Benson and Pendelton (Child support)
[2022] AATA 1701
•2 March 2022
Benson and Pendelton (Child support) [2022] AATA 1701 (2 March 2022)
DIVISION:Social Services & Child Support Division
REVIEW NUMBER: 2021/MC022928
APPLICANT: Mr Benson
OTHER PARTIES: Child Support Registrar
Ms Pendelton
TRIBUNAL:Member K Dordevic
DECISION DATE: 2 March 2022
DECISION:
The decision under review is affirmed.
CATCHWORDS
CHILD SUPPORT – child support agreement – whether termination of binding child support agreement occurred – no terminating event – decision under review affirmed
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 16(2AB)-16(2AC) of the Child Support (Registration and Collection) Act 1988.
REASONS FOR DECISION
BACKGROUND
This application for review is about whether the correct decision was made to refuse to terminate a binding child support agreement (BCSA) between Mr Benson and Ms Pendelton.
Mr Benson and Ms Pendelton are the parents of two children, in respect of whom a BCSA was entered into on 13 September 2019. The BCSA was registered by Services Australia – Child Support (the Agency) from 3 December 2019 and this was the basis for the assessment of child support.
On 20 August 2021 Mr Benson contacted the Agency and advised that one of the conditions which cause the BCSA to end (clause 12(d)) had been met in that Ms Pendelton’s taxable income had increased by 50% or more from her 2019 taxable income. Mr Benson asked for the BCSA to be removed and for the assessment of child support to revert to the usual formula assessment.
On 26 August 2021 the Agency refused to end the registration of the BCSA between Mr Benson and Ms Pendelton. Mr Benson lodged an objection to the decision on 14 September 2021 and an objections officer disallowed his objection on 10 November 2021.
On 14 December 2021 Mr Benson lodged an application for review by the Social Services and Child Support Division of the Administrative Appeals Tribunal (the tribunal). On 22 December 2021 he lodged a request to be represented by [Ms A], barrister. His request was granted on 1 February 2022. On the same day Ms Pendelton’s request to have a support person present was refused, given the private nature of the proceedings.
The application was heard on 2 March 2022. Both parents attended by MS Teams audio. The Child Support Registrar did not attend the hearing. At hearing Mr Benson advised that he would not be represented. He was unable to provide a satisfactory reason for why he did not, as a matter of courtesy, advise the tribunal of this prior to hearing. Mr Benson provided written submissions two days prior to hearing (folios A1 to A18). At hearing he was unable to adequately explain why he provided the evidence on which he intended to rely some two days prior to hearing, despite the Child Support Directions clearly stating that all such evidence that a party intends to rely on should be provided to the tribunal 14 days prior to hearing. Ms Pendelton declined the opportunity to adjourn and reconvene at a later date, to allow her sufficient time to consider the additional documents provided by Mr Benson. In addition to Mr Benson and Ms Pendelton’s oral testimony, the tribunal had regard to documents provided by the Agency (folios 1 to 390) and Ms Pendelton (folios B 1 to B237).
ISSUES
The legislative provisions relevant to this decision are contained in the Child Support (Assessment) Act 1989 (the Assessment Act) and the Child Support (Registration and Collection) Act 1988.
The issue in this case is whether, for the purpose of the assessment of child support, the terms of the BCSA dictate that a terminating event occurred requiring the Agency to end the registration of the agreement.
CONSIDERATION
There is no dispute that Mr Benson and Ms Pendelton entered into a BCSA regarding the provision of child support on 1 November 2019. The tribunal was satisfied that the agreement complied with the requirements of subsection 80C(2) of the Assessment Act. The child support agreement was accepted by the Agency and has been applied to the assessment of child support from 3 December 2019. The tribunal finds accordingly.
Under the subheading “Termination” the BCSA states at clause 12 that the agreement will cease to operate upon certain events occurring. In the tribunal’s view this subheading is somewhat misleading. As stated by her honour Small J in Nettleship & Nettleship [2016] FCCA 2947, if parties no longer wish to be bound by a binding child support agreement, that agreement can only be terminated by compliance with section 80D of the Act. As her Honour clearly states, section 80CA of the Act makes it clear that once in force (a BCSA) cannot be varied, even by consent of the parties. A BCSA can be terminated only by the methods prescribed under subsection 80D(1) of the Act, being:
·By making a new agreement and specifying in the new agreement that the previous agreement has terminated (paragraph 80D(1)(a) of the Act); or
·The parties to the agreement agree in writing to terminate the agreement (paragraph 80D(1)(b) of the Act; or
·By asking a Court to set aside the agreement under section 136 (paragraph 80D(1)(c) of the Act).
There is no other manner under the Act to terminate a BCSA. In this application, the tribunal finds that the parties have not entered into a new agreement nor have they made an agreement in writing to end the BCSA. It is also the case that the Court has not been asked to set aside the agreement. As none of these options have been met, the agreement cannot be terminated.
