Knight and Director, Australian Defence Force Reserves Employer Support Payment Scheme

[2011] AATA 131

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 131

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   2010/1666

GENERAL ADMINISTRATIVE DIVISION		)
Re		Doug Knight

Applicant

And Director, Australian Defence Force Reserves Employer Support Payment Scheme

Respondent

DECISION

Tribunal J W Constance, Deputy President

Date28 February 2011

PlaceMelbourne

Decision The Tribunal decides that the decision of the Director, Australian Defence Force Reserves Employer Support Payment Scheme made 19 March 2010 is affirmed.

…...(sgd. J W Constance).................

Deputy President

Defence (Employer Support Payments) Determination 2005 - meaning of “the previous 6 months” – decision affirmed

Defence (Employer Support Payments) Determination 2005 ss 3(1), 3C(6) and 7

REASONS FOR DECISION

28 February 2011 J W Constance, Deputy President

INTRODUCTION

1.      The Defence (Employer Support Payments) Determination 2005 provides for payment to a self-employed member of the Defence Reserve Service to compensate for loss of income while the member is absent on defence service provided various conditions set out in the Determination are met.

2.      Mr Knight is a member of the Active Army Reserve and also the sole proprietor of a business.  In 2009 he completed 2 periods of reserve service for which he lodged claims under the Determination.  On 19 March 2010 the Director rejected these claims.  Mr Knight has applied to this Tribunal for a review of this decision.

3.      For the reasons which follow the decision under review will be affirmed.

FACTS

4.      Mr Knight enlisted in the Regular Australian Army in 1972.  He transferred to the Active Army Reserve in 1973.

5.      In June 2004 Mr Knight established a business of security risk and emergency management, trading under the business name Security Risk Consulting.  Mr Knight has operated this business continuously as its sole proprietor since its establishment.

6.      On 11 June 2007 Mr Knight commenced employment as a non-ongoing Australian Public Service employee with the Department of Defence.[1]  Mr Knight did not apply for this position, but was approached on behalf of the Department to undertake consultancy work.  However to accommodate the Department’s funding arrangements he agreed to become an employee rather than acting as a consultant.  Mr Knight ceased this employment on 20 February 2008.

[1] Ex.R2 p.10.

7.      From 25 February 2008 until 31 August 2008 Mr Knight was employed on a continuous full-time service basis by the Australian Army.  He applied for and was paid employer support payments in respect of his business for the period 18 April 2008 until 31 August 2008.[2]

[2] Ex.A4.

8.      Between 4 September 2008 and 19 September 2009 Mr Knight was engaged for various periods as an Army Reservist.  

9.      It should be noted from the preceding two paragraphs that in the period from 11 June 2007 until 19 September 2009 there was no period of six months during which the business provided Mr Knight’s principal source of income or his principal employment.  Mr Knight did not dispute this.

10.     On 15 May 2009[3] Mr Knight lodged a claim as a self-employed member for employer support payments.  He made the claim for periods between 16 March 2009 and l4 May 2009.  He lodged a further claim on 25 November 2009[4] for periods between 1 July 2009 and 19 September 2009.

[3] Ex. R2 p.49.

[4] Ex. R2 p.73.

11.     Both claims were rejected by the Director on 19 March 2010.

LEGISLATIVE BACKGROUND

12.     Section 7 of the Defence (Employer Support Payments) Determination 2005 provides for the making of employer support payments to a self-employed member in circumstances set out in the section.

13.     “Self-employed member” is defined in section 3(1) of the Determination, which provides in part:

Self-employed member means a member:

(a)     who:

(i)conducts a recognised business as a sole trader;

…

(b)     for whom:

(i)the business or company mentioned in paragraph (a):

(A)     provides the member’s principal source of income; and

(B)     has been the member’s principal source of income for at least the previous 6 months; or

(ii)the business or company mentioned in paragraph (a):

(A)     is a legitimate business, in accordance with the legitimate business test set out in section 3C; and

(B)     provides the member’s principal employment; and

(C)    has provided the member’s principal employment for at least the previous 6 months.

14.     “Legitimate business” is defined in the same section to mean “a business or company approved under subsection 3C(6).”

15.     Section 3C(6) provides:

(6)The Director, Deputy Director or Assistant Director must approve the member’s business as a legitimate business if:

(a)the Director, Deputy Director or Assistant Director is satisfied that:

(i)     the business or company conducted by the member, or by which the member is employed, is legitimate; and

(ii)     the business or company is trading or otherwise operating; and

(iii)     the business or company provides the member’s principal source of employment, and has provided the member’s principal source of employment for a continuous period of at least 6 months; and

(iv)    the business or company is not:

(A)the investment of accumulated wealth; or

(B)investment in a superannuation fund; or

(C)a hobby; and

(b)it would be unfair to treat the member as not being a self-employed member on the basis that the business or company does not provide the member’s principal source of income, or has not provided the member’s principal source of income for a continuous period of at least 6 months.

