Bernard v Mill
[2021] FCCA 1836
•10 August 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Bernard v Mill [2021] FCCA 1836
File number(s): BRG 613 of 2020 Judgment of: JUDGE TONKIN Date of judgment: 10 August 2021 Catchwords: CHILD SUPPORT – Appeal – appeal from decision of Administrative Appeals Tribunal – where Child Support Registrar conceded that the Tribunal’s decision revealed an error of law – Tribunal decision set aside and remitted to be heard according to law. Legislation: Administrative Appeals Tribunal Act1975 (Cth) s 44AAA
Child Support (Assessment) Act 1989 (Cth) ss 44, 44(1)(a), 44(1)(b), 44(1)(c), 44(1)(d), 44(1)(d)(i), 44(1)(d)(ii), 44(3)(a)
Military Rehabilitation and Compensation Act 2004 (Cth) s 354
Social Security Act 1991 (Cth) s 8
Cases cited: Brent v Federal Commissioner of Taxation (1971) 125 CLR 418
Child Support Registrar & Crabbe & Anor [2014] FamCAFC 10
Child Support Registrar & Crowley and Anor [2015] FamCAFC 76
Clement Kam Man Tong and Commissioner of Taxation [2007] AATA 1234
Collector of Customs v Pressure Tanker Pty LtdandPazzolanic Enterprises Pty Ltd [1993] 43 FCR 280
David and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2013] AATA 181
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] 293 ALR 257
Henriques & Hatzis (SSAT Appeal) [2014] FCCA 1194
HGMZ v Secretary, Department of Social Services [2021] FCA 280
Hunter & Child Support Registrar [2017] FamCAFC 259
Luton v Lessels [2002] HCA 13
Project Blue Sky Inc v Australian Broadcasting Authority [1998] 194 CLR 355
Re Paul Cooper and Commissioner of Taxation [2003] AATA 296
Secretary, Department of Employment and Workplace Relations v Richards (2007) 98 ALD 310
Sharp Corp (Aust) Pty Ltd v Collector of Customs (1995) 59 FCR 6
United Voice v Serco Sodexo Defence Services Pty Ltd [2014] FCCA 2717
Number of paragraphs: 80 Date of hearing: 26 May 2021 Place: Brisbane Solicitor for the Applicant: IAMCU Legal Solicitor for the Respondents: No appearance by the First Respondent Solicitor for the Respondents: Mills Oakley Lawyers ORDERS
BRG 613 of 2020 BETWEEN: MR BERNARD
Applicant
AND: MS MILL
First Respondent
CHILD SUPPORT REGISTRAR
Second Respondent
ORDER MADE BY:
JUDGE TONKIN
DATE OF ORDER:
10 AUGUST 2021
THE COURT ORDERS THAT:
1.The appeal is allowed and the decision of the Tribunal is set aside.
2.The matter is remitted to the Administrative Appeals Tribunal to be determined according to law.
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Bernard v Mill is approved pursuant to s.110X(4)(h) of the Child Support (Registration and Collection) Act 1988 (Cth).
REASONS FOR JUDGMENT
JUDGE TONKIN:
INTRODUCTION
The Applicant appeals pursuant to section 44AAA of the Administrative Appeals Tribunal Act1975 (Cth) (“AAT Act”) from a first review decision of the Administrative Appeals Tribunal (“AAT”) dated 15 October 2020 (“AAT decision”). By Notice of Appeal (Child Support) filed on 25 November 2020 amended on 12 April 2021 the applicant seeks an order quashing the decision of the AAT and other relief with respect to the original Notice of Appeal filed on 25 November 2020. The issue for determination is whether the AAT erred in law in the application of each limb of the relevant test under paragraph s44 (1) (d) of the Child Support (Assessment) Act 1989 (Cth).
DOCUMENTS
The Applicant relied on his amended Notice of Appeal filed 12 April 2021, his affidavit filed on 12 April 2021 and written submissions whilst the Second Respondent relied on written submissions. The First Respondent took no part in the proceedings save for adopting the submissions of the Second Respondent. The matter was heard on 26 May 2021 and judgment reserved.
In the affidavit filed by the Applicant on 12 April 2021 he sought to annex documents that were not before the Tribunal. The Court accepts the submissions of the Second Respondent that these documents are relevant only to establishing facts about issues before the Tribunal and do not have a tendency to demonstrate an error of law.[1] Leave to rely on the documents was refused.
[1] Sagal & Child Support Registrar (SSAT Appeals) [2013] FCCA 51 at [29; Waterford v Commonwealth (1987) 163 CLR 54 at [28] per Brennan J; Rana v Repatriation Commission [2011] FCAFC 124 at [20]
THE APPEAL
An appeal from a first review decision of the Tribunal to the Federal Circuit Court of Australia (FCCA) does not constitute a re-hearing of the case on its merits but is limited to a review “on a question of law” alone. A particular question of law should be stated with sufficient precision.[2]
[2] Haritos v Commissioner of Taxation (2015) 233 FCR 315; [2015] FCAFC 92 at [62]
In HGMZ v Secretary, Department of Social Services [2021] FCA 280 at [19] Flick J observed:
“[19] Although expressed as an “appeal”, the jurisdiction sought to be invoked by a party appealing from a decision of the Administrative Appeals Tribunal is an application made in the original – and not the appellate – jurisdiction of this Court: Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 61-62 per Bowen CJ and Deane J, at 71 per Smithers J; TNT Skypack International (Aus) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178 per Gummow J (“TNT Skypack”).
