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High Court of New Zealand Decisions |
Last Updated: 19 January 2018
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PURSUANT TO S 124 CHILD SUPPORT ACT 1991 PUBLICATION OF NAMES OF APPLICANT
AND RESPONDENT OR PARTICULARS LIKELY TO LEAD TO THEIR IDENTIFICATION
PROHIBITED.
LEAVE GRANTED TO OTHERWISE PUBLISH THIS JUDGMENT.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2007-485-1634
AND IN THE MATTER OF THE CHILD SUPPORT ACT 1991
BETWEEN IPD Applicant
AND KME
First Respondent
AND COMMISSIONER OF INLAND REVENUE DEPARTMENT Second
Respondent
Hearing: 31 March and 1 April 2008
Counsel: J J Delany for Applicant
F C Devlin for First Respondent
M Deligiannis and L L du Claire for Second Respondent
Judgment: 24 April 2008
In accordance with r540(4) I direct the Registrar to endorse this judgment
with a delivery time of 2 pm on the 22nd day of April 2008.
RESERVED JUDGMENT OF GENDALL J
[1] These proceedings concern a child support assessment made in respect of two children, now aged 16 and 17. On the application of the First Respondent (the mother) for an administrative review, the Commissioner determined that the
applicant (the father) was to be assessed for child support on the basis
of an income
IPD V KME AND ANOR HC WN CIV-2007-485-1634 24 April 2008
of $70,000 for the year ended 31 December 2006. The father applied to the
Family
Court at Rotorua for a departure order from that assessment.
[2] The mother sought, in the form of a “cross-application” a departure order from the formula assessment because it related only to the year ended 31 December
2006, and she contended that the formula assessment for the years ended 2001
until
2006 be departed from to the extent of an assessment based on the
father’s $70,000 per annum income figure. She contended
that the father
had financial resources available to him which should have, if known to have
existed, justified a formula assessment
in excess of that made by the
Commissioner, for these years. The departure order ought to have been
“retrospective”.
[3] The proceedings are before this Court because Judge J P Geoghegan
in the Family Court at Rotorua concluded that High Court
decisions which he
regarded as binding upon the Family Court prevented retrospective
application of departure orders. The
Judge considered that there was a need
for the High Court to reconsider previous authority in the context of the
legislative provisions:
“...and [given] the particular circumstances of this case where it is
argued that the application had bought about by
the deceptive conduct
of the [father], there is sufficient complexity to warrant the transfer of the
proceedings.”
[4] Thereafter the father has elected to withdraw his departure application made under s 104(2)(b)(i), in respect of the income assessment but sought that application to be treated as an appeal to the Family Court under s 103B. The mother and the Commissioner objected and contended that the father was out of time for pursuing any appeal. I allowed the father’s application because in my view the Family Court should extend the time under s 103B(3)(b). Accordingly it is to be treated only as an appeal against the decision assessing his income at $70,000 for the year ended 31
December 2006. That appeal is remitted to be heard in the Family Court at Wellington, given that it involves questions of fact and evidence outside the ambit of this Court. It does not involve consideration of the essential matter referred to this Court, namely whether the mother’s departure order can be made retrospective.
[5] Nevertheless, I heard evidence and there was some cross-examination
on affidavits on factual matters largely relating to
the appropriateness of the
assessed investment return (7%) based upon the notional capital to which it was
said the father had access.
Those are matters which will be relevant in the
determination of the father’s appeal, and also, should it be that the
Family
Court has jurisdiction, the effect, if any, of any retrospective
departure order in favour of the mother. To that extent, I am not
prepared to
make factual findings on what now is only a departure application by the mother
on the issue of retrospectivity. She
does not say that the assessment of
$70,000 per annum is wrong, and the appeal by the father in that respect must
first be dealt
with by the Family Court. Otherwise, any decision in this Court
would remove a second stage appeal otherwise available to a party.
Furthermore,
the father’s appeal was not before this Court and it is not a matter of
such complexity that it requires a first
instance decision from this Court,
given the unique expertise of the Family Court in such matters.
The issue
[6] The sole issue for a determination in this Court is whether some
earlier Family Court and High Court decisions that
a departure order
from a formula assessment could not be retrospective, are correct and should
be followed.
Background
[7] Upon the breakdown of the parties’ marriage, the mother
assumed sole care of the children. Thereafter, the father
as the liable parent
was assessed to pay child support since December 1999 at the mandatory default
minimum rate for both children.
That was on the basis that he said he had no
income from wages or other sources, so as to require a greater
assessment.
[8] The father had formed a relationship with another woman and together they ran a horse breeding and farming property in South Auckland area which was acquired in about 2001 largely from funds obtained by the husband for $530,000 from a matrimonial property settlement, together with a mortgage of $210,000.
[9] Thereafter for the years 2002 to 2006, the father was assessed on the minimal rate on the basis of reported income or wages of nil. The farm property was registered in the name of a company, “C Limited”, which the father had incorporated. He held 90% of the shares and his partner, to become his wife, held
10% of the shares.
[10] In January 2003 the farm was sold at a profit of $150,000 and the
mortgage repaid. The father’s company purchased
another property near
Rotorua for $522,500 and thereafter the father married his partner.
[11] The property was run as a farm and mixed bloodstock or horse
breeding establishment with, it seems, very limited success.
