: | Dr R Savvas |
| Solicitors for the First Respondent: | Southern Community Justice Centre |
| Counsel for the Second Respondent: | Ms D Smith |
| Solicitors for the First Respondent: | Child Support Registrar |
ORDERS
The Notice of Appeal filed 25 July 2014 (as amended on 31 March 2015) is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Zammit & Taffey & Anor is approved pursuant to s.110X(4)(h) of the Child Support (Registration and Collection) Act 1988 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 1844 of 2013
| MR ZAMMIT |
Appellant
And
| MS TAFFEY |
First Respondent
And
| CHILD SUPPORT REGISTRAR |
Second Respondent
REASONS FOR JUDGMENT
Before the Court is the Appellant’s Amended Notice of Appeal filed 31 March 2015. The Appellant seeks to appeal the decision pronounced by the Social Security Appeals Tribunal (“SSAT”) where the Tribunal set aside a decision of the Child Support Registrar and substituted a new decision as follows:
1That for the period 23 July 2013 to 30 September 2015 the Appellant’s adjusted taxable income be set at $112,000 per annum.
The Appellant asserts that the SSAT made an error of law in pronouncing its findings. Both the First Respondent and the Second Respondent (the Child Support Registrar) argue that there was no error of law and the decision of the SSAT should stand.
Background
The background facts are taken from the SSAT reasons and are not in dispute. The Appellant and the First Respondent are parents of the child X, born (omitted) 2003. The parties separated in July 2012. X remained in the First Respondent’s care after separation and she sought a Child Support Assessment shortly after separation.
In 1999 the Appellant established his company (omitted) Pty Ltd (the company) and the Zammit Family Trust (the Trust), with (omitted) P/L as the Trustee. The Appellant operated his business, (business omitted), through the Trust. The Appellant operated this business during the parties’ relationship and continued to work in the business since separation.
The Appellant held the position of sole Director and Secretary of the company until November 2013, when he appointed his sons Mr K and Mr L as co-directors. The Appellant now holds 60% of the shares in the company and each of his sons own 20%. He says that he intends the business to be a legacy for his sons and now works in the business as a consultant, on an unpaid basis.
On 23 July 2013 the First Respondent requested a variation to the Child Support assessment, claiming that the Appellant had not accurately disclosed his income and financial resources. On 13 September 2013 a Senior Case Officer (“SCO”) determined that a reason for departure had been established and declared that the Appellant’s taxable income should be adjusted to the sum of $53,818. This resulted in the Appellant paying an increased amount of child support in the sum of $5,473 for the period 1 September to 30 September 2013 and the sum of $5,345 for the period 1 October 2013 to 31 December 2014.
The First Respondent filed an objection to that decision on 3 October 2013. On 16 January 2014 a CSA Objections Officer, determined that the Appellant was alienating his income through the Trust and allowed the objection. The Objections Officer determined that the Appellant’s adjustable taxable income should be set at $236,656 per annum which further increased the amount of child support payable by the Appellant to the sum of $20,477 for the period 1 October 2013 to 31 December 2014.
On 13 February 2014 the First Respondent sought a review of the Child Support Agency’s decision by the SSAT. The SSAT received evidence and heard submissions from each of the parties. On 6 June 2014 the SSAT set aside the earlier decision and substituted a new decision to the effect that the Appellant’s adjustable taxable income be set at $112,000 per annum for the period 23 July 2013 to 30 September 2015.
The decision and Reasons for decision of the SSAT are annexed to the original Notice of Appeal filed by the Appellant on 25 July 2014. On 3 September 2014 the Child Support Registrar was joined as the Second Respondent in the proceedings.
On 24 November 2014 the SSAT was ordered to produce documents to this Court in accordance with s.110K of the Child Support (Registration and Collection Act) 1988 (the Registration Act”) and the parties were otherwise directed to provide mutual informal discovery and attend a Conciliation Conference. The matter remained unresolved and on 16 February 2015 the matter was listed for hearing with each party to file their written submissions prior to the hearing date.
The hearing proceeded on 13 April 2015.
