Vaughn and Child Support Registrar (Child support)

[2018] AATA 2232

Vaughn and Child Support Registrar (Child support) [2018] AATA 2232 (12 April 2018)

DIVISION:Social Services & Child Support Division

REVIEW NUMBER:  2017/AC013114

APPLICANT:  Mr Vaughn

OTHER PARTIES:  Child Support Registrar

TRIBUNAL:  Member S Cullimore

DECISION DATE:  12 April 2018

DECISION:

The Tribunal sets aside the decision under review and Mr Vaughn is granted an extension of time, pursuant to section 83 of the Child Support (Registration and Collection) Act 1988 (the Act), to lodge an objection to the departure determination made on 21 February 2017.

CATCHWORDS
Child support – Refusal to grant extension of time to object - Departure from the administrative assessment - Reasonable explanation for delay - Potential merit - Decision under review set aside and substituted that extension of time be granted

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed 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. The following information is taken from the records of the Department of Human Services – Child Support (the CSA) and is not in dispute, and the Tribunal finds each matter as fact.

2. A child support case was first registered between Mr Vaughn and [Ms A] on 10 February 2003, and the case is now for two children, [Child 1], now aged 18, and [Child 2], now aged 6. The case has been Registrar Collect since 13 January 2006.

3. On 18 November 2016 [Ms A] lodged a change of assessment application based on Reason 8A for an increase in the annual rate of child support.[1] As at that date Mr Vaughn was assessed to pay child support of only $414 per annum (pa) based upon the parties’ 2014/15 provisional incomes of $6,822 and $4,440.[2]

   [1] See C14.

   [2] See page 124.

4. On 21 February 2017 a decision maker found Reason 8A established in relation to the income property and financial resources of Mr Vaughn and made a departure determination fixing Mr Vaughn’s adjusted taxable income at $240,000pa for the period 21 February 2017 to 21 February 2020. The resulting level of child support payable by Mr Vaughn was initially $40,974 pa.[3]

   [3] C135.

5. The CSA treated Mr Vaughn as not having lodged an objection to that decision within time and as not having made a request for an extension of time to lodge an objection until 24 November 2017.[4]

   [4] See the letter at C166. This issue is discussed in detail below.

6. On 5 December 2017 a delegate of the Registrar refused to grant an extension of time for Mr Vaughn to object.[5]

   [5] C2.

7. On 15 December 2017 Mr Vaughn applied for review of that refusal by this Tribunal. 

DOCUMENTARY EVIDENCE AND HEARING

1. [Ms A] took no part in these proceedings.

2. The Tribunal had before it a bundle of documents provided by the CSA. These documents are referred to as C1 to C251.

10.  Prior to the hearing, the Tribunal became aware that Mr Vaughn had lodged a related application with the Tribunal in July 2017. Documents relating to that matter (2017/AC012122) are marked T1 to T3. Copies were provided to Mr Vaughn and the CSA.

11.  Mr Vaughn attended the hearing on 15 March 2018 via teleconference. He gave affirmed evidence and made verbal submissions.

12.  Subsequent to the hearing, and at the request of the Tribunal, he provided some further documents which were marked A1 onwards. Copies were provided to the CSA.

13.  The Tribunal made this decision on 12 April 2018.

ISSUE

14.  The issue for the Tribunal to determine is whether Mr Vaughn should now be granted an extension of time in which to object to the departure determination made on 21 February 2017.

CONSIDERATION

The relevant law

15.  The law relating to a person’s right to seek review of a decision of a delegate or in this case a “decision maker” is contained in the Act. 

16.  Section 80 of the Act states that a person “may lodge with the Registrar an objection in writing”. The Act does not expressly require that an objection must be in writing.

17.  Section 81 of the Act requires that a person must lodge an objection to such a decision within 28 days after a “notice of the decision” is served on them.

18.  Where the period for lodgement has ended, the person may send the objection to the Registrar along with an application requesting that the objection be treated as if it was duly lodged, that is, that it was lodged within the allowed time: section 82 of the Act.

19. Section 83 of the Act then provides that the Registrar must consider the application for extension of time, grant or refuse that application and advise the person of the decision in writing.

20.  Section 89 of the Act allows the person who applied for the extension of time to apply to this Tribunal for a review of a decision to refuse to extend time.