But it was able to
acquire a sale of that property in November 2005 for $1.2 million. None of this
was known to the mother or the
Commissioner of Inland Revenue. The father,
through his counsel asks, why should they be entitled to have known?
[12] It seems the cash derived from the sale of the property was invested short term in bank accounts and transferred to Australia. That was not then known to the mother or the Commissioner. The evidence I have read, and heard from Mr D, suggests those funds were invested to obtain short term interest before being applied in the purchase of a property in Australia. It was purchased, he said in evidence, in the names of himself and his wife. He says it is now registered in the sole name of his wife. It contains a residence as well as farm property but is not producing income for him or his wife. He says it is not held in the name of the company which leads to the only conclusion that the company distributed the funds to its shareholders, probably in the form of capital drawings, so that they could acquire that property. His evidence before me did not appear consistent with his affidavit of
26 September 2006 in which he said “other than our personal affects all
of our other assets ... are owned by C”, and (of
9 August 2006) “the
company has purchased a property in Australia”.
[13] In any event, the mother had applied for a departure in an administrative review by the Commissioner (through a Review Officer) on 24 January 2006. That decision granted the departure on 9 March 2006 fixing the father’s child support
income for the period 1 January to 31 December 2006 at $70,000. That was fixed on the basis of an estimated 7% return on an investment of $1 million (notionally) over one year given that the Review Officer did not have information supplied by the father, despite extensive requests, as to the actual income acquired. According to the father, he believed that those funds “belonged to the company” and not him, and did not require to be disclosed. He said the funds had nothing to do with his income or earning capacity, and, in any event, related to assets and income of which he was largely ignorant as he had “left it to his accountant”. It is inconceivable that the father, having been instrumental in selling the property in November 2005 for
$1.2 million could not know what it sold for and where the funds had
gone.
[14] Subsequently the father applied for an administrative review by the
Commissioner on 19 March 2006, and again on 26 April 2006,
both of which were
not accepted.
[15] At the time of the decision of 9 March 2006 on the application of
the father for a departure from the former assessment,
the Review Officer
said:
“[The father] failed to disclose in his application the 90%
shareholding that he has in [the company] ....
• [he] told me he “wasn’t sure” what [the property]
sold for. He then said that his accountant had told
him not to disclose
information regarding the shares as it had to “go back to the
board”.
....
• [he] told me that other people in the family now have shares in the
[company] that all it owns is some horses, which weren’t
worth a lot of
money due to the racing industry collapse. He also said there were mortgages
to family members which were
unregistered. He further stated that the
company would be folded shortly and money paid back to people who put money
in.
[16] The decision refers to the father saying that an allegation that the property was sold for “over $1 million” was “all lies” and the Review Officer says “I found [Mr D’s] responses to be evasive and the information that he provided unpersuasive.”
[17] At that time, according to the records of the Companies Office the
father owned 90 of the 100 shares, was one of two directors;
had purchased the
property in December 2002 for $522,500 and sold it in November 2005 for $1.2
million. The Review Officer said
that based upon High Court cases, regard had
to be had to assets that did not produce but were capable of producing income,
and although
the father had presented an assessment of a nil income his shares
in the company were, the Review Officer concluded, capable of producing
significant income.
[18] In assessing the just and equitable grounds and whether it was
“otherwise proper to grant a departure”, having
regard to the
objects of the legislation set out in s 4 of the Act, the Review Officer said
that:
“I am satisfied that it would be just and equitable and otherwise
proper to recommend a departure order to reflect what [Mr
D] should be able to
receive from investing the capital which he should be entitled to from the
company shares”;
and the recommendation that he was assessed at an income for the year 1
January
2006 until 31 December 2006 at $70,000.
[19] Thereafter there was another administrative review, made by the
father with the mother as the other party, heard on 26 May
2006. It revolved
essentially around:
• the contention by the father that the capital sum he was
provided from the matrimonial property settlement should be
“ring-fenced” for him to invest at his advantage and he was, seeking
to revisit issues determined at the previous hearing,
contending he had no
income at present;
• the mother opposed that contention, submitting that nothing had
changed since the decision was delivered. The Review
Officer said:
“[Mr D] does not accept the appropriateness of the previous decision. It is not my function to discuss the merits of it. It is evident that the issues that [Mr D] has are complex and at odds with that decision.”
[20] The Review Officer then refused to make a determination under s 96
of the Act, because the issues were “too complex
[and] I recommend that
application be made to the Court for an Order under Part VII of this Act”.
That was done.
[21] In the Family Court, Judge Geoghegan thought the issues to be too
complex, so required to be determined by the High Court.
[22] The argument ranged far and wide, but I do not think that it is all
that complex when reduced to its essential elements.
The issues
are:
a) Can a departure order from a formula assessment be retrospective?
I
proceed to deal with that.
b) Was the assessment of income of $70,000 for the year
ended
31 December 2006 correct? This is the substance of the
father’s appeal and is to be determined by the Family Court.
It involves
whether the father has capital resources which should be taken into account and
if so, what is the appropriate interest
rate to apply so as to fix
“income”.
c) If retrospectivity is available, what level of income is to be
taken for the years 2001-2005? And should there be retrospective
departure on
the merits, for one or more of those years?