[20] And such jurisdiction as is conferred by s 44 of the Administrative Appeals Tribunal Act is a jurisdiction confined to a “question of law”. What constitutes a “question of law” has been canvassed in many decisions of this Court but it is sufficient for present purposes to cite the following summary provided by Dowsett and Gordon JJ (Edmonds J agreeing) in Federal Commissioner of Taxation v Trail Bros Steel & Plastics Pty Ltd [2010] FCAFC 94, (2010) 186 FCR 410 (“Trail Bros Steel”) at 415:
“[13] … what is “on a question of law” for the purposes of s 44 of the AAT Act has been analysed in many cases and includes:
1.Whether the AAT has identified the relevant legal test: …;
2.Whether the AAT has applied the correct test: …;
3.Whether there is any evidence to support a finding of a particular fact: …; and
4.Whether facts found fall within a statute properly construed: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287.
That list is by no means exhaustive: …
Appl’d: Phillips v Inspector-General in Bankruptcy [2013] FCA 552 at [23] per Middleton J. The list of questions identified in Trail Bros Steel, of course, is not an exhaustive list.
In Henriques & Hatzis (SSAT Appeal) [2014] FCCA 1194 Brown J discussed the nature and legislative basis of appeals from a decision of a Tribunal to the FCCA. He said at [133] “it is the function of this court to determine whether the decision of the SSAT was within its legal powers. That is what is meant by a question of law. It is not the function of this court to examine the merits of that decision. Essentially, it is not the function of this court to reappraise the evidence led before the SSAT and re-determine the case, according to the conclusions it draws from the available evidence”.
In Bedell & Kastens & Anor (SSAT Appeal)[2010] FMCAfam 1250, Sexton FM cited with approval the decision of Halligan FM in Agrippa & Horton (SSAT Appeal)[2010] FMCAfam 1144 who summarised the applicable law when a court reviews a decision of the Tribunal in the following terms at [10] to [11]:
“[10] ……. “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, (1993) 43 FCR 280, at 287, cited with approval in Minister for Immigration and Multicultural Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 272 per Brennan CJ, Toohey, McHugh and Gummow JJ, and referred to by Kirby J to similar effect at 291).
[11] Nonetheless as Riethmuller FM noted in PJ & Child Support Registrar, [2007] FMCAfam 829 at [38], [2007] FMCAfam 829; (2007) 38 Fam LR 31, (2007) FLC 98-035:
[38] The only right of review of a decision of the SSAT is an appeal ‘on a question of law’ to the courts ... Most significantly, such an appeal does not allow for a review on the merits. As a result, it is important for the Tribunal to provide appropriate reasons. This will usually entail careful findings of fact and clear explanations of the reasons for any decision, particularly where it involves the exercise of a discretion such as altering a child support amount.”
The Full Court of the Federal Court in Collector of Customs v Pressure Tanker Pty LtdandPazzolanic Enterprises Pty Ltd [1993] 43 FCR 280 said regarding appeals from decisions of the Administrative Appeals Tribunal “the nature of the task of this court is clear. It is to leave to the tribunal of fact decisions as to the facts and to interfere only when the identified error is one of law”.
In Child Support Registrar & Crowley and Anor [2015] FamCAFC 76 the Full Court of the Family Court stated at [22] and [24]:
“Appeals from the Tribunal to, relevantly the FCCA lie only on a question of law (s 110B of the [Collection] Act).
…..
A consequence of the confined nature of appeals from the Tribunal to the FCCA is a requirement that the grounds of appeal to that court be drawn with particular precision which bears that restriction firmly in mind.” Compliance with this prerequisite ensures the merits of a case are dealt with not by the Court but by the Tribunal a “distribution of function (which) is critical to the correct operation of the administrative review process.” [3]
[3] Repatriation Commission v Owens [1996] 70 ALJR 904 at 904
In Child Support Registrar & Crabbe & Anor [2014] FamCAFC 10 at [54] the Full Court of the Family Court set out the principles that emerge from the authorities and have relevance when reviewing a decision of the Tribunal:
•The question of whether there is evidence to support a finding of fact or an inference drawn from findings of fact is a question of law (Al-Miahi[4]);
•The making of a finding of fact or the drawing of an inference in the absence of evidence is an error of law (Al-Miahi);
•A wrong finding of fact is not an error of law (Al-Miahi);
•A finding of fact based on reasoning that is “demonstrably unsound” or on an “illogical course” or a “faulty process” of reasoning is not an error of law (Al-Miahi);
•Judicial review is not to be over-zealous in seeking to find inadequacy of reasoning by an administrative decision maker; the review of the reasons of an administrative decision maker must not be turned into a reconsideration of the merits of the decision (Wu Shan Lian [5]); and
•Section 103X(3)(b) of the Registration and Collection Act (by analogy with s 430 of the Migration Act) requires the (Tribunal) to do no more than set out the findings which it did make on facts which it considered material to the decision which it made (Yusuf[6]).”
