McKeown and McKeown (Child support)

[2021] AATA 5542

McKeown and McKeown (Child support) [2021] AATA 5542 (17 November 2021)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2020/BC019711

APPLICANT:  Mr McKeown

OTHER PARTIES:  Child Support Registrar

Ms McKeown

TRIBUNAL:Presiding Member K Dordevic

Senior Member J Cipolla

DECISION DATE:  17 November 2021

DECISION:

The decision under review is affirmed.

CATCHWORDS

CHILD SUPPORT – particulars of the administrative assessment – whether post separation costs should be excluded from the adjusted taxable income for the last relevant year – additional income was earned in the ordinary course of events – post separation costs should be refused - decision under review affirmed

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted 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

1. Mr McKeown is liable to pay child support to Ms McKeown in respect of their two children under the terms of a child support assessment issued by Services Australia – Child Support (the Agency) that commenced on 20 May 2019.

2. On 30 March 2020 Mr McKeown made an application to the Agency to exclude his post separation income of $32,410 from his 2019 taxable income for the purposes of the child support assessment. On 6 April 2020 his application was refused. Mr McKeown objected to that decision on 16 April 2020. On 21 July 2020 an objections officer disallowed his objection. Mr McKeown sought review to the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT). On 15 October 2020 the first constituted tribunal affirmed the decision under review.

3. Mr McKeown sought judicial review of that decision with the Federal Circuit Court of Australia (the Court). The Court, constituted by Tonkin J, delivered its judgement [in] August 2021: [reference deleted]. The appeal was allowed, the decision of the tribunal was set aside and the matter was remitted to be determined in accordance with the law.

4. On 11 October 2021 the reconstituted tribunal (the tribunal) issued directions pursuant to sections 33 and 33A of the Administrative Appeals Tribunal Act 1975, including directions to Mr McKeown to provide certain documents that the tribunal had determined were relevant to the review. Mr McKeown partially complied on 19 October 2021 (folios A1 to A23).

5. The matter was heard on 17 November 2021. Mr McKeown and Ms McKeown appeared before the tribunal by conference telephone. The tribunal took into account the documents provided by the Agency (folios 1 to 204), the decision of the Court and the additional documents provided by Mr McKeown (folios A1 to A67). It is noted that Mr McKeown provided the tribunal with documents marked A24 to A67 immediately before the hearing commenced. Ms McKeown raised no objection to those documents being taken into evidence, and a copy of the documents not already in her possession were provided to her after the hearing.

ISSUES

1. The statutory provisions relevant to this review are contained in the Child Support (Assessment) Act 1989 (the Act).

2. The issues which arise in this case are:

   ·     Should part of Mr McKeown’s 2019 financial year income be excluded from his 2019 adjusted taxable income?

   ·     If so, how much is to be excluded and from what date?

RELEVANT HISTORY

1. [In] October 2017 Mr McKeown was injured whilst in Army Reserve Service and deemed unable to work. Consequently, he sought incapacity payments through the Military Rehabilitation and Compensation Commission (the MRCC). There are two components to the incapacity payments made to a reservist: the first being military income and the second in respect of loss of civilian income. [In] November 2017 the MRCC accepted liability for the injury and Mr McKeown was granted incapacity payments of $373.75 per week, payable from 17 November 2017.

2. Mr McKeown sought a reassessment of the periodic compensation payments, seeking payment for the loss of civilian earnings component. [In] December 2017 the MRCC increased his incapacity payments, with the loss of earnings component being $750 per week from the date Mr McKeown sustained a compensable injury. Dissatisfied with the MRCC’s assessment of the loss of earnings component, Mr McKeown sought further review by the Veterans Review Board (the VRB) [in] January 2018. [In] May 2018 the VRB affirmed the decision of the MRCC. Mr McKeown then lodged an application for review of that decision to the Veterans Affairs Division (the VAD) of the AAT [in] June 2018. 

3. On 15 November 2018 Mr McKeown and Ms McKeown separated.

4. [In] April 2019 the VAD heard Mr McKeown’s application and remitted the matter back to the MRCC. [in] May 2019 the MRCC determined that the loss of earnings component of Mr McKeown’s incapacity payments was to be increased to $1,500 per week from the date of injury. The effect of this decision was that Mr McKeown received a lump sum payment of $32,410. 