[23] Issues (b) and (c) are matters on factual merits and are within the
special expertise of the Family Court, and decisions
on them may themselves be
subject to appeal.
[24] Leaving aside the question of the father’s appeal, and the income assessment at $70,000, the issue is simply whether the Family Court, or the Commissioner, has jurisdiction to make a departure order that is retrospective. If so, “how far” and what level depends on what is just and equitable. If jurisdiction exists, then Ms E’s application remains to be determined on whether it is just and equitable (s 105(1)(b)(i)) and it is otherwise proper to do so. Those are matters of judgment
involving questions, fact and degree. It is often been said, context is
everything. It is in that context that the Family Court
(or the Commissioner as
the case may be) may be required to consider the merits, provided that
jurisdiction exists.
Discussion on “retrospectivity”
[25] Liability for payment of child support under the Act is determined
by a formula assessment. Under s 104 a custodial parent,
or a liable parent,
may apply for a departure order, i.e. a departure from the formula assessment
statutory provisions. In terms
of subs (2) a departure application may be made
only if:
“(a) a formula assessment is in force in relation to the
child, the qualifying custodian, and the liable parent concerned;
and
(b) either –
(i) the Commissioner has made a determination under Part 6A in
relation to the matter [[and the person who applies under this
section is the
person who applied for that determination]]; or
(ii) the Commissioner has refused to make a determination under
[[Part 6A]] in relation to the matter; or
[[(iia) the Commissioner has refused to make a determination under
Part 6B in relation to the matter after having commenced
proceedings under that
Part; or.]]
(iii) the qualifying custodian or the liable parent are parties to
another application pending in a Family Court and the Court
is satisfied that it
would be appropriate for the Court to consider an application made under this
section at the same time as
it hears the other application; or
(iv) the application relates, wholly or in part, to child support
payable in the child support year ending on 31 March 1994
or any earlier child
support year.]”
[26] Part 6A, inserted in 1994, provided for a new procedure where parents could apply to the Commissioner for departure from a formula assessment. Whilst parents may still apply to the Family Court for a departure order, they must in terms of s 104 first apply to the Commissioner.
[27] Before a departure order can be made, one or more of the grounds in
s 105(2)
must exist, and the Court must be satisfied in terms of s 105(1)(b)
that:
“(b) it would be –
(i) just and equitable as regards the child, the qualifying
custodian, and the liable parent; and
(ii) otherwise proper - .... to make the order.”
[28] The grounds for departure said to be relevant in this case are those
contained in s 105(2)(c):
“that, by virtue of special circumstances, application in relation to the child of the provisions of this Act relating to formula 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 because of
–
(i) the income, earning capacity, property and financial resources of
either parent or the child; or
(ii) .... (iii) ....”
[29] In determining whether it would be just and equitable for there
to be a departure from the formula assessment, the Court
is required pursuant
to s 105(4) to have regard to:
“a) the objects of this Act, and, in particular, the nature of
the duty of a parent to maintain a child and the fact
that it is the parents of
a child themselves who have the primary duty to maintain the child; and
b) the proper needs of the child, having regard to –
(i) the manner in which the child is being, and in which the
parents expect the child to be, cared for, educated, or trained;
and
(ii) any special needs of the child; and
c) the income, earning capacity, property and financial resources of
the child;
d) the income, earning capacity, property and financial resources of each parent who is a party to the proceeding;
e) the commitments of each parent who is a party to the proceeding
that are necessary to enable the parent to support –
(i) himself or herself; or
(ii) any other child or another person that the parent has a duty to
maintain; and
f) the direct and indirect costs incurred by the qualifying
custodian in providing care for the child, including the income
and earning
capacity foregone by the qualifying custodian in providing that care;
and
g) any hardship that would be caused to –
(i) the child or the qualifying custodian by the making of, or the
refusal to make, the order; or
(ii) the liable parent, or any other child or another person that
the liable parent has a duty to support, by the making
of, or the refusal to
make, the order.
[30] It is clear that capital resources may be taken into account although obviously a departure should not have the effect of stripping a party of vital assets by instalments. But potential earning capacity is clearly relevant in terms of s 105(5) and regard may be had to assets which do not produce but are capable of producing income. An example of this can be seen in Willshire v Willshire (1994) 11 FRNZ
590, where the Family Court held, correctly, that if a majority shareholder
of a company who had all the voting power was able to
create a situation whereby
an expense which was personal to that shareholder was claimed by the company,
the Court could not ignore
the expense when assessing what the
“real” income was of that shareholder.
[31] The objects of the Act are contained in s 4. They are
comprehensive and include affirming the rights of children to be
maintained by
parents who have a corresponding obligation to them, and to ensure that equity
exists between custodial and non-custodial
parents in respect of the costs of
supporting children.
[32] The legislative purpose is discussed by Tipping J in Ewing v
Ewing (1993)
11 FRNZ 364. In dealing with departure orders he said (at
366-367):
“(3) The criteria for departure are complicated and are by design narrowly drawn. They are expressed in considerable detail and require precise analysis for their application to the particular case.
They are all conditioned by the need to show not only the necessary factual
criteria but also that those facts arise
in special
circumstances.