[4] Minister for Immigration and Multicultural Affairs v Al-Miahi[2001] FCA 744; (2001) 65 ALD 141
[5] Minister for Immigration and Ethnic Affairs v Wu Shan Liang(1996) 185 CLR 259
[6] Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323
AMENDED NOTICE OF APPEAL
The applicant filed an amended Notice of Appeal on 12 April 2021 raising the following grounds:
(1)Did the AAT member fail to properly construe the legislative provisions in s 44(1)(d)(i) when the Tribunal member concluded at paragraph [15] that the Applicant was at all material times deriving an entitlement which was always present but was not paid until after the successful appeal of 8th April 2018 at the AAT lead to a new determination being made by the Military Rehabilitation and Compensation Commission;
(2)Whether there was no evidence, which supported the AAT member’s conclusion at paragraph [15] of their decision;
(3)Did the AAT member fail to properly construe the legislative provisions in s44(1)(d)(ii) when he considered at paragraph [17] that a successful application for review to the AAT is income of a kind that it is reasonable to expect would have been earned, derived, or received by the Applicant in the ordinary course of events;
(4)Whether there was no evidence to support the AAT member’s finding at paragraph [17] that a successful review application before the AAT is an outcome which occurs in the ordinary course of events.
(5)Whether the AAT member failed to properly consider a relevant consideration in that the Applicant provided statistics to support his submission that a successful outcome on appeal to the AAT following a rejection by the VRB is not statistically an ordinary course of events as described by s44(1)(d) (ii); and
(6)Whether the AAT member failed to properly consider and correctly apply section 8 of the Social Security Act 1991 (Cth).
The Applicant raised further “Grounds” in the Amended Notice of Appeal however “Grounds” [1] – [12] are not grounds of appeal but statements of fact setting out the history of the proceedings. “Grounds” [13] – [25] represent the argument advanced by the Applicant on appeal. I intend to consider the six questions of law raised by the Applicant.
RELEVANT STATUTORY PROVISION
The Applicant contends that the AAT erred in failing to properly construe the legislative provision under Part 5 section 44 of the Child Support Assessment Act 1989 (Cth) (“CSA Act”). That section provides as follows:
Application for post-separation income to be excluded
“s.44 (1) A parent (the applicant ) of a child may apply to the Registrar to amend an administrative assessment of child support payable by or to the parent for the child for part of a child support period if:
(a)the applicant and the other parent of the child lived together on a genuine domestic basis for at least 6 months; and
(b)the separation, following that 6 month period, of the applicant from the other parent occurred:
(i)within the last 3 years; and
(ii)before the application for administrative assessment of child support for the child was made under section 25 or 25A; and
(c)at the time of the application under this section, the applicant and the other parent remain separated; and
(d)in the last relevant year of income, or in the application period for an income election (if such an election has been made by the parent), the applicant earns, derives or receives income:
(i)in accordance with a pattern of earnings, derivation or receipt that is established after the applicant and the other parent first separate; and
(ii)that is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events.
(2)If the applicant makes an application under this section, the Registrar may determine that the applicant's adjusted taxable income for the child for a day in the child support period is a specified amount that excludes the income referred to in paragraph (1)(d).
(3)However, the Registrar may make a determination under subsection (2) only if the determination:
(a)reduces the applicant's adjusted taxable income for the child for a day in the child support period by 30% or less; and
(b)applies in respect of a day in the child support period, being a day that is less than 3 years after the last separation referred to in paragraph (1)(b).”
In Luton v Lessels [2002] HCA 13; 210 CLR 333; 187 ALR 529; 76 ALJR 635 (11 April 2002) at [4] the High Court observed that the principal object of the Child Support (Assessment) Act1989 (Cth) is “to ensure that children receive a proper level of financial support from their parents. To that end, the Act provides for a level of support to be determined in accordance with legislatively fixed standards, and permits carers of children to have the level readily determined without the need to resort to court proceedings”.
In Hunter & Child Support Registrar [2017] FamCAFC 259 (30 November 2017) the Full Family Court said at [2]:
“The laws of the Commonwealth attach significance to the obligation of separated parents of children to provide for their proper financial support. The important features of these laws are a set of provisions by which the liability of parents to pay child support is assessed and another set by which the payments thus assessed to be due are collected…….The Registrar is empowered, on application by a child’s carer, to assess the liability of a parent to pay child support and the process of assessment bears similarities to the way in which income tax is assessed. Once assessed the parent must pay the amount of child support to the child’s carer in accordance with the assessment (s 31 of the Child Support (Assessment) Act 1989 (Cth)).”
The Applicant contends that the AAT fell into error when determining whether the Applicant satisfied both limbs of the text under section 44 (1) (d) of the CSA Act.
BACKGROUND
The Applicant and First Respondent are parents of children X (born in 2015) and Y (born in 2018). The parties separated on 15 November 2018. The Applicant is the parent liable to pay child support.
A child support case was registered on 20 May 2019 and the First Respondent elected to collect child support from the Applicant from that date.
On 17 October 2017 the Applicant sustained an injury while on Army Reserve Service and was incapacitated for civilian work.
On 7 November 2017 the Applicant applied for incapacity payments for the loss of civilian earnings due to the accepted injury.
The Military Rehabilitation and Compensation Commission (“MRCC”) accepted liability for the injury and on 27 November 2017 granted the Applicant incapacity payments in the amount of $373.75 per week from 16 November 2017.
On 18 December 2017 the MRCC reassessed the Applicant’s entitlement and granted him incapacity payments for loss of civilian earnings in the amount of $750 per week commencing 16 October 2017.
On 1 January 2018 the Applicant sought review of the MRCC decision by the Veterans Review Board “(“VRB”). On 24 May 2018 the VRB affirmed the decision of the MRCC.
On 22 June 2018 the Applicant applied for review of the decision of the VRB to the Veteran’s Affairs Division to the AAT under section 354 of the Military Rehabilitation and Compensation Act 2004 (Cth) (“MRC Act”).
On 8 April 2019 the AAT determined to remit the matter to the MRCC for reconsideration.