5. As outlined above, on 30 March 2020 Mr McKeown made an application to the Agency to exclude the backpayment component of $32,410 from his 2019 taxable income. He submitted that this lump sum was of a kind that it was reasonable to expect would not have been earned, derived or received in the ordinary course of events (at folio 53):

   IN FEBRUARY 2019, 3 MONTHS AFTER SEPARATION I COMMENCED LEGAL PROCEEDINGS TO CHANGE THE ORIGINAL DETERMINATION TO $3133.45 PER FORTNIGHT. I WAS SUCCESFUL IN MY LITIGATION [IN APRIL 2019] AND MY PAYMENT WAS INCREASED TAKING EFFECT 22/05/2019 IF I HAD ALLOWED THE NORMAL COURSE OF EVENTS TO UNFOLD I WOULD STILL BE EARNING $750 PER WEEK. I WOULD NOT BE EARNING $1500 PER WEEK WITHOUT SIGNIFICANT ACTION AND EXPENSE INCURRED BY MYSELF

6. The Agency’s original decision maker and objections officer refused his applications. Mr McKeown then sought review by the first constituted tribunal.

The first tribunal decision

1. The first constituted tribunal affirmed the decision under review on 15 October 2020, based on the following reasoning:

   15.  Here Mr McKeown 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.

   16. The Tribunal considers Mr McKeown has put forward an arguable case. However, ultimately, the Tribunal considers the better view is that Mr McKeown 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 Ms McKeown first separated. He cannot satisfy subparagraph 44(1)(d)(i).

   17. It is not necessary for the Tribunal to consider the second limb contained in subparagraph 44(1)(d)(ii); however, the Tribunal observes that Mr McKeown disagreed with the initial assessment and exercised his right of review. He was ultimately vindicated on appeal. Whilst the Tribunal understood Mr McKeown’s suggestion of a relatively low success rate on review, a successful review application before the Administrative Appeals Tribunal is an outcome which occurs in the ordinary course of events in situations where – as occurred here – the Department of Veterans’ Affairs had not made the correct or preferable decision in the first instance. The Tribunal does not consider Mr McKeown could satisfy subparagraph 44(1)(1)(d)(ii).

Judicial review

1. Mr McKeown sought judicial review of the first constituted tribunal’s decision. The six grounds of appeal identified in his amended Notice of Appeal lodged on 12 April 2021 were as follows:

   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 [in] 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).

2. In its judgement made [in] August 2021 the Court addressed each ground of review sequentially.

3. With regards to ground 1, it was determined that the first constituted tribunal failed to apply the principles of statutory interpretation. In considering these principles, Tonkin J cited a number of cases pertaining to statutory interpretation and determined the tribunal erred in failing to consider the ordinary meaning of the words “earned, derived or received” in subparagraph 44(1)(d)(i) of the Act. As each of these words has a different meaning, the tribunal was in error in only focussing on whether the income was “earned” and not “derived or received”. The Court went on to state that the first constituted tribunal erred in determining a “present legal entitlement” when it found that the applicant’s entitlement to a payment at a higher rate was always present. Instead, it was determined (at paragraph 54) that Mr McKeown’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 [in] May 2019 (after the parents separated)”.  Thus, the tribunal erred in finding Mr McKeown “was entitled to, and ‘deriving’ an income prior to separation” and “his pattern of earning, derivation or receipt” was established prior to when Mr McKeown and Ms McKeown separated. Subsequently, the first constituted tribunal was in error in determining that subparagraph 44(1)(d)(i) of the Act was not satisfied.

4. With regard to ground 2, it was determined that the first constituted tribunal’s conclusion at paragraph 15 was not based on the evidence, but rather on the interpretation of the law. Therefore, it was not necessary for the Court to answer the question posed.

5. With respect to ground 3, where the first constituted tribunal concluded that the applicant could not satisfy the requirements of subparagraph 44(1)(d)(ii) the Court determined that the question of law raised was whether this legislative provision was properly construed. The Court found with respect to this ground that (at paragraph 66):

   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 [in] 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)”.

6. In response to the fourth appeal point raised by the applicant, Tonkin J determined that it was open to the tribunal to make such a factual finding and the Court was not satisfied that the first constituted tribunal erred in this respect.

7. In respect of the fifth ground raised the Court found that the first constituted tribunal did consider the statistical evidence but did not accept Mr McKeown’s proposition and this, in and of itself, did not give rise to legal error.

8. The sixth and final ground of review before the Court was also not established. The Court found that the tribunal was not bound to consider section 8 of the Social Security Act 1991. Rather it was required to properly construe section 44 of the Act. Therefore, no error of law was “exposed”.