21.  In making this decision, the Tribunal considered the guiding principles for the exercise of a discretion to allow an extension of time as set out in various cases, the first of which is Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344.

22.  In that case the Federal Court said that an extension of time should not be granted unless it was proper to do so, noting that in general, applications or proceedings commenced outside of a prescribed time limit will not be considered. The Court also said that there must be an acceptable explanation for the delay and that it must be fair and equitable in the circumstances to extend time.

23.  In ReMulheron and Australian Telecommunications Corporation (1991) 14 AAR 42 O’Connor J outlined some principles to be applied in considering an application for an extension of time:

The principles to be applied in considering an application for extension of time … are

(i)    prima facie proceedings commenced outside the prescribed period will not be entertained. An extension of time will be granted, however, if it is proper to do so;

(ii)   It is relevant whether the applicant rested on his [or her] rights or took action to make the decision maker aware that the decision was being contested;

(iii)   any prejudice to the respondent [[Ms A]] that would be caused by granting the extension of time is relevant;

(iv)   any wider prejudice to the general public in terms of disruption to established practice is relevant;

(v)    the merits of the substantial application are relevant; and

(vi)   fairness of granting an extension of time as between the applicant and other persons in like position is relevant. 

24.  In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, the High Court in dealing with an extension of time and the general concept of time limitation periods, noted that while an extension of time is the exception to the general rule, there are legislative provisions which in the circumstances of the facts of a particular case, may indicate that justice is served by the general rule being overturned.

25.  Considering the above authorities, the Tribunal is of the view that in deciding whether or not to grant an extension of time to object, it should consider and balance a number of factors and principles, and determine whether, on balance, the extension should or should not be granted. No one factor is determinative in itself: the whole of the relevant circumstances must be considered.

DISCUSSION OF EVIDENCE, CONCLUSIONS AND REASONING

The length of the delay and the reasons for the delay

26.  The Tribunal notes that the departure determination was made on 21 February 2017.

27.  Letters were sent out to each party on that day with copies of the decision.[6] They stated that objections have to be lodged “within 28 days from the date you receive this letter”.

[6] C121,122.

28.  Given the 28 days to lodge an objection contained in subsection 81(1) of the Act starts from the “notice of the decision being served on the person”, and that the CSA now allows a period of up to nine working days for postage, the Tribunal finds that the 28 days would have expired on 3 April 2017.

29.  The Tribunal notes that Mr Vaughn verbally objected on 2 March 2017. He was recorded as saying to a CSA officer that “...he disputes the decision ….as he does not earn $240K [pa] as per the decision”. He was advised to lodge a written objection.[7]

[7] C137.

30.  The subsequent history of his trying to challenge the change of assessment decision is now summarised as follows:

·     He provided a written objection dated 19 June 2017 (received by the CSA 3 July 2017). He stated that the income used was “based on a loan and not my actual income”;[8]

·     In a telephone conversation on 28 June 2017, he asked a CSA officer “..why CSA are using an income of $240,000 as he is not earning that amount”. The CSA officer advised him to object to the decision;[9]

·     On 14 July 2017 Mr Vaughn lodged an application for review with the Tribunal seeking to review a decision supposedly made on 7 July 2017;[10]

·     On 8 August 2017 the Tribunal dismissed that application, finding that there was no reviewable decision such as a decision by an objections officer which it had jurisdiction over;[11]

·     On 8 August 2017 a CSA officer noted that Mr Vaughn had objected out of time but not requested an extension;[12]

·     A letter dated 17 August 2017 was sent to Mr Vaughn advising him to apply for an extension of time;[13]

·     By letter dated 20 November 2017 Mr Vaughn requested an extension of time to lodge his objection.[14]

[8] C2168.

[9] C167.

[10] T3.

[11] T2.

[12] C180.

[13] C182.

[14] C201.

31.  As the original deadline was for Mr Vaughn to lodge an objection was 3 April 2017, the Tribunal finds that Mr Vaughn was 77 days (11 weeks) late in lodging his written objection dated 19 June 2017.

32.  In the view of the Tribunal, the length of the delay in this matter is quite significant, but this is not a case in which Mr Vaughn has “sat on his rights”. He advised the CSA at the earliest opportunity that he disagreed with the change of assessment decision, and why.