The relevant law
The relevant law is that which applied at the time the Appeal was filed. The appeal is brought under s.110B of the Registration Act which provides as follows:
“A party to a proceeding before the SSAT under Part VIIA may appeal to a court having jurisdiction under this Act, on a question of law, from any decision of the SSAT in that proceeding.”
The Federal Circuit Court is a Court for the purposes of s.110B. Appeals from the SSAT are limited to appeals based on a question of law. It is not this Court’s role to consider findings of fact made by the Tribunal. As was held in Sagal & Child Support Registrar & Anor (SSAT Appeal):
“Consistent with these and other decisions of this Court, such as Podmore & Pillai (SSAT Appeal) and Tasman & Tisdall [citations omitted] the approach to be taken in an appeal pursuant to s.110B of the Registration and Collection Act is not a rehearing on the merits in which findings of fact made by the SSAT are reviewed and the Court’s views of the facts substituted.”
An appeal on a question of law is more limited in scope than an appeal which involves a question of law. In Australian Postal Corporation v Hughes, Flick J considered an analogous provision within the Administrative Appeals Tribunal Act 1975 and said:
“The jurisdiction being exercised is … constrained by the requirement that the appeal be ‘on a question of law’. In Brown & Repatriation Commission [footnote omitted] Bowen CJ, Fisher and Lockhart JJ observed in respect to this constraint:
‘The existence of a question of law is not merely a qualifying condition to ground an appeal from a decision of the Tribunal; rather it and it alone is the subject matter of the appeal and the ambit of the appeal is confined to it.’[2]
[2] Australian Postal Corporation v Flick [2009] FCA 1057 at par. 7
In LDME & JMA (SSAT Appeal) Halligan FM (as he then was) said:
“The basis and focus of a section 110B appeal is a question of law. The appeal is not one in which findings of fact per se can be called into question (Comcare v Etheridge) [footnotes omitted] … the grounds of appeal called for in the Notice of Appeal in this Court assume the provisions of s.110B. Thus in my view the grounds of appeal to be set out in the Notice of Appeal should ideally be expressed in a way that enables the Respondent and the Court to identify the question or questions of law sought to be raised by the Appellant and the reasons why a finding for the Appellant on that question or those questions should result in the orders sought in the Notice of Appeal being made.”[3]
[3] LDME & JMA (SSAT Appeal) [2007] FMCAfam 712 at par. 29
Proper drafting of the grounds of appeal and the Notice of Appeal ensure that the Tribunal’s role as the determiner of facts is maintained and helps to ensure that this Court’s role only arises where an error of law is identified.
It is well understood that the statutory requirements of the Federal Circuit Court require that hearings proceed without undue formality and that the Court endeavour to avoid protracted proceedings. To quote again from Halligan FM:
“Notwithstanding this ideal, this Court must have regard to the statutory requirement binding it to “proceed without undue formality” and to “endeavour to ensure that the proceedings are not protracted” (s.42, Federal Magistrates Act 1999), reflecting the objects of the Federal Magistrates Court Act (see especially s.3(2)(a) and (b)). The eschewing of undue formality is particularly significant in matters, such as child support matters, where unrepresented litigants are a significant phenomenon. The lack of representation of a s.44 appellant has been recognised in this Court as justifying some amelioration of the usually strict requirement in such appeals for the question of law to be stated in the Notice of Appeal (Burgess v Centrelink and Ors [2006] FMCA 1952 at [5] and [6]).
I am therefore of the view that an unduly legalistic or pedantic approach should not be taken in analysing the grounds of appeal stated in the Notice of Appeal. Especially with unrepresented litigants, the Court must strive to identify from the case presented whether a question of law arises that may justify the orders sought and strive, consistent with the requirements of procedural fairness, to deal with the substance of the case.[4]
[4] LDME & JMA (SSAT Appeal) ibid, at par 30
In the event the Court determines that an error of law has been made then s.110F of the Registration Act authorises the Court to make such Orders as it thinks appropriate including:
1An order affirming or setting aside the decision of the SSAT; or
2An order remitting the case to be heard and decided again, either with or without the hearing of further evidence, by the SSAT in accordance with the directions of the Court.
Grounds of appeal
The Appellant’s grounds of appeal are set out in his Amended Notice of Appeal filed 31 March 2015 as follows:
1That the Tribunal erred in law in finding that the Appellant’s taxable income was $112,000 from 23 July 2013 to 30 September 2015.