CONSIDERATION

1. The provision relevant to this review is outlined in section 44 of the Act, where a parent may apply for post‑separation income to be excluded from their adjusted taxable income:

   Post-separation costs

   Application for post-separation income to be excluded

   (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).

   …

2. The tribunal makes the following findings. Mr McKeown and Ms McKeown lived together on a genuine domestic basis for at least six months. They both nominate 15 November 2018 as their date of separation, notwithstanding their evidence at hearing that there was an attempt at rapprochement before and immediately after the birth of their youngest child and that it was in February 2019 that they both reached the view that the marriage could not be revived. Therefore, their separation occurred within three years of Mr McKeown’s application and their consistent testimony is that they remained separated at the date of Mr McKeown’s application to the Agency for his post-separation income to be excluded. Paragraphs 44(1)(a), (b) and (c) of the Act are satisfied.

3. The tribunal next considered whether Mr McKeown earned income in accordance with a pattern of earnings established after he and Ms McKeown formally separated, pursuant to subparagraph 44(1)(d)(i) of the Act.

4. The tribunal finds that Mr McKeown did not make an income election in the application period. The last relevant year of income was the 2019 financial year. Mr McKeown’s adjusted taxable income in that financial year was $109,119, including the backpayment of $32,410. Whilst Mr McKeown’s evidence at hearing is that he has applied to the Australian Taxation Office to amend his 2018 and 2019 taxable incomes, without any evidence to the contrary the tribunal proceeds on the basis that Mr McKeown’s 2019 adjusted taxable income is $109,119.

5. The tribunal finds that the terms “earns, derives or receives” are not defined within the Act.  The only judicial guidance in respect of the proper construction of this subparagraph is in the decision in Bernard v Mill, the decision that remitted the current matter to the tribunal. The tribunal adopts the reasoning of Tonkin J, which can be summarised as being that income is earned or derived only when it is received or realised. In adopting Tonkin J’s approach, the tribunal finds that Mr McKeown did not have a present legal entitlement to the backpayment until such time as the MRCC’s determination [in] May 2019. Thus, his entitlement to this income crystallised after separation. The tribunal is satisfied that Mr McKeown’s receipt of income in the amount of $32,410 was in accordance with a pattern of earnings, derivation and receipt established after he and Ms McKeown first separated. Subparagraph 44(1)(d)(i) of the Act is satisfied.

6. Consideration is next given to subparagraph 44(1)(d)(ii) of the Act and in particular the meaning of the term “in the ordinary course of events”. The tribunal finds that there is no definition of this term in the legislation, and that this phrase in the context of section 44 has not been considered judicially. In the absence of judicial consideration the tribunal has had regard to extrinsic material to assist in the interpretation of this term.

7. The Explanatory Memorandum[1] attached to the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Bill 2006 states that the Bill provides the basis of the Government’s “major overhaul” of the child support scheme, with measures that include:

   …

   ·Parents who are using income from second jobs and overtime to help re-establish themselves during the first three years after separation may have that income excluded from child support calculations.

   [1]

8. In relation to post-separation costs addressed in section 44 of the Act it states:

   Post-separation costs

   Section 44 sets out how post-separation costs are to be assessed.  It recognises that a parent may have extra costs to re-establish themselves following separation from the other parent of their child, whether they provide care for the child or not.  As a result of these extra costs, a parent may take on overtime work or a second job.  The parent’s child support liability should not necessarily be increased as a result of this extra income. However, as a parent’s costs to re-establish himself or herself diminish over time, section 44 is limited to the first three years after the parents last separated before the commencement of the child support case. Section 44 allows a new three-year period from a subsequent separation to be considered under an application so long as the other requirements are met.  Subsequent separations from a different partner will attract a new three-year period if the parent has a child support case with that parent.  That is, the parent would make an application in accordance with this section in relation to the new child support case. Parents will have to reapply for the lower level of income for each new child support period if applicable. 

   Subsection 44(1) provides that a parent (the applicant) may apply to the Registrar to amend an assessment of child support for a child for part of a child support period if certain criteria are met.  These criteria are that:

   (a)    the applicant and the other parent lived together on a genuine domestic basis for at least six months; and

   (b)    the last separation of the applicant and the other parent before the application for administrative assessment was made occurred within the last three years; and

   (c)    at the time of the application, the applicant and the other parent remain separated; and

   (d)    in the last relevant year of income, the applicant earned, derived or received income in accordance with a pattern of earnings that was established after the applicant and the other parent last separated (see paragraph 44(1)(b)), and that would not have been reasonable to expect in the ordinary course of events.  Income that would have been earned in the normal course of events, such as an annual pay rise, is not additional income for the purposes of paragraph 44(1)(c).  An application for the lower level of income may not be necessary if, for example, the income pattern has reverted to what it was before the parents separated.

