Issued
2008
Decision
24 Apr 2008
Appeal Status
Appealed

Child support - retrospective reviews and departures

2008 case note - Child Support Act 1991 question of whether a departure order from a formula assessment could be retrospective. Matter remitted to the Family Court.

Case
IPD v KME and The Commissioner of Inland Revenue
Legal terms
child support, retrospective departure orders

Summary

A Child Support Act 1991 question of whether a departure order from a formula assessment could be retrospective. The High Court did not follow Aspinall and Johnson, preferring CYF v SKF, WAC v CIR, and Hastings v Morel, and found that there was jurisdiction to make a departure order retrospectively. The matter was remitted to the Family Court for determination on its merits.

Facts

Mr IPD and Ms KME separated upon the breakdown in their marriage, with the mother assuming sole care of their two children. The father was subsequently assessed to pay child support from December 1999.

For the years 2002 to 2006, the father was assessed at the minimal rate on the basis of reported nil income or wages.

The father, together with his new partner whom he subsequently married, operating through their company, ran a horse breeding and farming property in South Auckland which had been acquired in about 2001 for $530,000 from a matrimonial property settlement, together with a mortgage of $210,000. That property was sold at a profit of $150,000 in January 2003 and the mortgage repaid. The company then purchased a property near Rotorua for $522,500. That property was run as a farm and mixed bloodstock or horse breeding establishment and sold in November 2005 for $1.2 million. None of this was known to the mother or to the Commissioner of Inland Revenue. The cash derived from the sale of the property was invested short-term in bank accounts and transferred to Australia.

The mother had applied for a departure in an administrative review by the Commissioner on 24 January 2006, and on 9 March 2006 the review decision fixed the father's child support income for the period 1 January to 31 December 2006 at $70,000 on the basis of an estimated 7% return on an investment of $1 million (notionally) over one year, given the Review Officer did not have the father's actual income details.

The father subsequently applied for two administrative reviews. Neither succeeded. A determination in the latter case was refused because the issues were too complex (section 96F). The Review Officer recommended that application for a departure order be made to the Family Court, which was done.

The mother cross-applied and also contended that the formula assessment for the years ended 2001 to 2006 should be departed from as well, that is, the departure order ought to have been "retrospective".

The Family Court considered that there was a need for the High Court to reconsider previous authorities in the context of the legislative provisions, and transferred the proceedings to the High Court for determination.

Decision

Having considered in detail the Judicial pathway on retrospectivity, Counsel's arguments, and an alternative Family Court view, Gendall J observed at [71], [72] and [75]:

[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 with 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. ... I agree with the analysis that Judge Ullrich made in CYF v SKF that "would" does not necessarily refer to the future.

...

[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 the multitude of circumstances justifying a departure order (either increasing or decreasing).
[Emphasis added]

His Honour summarised at [76]

  1. The bar to there being retrospective departure orders arose from the decision of Taylor v Oliver;
  2. The High Court decision of Hastings v Morel, to the opposite effect, was not referred to;
  3. Aspinall v CIR followed or approved Taylor v Oliver, which, on its facts may have been the correct outcome;
  4. 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;
  5. a formula assessment does not cease to exist when a liable parent accepts its validity and pays pursuant to it;
  6. an application for a departure order is not an application for a "new" formula assessment;
  7. 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;
  8. I respectfully do not follow the decisions as to retrospectivity in Aspinall and Johnson;
  9. 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;
  10. 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 [s 105(1)(b)].

His Honour remitted both the father's appeal and the mother's departure application to the Family Court for determination on the merits, observing (at [77]) that the Family Court had jurisdiction to grant the mother's departure application if it wished (at what level and for what period it decided proper). This decision did not mean that it would necessarily follow that a departure order would be made.

Child Support Act 1991 sections 96O, 118(1) (e), 105(2) (c) and Child Support Amendment Act 2006 section 49