Universal Family Day Care Pty Ltd and Secretary, Department of Education
[2020] AATA 1369
•19 May 2020
Universal Family Day Care Pty Ltd and Secretary, Department of Education [2020] AATA 1369 (19 May 2020)
Division:GENERAL DIVISION
File Number: 2018/6126
Re:Universal Family Day Care Pty Ltd
APPLICANT
AndSecretary, Department of Education
RESPONDENT
DECISION
Tribunal:Dr L Bygrave, Member
Date:19 May 2020
Place:Sydney
The decision under review is affirmed
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Dr L Bygrave, Member
CATCHWORDS
CORPORATIONS – cancellation of approval for child care subsidy – deregistration – the effect of reinstatement – whether the applicant ceased to operate when deregistered – whether the Corporations Act can be applied retrospectively – decision under review affirmed.
LEGISLATION
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth)
Corporations Act 2001 (Cth)
CASES
Assen Atanasov Mitzev v Marsha Foxman [2007] NSWCA 273
Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) [2007] NSWSC 1422
SECONDARY MATERIALS
Child Care Subsidy Minister’s Amendment (Building on the Child Care Package and Other Measures) Rules 2020 (Cth)
REASONS FOR DECISION
Dr L Bygrave, Member
19 May 2020
INTRODUCTION
On 30 July 2018, the Department of Education and Training (the Department)[1] made a decision to cancel the approval of Universal Family Day Care Pty Ltd (Universal FDC) for child care subsidy in accordance with section 197H of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (the Administration Act).
[1] The Department is now named the Department of Education.
Universal FDC requested a review and, on 16 October 2018, an authorised review officer of the Department affirmed the decision.
On 22 October 2018, Universal FDC applied to the General Division of the Administrative Appeals Tribunal (the Tribunal) for review.
The application was heard on 24 March 2020 with legal representatives for Universal FDC and the Department providing oral submissions to the Tribunal. Following the hearing, further written submissions were made by the Department on 16 April 2020 and Universal FDC on 1 May 2020 about the applicability of the Child Care Subsidy Minister’s Amendment (Building on the Child Care Package and Other Measures) Rules 2020 (the Rules) to the matter.
RELEVANT LEGISLATION
Part 8 of the Administration Act sets out the statutory provisions for ‘approval of provider of child care services’. Relevant to this matter, section 197H of the Administration Act states:
Cancellation for ceasing to operate any approved child care service
(1) The Secretary must cancel the approval of an approved provider if the provider ceases to operate all the approved child care services of the provider.
…
(3) In this section:
ceases to operate has the meaning given by the Minister’s rules.
Written submissions provided by the Department following the hearing stated the ‘Minister’s Rules’ referred to in section 197H of the Administration Act are the Rules set out in paragraph 4 above, which came into effect on 5 March 2020. (Notably, this date is after the date of the decision made by the Department but prior to the date of the Tribunal hearing).
Section 7A of the Rules provides in relevant part:
7A Meaning of ceases to operate any approved child care service
(1) For the purposes of section 197H of the Family Assistance Administration Act, a provider ceases to operate all the approved child care services of the provider if one or more of the following circumstances applies to the provider:
…
(b)if the provider is a body corporate – the body corporate is deregistered (within the meaning of the Corporations Act 2001).
The following provisions in the Corporations Act 2001 (Cth) (the Corporations Act) are also relevant to this matter:
601AB Deregistration – ASIC initiated
Circumstances in which ASIC may deregister
…
(1A) ASIC may also decide to deregister a company if the company’s review fee in respect of a review date has not been paid in full at least 12 months after the due date for payment.
601AD Effect of deregistration
Company ceases to exist
(1) A company ceases to exist on deregistration.
Note: Despite the deregistration, officers of the company may still be liable for things done before the company was deregistered.
601AH Reinstatement
Reinstatement by ASIC
(1) ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered.
…
Effect of reinstatement
(5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.
CONSIDERATION
The following facts are not in dispute between Universal FDC and the Department:
·Universal FDC was registered as a company by the Australian Securities and Investment Commission (ASIC) on 21 February 2013 and received provider approval from a delegate of the Department in accordance with the Administration Act to operate a child care service on 28 October 2016.
·On 22 May 2018, ASIC published the following notice on its website:
Corporations Act 2001
Subsection 601AB(3)
NOTICE OF PROPOSED DEREGISTRATION – ASIC initiated under s601AB(1) or (1A)
Company details
Company: UNIVERSAL FAMILY DAY CARE PTY LTD
…
Notice
ASIC proposes to deregister the Company under section 601AB
ASIC may deregister the Company when two months have passed since publication of this notice.