   …

   Paragraph 44(3)(b) applies as set out in the following example:

   Ted has an income of $30,000 at the date of separation from his wife.  After separation, his income increases to $60,000 as he takes on a second job.  His child support liability is assessed on $60,000, as that was his income for last relevant year of income.  Ted can apply to have his income set at $30,000 rather than $60,000, the extra $30,000 being additional income earned for re-establishment costs. However, even if his application is successful, his current income used in the assessment, that is, $60,000, can only be reduced by a maximum of 30%.  Therefore, his income would be set at $42,000.  Ted has $18,000 quarantined from his income before the self-support component is deducted and his children receive child support based on an income for him of $42,000.

   [Tribunal’s emphasis]

1. The tribunal may also have regard to the relevant policy, although it is not bound by the policy if there are cogent reasons not to do so: Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634. The Child Support Guide (the Guide) (Version 4.59) relevantly states at Chapter 2.5.2:

2.5.2 Additional income earned post separation

Context

A parent can apply to have extra income earned following separation excluded from their child support assessment.

…

A parent can apply to have additional income that was earned after separation excluded from their adjusted taxable income for child support purposes in certain circumstances. A parent may apply to have additional income excluded, regardless of whether they pay or receive child support.

The exclusion of additional income post separation is limited to the first 3 years after the parents last separated before the start of the child support case.

…

Additional income

Parents may earn additional income from a variety of sources, including for example, from overtime, a second job, a career change to a higher paying job, or from investment income. For a self-employed person, additional income may be earned, derived or received through extending the opening hours of their business, increasing production or developing new markets or new products (to a greater extent than before separation). The parent must be able to show that the change that resulted in the additional income being earned happened after separation (section 44(1)(d)(i)).

The ordinary course of events

Not all additional income that is earned, derived or received after separation will qualify for exclusion from a parent's adjusted taxable income. The new pattern of earnings must have been established after separation and would not have been reasonable to expect that income in the ordinary course of events (section 44(1)(d)(ii)).

Income that parents would have been reasonably expected to earn in the ordinary course of events cannot be excluded from their adjusted taxable income. For example, it is within the ordinary course of events that parents will earn additional income through regular pay rises, or seasonal variations in income.

However, income that parents earn outside the ordinary course of events is able to be excluded from their adjusted taxable income. This could include, for example, income from overtime or second jobs taken on after separation, a cashing out of leave entitlements, promotions or a shift to a higher paying job. However, moving from an unemployment benefit to employment is considered to be within the ordinary course of events. Any income to be excluded must have been earned, derived or received in a pattern established after separation. [Tribunal’s emphasis]

1. The tribunal understands that the Explanatory Memorandum and the Guide reflect the legislative intent to quarantine income from the administrative assessment of child support where the applicant parent takes action to ameliorate the financial effects following separation (such as a second job or accepting overtime) that would not have been reasonable to expect would have occurred had the parents not separated, that is, in the ordinary course of events.

2. Mr McKeown’s testimony regarding the statute, the Explanatory Memorandum and policy is summarised as follows. A week or so before the compensable event he was engaged as a sub-contractor on a full-time basis with gross income of $300 per day. There was no written contract, rather it was a verbal agreement. To obtain the loss of civilian earnings component of the incapacity payment reservists are required to provide at least the last two weeks of payslips from their civilian employment prior to the injury date. Mr McKeown was able to provide additional evidence to the MRCC so that by 18 December 2017, some nine weeks after sustaining the injury, the loss of the civilian income component was raised to $750 per week. However, the deadline by which he was to provide other supporting documents was not adhered to by the MRCC, who made the [December] 2017 decision before the submission deadline had elapsed. Consequently, he pursued further merits review with the VRB. He understood from the VRB decision there was an implication that he was not being truthful about the work contract secured immediately before his injury. He saw this as an attack on his integrity and thought it a “travesty”. He was determined to prove that he was in receipt of $1,500 per week prior to his injury and so lodged his application with the VAD. It was “implied” at the conference held prior to the VAD proceedings that his application had little prospect of success. He considered this implication for some time and only formed the intent to continue to litigate the matter at the VAD on 12 December 2018, when he lodged his statement of facts and contentions. He stressed that this was after separation took place. The contractor who had engaged him as a sub-contractor appeared as a witness in the VAD proceedings. On the strength of the contractor’s testimony it was accepted that his pre-injury civilian income was $1,500 per week. This resulted in the VRB’s determination being overturned and the matter being remitted to the MRCC by the VAD. 