2That the Tribunal erred in law in its application of section 117(2) Child Support (Assessment) Act 1989 in departing from an administrative assessment of child support of the Appellant.
3That the Tribunal erred in law finding that it was just and equitable and otherwise proper to set aside the decision of the Child Support Agency and substitute the Appellant’s taxable income as $112,000 for the period of 23 July 2013 to 30 September 2015.
4Whether the scope of the decision making power in section 117(2) of the Child Support (Assessment) Act 1989 properly construed required the Tribunal to consider according to law the control of the Zammit Family Trust (‘the Trust’) and to consider according to law the carry forward losses, such that:
i)by reason of the failure of the Tribunal at para.78 of its Reasons of Decision to consider according to law the carry forward losses; and
ii)by reason of the failure of the Tribunal at para.58 of its Reasons of Decision to consider the control of the Trust according to law;
iii)the administrative decision action should be set aside on the ground of illegality.
5Whether on a proper construction of section 117(2) of the Assessment Act the Tribunal was required to determine the benefit, if any, that the Appellant received from the Trust having regard to the losses of the Trust, and to consider according to law the question of control of the Trust, such that:
i)by reason of the Tribunal’s failure at para.78 and para.79 of its Reasons of Decision to have regard to the losses of the Trust being a relevant consideration; and
ii)by reason of the Tribunal’s failure at para.58 of its Reasons of Decision to consider according to law the control of the trust being a relevant consideration; and
iii)by reasons of the Tribunal’s failure at para.78 and para.79 of its Reasons of Decision having regard to an irrelevant consideration, namely the profit of the Trust without regard to the losses;
iv)the administrative decision action should be set aside.
6Whether on a proper construction of section 117(2) of the Assessment Act there was manifest unreasonableness in the decision making process of the Tribunal and the decision is amenable to review on the grounds of Wednesbury unreasonableness, in that the Tribunal has used the profit of the Trust in a capricious way with no regard to the losses sustained by the Trust. The Tribunal has further erred at para.79 of its Reasons of Decision in ‘grossing up’ this figure contrary to the requirements of section 117(2) of the Assessment Act.
7Whether a proper construction of section 117(2) of the Assessment Act provides that procedural fairness should be provided to the Appellant such that there was procedural impropriety in the decision making process and a failure to properly observe the statutory process by which jurisdiction is conferred.
8Whether on a proper construction of section 117(2) of the Assessment Act the Tribunal failed to accord procedural fairness to the Appellant as an unrepresented litigant in not rejecting the evidence of the Appellant’s accountant but in failing to have regard to the evidence of the accountant concerning the financial impact of the carry forward losses; and further in making at para.62 of its Reasons of Decision an adverse finding concerning the non-production of documents in relation to documents the production of which were not sought.
The Appellant and the Second Respondent presented detailed submissions and Counsel for both parties spoke to those submissions in the course of the hearing. The First Respondent endorsed the submissions presented by the Second Respondent.
The Appellant concedes that the Tribunal has the capacity to look beyond the formal legal structure of a party’s financial, corporate or trust arrangements, but argues the SSAT did not properly undertake this factual enquiry. Rather, the Appellant argues that the SSAT relied solely upon his 60% shareholding of the company to base its finding that the Appellant controls the Trust. The Appellant argues that the Tribunal fell into error in determining that he had control of the company and therefore control of the Trust.
Determining who has actual control of the Zammit Family Trust is a finding of fact. The Tribunal’s conclusion in para. 57 is based on the contents of the whole paragraph, including reference to the minority shareholding of each of the Appellant’s sons and their recent appointment as directors.[5] The evidence before the Tribunal indicated that neither son played a significant decision-making role in the company. The evidence also established that a range of the Appellant’s personal expenses were paid by the company. I am satisfied that the Tribunal, having examined the Appellant’s financial arrangements beyond the formal legal structure, was entitled to conclude that the Appellant was in actual control of the company and that he was also in actual control of the Trust. It follows therefore that he controlled any income earned by the Trust.