(4) Against that background it seems clear enough that the legislative
approach was that the formula assessment is likely to
be, indeed is deemed to
be, appropriate for the general run of cases but in the individual case can be
shown to be special –
i.e. out of the ordinary run of cases – a
departure can be granted. That departure will often be by way of a downward
adjustment
in favour of the liable parent but it also can be upwards in favour
of the qualifying custodian. The purpose of the capacity to
depart from the
formula is to reflect what is fair and just in the particular special
case.
(5) Whether the circumstances are special is a matter of
judgment against a correct understanding of the concept.
Some circumstances
will be intrinsically special. Others will be special only by dint of their
degree of departure from the ordinary.
Cases in the second category, i.e.
circumstances which are special by degree, are likely to be the more
controversial and difficult.”
[33] The question is whether, assuming that a departure order should be
made because the circumstances were special, and it was
unjust and inequitable
for the formula assessment to apply in the factual circumstances, there is
jurisdiction to make the departure
order retrospective.
[34] Under the Court’s general powers contained in s 118, it
may:
“(1)(e) make an order expressed to be retrospective to such day as the
Court considers appropriate, not being a day that precedes
the later of
–
(i) 1 July 1992; or
(ii) the day on which the application for formula assessment to which
the order applies was made.”
[35] To some extent this is mirrored in s 96O (inserted in 1994) which
relates to the operative date upon which a determination
by the
Commissioner on an application for departure from a formula assessment under s
96B. It provides that:
“The Commissioner may, under this Part, make a determination expressed
to be retrospective to such day as the Commissioner considers
appropriate, not
being a date that precedes the later of –
(a) 1 April 1994; or
(b) the day on which the application for formula assessment to which the determination applies was made.”
The Judicial Pathway on Retrospectivity
[36] The High Court has held (on two occasions) that the Commissioner and
the Family Court do not have power to make a retrospective
determination
departing from a formula assessment of child support under Part 6A (s 96C and s
96O) of the Act. The Commissioner
and most Family Court Judges (if unable to
distinguish the authorities) have considered themselves bound by those
decisions. They
are Commissioner of Inland Revenue v Aspinall [1999] 3
NZLR 87, and Johnson v Commissioner of Inland Revenue [2002] NZHC 241; [2002] 2 NZLR
816.
[37] The view that departure orders could not be retrospective (in
appropriate circumstances) appears to have originated in the
Family Court
decision in Taylor v Oliver (1997) 15 FRNZ 392. There Judge Inglis QC
said that although on its face s 118 appears to authorise the Court to make a
departure
order retrospectively, a grammatical construction of s 105(2)(c), and
use of the words “would result in unjust and inequitable
determination” of the financial support and “to be
provided” could only relate to child support liability which
post-dated or was concurrent in time with the application for
departure.
[38] That view was then adopted by Goddard J in Commissioner
of Inland Revenue v Aspinall. There a liable parent had paid irregular
amounts direct to the custodial parent according to the children’s
needs.
But the mother was also a beneficiary. The father sought to have
his liability to the Commissioner reduced through a departure
order. Goddard J
approved Taylor v Oliver and held that the Act did not provide for
expunging of a debt between a liable parent and the Crown by way of a departure
application.
Her Honour said, at p 95:
“Judge Inglis QC’s interpretation ... is also supported by the intent of the Act as a whole, which is a revenue Act, and particularly the object of certainty set out in s 4(f) and (g). It would be quite inconsistent with the Act’s stated object of certainty if formula assessments, acknowledged and accepted as just and equitable by the parties at the time they are made, are able to be retrospectively re-opened. If circumstances change which do require reassessment then such reassessment can only be contemporaneous with the change in circumstances or prospective. The Act do not envisage otherwise.”
[39] It has been said that the Act is in some respects
“revenue or taxation” legislation but, in my view,
that
designation would only apply to the situation where the State recovers from
non-custodial parents a fair contribution of what
the State provides to
custodial parents who are in receipt of benefits. Child support is not a tax,
and the revenue aspect of the
legislation is only so as to permit collection of
child support for the benefit of a custodial parent (where he/she is not a
beneficiary),
or for the State, if it supports the child.
[40] The intent of the Act, viewed comprehensively, is to ensure that
children are properly supported by parents to the extent
that they can afford to
do so.
[41] Certainty will be a factor if earlier formula assessments are
“acknowledged and accepted as just and equitable by the
parties at the
time they are made”. But what if the assessment was not just and
equitable at the time it was made? Considerations
referred to by Her Honour may
go to merits and just and equitable, considerations, rather than
jurisdiction.
[42] In Johnson v Commissioner of Inland Revenue O’Regan J
applied Aspinall, and held that departure orders could not be
retrospective. He said this was not affected by ss 96B, 96D and 96O because,
they
were limited to the Commissioner’s powers after the introduction of
the 1994 amending provision. His Honour took the view
that any retrospectivity
was limited to the introduction of the 1994 amendment and (at [55]):
“... to the date of the application for a departure
order.”
[43] Neither ss 96O or 118(1)(e) refer to the day of the application for
departure from the formula assessment, but the day of
the application for
formula assessment. That may not have been made clear to O’Regan J. He
followed the reasoning of Goddard
J in Aspinall and said at paras
[57]-[59]:
[57] Section 106(2) [which enables different provisions to be made in relation to different child support years.] does not necessarily indicate that the Family Court can make retrospective determinations. The power to make different orders in relation to different years could allow the Commissioner or Family Court to order a reduced contribution in the immediate year, to be increased by a certain rate in subsequent years. The effect of s 106(2), under this construction, would be simply to avoid the
Commissioner or Family Court being forced to order a single inflexible
assessment.