3. Mr McKeown maintains that the backpayment was income of a kind that it is not reasonable to expect would have been received in the ordinary course of events. His primary argument in this respect is that the chance of a successful appeal from the VRB to the VAD is statistically remote. In support of his assertion, he compiled data from the AAT and Department of Veterans’ Affairs (the DVA) reports. He asserts that in the 2018 financial year there were 361 applications to the VAD and of the 480 cases that were finalised in that period, only 37% of the decisions were changed by the VAD (at folio 37). Furthermore, in the 2019 financial year 84,974 primary determinations were made by the DVA and during that same period the VAD decided 86 applications from the MRCC. Of these, only 20 cases were set aside at hearing. Thus, he calculates that only 0.41% of all claims made to the DVA are decided at the VAD and of these, only 0.02% of all determinations are set aside. It is on this basis that he submits that success at the VAD is remote and therefore is an outcome that is not reasonable to expect would occur in the ordinary course of events.

4. The tribunal carefully considered Mr McKeown’s evidence regarding the statistical probability of a successful outcome at the VAD and concludes that the analysis is flawed. The data contained in the DVA’s 2018 financial year is opaque. There is no data about, of the determined 480 cases, how many were settled and indeed “changed” following the consent of the parties at the pre-hearing stage. As for the 2019 financial year data, the DVA cautioned that “While the number of [VAD] decisions affirmed at hearing may seem low compared with the number decided, this is because not all were decided following [VAD] hearing. For example, some were withdrawn and others were resolved by consent without the need for a hearing”. The 2019 statistics also bear this out: of the 86 applications to the MRCC, 40 were either affirmed, withdrawn or dismissed, 40 were settled by consent and six were set aside at hearing. Without being able to drill down further into these outcomes, and in particular the matters settled by consent, the tribunal is not satisfied that Mr McKeown has accurately presented the statistical probability of a successful review. In any event, the tribunal accepts that what can be gleaned from these reports is that there is a low probability of a successful outcome upon review by the VAD. 

5. It is the tribunal’s view that Mr McKeown’s interpretation of the meaning “ordinary course of events” which is based on how likely or foreseeable the financially beneficial outcome is, cannot be supported. His argument implies that something is not in the ordinary course of events if it is an unlikely or unusual outcome. Of course, a successful outcome following an application to the VAD is not assured. It may, in fact, be unlikely overall. Nevertheless, there is at least an expectation that his pursuit of merits review may be successful, notwithstanding the fact that an applicant had no control over the outcome, nor when the decision would be made. Similarly, in a context of a period of wage stagnation it may be statistically unlikely that a person secures a pay rise. However, this does not mean that this pattern of earnings (the pay rise) is of a kind that it would be reasonable to expect would not have been earned in the ordinary course of events. The tribunal is of the view that the first constituted tribunal accurately dealt with this point, when it stated (at paragraph 17):

   Whilst the Tribunal understood Mr McKeown’s suggestion of a relatively low success rate on review, a successful review application before the Administrative Appeals Tribunal is an outcome which occurs in the ordinary course of events in situations where – as occurred here – the Department of Veterans’ Affairs had not made the correct or preferable decision in the first instance.

6. Having regard to the legislative intent the tribunal invited Mr McKeown to explain how the receipt of the backpayment differed to the examples in the Explanatory Memorandum and policy, such as an annual pay rise. Mr McKeown again responded that the additional compensation he received as a consequence of successful merits review was statistically remote having regard to outcomes in the VAD and thus did not occur in the ordinary course of events. On this point, the tribunal notes that the evidence indicates that Mr McKeown pursued merits review because he had formed the view that the decision of the VRB was not correct and determined that there was merit in pursuing further review to the VAD. This right is something available to any person who believes that an administrative decision is not the correct and preferable one. Thus, it is a right that accrues to that person in the ordinary course of events. As discussed with Mr McKeown at hearing, the military offers compensation for military personnel who are injured during their service. The injury, if it precludes a person from working, sets up an immediate expectation that compensation to sustain the injured worker will be payable until such time as they are fit to return to work or to military or reservist duties. The tribunal invited comment from Mr McKeown as to whether this was something that occurred in the ordinary course of events. Mr McKeown argued it was not, restating his argument that his successful merits review at the VAD, resulting in a higher rate of the loss of earnings component in his incapacity payments was statistically remote and thus, not something that occurred in the ordinary course of events.

