Hilal Family Day Care Scheme and Secretary, Department of Education and Training

[2018] AATA 2922

Hilal Family Day Care Scheme and Secretary, Department of Education and Training [2018] AATA 2922 (15 August 2018)

Division:GENERAL DIVISION

File Number:           2017/6610

Re:Hilal Family Day Care Scheme

APPLICANT

AndSecretary, Department of Education and Training

RESPONDENT

DECISION

Tribunal:Deputy President Rayment QC

Date:15 August 2018

Place:Sydney

The decision under review is affirmed.

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Deputy President Rayment QC

CATCHWORDS

CHILD CARE – benefits and rebates – family assistance law – cancellation of Applicant’s approval as a child care service – breach of obligation to provide weekly reports containing accurate information – failure to institute a proper system to comply with statutory obligations – failure to remit moneys wrongly paid – serious contravention of family assistance law – decision affirmed

LEGISLATION

A New Tax System (Family Assistance) Act 1999

A New Tax System (Family Assistance) (Administration) Act 1999

A New Tax System (Family Assistance and Related Measures) Act 2000

REASONS FOR DECISION

Deputy President Rayment QC

15 August 2018

1. Hilal Family Day Care Scheme Pty Ltd (the applicant) was approved as a child care service operator under the family assistance law with effect from 7 April 2014. The expression “family assistance law” refers to an interlocking series of Acts A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) and A New Tax System (Family Assistance) Act 1999 (Cth), together with instruments including regulations made under those Acts from time to time and Schedules 5 and 6 to the A New Tax System (Family Assistance and Related Measures)Act2000 (Cth).

2. The most important aspects of the regulatory scheme (as it stood at the relevant time) to which it is necessary to refer for present purposes are the following:

   (a)By s 195A of the A New Tax System (Family Assistance) (Administration) Act 1999, an obligation imposed on a child care service by the family assistance law is taken to be imposed on the operator;

   (b)By s 205(1)(b) of that Act, the Minister was empowered by legislative instrument, to determine rules relating to the eligibility of child care services to continue to be approved as such, and by s 196(1), compliance with such rules was made a condition of the continued approval of a child care service;

   (c)Similarly, by s 196(2), it was a condition of continued approval that the service not contravene an obligation imposed on the service by the family assistance law;

   (d)By s 219N, the child care service was required to give to the Secretary, a report for each week in which a session of care is provided containing information required by the Secretary relevant to enable the Secretary to determine a number of matters including the amount of payments to be made by the Secretary for fee reduction or the child care rebate. Such payments are made to the operator for payment (usually by way of fee reduction) to the parents of a child; by implication, the reports are to contain correct information, so as to enable the Secretary to make correct determinations;

   (e)If it is not reasonably practicable for relevant child care rebate or fee reduction paid to the service to be passed on to the parents within the (short) time limits provided by the Act, s 219QB and s 219QE require the service immediately to remit such amount to the Secretary.

3. The obligation to provide weekly reports containing accurate information under s 219N was repeatedly breached by the applicant while it remained registered. The Secretary computed amounts to be paid to the operator on the basis of incurred information contained in the reports and remitted funds by way of child care rebate to the applicant, which were not passed on by the applicant and substantial sums were not remitted immediately or at all to the Secretary in breach of s 219QB and/or s 219QE, so that it was and is the case that the applicant is a substantial debtor of the Secretary in amounts which the respondent is still seeking to determine.

4. The method by which the applicant carried on its business as an operator and the method by which it purported to comply with its reporting obligations was to enter into service agreements with “educators” who would make their own homes available for childcare, and receive weekly fees for such child care from the parents of the children. They would then make reports to the applicant on the basis of which the applicant would provide information to the respondent, who would use that information to remit moneys for child care support or fee reduction, less a commission charged by the applicant for the educators.

5. Unless that business method involved comprehensive checking by the applicant of the information provided by the educators to the applicant, the business method exposed the applicant to the risk of contravention of the family services law, particularly s 219N, s 219QB and s 219QE.

6. The applicant did contravene each of those provisions in 2017. In the case of 3,641 sessions of care, for dates on which it was stated that care was provided by educators, those persons could not have done so because the educators were overseas. In the case of 34 sessions of care, the purported educators were giving birth, or it was within one week of them giving birth. The reports claimed that 1,546 sessions of care were provided to children who were themselves overseas at the time. There were 36 instances in which a session of care was reported for a child, when the child was actually attending another service.

7. The means by which the respondent ascertained those contraventions was that the respondent had access to the arrival and departure records of the immigration authorities and to birth records, as well as to reports provided to the respondent by other operators.

8. The applicant in its Statement of Facts, Issues and Contentions (SFIC), admits each of the contraventions and claims that in the case of the educators who were overseas and in the case of 6 of the 20 educators, the applicant had been made aware that contrary to its own reports, the educators were overseas at the relevant time and submitted that the reports were made by “inadvertence”. I invited the representative of the applicant during the hearing to place evidence before me of such inadvertence and the applicant failed to do so.

9. In the case of the other 14 educators, the applicant stated that it relied upon the failure of the educators to inform the applicant that they were going overseas by submitting a “holiday form”. That kind of case suggests that any reliance on the educators to inform the applicant that they were going overseas would have been unreasonable. The applicant was limited to engaging 50 educators, and 14 represents a 28% sample. Moreover, such a case of reliance would require the applicant to show that any information to the effect that such care was provided was reasonable, and I have been provided with no such evidence.