[58] Section 106(2) does indicate that the legislation is not
necessarily irreconcilable with retrospective operation. However,
in my view,
analysis of ss 96B, 96D and 96O does not weaken Goddard J’s reasoning in
Aspinall. Goddard J determined that the statutory language indicated
departure orders could not be retrospective and that this was consistent
with
the purpose of the Act. There is nothing in ss 96B, 96D or 96O which leads me
to a different view.
[59] I therefore conclude that neither the Commissioner nor the Family
Court has power to make a retrospective departure order
from assessments
relating to a previous year except to the extent specifically provided for in s
96O.
[44] In neither Aspinall nor Johnson was the Court referred
to an earlier decision of Hastings v Morel (High Court, Wellington
Registry, AP 351/93, 19 July 1995, Neazor J). There, Neazor J concluded that s
118 permitted retrospectivity.
He said that it:
“allows the order to be made retrospective to the later of 1 July 1992
or the day on which the application for formula assessment
to which the
departure order applies was made. It is to be noted that the statute refers to
the application for formula assessment,
not the application for departure, so
that the relevant later date in this case was 1 July 1992.” (p
16)
[45] Australian authorities support that view, and the decisions are based upon legislation upon which the Child Support Act 1991 was modelled. They have determined that jurisdiction to make retrospective departure orders exists; Bassingthwaite v Leane (1993) 114 FLR 202; Hides v Hatton (1997) 139 FLR 81. In Hides the Full Court of the Family Court made it clear that a retrospective order would not be made if onerous ( “ruinous” as described in Taylor v Oliver), and (at
865):
“We would accept that in determining whether ... it is just and
equitable to the parties and child concerned to make a particular
order ...
otherwise proper to make that order, the court can have regard to the impact on
the payer or the payee of the making of
a departure order setting liability for
a past period and thus immediately creating the burden of arrears for the payer
or of a credit
for the payee. These may also be matters which could be
addressed ... when considering whether a ground for departure exists in
a
particular case.”
[46] Mr Delany submitted that the Australian provisions have significant differences to those in the New Zealand Act because there is a restriction in Australia
as to the date the Commissioner may back date a departure determination. But
s 141 of the Australian Child Support (Assessment) Act 1989, provides in s
141(h) that the court:
“... may make an order expressed to be retrospective to such day as the
court considers appropriate.”
[47] In New Zealand, s 118(1)(e) the provision giving the Court’s powers, is the same except having the limitation of the operative day not being before the later of 1
July 1992 or the day on which the application for formula assessment was
made. Likewise under s 96O as it relates to the Commissioner’s
powers
(with the date being 1 April 1992).
[48] The decision in Aspinall was delivered on 23 December 1998.
On 2 June
1999, the Family Court decision in Zimmerman v Zimmerman (FP 031/138
92, Family Court Levin, 2 June 1999, Judge B D Inglis QC) was delivered. There
the Court was dealing with whether a discharge
or variation of a departure order
could/should be made retrospective. His Honour said (at pp 8-9):
“Reference should also be made to s 118, which provides the Court with
general powers, including (by subs (1)(e)) the power to make a retrospective
order and (by subs (1)(f)
the power to make an order imposing terms and
conditions. No criteria on which the discretion is to be exercised are
expressly
stated in either instance.”
[49] And (at p 10):
“The Court’s power to make an order retrospective is
discretionary, and it is therefore necessary to consider the principled
basis on
which the discretion should be exercised. There appear to be only two reported
cases in point. Both of them were concerned
with whether the ground for
departure in s 105(2)(c)(i) could have retrospective effect, and in
support of an interpretation of s 105(2)(c)(i) itself as justifying only
contemporaneous and prospective departure reliance was also placed on a more
general view of the scheme
of the Act. For present purposes there is no
discernible difference in principle between retrospectively reopening a formula
assessment
and retrospectively reopening a departure order.”
[50] His Honour then referred to Taylor v Oliver and Aspinall
and concluded (at p 22):
“As I have indicated, in the circumstances of the present case there is no difference in principle between an attempt to reopen retrospectively a
formula assessment and an attempt to reopen retrospectively a departure
order, for each is directed at altering retrospectively the
amount of child
support payable. There may of course be cases where the discretion to reopen
retrospectively a departure order
ought properly to be exercised: an obvious
example is where the departure order has been obtained by fraud (specifically
dealt
with by s 112(4)(d)). Otherwise the factors against retrospective
adjustments referred to in Taylor v Oliver and Commissioner of Inland
Revenue v Aspinall must rationally be applied both to departure applications
and applications to discharge or vary departure orders.
[51] It appears that the view that no jurisdiction exists for
retrospectivity has been mellowed to accept that there may be cases where it is
appropriate. If there is a “discretionary”
power to make a
departure order retrospective, there would have to be jurisdiction to do so.
Although His Honour has limited the
remarks to obtaining a departure order by
fraud, there ought to be no difference in principle with obtaining a formula
assessment
in a similar way – as the initial remarks indicate. His Honour
went on to say that (at p 13):
“I do not see in the circumstances of this case ... any compelling
reasons why the general principle against retrospective
adjustments
beyond the current child support year [as stated in Taylor and
Aspinall] should be departed from.”