On 20 May 2019 the MRCC made a new determination and granted the Applicant incapacity payments at the rate of $1500 per week with effect from 17 October 2017.
On 30 May 2019 the Applicant received a lump sum of $32,410 referrable to the decision made on 20 May 2019.
REASONS FOR DECISION
The Tribunal member set out the relevant legislative provision and indicated that no issue arose with respect to subparagraphs s44 (1) (a) (b) (c) finding that the Applicant and First Respondent separated in November 2018 and their separation occurred within three years of the Application. They remained separated at the date of the Applicant’s application to exclude some post separation income.[7]
[7] AAT Reasons for decision 15 October 2020 at [6]
The Tribunal member considered that the first question for determination was whether the Applicant earned income in accordance with a pattern of earning established after the Applicant and First Respondent separated in November 2018[8]. He found that the Applicant was receiving $1500 per fortnight in DVA payments when on a successful application for review the sum was increased to $3000 per fortnight in April 2019 backdated to November 2017 (notably before he and the First Respondent separated).[9]
[8] AAT Reasons for decision 15 October 2020 at [6]
[9] AAT Reasons for decision 15 October 2020 at [7]
The Tribunal member noted it was the Applicant’s case that “he considers the ‘pattern’ of his income had clearly changed after separation…..he was receiving $1500 per fortnight which increased to $3000 per fortnight which formed a ‘new pattern’”. He observed that the Applicant referred to “statistical research…….there were 85,000 compensation determinations by DVA in 2018/2019 only 500 went to the AAT. By definition of ‘ordinary’ at no time could a successful result at the AAT be considered ‘commonplace or standard’”.[10]
[10] AAT Reasons for decision 15 October 2020 at [8]
Further he observed that the Applicant “emphasised that ‘receipt’ was paramount, the DVA had determined he had no right to the higher income. Only upon actual receipt of the higher entitlements (which occurred in June 2019) was there a material change.”[11]
[11] AAT Reasons for decision 15 October 2020 at [8]
The Tribunal member set out the relevant statutory provision and considered 2.5.2 of the Child Support Guide and concluded that “the Tribunal is satisfied that these passages are an accurate statement both of the law and the appropriate approach to be taken to the application of the law.” He referred to the decision in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 noting that the Full Federal Court held “that a Tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the relevant legislation”[12]. He found that the “underlying policy intent is that in recognition of additional effort, an amount is excluded to allow a parent to ‘get back on their feet’ after the often financially detrimental impacts of separation”[13].
[12] AAT Reasons for decision 15 October 2020 at [10]
[13] AAT Reasons for decision 15 October 2020 at [11]
He noted that the Applicant’s case “was an unusual one”. He considered there were parallels to draw with the broad definition of income in the social security referring to the definition of income at section 8 of the Social Security Act1991 (Cth) and social security policy guidelines.
At paragraph [15] of the reasons for decision[14] the Tribunal member determined that the Applicant “had been paid entitlements by DVA at the wrong rate; on review the correct or preferable decision was substituted and his rate retrospectively increased. In other words he had effectively been underpaid; his entitlement to the higher rate was always present. In that sense he was at all material times ‘deriving’ an entitlement which was not paid; he did not receive his entitlement until around June 2019”.
[14] AAT Reasons for decision 15 October 2020 at [15]
The Tribunal member found that “the better view is that the Applicant was entitled to, and deriving an income (albeit with a large part of it unpaid) prior to separation at an equivalent level to post separation. Accordingly ‘his pattern of earning, derivation or receipt’ was established prior to when he and the First Respondent first separated. He cannot satisfy subparagraph s44 (1) (d) (i)”[15].
[15] AAT Reasons for decision 15 October 2020 at [16]
The Tribunal member determined it was not necessary to consider the second limb of the text but observed that “whilst he understood the Applicant’s suggestion of a relatively low success rate on review a successful review application before the AAT is an outcome which occurs in the ordinary course of events in situations where – as occurred here – the Department of Veteran’s Affairs had not made the correct or preferable decision in the first instance”[16]. He determined that the Applicant could not satisfy subparagraph s44 (1) (d) (ii). He concluded it was not necessary to consider the second issue (that is how much income could be excluded and from what date). He affirmed the decision under review.
QUESTION 1:
(1) Did the AAT member fail to properly construe the legislative provisions in s 44(1) (d) (i) when the Tribunal member concluded at paragraph [15] that the Applicant was at all material times deriving an entitlement which was always present but was not paid until after the successful appeal of 8th April 2018 at the AAT lead to a new determination being made by the Military Rehabilitation and Compensation Commission?
[16] AAT Reasons for decision 15 October 2020 at [17]
Applicant’s Submissions
The Applicant contends that the Tribunal erred by focusing on earning as opposed to deriving and receiving income when determining the matter and by not interpreting the law in respect of what constitutes a present legal entitlement to derive income and when that entitlement is legally enforceable.
Further the Applicant contends that the Tribunal member failed to correctly apply the principles of statutory interpretation in determining the meaning of the words “earned, derived and received”. He observed that in Project Blue Sky Inc v Australian Broadcasting Authority [1998] 194 CLR 355 at [69] the Court said “The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of the provisions of the statute”. He argued that the ordinary meaning of the words “earn”, “derive” and “receive” did not support a finding that the Applicant was deriving a pattern of income in the order of $3000 per fortnight prior to his separation from the First Respondent. Further the Applicant argued that the Tribunal member erred in his conclusion as to what constitutes “a present legal entitlement” to income and in finding that the Applicant’s entitlement to the higher rate “was always present” [at 15 and 16].