[5] On 28 November 2013
It is plain from the reasons that the Tribunal considered all relevant material, including the Trust Deed, and was clearly aware of the legal structure of the business and the Trust. It may be that para. 57 was poorly expressed, but this Court should not be too quick to find fault with the Tribunal’s written reasons. To quote again from Halligan FM:
”It is well settled that when reviewing an administrative decision for error, a court should not be “concerned with looseness in language nor with unhappy phrasing”, and “the reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error” (Collector of Customs v Pozzolanic Enterprises Pty Ltd, above, at 287, cited with approval in Minister for Immigration and Multicultural Affairs v Wu Shan Liang (1996) 185 CLR 259 at 272 per Brennan CJ, Toohey, McHugh and Gummow JJ, and see the comments of Kirby J to similar effect at 291).”[6]
[6] LDME & JMA (SSAT Appeal) ibid, para 34
Even if the Tribunal was wrong in finding that the Appellant “…controls the trustee company and therefore that he controls the Trust…”[7], there was other evidence before the Tribunal to justify the finding that the Appellant does exercise ultimate control over the Trust. This is a factual matter for the SSAT to determine and I am satisfied that the SSAT did so based on proper evidence before it.
[7] SSAT, Reasons for Decision, para.58
In finding that the Appellant had effective control of the business and the Trust, the Tribunal properly considered the legal structure in place and then went on to consider other factors relating to the Appellant’s actual control of the Trust, including the monetary benefits received by him and the level of intermingling between the Appellant’s personal finances and the business accounts.
The Appellant argued that the Tribunal failed to properly consider the true financial circumstances of the Zammit Family Trust, in that it failed to take into account the carry forward losses held by the Trust. Counsel argued that relying upon the profits of the Zammit Family Trust, without having regard to the losses held by the Trust, equates to an error of law.
Having considered the Reasons published by the Tribunal, I reject this submission. The Tribunal found that the level of intermingling between the Appellant’s business finances and his personal finances made it difficult to determine the Appellant’s actual income, a task made more complicated given that the Tribunal was not satisfied that the Appellant had provided full disclosure in relation to his financial circumstances.[8]
[8] SSAT Reasons for Decision, para.62
The SSAT clearly had regard to all of the financial arrangements surrounding the company and the Trust, based on the evidence provided by the Appellant and his accountant. The SSAT identified the evidence upon which it based its decision. They acknowledged that the business profit in the 2012/2013 financial year was essentially a “paper profit” in the sum of $73,922, taking into account the ongoing retained losses, or carry forward losses, of the Trust.
The Tribunal found that the benefits that the Appellant derives from the business constitute “income” for the purposes of the Child Support scheme, even though it may not equate to income for taxation purposes. They concluded that the figure of $73,000 was a starting point for determining the Appellant’s Child Support income, in circumstances where the Appellant had not presented any more reliable evidence. While acknowledging that the Trust profit was essentially a “paper profit”, the Tribunal also noted the evidence from the Appellant’s accountant, to the effect that there are no legal consequences or any tax implications if the income was not directed to reduce the held over Trust losses.[9]
[9] SSAT Reasons for Decision, para.78
The Tribunal specifically noted that the Appellant’s income may actually be higher than the Trust profit figure of $73,922, given their concerns about the reliability of some very high business expenses claimed in the 2012/13 Financial Statements. Nonetheless the Tribunal ultimately accepted those figures and used the “on paper” Trust profit as a starting point from which to determine the Appellant’s income. The fact that the Trust held ongoing carry forward losses is a separate issue to the Tribunal’s task, which is to establish the Appellant’s likely income over the relevant period.