Date of publication: 22 May 2018[2]
·On 2 July 2018, the child care subsidy replaced the child care benefit and child care rebate as the Australian government’s subsidy to assist families with child care fees.
·On 22 July 2018, Universal FDC was deregistered as a company by ASIC. The basis for the deregistration was Universal FDC had not paid its ASIC annual review fees.
·On 30 July 2018, the Department provided written notice to Universal FDC that its provider approval was cancelled under section 197H of the Administration Act ‘on the basis…that the Provider [Universal FDC] has ceased to operate all the approved child care services of the Provider’.[3]
·Mr Gaal Gaal, Director of Universal FDC, wrote to the Department on 31 July 2018 explaining that the renewal notice from ASIC was ‘lost through the postal system’ and Universal FDC was in the process of reinstating the registration of the company.[4] Mr Gaal requested the Department ‘remove the suspension/ cancellation of the Provider Approval and…restore Universal’s access to’ child care subsidy.[5]
·On 14 August 2018, ASIC reinstated the registration of Universal FDC under section 601AH of the Corporations Act.
[2] Exhibit T-T3, page 12.
[3] Exhibit T-T5, page 15.
[4] Exhibit T-T8, page 27.
[5] Exhibit T-T8, page 28.
The issue for determination by the Tribunal is whether the Department properly cancelled Universal FDC’s provider approval as a result of ASIC’s decision to deregister the company. This requires the Tribunal to consider:
·whether, as a result of ASIC’s deregistration of the company on 22 July 2018, Universal FDC ceased to operate for the purposes of section 197H of the Administration Act; and
·whether the subsequent re-registration of Universal FDC by ASIC on 14 August 2018 had any effect on the decision to cancel Universal FDC’s provider approval.
At the Tribunal hearing, legal representatives for Universal FDC and the Department agreed that these issues for determination relied on interpretation of the statute.
Universal FDC submitted to the Tribunal that child care services for, and on behalf of, the company (educators providing child care in their private homes) continued during the period the company was deregistered from 22 July 2018 to 14 August 2018. Universal FDC contended this demonstrated the company neither permanently ceased to provide child care services nor ever had the intention to not continue to provide services. Consequently, Universal FDC stated that the company did not cease to operate (in practice) and so the deregistration and subsequent re-registration of the company should have no effect on the company’s provider approval.
The legal representative for Universal FDC further submitted that subsection 601AH(5) of the Corporations Act should be interpreted to mean that, when the company was reinstated by ASIC on 14 August 2018, the period from 22 July 2018 to 14 August 2018 should have been treated by the Department as though the company was not deregistered.
In contrast, the Department submitted that the statutory construction of the Administration Act and the Corporations Act meant that when Universal FDC was deregistered by ASIC on 22 July 2018 in accordance with section 601AB of the Corporations Act, the company ceased to exist pursuant to section 601AD of the Corporations Act. This meant that Universal FDC legally ceased to operate all child care services when it was deregistered. Consequently, the Department was required to cancel the approval of Universal FDC as an approved provider pursuant to section 197H of the Administration Act.
The Department’s legal representative relied on two authorities regarding the effect of reinstatement of a company under subsection 601AH(5) of the Corporations Act. First, the Department referred to Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq), in which White J observed the following about interpreting subsection 601AH(5):
It is far from clear what is the intended effect of reinstatement under s 601AH(5). The first sentence of s 601AH(5) re-enacts language which had a settled meaning in earlier legislation… But as the authorities recognise, it is difficult to maintain that construction in the face of the sentences which follow. In particular, the second sentence appears to mean that the company is not taken to have had directors during the period of deregistration. As it is the directors who have the power to manage the affairs of the company, if the company, although taken to have been in existence, is not taken to have had directors, even though there were persons who may have purported to act as directors during the period of deregistration, then it is difficult to see how anyone could be taken to have had authority to act on behalf of the company. Prima facie, the third sentence suggests that property which reinvests in the company is property which is still vested in ASIC immediately before reinstatement. Again, this suggests that, notwithstanding the first sentence of s 601AH(5), although the company is taken to have continued in existence as if it had not been deregistered, it is not taken to have continued to have had the property which it had immediately before deregistration, or to have dealt with the property in a way it may purportedly have appeared to deal with it. The authorities on s 601AH(5) show that the first sentence is indeed qualified by the following sentences.[6] [emphasis added]
[6] [2007] NSWSC 1422 at [42].