ISSUES FOR DETERMINATION

16.     I have to determine whether Mr Knight is a “self-employed member” within the meaning of the Determination for the purposes of the two periods for which he is claiming payment, namely 16 March 2009 – 4 May 2009 and 1 July 2009 – 19 September 2009.

17.     The Director concedes that Mr Knight conducted a recognised business as a sole trader at the relevant times and therefore satisfies the requirement of paragraph (a) of the definition. The Director concedes also that Security Risk Consulting is a “legitimate business” within the meaning of paragraph (b).  I am satisfied on the evidence before me that these are proper concessions.

18.     The parties agree that the issues for determination are:

1)did the business Security Risk Consulting provide Mr Knight’s principal source of income “for at least the previous  6 months”?

2)if not, did Security Risk Consulting provide Mr Knight’s “principal employment for at least the previous 6 months”?

It is not in dispute that the periods referred are periods prior to the period for which payment is claimed.

MR KNIGHT’S ARGUMENT

19.     It was put on behalf of Mr Knight that the phrase

“ ‘for at least the previous 6 months’ provides a minimum period of time for which a business is required to provide a member’s principal employment prior to the lodgement of a claim; it does not limit the period over which a business has to be assessed to only a period of 6 months immediately prior to the lodgement of a claim.” [5]

[5] Applicant’s Statement of Facts and Contentions, para.3.5.

20.     It was argued that this interpretation is consistent with the wording of section 3C(6) which requires the business to be the member’s principal source of income “for a continuous period of at least 6 months”.

21.     It was argued further that as Mr Knight had agreed to become an employee rather than a consultant at the request of the Department, it would be unfair to treat him as not being a self-employed member.  This argument was based on the provisions of section 3C(6). However this provision relates only to the approval of a member’s business as a “legitimate business” and the Director concedes that Mr Knight’s business is such a business for the purposes of this application.

22.     The nature of the dealings which resulted in Mr Knight being employed by the Department is irrelevant in otherwise determining whether Mr Knight was a “self‑employed member” within the definition in section 3.  The decision to become an employee rather than a consultant may have been an unfortunate choice for Mr Knight but this does not change the nature of the legal relationship which he chose to enter with the Department.

REASONING

Did the business Security Risk Consulting provide Mr Knight’s principal source of income “for at least the previous 6 months”?

23.     The starting point in interpreting any legislation is to look to the ordinary meaning of the language used.  In this case, the use of the definitive “the” before “previous 6 months” indicates clearly that the intention of the author of the Determination was to refer to the period immediately prior to the period of the claim.  It is not sufficient for an applicant to show that he or she was a self-employed member for any period of six months before the period for which payment is claimed.  To adopt the interpretation put forward on behalf of Mr Knight would have the effect of replacing the definitive adjective “the” with the indefinite adjective “a”. For this reason I do not accept Mr Knight’s argument.

24.     The comparison of the wording under consideration with the wording of section 3C(6) supports the interpretation I have placed on the words used rather than the interpretation proposed on behalf of Mr Knight.  In approving the business as a “legitimate business” the Director is required to consider “a period of at least 6 months” (emphasis added).  The use of the indefinite “a” makes it clear that any period of at least 6 months is being referred to rather than the specific period referred to in the definition of self-employed member.

25.     Mr Knight’s first claim was for the period 16 March 2009 to 4 May 2009.  The “previous 6 months” covered the period 16 September 2008 to 15 March 2009.  I have found that between 4 September 2008 and 19 September 2009 Mr Knight was engaged in Reserve Service and this was his principal source of income during that period.  This means that his business Security Risk Consulting was not his principal source of income during the period prescribed in paragraph (b)(i)(B) of the definition of self-employed member and Mr Knight does not come within paragraph (b)(i) of the definition.

26.     The second claim is for the period commencing on 1 July 2009 which means that “the previous 6 months” commenced on 1 January 2009.  For the same reason as is stated in the previous paragraph Mr Knight has failed to establish that his business was his principal source of income in that period.

27.     Counsel for the Director informed me that the Director is of the view that the 6 month period in respect of claims such as those made by Mr Knight may be extended by 3 months in reliance upon the provisions of section 3B.  However on the facts I have found this would make no difference to the outcome of the application before me.  Nothing in these Reasons should be taken as an acceptance of the Director’s view in this regard.

Did Security Risk Consulting provide Mr Knight’s principal employment for at least the 6 months previous to the period of each of his claims?

28.     For the same reasons as I have stated in the preceding three paragraphs Mr Knight has failed to show that he falls within the provisions of paragraph (b)(ii).  As Mr Knight was employed for most of the previous 6 months as a reservist his business was not providing his principal employment during this period.

DECISION

29.     The decision of the Director, Australian Defence Force Reserves Employer Support Payment Scheme made 19 March 2010 is affirmed.

I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of

J W Constance, Deputy President

Signed:         .....(sgd. K Peterson)........................
  K Peterson, Associate

Date of Hearing  31 January 2011
Date of Decision  28 February 2011
For the Applicant  Mr R Douglass
Solicitor for the Respondent     Mr T Reilly. DLA Phillips Fox