The Applicant relied on the decision in Re Igor[17] at [9] where the AAT observed:
“The predominant test by which moneys not yet received may be identified as having been either "earned" or "derived" at a point earlier than receipt is to ask whether there is a "present legal entitlement" to those moneys. He referred to the decision of Deputy President Layton in Re Ronald Sharp and Secretary to Department of Social Security S85/131; 4 August 1986 at paragraph 23 where she observed:
‘it is necessary for the recipient of a benefit or pension to have a present legal entitlement to moneys before they can be described as either ‘earned’ or ‘derived.’
[17] Re Igor Sas and Secretary, Department of Social Security [1987] AATA 79
The Applicant referred to the decision in Vasey[18] at [8] where Tribunal member Longo concluded that “income is derived when an enforceable legal right to compel the payment of income exists”. The Tribunal in Vasey had determined at [20] that Mr Vasey did not have a legal present entitlement to the payment until such time as the decision was made on his application and until then Mr Vasey had no entitlement to the payment.
[18] Vasey v Secretary, Chief Executive of Centrelink unreported 4 October 2018 at [8]
In addition the Applicant relied on the decision in Brent v Federal Commissioner of Taxation (1971) 125 CLR 418 where the High Court considered the meaning of “time of derivation of income” Gibb J said at [11]:
“[11] The second question that arises is whether the whole sum of $65,250 was income derived during the relevant year of income. In that year the whole of that sum had become due and payable to the appellant but she had been paid only $10,000 of the total. The question is whether the balance which, although receivable, had not been received was rightly treated by the Commissioner as income derived during that period. In my opinion, that question must be answered in the negative. (at p427)
At [12] Gibbs J noted that “…….The Act does not define the word "derived" and does not establish a method to be adopted as a general rule to determine the amount of income derived by a taxpayer……. The word "derived" is not necessarily equivalent in meaning to "earned". "Derive" in its ordinary sense, according to the Oxford English Dictionary, means "to draw, fetch, get, gain, obtain (a thing from a source)……In Commissioner of Taxes (S.A.) v. Executor, Trustee and Agency Co. of South Australia Ltd. (Carden's Case)) (1938) 63 C.L.R.108, at pp. 152-154 Rich and McTiernan JJ. concurred, Dixon J said (938) 63 CLR at 155 “Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form."
At [16] Gibbs J said “It follows that the assessable income which the appellant derived during the income year in question was the sum of $10,000 and that her taxable income was that amount less the agreed deduction. The Commissioner was wrong in bringing into her income for the year of income that ended on 30th June 1970 the further amount of $55,250 which she did not, in fact, receive in that income year. (at p431).”
Second Respondent’s Submissions
The Second Respondent concedes that the Tribunal member made an error of law in its application of paragraph 44 (1) (d) (i) of the CSA Act. On behalf of the Registrar it was submitted that unlike “income” within the social security legislation there is no definition of “income” nor of the words “earns, derives or receives” under the Child Support (Assessment) Act1989 (Cth). The Second Respondent contends that the rules of statutory interpretation dictate that the ordinary meaning of the word or phrase is to be considered within its context in the Act.
Counsel for the Registrar relied on the decision of the Federal Court in Secretary, Department of Employment and Workplace Relations v Richards (2007) 98 ALD 310; (2007) FCA 1710 at [34] where Collier J discussed the words “earned, derived or received”:
“[34] In relation to the concept of income being earned, derived or received it is clear that:
•The use of the verbs “earned”, “derived” and “received” in juxtaposition in the definition of “income” in the Social Security Act suggests that each word was intended to have a different meaning: See Shepherd J in Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307 at 311;
•Income cannot be “earned, derived or received” unless it is realised: Read 167 CLR per Mason CJ, Deane and Gaudron JJ at 67;
•Income can be realised – and hence received – even if temporarily it is not accessible: Rose 21 FCR at 245;
•Income can be “derived” within the meaning of ss8 (1) even if it is not at that time received: Inguanti 80 ALR at 311;
•“Earned” relates to personal earnings and profits Inguanti 80 ALR at 310.
He noted that the AAT in David and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2013] AATA 181 at [16] – [17] held:
“The word ‘derive’ is an ordinary English word and should be given its ordinary meaning in the context in which it appears. The Macquarie Dictionary defines ‘derive’ to mean ‘to receive or obtain from a source or origin.’ The Oxford English Dictionary offers this definition: ‘to draw, fetch, get, gain, obtain (a thing from a source).”
It was submitted on behalf of the Registrar that while the Tribunal member found that the applicant had “effectively been underpaid his entitlement to the higher rate was always present” [at 15] the applicant’s entitlement to the higher rate did not crystalize until the MRCC made the reconsideration determination on 20 May 2019 where it was determined that the applicant’s rate of payment was approximately $3000 per fortnight. Prior to that determination the Applicant did not have a “legal entitlement” to the higher rate.
QUESTION 1 - CONCLUSION
In United Voice v Serco Sodexo Defence Services Pty Ltd [2014] FCCA 2717 Neville J said at [78]:
“[78] In Project Blue Sky Inc v Australian Broadcasting Authority and CIC Insurance Ltd v Bankstown Football Club Ltd[19] the High Court said:
[19] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
… the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.