The tribunal turned its mind to whether there is a provision that allows for Mr Benson’s liability under the BCSA to end from a specified day. The ending of a liability under the agreement is not the termination of the agreement; or stated another way, a liability may end, but the ending of a liability does not terminate a BCSA. However, a liability ending, whether as specified in the agreement or specified in the Act, is a child support terminating event. Section 12 of the Act outlines what can be a child support terminating event. The tribunal will address this further below.
The tribunal next turned its attention to subclause 12(d) of the BCSA, which states:
12. The terms of this Agreement will cease to operate for each of the children upon the
first of the following events occurring:
…(d) [Ms Pendelton]’s [the mother’s] taxable income increasing by 50% or more from
her taxable income for the year ending 30 June 2019; [Tribunal’s emphasis].
Clause 13 of the BCSA states that the parents are to provide each other with a copy of their 2019 notices of assessment within seven days of receipt.
Mr Benson contends that the mother’s 2020 taxable income has increased by more than 50% of her 2019 income. The Agency determined that Ms Pendelton’s adjusted taxable income had not increased by 50% and so refused Mr Benson’s application to terminate the BCSA and revert to the formula assessment.
The tribunal makes the following findings in respect of the mother’s taxable income and adjusted taxable income:
Mother
2019 Notice of Assessment
$133,367
2019 Adjusted taxable income
$172,094
2020 Notice of Assessment
$250,283
2020 Adjusted taxable income
$250,408
Mr Benson contends, that the term ‘taxable income’ must be given its plain and ordinary meaning, consistent with principles of contract law. Furthermore, the term ‘taxable income’ was referring to the parent’s income as assessed by the Australian Taxation Office; this interpretation is supported by the inclusion of clause 13 of the BCSA. It allowed the parents to determine the “baseline” on which their future income can be compared. He stressed that he was first cognisant of the term ‘adjusted taxable income’ only after the BCSA was registered with the Agency.
Ms Pendelton’s submissions can be summarised as follows. The term ‘taxable income’ is not explicitly defined in the BCSA and therefore it is reasonable to interpret the term as referring to the parents’ adjusted taxable incomes. When entering into the agreement she understood that the term ‘taxable income’ must be read in conjunction with the Agency’s determination of the standard administrative assessment, which usually refers to adjusted taxable income. She stressed that if the BCSA was in fact referring to taxable income then, on the facts known at the time, at best the agreement would terminate shortly after its execution or at worst was null and void at the time of execution given that it was known that her 2020 taxable income would exceed her 2019 taxable income by virtue of the fact that she would receive her redundancy payment in August 2019 and that in the 2019 financial year she claimed a joint investment loss of about $38,000. It was her express understanding when signing the BCSA that only if her adjusted taxable income exceeded $268,000 would clause at 12(d) come into effect. She confirmed that the amendments to clause 12(c) and (d) were made at Mr Benson’s request; she believes now that he did not negotiate in good faith.
Ms Pendelton’s submissions also rely on recital I in the BCSA which states:
[Ms Pendelton] has recently been made redundant from her role as a [Occupation 1] with [Company 1], part-time 4 days a week. [Ms Pendelton]’s annual gross income in that role was $173,181 for the financial ending 30 June 2019. [Ms Pendelton] is currently seeking new employment which she hopes will provide a similar income
In this matter it is clear that the parents have differing views as to what was expressly agreed upon in the BCSA. Clearly, the term is not defined under clause 1 of the BCSA, which deals with definitions and interpretation. After much deliberation, the tribunal is of the view that the Agency’s position cannot be preferred. It is a fundamental principle of statutory and legal interpretation that one must only look behind the terms of the agreement if there is some ambiguity in its terms or to the extent it is necessary to avoid absurdity or inconsistency in its implementation. The tribunal is not persuaded that there is any ambiguity associated with this term ‘taxable income’ in the BCSA. It must be interpreted literally. Certainly, the term it is not used inconsistently in the BCSA and in attaching it with its ordinary meaning does not create an inconsistent or absurd outcome. There is no basis on which to conclude that a reference to Ms Pendelton’s “annual gross income” in recital I can be interpreted as a reference to her ‘taxable income’.
Furthermore, reference to the terms ‘taxable income’ or ‘adjusted taxable income’ in the Act do not provide Ms Pendelton with any relief. Section 5 of the Act defines both taxable income and adjusted taxable income. It states that the term ‘taxable income’ has the meaning given by sections 56 and 57 of the Act. Division 7, Subdivision B of Part 5 (which addresses administrative assessments) is entitled “Adjusted taxable income determined by reference to taxable income etc”. Subsection 56(1) in this subdivision states that a parent’s taxable income is the amount assessed under the Income Tax Assessment Act 1936 (the Tax Act). Subsection 56(3) states that for the purposes of this section if a notice of assessment under the Tax Act has been served, and the notice is dated, then the assessment is taken to be made on the date of the notice. Section 57 of the Act also refers to a parent’s taxable income being determined under the Tax Act. Section 5 states that the term ‘adjusted taxable income’ has the meaning given by sections 43 and subsections 61(1) and 63(1) of the Act. Subsection 43(1) of the Act dictates the various components form part of a parent’s adjusted taxable income, including their taxable income, as well as reportable fringe benefits, foreign income, net investment losses, tax free pensions or benefits and reportable superannuation contributions.