10. As to the children overseas, the applicant says in its SFIC that it had no timesheets for 29 of the 62 children and that its reports were submitted by “inadvertence”. No evidence to that effect was called before me. For the other 33 out of 62 children involved, the applicant submits that it relied upon timesheets submitted by the educators. Such a case should have as a minimum, involved proof that the experience of the applicant was that the educators involved were believed on reasonable grounds to be reliable.

11. The case of reliance upon false reports made to the applicant by educators in the 36 instances where children were attending care conducted by another service was also relied upon by the applicant in its SFIC, similarly without evidence that such reliance was reasonable.

12. As to the failure to remit funds, the case of the applicant is that it would have paid such money by allowing deductions to be made by the respondent from future payments to the applicant, had its business continued. Such a method of repayment is quite inconsistent with the obligation in sections 219QB and 219QE to remit such funds “immediately”. Save for a small portion of the sum involved (some $8,000), no repayment has been made by the applicant.

13. A failure to institute a proper system to enable the applicant to comply with its statutory obligations is very concerning.

14. An allegation of reliance upon educators without evidence that such reliance was reasonable, and an unsupported allegation of inadvertence, in cases where the applicant does not suggest it had records from the educators to support its reports to the respondent makes it impossible for me to be satisfied with either allegation made by the applicant.

15. The failure to remit the moneys wrongly paid to the applicant as a result of its own incorrect reports is very serious, unless the applicant is without funds or the means to obtain such funds. No such fact has been proved before me.

16. It is an entirely insufficient response by an applicant faced with an admitted case of contravention of the important obligations of the applicant to seek review of an adverse decision merely to submit that its failures were innocent and, by implication at least, reasonable. The applicant in some of its correspondence with the respondent, was represented by a solicitor. It was represented before me by Mr Rahman, a person without legal qualifications, who had formerly been employed by the applicant. I observed to Mr Rahman that normally where the case is that facts exist which would qualify a breach of the statute, evidence is called by the applicant that the breach came about as the result of some mistake, for example. Mr Rahman said that his client had been made aware of the effect of not calling witnesses and the applicant did not desire to call witnesses.

17. Consistently with its statutory obligations, the respondent gave notice of the Secretary’s intention to cancel the applicant’s registration and a firm of solicitors responded to that notice on the applicant’s behalf. The letter stated that the solicitors were instructed that the educators who had given false information to the applicant had been terminated by the applicant with immediate effect. The letter advanced a number of allegations on the instructions of the applicant, supported in some cases by documents submitted together with the letter. In the case of some of the absences overseas of educators, the letter suggested that relief educators (rather than the educators reported to the respondent) had in fact provided the care in question. The relief educators were said in some cases to have submitted timesheets in their own names and the applicant was alleged to have inadvertently submitted claim forms naming the absent educator. That inadvertence required proper proof in my opinion.

18. In many respects, the letters from the solicitors offered explanations or submissions that, if correct, should have indicated to the applicant, the nature of the evidence that it would need to call to satisfy the Tribunal of the nature of the evidence that should be called to support those explanations and submissions. To a limited extent, the documents provided by the solicitors together with their letters supported or provided some support for explanations or submissions made on behalf of the applicant.

19. A number of submissions about planned changes alleged on behalf of the applicant about to be made to their business operations designed to overcome the deficiencies identified by the respondent to the applicant, are the subject of submissions made on behalf of the applicant. In the first place, those planned changes would need to be the subject of evidence able to be tested before the Tribunal before one could be satisfied about them. In the second place, one needs, when considering the position of reactive rather than proactive improvements proposed to be made by the applicant, to have regard to its earlier regulatory history.

20. Seven children was the limit of the number of children capable of being educated and cared for at any one time, with certain exceptions in accordance with regulations in force. Between the beginning of 2015 and 30 October 2016, the applicant reported a total of 6,952 one-hour periods of care, across 506 days and involving 36 different educators, where the service attributed care to more than seven children at one time. Ten to twelve children were the subject of a report of attributed care over 1,843 of those hours. These breaches of regulation led to reactive measures taken by the applicant. But the significance of the breaches is that they could go to the health and safety of children in care, and the facts showing the breaches must have been known to the applicant, which should have introduced proactive rather than reactive measures to correct them.

21. “Child swapping” was engaged in by the applicant, a term used in this industry to describe the practice of allowing an educator to pretend that his or her own child attended another child care centre and that a child from that other centre attended at the educator’s premises. That practice was embarked upon because care cannot be claimed for an infant of the educator. This practice occurred on 997 occasions of the reporting of the applicant.

22. Other regulatory history of the applicant included deficiencies identified by the respondent in 2015, referred to by the respondent in its notice of intention to cancel the applicant’s registration.

    CONCLUSION

23. I am satisfied overall that comprehensive and serious contraventions of the family assistance law by the applicant have been established, which merit sanction.

24. The respondent decided that the appropriate sanction was to cancel the applicant’s approval, a matter within the respondent’s discretion under the statute. For all the reasons I have mentioned, I consider that decision to be the correct or preferable decision, and the reviewable decision will be affirmed.

I certify that the preceding 24 (twenty -four) paragraphs are a true copy of the reasons for the decision herein of Deputy President Rayment QC

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Associate

Dated: 15 August 2018

Date(s) of hearing:	20 June 2018; 30 July 2018
Advocate for the Applicant:	Mr S. Rahman
Solicitors for the Joined Party:	Mr D. Hertzberg, Department of Education and Training