White J observed the ‘contrary’ intentions in the three sentences of subsection 601AH(5) of the Corporations Act and referred to authorities that held ‘that s 601AH(5) created only a limited form of retrospectivity and…did not give efficacy to active steps taken in relation to a company which, because of the company’s non-existence, were, when taken, devoid of legal effect’.[7] [emphasis added]
[7] Ibid [60]-[61].
The second authority referenced by the Department was Assen Atanasov Mitzev v Marsha Foxman, in which their Honours decided the interpretation of subsection 601AH(5) to mean that ‘where a company is reinstated on the register, it is “taken to have continued in existence as if it had not been deregistered”’ is an argument ‘based on a fallacy’.[8] Their Honours further stated:
As s 601AH(5) itself recognises, the past can only partly be undone. Thus, a person who is a director immediately before deregistration becomes a director again “from the time when ASIC or the Court reinstates the company”…If the company was insolvent immediately prior to its deregistration, its reinstatement will not result in it having traded during a period after deregistration, when insolvent. Similarly, if the company operated a trading exchange up to the time of its deregistration, its reinstatement does not mean that it continued, by some fictional means, to carry on a business which in fact was not being carried on.[9]
[8] [2007] NSWCA 273 at [24]-[25].
[9] Ibid.
The Department’s written submissions to the Tribunal detailed legal, financial, banking and insurance ramifications if a deregistered company was treated as continuing to provide or operate services as an ‘approved provider’.[10]
[10] Respondent’s Statement of Facts, Issues and Contentions, 29 November 2019, paragraph 23.
Clearly, the issue I must determine is whether subsection 601AH(5) of the Corporations Act can be considered to operate retrospectively.
I am satisfied that when Universal FDC was deregistered as a company by ASIC on 22 July 2018, the effect of this deregistration was that Universal FDC ceased to exist pursuant to subsection 601AD(1) of the Corporations Act. This was the legal status of the company, irrespective of whether Universal FDC’s educators continued to provide child care services after this date. For this reason, in accordance with section 197H of the Administration Act, I find the Department was required to cancel the approval of Universal FDC as an approved provider on 22 July 2018 because the company legally ceased to operate when it ceased to exist.
In considering the meaning of subsection 601AH(5) of the Corporations Act, all the sentences in subsection 601AH(5) are to be read together. This means the first sentence of the subsection, that a reinstated company ‘is taken to have continued in existence as if it had not been deregistered’, is qualified by the subsequent sentences.
The language of the second sentence of subsection 601AH(5) of the Corporations Act: a ‘person who was a director…before deregistration becomes a director again…’ clearly implies the legal status of any director ceased during the period the company was deregistered. Similarly, the wording in the third sentence: any ‘property…still vested in the Commonwealth…revests in the company’ specifies that property of the company held by the Commonwealth during the period the company was deregistered reverts to the company on reinstatement. This interpretation of subsection 601AH(5) of the Corporations Act is consistent with the decisions in Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) and Assen Atanasov Mitzev v Marsha Foxman.
Reading the whole of subsection 601AH(5), I am satisfied that it was not until 14 August 2018, the date Universal FDC was reinstated by ASIC, that Universal FDC again legally operated as a company under the Corporations Act and was an approved child care service for the purpose of receiving child care subsidy in accordance with the Administration Act.
For completeness, I noted at paragraph 4 that the parties provided written submissions on the applicability of the Rules to this matter. I have considered these submissions and, consistent with the Department’s submissions, I find the Rules have limited applicability to determining the issue before the Tribunal. This is because the Rules do not alter the relevant law or interpretation of the statute; rather they merely codify and clarify the existing law.
CONCLUSION
For the reasons set out above, I find that Universal FDC ceased to operate any approved child care service for the period from 22 July 2018 to 14 August 2018 in accordance with section 197H of the Administration Act and therefore was not eligible to receive child care subsidy during this period.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 26 (twenty-six) paragraphs are a true copy of the reasons for the decision herein of Dr L Bygrave, Member
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Associate
Dated: 19 May 2020
Date of hearing: 24 March 2020 Date final submissions received: 1 May 2020 Counsel for the Applicant: Mr Jared Bennett Solicitors for the Applicant: Vizzone Ruggero Twigg Lawyers Solicitors for the Respondent: Australian Government Solicitor
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