[79] Earlier, in CIC Insurance, the Court (Brennan CJ, Dawson, Toohey and Gummow JJ) said (internal citations omitted):
‘Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses “context” in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy…
[80] More recently, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory), French CJ summarised the position as follows:
The starting point in consideration … is the ordinary and grammatical sense of the statutory words to be interpreted having regard to their context and the legislative purpose. … In so saying, it must be accepted that context and legislative purpose will cast light upon the sense in which the words of the statute are to be read. Context is here used in a wide sense referable, inter alia, to the existing state of the law and the mischief which the statute was intended to remedy.
Section 44 of the CSA Act is found in Part 5 of the CSA Act “Administrative Assessment of Child Support”. Part 5 uses a parent’s adjustable taxable income to work out their child support income and determine their liability under an administrative assessment of child support. “Income” in the CSA Act refers only to income capable of forming part of a parent’s adjusted taxable income and is otherwise not defined.
The object of the CSA Act is to ensure that children receive a proper level of financial support from their parents. Pursuant to the objects the legislature has made provision for working out child support income from each parent and has relevantly provided grounds for the exclusion of post separation income by application by a parent. The context of s44 of the Act provides for consideration of and recognition of additional post separation income by one parent being excluded in order to allow a parent to recover from the financial detrimental impacts of separation. Subsection 44 (3) (a) of the Act limits the reduction to a maximum of 30% in order to meet the paramount object of the Act.
I am satisfied that the Tribunal erred in failing to properly apply the principles of statutory interpretation in determining whether the Applicant satisfied subparagraph 44 (1) (d) (i) of the CSA Act. The Tribunal member erred in failing to consider the ordinary meaning of the words “earned, derived or received” contained exclusively within subparagraph s44 (1) (d) (i). Each of those words have a different meaning. The Tribunal member focused on whether the income was “earned” as opposed to being “derived or received” and by failing to properly determine what constitutes a present legal entitlement.
I accept that the Tribunal member failed to refer to relevant authority to assist with his consideration of the statutory provision. In Re Paul Cooper and Commissioner of Taxation [2003] AATA 296 the applicant in that matter had objected to the inclusion in assessable income of a lump sum paid in arrears. The question posed was “was the lump sum derived by Mr Cooper in the year it was paid or in the earlier years”. The AAT determined that the fact that the applicant was able to eventually achieve that result with benefits backdated to the date of retirement does not mean that he can be said to have derived those benefits for income tax purposes in the years between retirement and receipt or them. “Until the authority approved the payment the Applicant had no right to any payment.” The AAT said “any other conclusion would be strange to say the least. It would require a conclusion that in the years before 2000 the entitlement of Mr Cooper was such that he should have brought to account for taxation purposes the income that he had not received and which at the time he had no right to receive”.
In Clement Kam Man Tong and Commissioner of Taxation [2007] AATA 1234 the AAT in applying the decision in Cooper (supra) said “there is quite an amount of case law which is authority for the fact that pension income is derived when it is received and taxed in the year of receipt”.
These decisions demonstrate the meaning of “derived” and “received” pursuant to a “legal entitlement”.
In Brent v Federal Commissioner of Taxation (1971) 125 CLR 418 when considering the meaning of “time of derivation of income” Gibb J said:
“[11] The second question that arises is whether the whole sum of $65,250 was income derived during the relevant year of income. In that year the whole of that sum had become due and payable to the appellant but she had been paid only $10,000 of the total. The question is whether the balance which, although receivable, had not been received was rightly treated by the Commissioner as income derived during that period. In my opinion, that question must be answered in the negative. (at p427)
At [12] Gibbs J noted that “…….The Act does not define the word "derived" and does not establish a method to be adopted as a general rule to determine the amount of income derived by a taxpayer, although particular situations not relevant to the present case are dealt with. The word "derived" is not necessarily equivalent in meaning to "earned". "Derive" in its ordinary sense, according to the Oxford English Dictionary, means "to draw, fetch, get, gain, obtain (a thing from a source)……In Commissioner of Taxes (S.A.) v. Executor, Trustee and Agency Co. of South Australia Ltd. (Carden's Case)) (1938) 63 C.L.R.108, at pp. 152-154 Rich and McTiernan JJ concurred. Dixon J said (938) 63 CLR at 155:
“Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form."
At [16] Gibbs J said “It follows that the assessable income which the appellant derived during the income year in question was the sum of $10,000 and that her taxable income was that amount less the agreed deduction. The Commissioner was wrong in bringing into her income for the year of income that ended on 30th June 1970 the further amount of $55,250 which she did not, in fact, receive in that income year. (at p431).”
I accept the submission of the Applicant that the Tribunal erred in determining the Applicant’s “present legal entitlement”. The Tribunal concluded at [17] that the Applicant “had been paid entitlements by DVA at the wrong rate; on review the correct or preferable decision was substituted and his rate retrospectively increased. In other words he had effectively been underpaid; his entitlement to the higher rate was always present. In that sense he was at all material times ‘deriving’ an entitlement which was not paid; he did not receive his entitlement until around June 2019”. The Applicant’s entitlement to a higher rate was not “always present” rather the entitlement to a higher rate of payment did not crystalize until the MRCC made a reconsideration decision on 20 May 2019 (after the parents separated) and determined the Applicant’s rate of payment to be $3000 per fortnight.
I am satisfied that the Tribunal erred in finding that the Applicant “was entitled to, and ‘deriving’ an income prior to separation at an equivalent level to post separation” [16] and “his pattern of earning, derivation or receipt” was established prior to when the Applicant and First Respondent first separated. The Tribunal was in error in finding that the Applicant “cannot satisfy subparagraph 44 (1) (d) (i)”.