A determination about the Appellant’s income is a finding of fact. I am satisfied this finding was open to the Tribunal, on the available evidence. It was equally open to the Tribunal to take into account that the Trust pays many of the Appellant’s personal costs and to allocate an additional figure in that regard when setting his child support income.[10]
[10] SSAT Reasons for Decision, para.79
The Appellant argues that the Tribunal attached excessive weight to the evidence regarding the Trust income and that this equates to an error of law. I reject that submission. The weight to be attached to particular evidence is a matter for the Tribunal. It is also well understood that the Tribunal need not be “unduly cautious” in making adverse findings in circumstances where the Tribunal concludes that a party has not provided full disclosure in relation to his or her financial circumstances.[11]
[11] Humphries & Berry (SSAT Appeal) [2008] FMCAfam 409 at para.31
The Appellant argues that the Tribunal fell into further error by “grossing up” the Appellant’s income. The Tribunal’s reasons in this regard are as follows:
“We consider it appropriate to ‘gross up’ this net figure [$83,000 per year] in the same way that a wage and salary earner’s gross salary would be used in the assessment, not their net salary, in particular because prior years’ losses for the trust have offset this profit, resulting in no taxable income for the Trust and therefore also for Mr Zammit from that source. A net amount of $83,000 per year would result in a grossed up amount of approximately $112,000 per year.”[12]
[12] SSAT Reasons for Decision, para.79
In adopting this reasoning the SSAT was endeavouring to place the Appellant in the same position that a wage earner would be in when applying the formula under the Assessment Act. The SSAT’s findings in this regard cannot be said to be greatly unreasonable, illogical or irrational.
The Appellant argues that the Tribunal failed to afford him procedural fairness as an unrepresented litigant. He argues that the Tribunal did not formally reject the evidence from Mr B, but then did not accept his evidence in relation to the financial impact of the carry forward losses. Finally, the Appellant argues that the Tribunal made an adverse finding concerning the non production of documents by the Appellant, when the documents in question were not specifically sought by the Tribunal.
Regarding Mr B’s evidence, there is nothing to suggest that the Tribunal erred in its assessment of his evidence. The Tribunal took his evidence into account, along with all the other evidence presented in the hearing, and placed such weight upon Mr B’s evidence as it considered appropriate. There is no obligation on the Tribunal to “formally reject” evidence of a witness in the way proposed by the Appellant.
In relation to the non production of documents, the Tribunal has dealt with this matter adequately in its Reasons at paragraphs 61 and 62. I agree with the Tribunal’s finding that the Appellant was fully aware that the true state of his financial affairs would be a major topic of enquiry before the Tribunal. He was well aware that he had a responsibility to present the relevant evidence. The Tribunal made an adverse finding against the Appellant based on a range of concerns, including the absence of “an explanation for very significant transfers from the business bank accounts”,[13] in addition to the non production of documents.
[13] SSAT Reasons for Decision, para.62
The Appellant gave evidence. His accountant gave evidence on his behalf. In those circumstances, the Tribunal is entitled to expect that the Appellant would present a full and accurate picture of his financial situation and that their reasonable enquiries would be answered by the Appellant or Mr B. Ultimately the Tribunal concluded that they were not given adequate evidence or explanations on these topics. That is a conclusion open to the Tribunal, as the finder of fact.
Conclusion
Taking into account all of the submissions, I do not consider the grounds of appeal have been made out. I am not satisfied that the Tribunal made an error in law in relation to its factual findings nor that any of its factual decisions were unreasonable, illogical or irrational, in the Wednesbury sense. Even if the Tribunal did find that the Appellant was in control of the company solely by virtue of his majority shareholding, an incorrect finding of fact is not sufficient to overturn a decision by the Tribunal in an appeal that can only be founded on a question of law.
I am satisfied there was other evidence before the Tribunal to justify a finding that the Appellant was in actual control of both the trustee company (omitted) Pty Ltd and the Zammit Family Trust itself, despite the strict legal construction that applies. I reject the argument that the Tribunal’s findings of fact were so unreasonable as to become an error of law.
I conclude the Tribunal was entitled to find that:
1In accordance with s.117(2), the grounds to justify departing from an administrative assessment had been established;
2It was just and equitable and otherwise proper to set aside the decision under review;
3The Appellant’s income should be set in the amount of $112,000;
4The Appellant exercised effective control of the trustee company and the Trust.
I further conclude that the Appellant has not been denied procedural fairness in the hearing before the Tribunal. I find that grounds 4, 5, 6, 7 and 8 of the grounds of appeal are not made out. It therefore follows that grounds 1, 2 and 3 are not made out.
The Notice of Appeal and amended Notice of Appeal are dismissed.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Kelly
Date: 9 February 2016
[1] Sagal & Child Support Registrar & Anor (SSAT Appeal) [2013[ FCCA 51 at par. 24
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