7. Mr McKeown asserted that the additional income to compensate him for his loss of civilian earnings was akin to him working overtime or taking on a second job. He stated that had he not separated, he would not have pursued the matter at the VAD. He went on to state that the family did not have sufficient income in which to meet its necessary expenses when the incapacity payments only included $750 per week in lost civilian income. Thus, in light of the anticipated costs associated with separation, he had no choice but to pursue the legal remedies available to him. This was the only way in which he could increase his income.

8. In the tribunal’s view, Mr McKeown’s evidence on this point is problematic. As a matter of fact he had lodged all the applications requesting reviews of the decisions well before he and Ms McKeown separated. His submissions on this point are also at odds with his testimony that his motivation in seeking review of the VRB decision was because his personal integrity had been called into question and his loss of the civilian income component was not consistent with the contract in place prior to his injury. When presented with this tension in his testimony, Mr McKeown asserted that he had become aware of issues in the marriage in June 2018, the same time that he lodged the VAD application. Therefore, it would certainly be necessary to increase his income to meet the costs of two households and so he “became proactive before the event”. The tribunal is not persuaded that this was the case. Even if it was accepted that Mr McKeown lodged the VAD application in anticipation of a separation (which the tribunal is not persuaded was the case), it does not negate the fact that Mr McKeown had lodged the applications to the MRCC and VRB on the basis that he knew his pre-injury civilian income was $1,500 per week and the family were unable to survive on the loss of the civilian earnings component of $750 per week and later to the VDA because his integrity had been called into question. Equally, it may well be the case that on 12 December 2018 Mr McKeown reaffirmed his commitment to pursue his application with the VAD. However, the tribunal is persuaded that it is significant that Mr McKeown lodged this application prior to the formal separation that took place in November 2018.

9. The tribunal concludes that Mr McKeown’s action in lodging his applications for review, and in particular the application to the VAD, was not initiated so that he could ameliorate the financial consequences of separation that had not yet occurred. As the positive action by Mr McKeown to pursue merits review to increase his incapacity payments were taken well before separation took place, the tribunal finds that it was in the ordinary course of events. Furthermore, the tribunal is not persuaded that the continuation of an application for review, made before separation, is analogous to a parent taking active steps to secure a second job or overtime or indeed taking any action to mitigate the financial consequences arising from the breakdown of a relationship. In the tribunal’s view the correctness of this conclusion is supported by the Explanatory Memorandum, which clearly articulates the mischief that the legislation was designed to address, which is to quarantine income that would not have been sought and secured had the financial costs arising from the separation not occurred.

10. The tribunal is of the view that the preferable interpretation of the phrase “ordinary course of events” is gleaned from the Explanatory Memorandum and with reference to the applicable Child Support policy. The ordinary course of events is in reference to whether the income would have been earned, derived or received irrespective of whether separation occurred. In the examples outlined in the Explanatory Memorandum and in the policy, the applicant is required to take some positive action that would not be reasonable to expect would have occurred in the ordinary course of events. The implicit reasoning is that had the applicant parent not separated (and so not have experienced a change to their personal and financial circumstances) it would be reasonable to expect they would not have taken the action to secure the additional income. Thus, the increase in income did not occur in the ordinary course of events. Conversely, if the additional income would still have been earned, derived or received irrespective of whether there was a change to the applicant parent’s relationship status, it is reasonable to find that an increase in income was in the ordinary course of events. 

11. Applying this reasoning to Mr McKeown’s situation, the tribunal is satisfied that he took a series of actions prior to separation that ultimately led to the successful application before the VAD. Taking into account his testimony and the documentary evidence before it the tribunal is not persuaded that Mr McKeown would not have taken this action (and in particular, his application to the VAD) if he had not separated. The tribunal concludes that the increase in the loss of civilian earnings component of Mr McKeown’s incapacity payment is of a kind that is reasonable to expect would have been earned, derived and received in the ordinary course of events. Therefore subparagraph 44(1)(d)(ii) of the Act is not satisfied.

12. Thus, Mr McKeown’s application to amend the administrative assessment of child support on the basis of his post-separation income must be refused.

DECISION

The decision under review is affirmed.