QUESTION 2:
(2) Whether there was no evidence, which supported the AAT member’s conclusion at paragraph [15] of their decision;
Neither the Applicant nor the First Respondent provided evidence to the AAT to support the decision that the entitlement at the higher rate of payment was always present or that the Applicant was “deriving” an entitlement that was not paid before the reconsideration by the MRCC. The Second Respondent does not contend otherwise however the conclusion reached by the Tribunal member was not evidentiary based but based on the Tribunal member’s interpretation of the relevant statutory provision. As such it is unnecessary to answer the question.
QUESTION 3:
(3) Did the AAT member fail to properly construe the legislative provisions in s44(1)(d)(ii) when he considered at paragraph [17] that a successful application for review to the AAT is income of a kind that it is reasonable to expect would have been earned, derived, or received by the Applicant in the ordinary course of events;
The Applicant argued that although the Tribunal member indicated that “it was not necessary to consider the second limb” he chose to do so and determined that the Applicant could not satisfy the requirements of subparagraph s44 (1) (d) (ii) because “a successful review application before the AAT is an outcome which occurs in the ordinary course of events in situations – where – as occurred here – the Department of Veteran’s Affairs had not made the correct or preferable decision in the first instance”.
The Applicant argued that statistical data presented to the Tribunal during the hearing supported the conclusion that “a successful appeal to the AAT from the VRB from the first instance decision of the DVA is not an outcome that results in income earned, derived or received in the ordinary course of events”[20]. He contended based on the statistical data that “on any view these percentages cannot be seen as an outcome occurring in the ordinary course of events” and asserted that the Tribunal member erred in law in his interpretation of subparagraph s44 (1) (d) (ii).
[20] Applicant’s amended outline filed 17 May 2021 paragraph [49]
The Second Respondent argued that the Applicant’s contention that “the member considered a successful review application before the Tribunal to be an outcome that occurs in the ordinary course of events” misrepresents the reasons of the AAT and submitted that the Tribunal member did not suggest that a successful review application before the Tribunal was an outcome that “occurs in the ordinary course of events” but confined this to situations where the primary decision maker had not made the correct or preferable decision in the first instance.
The Second Respondent submitted that the phrase “in the ordinary course of events” should be given its ordinary meaning noting that the Applicant did not suggest otherwise. He argued that determining whether “the applicant earns, derives or receives income…..that is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events (s.44 (1) (d) (ii)) is a question of fact. The Second Respondent relied on the decision of the Full Federal Court in Sharp Corp (Aust) Pty Ltd v Collector of Customs (1995) 59 FCR 6 at [12] as follows:
“It is primarily a question of fact not of law as to what is the meaning of an ordinary English word or phrase as used in a statute in its ordinary sense and so also is the question whether there being different conclusions reasonably open, a particular set of facts comes within the description of such a word or phrase….. …Australian Gas Light Co v Valuer – General (1940) 40 SR (NSW) 126 at 137 – 138 ….Hope v Bathurst City Council (1980) 144 CLR 1 at 7 – 8.
The Second Respondent contends that the question whether the Applicant’s successful outcome by way of the reconsidered decision occurred “in the ordinary course of events” within the meaning of subparagraph s44 (1) (d) (ii) is a question of fact not law and was solely a matter for the Tribunal’s determination on the evidence before it.
QUESTION 3 - CONCLUSION
The Tribunal member found that the Applicant had not satisfied subparagraph s44 (1) (d) (i) and was in error in doing so. It was not suggested by either party that the use of the word “and” in section 44 of the CSA Act should not be taken to be used in any sense other than its ordinary conjunctive sense. Thus all limbs of the subsection must be satisfied before post separation income is excluded.[21] No issue was taken with the Tribunal’s findings that the Applicant had satisfied subparagraphs s44 (1) (a), (b) and (c). It was on the basis of his erroneous finding that he determined it was not necessary to consider the second limb of the test.
[21] See the discussion of the construction of conjunctive or disjunctive statutory provisions in DC Pearce and RS Geddes Statutory Interpretation in Australia, 4th ed, Butterworths
The Tribunal member then proceeded to consider whether “a successful review application before the AAT is an outcome which occurs in the ordinary course of events in situations where the DVA had not made the correct or preferable decision in the first instance” and determined that the Applicant could not satisfy subparagraph s44 (1) (d) (ii).
The existence of a question of law within the Applicant’s ground of appeal is critical to the exercise of the jurisdiction of the Court to hear an appeal from the SSAT. In Rana v Repatriation Commission[2011] FCAFC 124 at [11] the Court noted:
“The need for a notice of appeal to specify a question of law is not just a matter of pleading. In the absence of a question of law there is no subject matter for the appeal and the court has no jurisdiction to entertain the proceeding.”
The question of law raised by the Applicant was whether the Tribunal failed to properly construe the legislative provisions in s 44(1)(d)(ii). Subparagraph s44 (1) (d) (ii) required the Tribunal to consider whether “in the last relevant year of income …. the applicant earns, derives or receives income….. that is of a kind that it is reasonable to expect would not have been earned, derived or received in the ordinary course of events.” In Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] 293 ALR 257 the High Court said at [39] “this court stated on many occasions that the task of statutory construction must begin with the consideration of the text. So must the task of statutory construction end. The statutory text must be considered in its context.”