[52] If that is correct, and the principle is only
“general” and there can be situations where it is
just and
equitable to depart from formula assessments or vary departure orders, the issue
is not jurisdiction, but discretion.
Counsel’s arguments
[53] Mr Delany in very careful and comprehensive submissions argued that there was a need for certainty which could not exist if orders were retrospective and relied upon – the views expressed in Taylor v Oliver and Aspinall. He argued that the New Zealand legislation confines retrospective jurisdiction (for both the Court and the Commissioner) to the date on which the application for departure order was made, and not the date on which the original formula assessment application was made. By an intricate analysis of the provisions he argued that the proper interpretation was when a parent applied for a departure from an existing formula assessment, he/she were in fact applying for a new formula assessment, and such could only be for the upcoming child support year. Likewise he argued that the
formula assessment had to be “in force” for the Commissioner or
the Court to be able to make a departure order, and that
a formula assessment is
no longer in force once a liable parent has accepted it and paid in accordance
with it. He relied upon the
text of B D Inglis QC, New Zealand Family Law in
21st Century [para 24.8.2] quoting from Hawke v Commissioner
of Inland Revenue (Family Court, Porirua, CS3/02, 12 September 2002, Judge J
D Johnston).
[54] But Hawke v Commissioner of Inland Revenue depended on
special facts, and is not authority for the proposition that it is
always the case that a formula assessment
“ends” when a liable
parent pays pursuant to it. Hawke’s case involved an application
for a departure order and for an order suspending a liability by a liable parent
who had been assessed
to pay the IRD $38,000 for a child support year. He had
paid an amount agreed with the child’s mother direct to her. He had
not
been aware of the assessment prior to leaving New Zealand, and continued to pay
the custodial parent directly. He was able to
obtain a departure order for one
year at a Review Hearing, but not told he needed to apply for
a departure
order. Consequently, he was later told that he owed the
Department of Inland Revenue the substantial amount in excess of $38,000.
The
child was then 18 years, financially independent and therefore did not qualify
for a formula assessment for child support for
the current year.
[55] Judge Johnston found that there was a formula assessment in force,
that being the one the Commissioner tried to enforce.
The Commissioner applied
to strike out Mr Hawke’s applications for departure, and orders suspending
liability. The Judge
refused to do so finding there was a “reasonable
cause of action”. His Honour held the reference to formula assessment
in
s 104(2)(a) is not something being in force “for the current year”,
but:
“In force” means binding and valid, continuing in existence. It
will continue to exist or be in force until it is paid
or validly departed
from.
[56] Those comments were made in the context that “until it is paid” referred to accumulated arrears given that the child was independent and there was no current formula assessment. Those comments do not in my view refer to a formula assessment, current for the existing child support year, or for that matter, earlier,
ceasing to be in existence simply because a liable parent accepts and pays
under the earlier assessment. It is illogical to say that
a formula assessment
continues to exist where a liable parent does not pay pursuant to it,
yet it somehow ends when
payments are made pursuant to it.
[57] The remarks in Hawke v CIR applied to the unique facts,
namely that there was no assessment for the year in which the application was
made (because the child
did not qualify) so the formula assessment earlier made
in respect of the child, when eligible, remained in force until such time
as the
arrears were paid. The decision is not authority for the proposition advanced
by counsel in the present case.
[58] Although Goddard J in Aspinall said that where formula
assessments are made and accepted by the parties of course there ought to be
certainty for the future, that
is when they acknowledge it as just and
equitable. Improved (or worsened) later assets/income do not alter the original
“justness”.
But if a formula assessment is assessed (for example),
based upon fraudulent or wrong information, or improper applications, or
made
wrongly, so that the position is unjust and inequitable, why should there be
“certainty” of something that, from
the start, was inequitable?
Certainty ought not “trump” injustice.
[59] Mr Delany argued that an application for departure order is an
application for a new formula assessment. I do not accept
that argument. The
application is to “depart” from the formula assessment already made.
By s 2, a “formula assessment”
is an assessment made by the
Commissioner in accordance with Part 2 of the Act, which only applies if an
application for formula
assessment is made, required to be made, or deemed to be
made. In circumstances where a custodian applies for a formula assessment,
the
amount of child support payable under the formula is made by the Commissioner
under Part 2. Departure from such formula
assessment initiated by a
liable parent on qualifying custody is made under Part 6A. It is not an
application for a new formula
assessment.
[60] Mr Delany argued that the objects of the Act are prospective because provisions are expressed in the future (e.g. “to be maintained” and “to be provided”), as decided in Taylor v Oliver. That does not accord with the precise wordings of
s 118. Nor does it fit with the general objective that children are
entitled to be maintained by both parents, and there may be
circumstances where
it is just and equitable that some degree of “past maintenance” is
proper if the just and equitable
test is met. That was the case under earlier
legislation (before the Child Support Act was introduced and in proper cases
“past
maintenance” could be ordered).