The tribunal concludes that the term ‘taxable income’ in subclauses 12(c) and (d) must be given its ordinary meaning. However, for the reasons outlined below, the tribunal is of the view that a child support terminating event has not occurred.
The tribunal reached this conclusion on the following basis. Subparagraph 12(4)(a)(ii) of the Act applies where a child support agreement includes provisions under which the child support liability is to end from a ‘specified day’ and the ‘specified day’ arrives:
(4) A child support terminating event happens in relation to a child and the persons who are respectively a carer entitled to child support and a liable parent in relation to the child if:
(a) either of the following subparagraphs applies in relation to the child and those persons:
(i) the carer entitled to child support or the liable parent elects by a notice that complies with section 151 (election to end administrative assessment) that the liability of the liable parent to pay or provide child support for the child to the carer entitled to child support is to end from a specified day;
(ii) the Registrar accepts a child support agreement made in relation to the child between the carer entitled to child support and the liable parent, and the agreement includes provisions under which the liability of the liable parent to pay or provide child support for the child to the carer entitled to child support is to end from a specified day; and
(b) the specified day arrives.
This provision links with section 84 of the Act:
Provisions that may be included in agreements
Provisions that may be included
(1) An agreement is a child support agreement only if it includes one or more of the following kinds of provisions:
…
(g) provisions under which the liability of a party to pay or provide child support for a child to another party is to end from a specified day.
The tribunal is not persuaded that subclauses 12(c) and (d) of the BCSA stipulate a ‘specified day’ on which the liability ceases to have effect. Of course, the specified date need not be exact, consistent with Murphy J’s reasoning in Masters & Cheyne [2016] FamCAFC 225 at [151]. The reference point in subclause 12(d) is when Ms Pendelton’s taxable income increases by more than 50% than her 2019 taxable income. There is nothing in the BCSA which assists in determining the date on which this occurs. Walters FM (as his Honour then was) made the following observations in MNR & MEA [2004] FMCAfam 619:
95. A contract must be sufficiently certain if it is to bind the parties to it. In other words, the essential elements of the contract must be "both clear and complete"[16] If a contract is not sufficiently certain, then it may be held to be void (unless the uncertain part can be severed).
96. A contract can only be affected by uncertainty if the terms that are uncertain or lacking are essential terms. Terms that are not essential can, to the extent that they may be unclear, be interpreted by the Court (or ignored or severed).
Such uncertainty is evident in subclause 12(d) of the BCSA. There is no capacity for the parents, the Agency or this tribunal to determine the specific date that Ms Pendelton’s taxable income may exceed the 50% threshold at any date within the 2020 (or subsequent) financial year. By way of example, the day that her income exceeds the threshold may be 31 March of a particular financial year. Determination of the specific date is only possible by assessing Ms Pendelton’s year to date income (and taking into account any other forms of income that must be included in the assessment of her taxable income) on each and every day of a financial year. Only this would allow the identification of the specific date that her income exceeds the 50% threshold, when compared to her 2019 taxable income. As a matter of logic, her taxable income will exceed the threshold prior to the determination of her taxable income by the Australian Taxation Office (as demonstrated by the issuing of the notice of assessment). The issuing of this notice is simply the date on which Ms Pendelton’s taxable income is reported by the Australian Taxation Office and so is not the date that her income exceeds the requisite 50% threshold.
The outline of argument prepared by Mr Benson’s counsel does not specify the date of effect that the BCSA ended; instead the orders sought are that the BCSA “made between the parties ended”. It is significant that the submissions did not specify the date that the BCSA ended. In the tribunal’s view this is not an oversight; the date was unable to be isolated as the terms of the BCSA give no such guidance as to how this can be determined. Even the extrinsic material in evidence does not assist the tribunal to determine the specified date/s that subclauses 12(c) and (d) can be given effect.
The tribunal is satisfied that subclauses 12(c) and (d) of the BCSA are not provisions referred to in paragraphs (a) to (g) outlined in subsection 84(1) of the Act. Subsection 84(3) of the Act provides that if a BCSA includes a provision of a kind not referred to in subsection 84(1), that provision does not have any effect for the purposes of the Act. Therefore subclauses 12(c) and (d) of the BCSA have no effect for the purposes of the child support assessment. This conclusion is consistent with subsection 4(3) of the Act which makes it clear that the Act should be construed, ‘to the greatest extent consistent with the attainment of its objects’ which are to permit parents to make private arrangements for the financial support of their children and to limit interferences with the privacy of persons.
Therefore, there has not been a child support terminating event as Mr Benson’s liability, as assessed under the BCSA, has not ended. Thus, the liability dictated under the BCSA remains enforceable, albeit for different reasons than those reached by the objections officer.
DECISION
The decision under review is affirmed.
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