No analysis was undertaken by the Tribunal as to whether in the last relevant year of income (which occurred after separation) the Applicant derived income that was of a kind it was reasonable to expect would not have been derived in the ordinary course of events. The income derived by the Applicant was the result of a reconsideration by the MRCC the outcome of which the Applicant did not control. The Applicant’s higher rate of payment crystalized following the reconsideration by the MRCC on 20 May 2019. The Tribunal failed to consider whether “it is reasonable to expect (that the income) would not have been earned, derived or received in the ordinary course of events.” I am not satisfied that the Tribunal properly construed subparagraph s44 (1) (d) (ii). I am satisfied that the Tribunal was in error in finding that the Applicant “could not satisfy subparagraph 44 (1) (d) (ii).”
QUESTION 4:
(4) Whether there was no evidence to support the AAT member’s finding at paragraph [17] that a successful review application before the AAT is an outcome which occurs in the ordinary course of events
The Applicant contends there was statistical data that supported the conclusion that a successful appear to the AAT from the VRB from a first instance decision of the DVA “is not an outcome that results in income earned, derived or received in the ordinary course of events”. He argued there was no evidence to support the AAT member’s finding that “a successful review application before the AAT is an outcome which occurs in the ordinary course of events in situations where the DVA had not made the correct or preferable decision in the first instance”.
The Second Respondent argued that it was within the realm of the AAT’s experience and expertise to make that finding and contends that a successful outcome on review is one of a number of possible outcomes that must automatically flow from the applicant making an application for review of the VRB decision. Further the Second Respondent referred to oral evidence presented by the Applicant before the AAT about the likelihood that DVA compensation matters progress to the AAT.
I am satisfied that it was open to the Tribunal on the evidence to make a factual finding that “a successful review application before the AAT is an outcome which occurs in the ordinary course of events in situations where the DVA had not made the correct or preferable decision in the first instance”. I am not satisfied that the Tribunal erred in this regard.
QUESTION 5:
(5) Whether the AAT member failed to properly consider a relevant consideration in that the Applicant provided statistics to support his submission that a successful outcome on appeal to the AAT following a rejection by the VRB is not statistically an ordinary course of events as described by s44(1)(d) (ii);
The Applicant contends that the statistical data relied on by the Applicant during the AAT hearing supported a conclusion that “appealing and a successful outcome on appeal is not an event in the ordinary course of events”. The Applicant contends the Tribunal member failed to properly consider the statistics provided by the Applicant.
The Second Respondent contends that the AAT considered the statistical data and rejected the proposition contended for by the Applicant. He argued that even if the Tribunal member erred in the factual finding there is no error of law in the AAT making a wrong finding of fact.[22]
[22] Haritos v Commissioner of Taxation [2015] FCAFC 92 at [192] citing Waterford v The Commonwealth [1987] HCA 25; 163 CLR 54 at [77]
During the hearing the Applicant referred to the statistical data for example he indicated there were “85,000 compensation determinations made by the DVA in the 2018/2019 (financial year) ……and only 500 of them went to the AAT and only 80 of them were heard…..that is the vast majority were actually gone (sic) to the AAT and by definition the word ‘ordinary’ what is commonplace or standard, at no time could the AAT be considered commonplace or standard. If that makes sense”.
The Tribunal member found at [16] that the Applicant “put forward an arguable case” and concluded that “...whilst the Tribunal understood the Applicant’s suggestion of a relatively low success rate on review a successful review application before the AAT is an outcome which occurs in the ordinary course of events in situations where – as occurred here – the Department of Veteran’s Affairs had not made the correct or preferable decision in the first instance”.
It is apparent that the Tribunal member did not ignore the evidence put forward by the Applicant, considered the evidence but ultimately did accept the propositions put by the Applicant and found otherwise. The fact that the Tribunal member did not agree with the Applicant’s contention did not give rise to any legal error on the part of the Tribunal.
QUESTION 6:
(6) Whether the AAT member failed to properly consider and correctly apply section 8 of the Social Security Act 1991 (Cth)
The Applicant contends that in attempting to interpret “earned, derived or received” pursuant to the test under subparagraph s 44 (1) (d) (i) of the CSA Act the Tribunal member fell into error in relying on the definition of income in section 8 of the Social Security Act 1991 (Cth). He argued that “on the basis of this interpretation” the Tribunal member concluded that the appellant’s favourable determination before the AAT resulted in a retrospective repayment which in the member’s opinion was “an entitlement to the higher rate that was always present”. Further the Tribunal member concluded that the Applicant was at all material times “deriving” an entitlement which was not paid…..until around June 2019”.
The Second Respondent submits that the Tribunal was not bound by the definition of “income” outlined in section 8 of the Social Security Act 1991 (Cth) but had regard to it given the analogous provisions. He submitted that the relevant provision for the matter was exclusively contained within section 44 of the CSA Act and no error of law is exposed.
I adopt the submission of the Second Respondent that the Tribunal was not bound “to consider and correctly apply section 8 of the Social Security Act 1991” but was required to construe section 44 of the CSA Act the relevant statutory provision. No error of law is exposed.
CONCLUSION
The Tribunal in exercising a discretion whether to exclude the Applicant’s post separation income was required to satisfy all the criteria under section 44 of the CSA Act. I am satisfied that the Applicant has demonstrated that the Tribunal member erred in the interpretation and/or application of subparagraphs s44 (1) (d) (i) and (ii) of the Child Support (Assessment) Act1989 (Cth).
Questions 1 and 3 should be answered in the affirmative. The appeal is allowed and the decision of the Tribunal is set aside. The matter is remitted to the Administrative Appeals Tribunal to be determined according to law.
I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Tonkin. Dated: 10 August 2021
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