[61] There has been significant debate in commentaries in the New Zealand
Law Journal concerning the issue of retrospectivity;
see Benson
“Departures from Child Support Assessments” (May 2000) NZLJ
176 and Benson “Child Support
Payments” (October 2002) NZLJ
369. In the latter article Benson expressed the view that the line of
authority against retrospective
departure orders was wrong. The author observed
that the Act is only a “revenue act for the purpose of use of tax
information
and collection powers and retrospective departures would not be
“ruinous” to liable or custodial parents if the “just
and
equitable” and other criteria are applied in the child support
assessments. He said that formula assessments:
“Do not exist in a perfect world where they are “acknowledged and accepted as just and equitable by the parties at the time they were made” (Aspinall at
95) – they may not be known ... or not challenged for reasons not implying acceptance such as (to name a few) misinformation, illness, ignorance, fear
of attribution from the other party and dealing with
accountants.”
An alternative Family Court view
[62] Recent decisions of Judge V H Ullrich QC, sitting in the Family
Court are illustrations of endeavours to distinguish the
authorities of
Aspinall, Johnson and Taylor v Oliver.
[63] In WAC v CIR [2005] 25 FRNZ 5 Her Honour considered a
situation where the Commissioner was able to reassess child support payable
retrospectively
but the liable parent was said to have the power to question
such retrospective assessment. Her Honour, when faced the earlier authorities,
said at [28]-[32]:
“[28] Section 96O provides that when dealing with departures from formula assessments the Commissioner may make a determination expressed to be retrospective to such day as he considers appropriate not being a day that precedes 1 April 1994 or the day on which the application for formula assessment to which the determination applies was made. This section
clearly refers to the application for the formula assessment and not
the application for the departure order.
[29] Section 118(1)(e) allows the Court to make an order expressed as
retrospective to such day as the Court considers appropriate
not being a day
that precedes the later of 1 July 1992 or the day on which the application for
the formula assessment to which the
order applies was made. Here again
retrospectivity is limited to the time before any application for a formula
assessment has been
made, not to a specific child support year.
[30] In Taylor v Oliver Judge Inglis found that s 118 seemed to
allow for retrospectivity on its face but he ruled that a departure could only
be made if
it met the grounds in s 105(2)(c) which he interpreted as
requiring the departure to be contemporaneous or prospective
because of
the words “would result in”.
[31] In my view that wording is not sufficient to rule out retrospective
application especially when the other grounds in s 105(2)(a)
and (b) are
expressed in the present tense so that argument could not apply.
[32] There are therefore good grounds for distinguishing Johnston and
Aspinall in situations where the Commissioner has made a new assessment or a
reassessment for a child support year which is already past.
In those cases
the liable parent or the custodial parent should still have the right to apply
for a departure order within a reasonable
time of that
reassessment.”
[64] I have already referred to the decision in Zimmerman v Zimmerman FC LEV FP031/138/92 2 June 1999 where the Judge stated the Court’s power to make an order retrospectively is “discretionary”, and it was necessary to consider the principled basis on which that discretion should be exercised. His Honour (at page
11) said that there may be appropriate cases where the discretion to reopen a
departure order retrospectively ought to be exercised.
[65] More recently in CYF v SKF (Family Court, Porirua, FAM
2007-091-000528,
16 November 2007, Judge V H Ullrich QC) she comprehensively dealt with the
issue. She reviewed the decisions in Aspinall and Taylor v
Oliver noting that Goddard J had concurred with Judge Inglis’
interpretation in Taylor v Oliver without further discussion, simply
saying the interpretation was supported by the intent of the Act and the
objective of certainty.
[66] Her Honour went on to observe that:
“Judge Inglis did envisage circumstances when it would be necessary to reassess the child support payable in respect of earlier years. And Her Honour’s view was that the wording in s 105(2)(c) did not require that a
departure application must refer to the current situation and to the future
only. Her Honour then undertook a careful analysis of
Johnson v CIR in
endeavouring to distinguish it stating that the reasoning was incorrect in
respect of s 96O in Part 6A of the Act, so the discussion
did not support an
interpretation that s 105(2)(c) disallowed a retrospective departure
order.”
[67] Judge Ullrich QC summarised at [36]:
“In summary, although there are two High Court decisions which state
that a retrospective departure application is not possible
in terms of the
statutory wording, the reasoning used does not support this conclusion.
Aspinall v CIR relied on the reasoning in Taylor v Oliver that the
use of the words “would” and “to be provided” meant that
the section could not refer to a previous
child support year. That reasoning is
not grammatically correct.
[37] CIR v Johnson relied on an incorrect interpretation
of s 96O to support the reasoning of Goddard J in Aspinall ....
That interpretation cannot give any support to the reasoning in
Aspinall.”
[68] The facts in Taylor v Oliver, Aspinall and Johnson
led to decisions which were not inequitable on the facts of those cases, but
Judge Ullrich considered that to apply, as a general
principle, a bar on
retrospective departure orders could result in serious injustice in different
factual situations.
[69] Her Honour said:
“In Taylor v Oliver Judge Inglis acknowledged that there would
be situations where retrospective applications would be appropriate. He
referred to the
possibility of retrospective reassessments by the Commissioner
which may require a reassessment of the formula.”
[70] Judge Ullrich referred to situations where unnecessary and unjust outcomes could bring the child support legislation into disrepute, and distinguished both Aspinall and Johnson so as to enable a retrospective departure order to be made which was just and equitable as regards to the child, qualifying custodian and liable parent. There, a liable parent had suffered a mental illness during the relevant child support year and earned a very minimum amount during that year, but a formula assessment based on the previous year’s earning (when not ill) would have resulted in an unjust and inequitable determination of the level of financial support to be provided by him.
[71] I find much to commend in the reasoning and judgment of Judge
Ullrich QC in having to deal with what was proper, just and
equitable in the
particular circumstances of that case. She held that the Court had
jurisdiction to make a departure order retrospective.
I am not able to disagree
her reasoning.
[72] Given the wording of s 96O and s 118(1)(e), I do not accept that an
intricate grammatical analysis of s 105(2)(c) means that
retrospective
departures cannot be made. The interpretation of statutes (as with contracts)
is not a “game with words”.
The overall purpose and object of the
Act has to be kept squarely in mind in assisting in the interpreting of
individual provisions,
and authorities such as Public Trustee v McKay
(Minister of Health) & Anor [1969] NZLR 995 (CA) support the view that
tenses in legislation are not necessarily determinative in interpreting its
application.
So that, for example, words referring to the present tense could be
read so as to have application to past events. I agree with
the analysis that
Judge Ullrich made in CYF v SKF that “would” does not
necessarily refer to the future.
[73] Whether or not a retrospective departure order is appropriate will
depend upon many factors, for and against. They will
be issues for the measured
assessment and determination of the Commissioner and the Family Court.
Circumstances will vary infinitely.
But they are not matters that would go to
jurisdiction. What those circumstances are must depend upon an assessment of
all the
facts that then exist. At one end of the spectrum, a person may come
into funds through later good fortune (as in Taylor v Oliver), whereas at
the other end of the spectrum a parent (liable or custodial) may have had hidden
away very substantial assets, or the
ability to earn income from them, unbeknown
to anyone but him or herself so that the child support assessment was made on an
inaccurate
and inequitable basis.
[74] An asset of a liable parent may appreciate through inflation, or
depreciate through market forces, but such alone would not
render an earlier
proper assessment, susceptible to retrospective departure, either at the suit of
custodial, or liable, parent.
[75] The distinction has to be drawn between the jurisdiction and discretion, and Judge Inglis recognised this in Zimmerman when he said the power was “discretionary”. The issue is for the careful assessment of the Review Officers or the
Family Court. It is not an issue as to jurisdiction. It is incorrect to
say, as it appears to have been the case in the authorities
referred to, that
there is no jurisdiction to enter upon such an inquiry, yet at the same time say
there may be cases where discretion
to reopen retrospectively a departure order
may properly be considered. What those cases or circumstances are must depend
upon an
assessment of the contents of circumstances that then exist, whether
they be “fraud” as identified by Judge Inglis,
deliberate
withholding of information, or any one of a multitude of circumstances
justifying a departure order (either increasing
or decreasing).
[76] To summarise:
a) The bar to there being retrospective departure orders arose from
the decision of Taylor v Oliver;
b) The High Court decision of Hastings v Morel, to the opposite
effect, was not referred to;
c) Aspinall v CIR followed or approved Taylor v Oliver,
which, on its facts may have been the correct outcome;
d) Johnson v CIR also proceeded down that path, and was helpful
in analysing the process. But I am satisfied that the Judge may have been lead
into
error by concluding that the relevant date was the date of application for
the departure order rather than the date upon which the
formula assessment order
was made;
e) a formula assessment does not cease to exist when a liable parent
accepts its validity and pays pursuant to it;
f) an application for a departure order is not an application for a
“new”
formula assessment;
g) a proper application and interpretation of the words “would be”, “would result” and “to be provided” do not prevent the Court
exercising a jurisdiction to make a departure order retrospective,
clearly given to it by s 118, and to the Commissioner by
s 96O;
h) I respectfully do not follow the decisions as to retrospectivity
in
Aspinall and Johnson;
i) the reasoning, and decisions of Judge V H Ullrich QC in CYF v
SKF and WAC v CIR, and of Neazor J in Hastings v Morel are to
be preferred, and I respectfully concur with them;
j) jurisdiction to make a departure order retrospective
exists, but whether or not that discretion is exercised will
depend upon an
assessment of all the facts and circumstances (which may be infinitely
different) so as to ultimately determine whether
it is just and equitable and
otherwise proper to make such order (whether by the Commissioner [s 96R(b)], or
the Court [ 105(1)(b)].
Conclusion
[77] In this case it will be for the Family Court to decide, on the
merits, the father’s appeal. Likewise, it is to decide,
on the merits,
the mother’s departure application. It has jurisdiction to grant it if it
wishes (at whatever level and for
what period it decides proper), which may
depend on factors relating to the father’s appeal. It will depend on
an assessment
of all the evidence. This decision does not mean that it
necessarily will follow that a departure order is made.
[78] Both matters are remitted to the Family Court at Wellington
for its determination on the merits. The transcript
of sworn oral evidence
taken in this Court may, if the Family Court considers it necessary, be used in
those matters.
[79] There will be no order for costs for the proceedings in this Court.
Costs in the Family Court are a matter for
it.
“J W Gendall J”
Solicitors: MacKenzie Elvin, PO Box 14016, Tauranga for Applicant
Fenella Catherine Devlin, P O Box 232, Wanganui for First Respondent
Crown Law, Wellington for Second Respondent
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