33.  Further, Mr Vaughn stated that he had sent in two written objections to the CSA, but they were not on the CSA file. He stated that he had first sent in a written objection about mid- March 2017, and another shortly afterwards. He had posted both to the CSA Post Office Box number.

34.  He stated that his father had died in early 2017 and that he had to take over his father’s business affairs.

35.  Whether or not all of this evidence was true, the Tribunal is of the view that any delay is not excessive and that Mr Vaughn did take steps within a reasonable time to challenge the change of assessment decision.

The merits of the objection

36.  The Tribunal has considered what grounds and arguments Mr Vaughn might be able to put up to an objections officer to seek a reduction in his child support liability from the level as fixed in the departure determination, and/or a shorter departure period.

37.  The Tribunal has considered the evidence before it of the actual income, property and financial resources of Mr Vaughn and has concluded that there appears to be significant merit in him pursuing an objection.

38.  Firstly, the amount of child support payable by Mr Vaughn appears to the Tribunal on its face to be excessive. There was no evidence before the decision maker of the actual costs of care of the children. The law is reasonably clear that the level of child support should not significantly exceed the costs of care of the children in any matter.

39.  The Tribunal notes that Mr Vaughn’s income has been fixed at $240,000 pa for a three year period to February 2020. This initially produced a rate of child support of $40,974 pa for two children. At that stage, the case for [Child 1] was due to end at her 18^th birthday, on 30 December 2017. However, by a decision dated 28 July 2017 the CSA extended the case for [Child 1] until the end of the 2018 school year.[15] This means that the effect of the change of assessment decision is that Mr Vaughn is liable to pay in excess of $100,000 in child support to [Ms A] during the departure period. That is a very substantial amount of child support for any payer.

[15] C174.

40.  Secondly, the evidence supporting the fixing of Mr Vaughn’s annual income at $240,000 is very problematic. The decision maker seems to have relied entirely on two sets of bank statements, which covered only a short period in late 2016. Some statements were for a company called “[Company 1]” (at C86 to 88). There was no dispute that Mr Vaughn is the sole shareholder and director of that entity. The other bank statements were for [Bank 1] account ending #1914 (at C51 to 86). That bank account was in the name of “Mr Vaughn trading as [Business 1]”.

41.  The decision maker assumed or appears to have assumed that all or nearly all of the deposits into these accounts were “income” for the benefit of Mr Vaughn, and that no expenses were incurred in earning that income. These are highly questionable processes and assumptions.

42.  Thirdly, there is now at least some credible evidence as to what the income of Mr Vaughn really is. The tax estimates which he provided after the Tribunal hearing show that his taxable income in 2015/16 was $52,653 and in 2016/17 was $59,528. His evidence to the Tribunal was that he was a PAYG employee for an [particular] company. His evidence was that as well as the PAYG income he also had some income from the carrying out of home inspections in the name of the business, [Business 1]. This business had formerly been operated by his father. Various deposits into the [Business 1] account support that evidence, the amounts concerned being in the order of $300 to $500 each, received from named individuals. Mr Vaughn agreed that this was part of his income.

43.  The Tribunal is also concerned that some of the deposits into that account which may also have also been treated as income were simply internal bank transfers, e.g. the $10,000 deposited into the account at C65.

44.  Finally, Mr Vaughn offered some explanation of other, larger deposits into this bank account. These are the deposits referenced to “[a Property transaction]” or similar wording. In total they came to about $22,000 in the relevant three months.

45.  Mr Vaughn provided a copy of a complex Agreement which related to two properties: a property at [Suburb 1] owned by [Company 1] and a property at [Suburb 2] owned by his mother, over whose affairs he has a power of attorney. Both properties were evidently heavily mortgaged and the loans concerned were in arrears when the agreement was made.

46.  Under this Agreement, a man called  [Mr A] agreed to pay out those loans (which came to over $730,000 including arrears of $32,000) in return for an option to purchase the [Suburb 2] property, which he ([Mr A]) intended to use – with adjoining land – for a substantial apartment development. A further term was that one apartment be “reserved”, it appears for [Mr Vaughn’s mother] (the legal owner) but, the Tribunal suspects, effectively for her son, Mr Vaughn.

47.  Mr Vaughn explained that the deposits referenced to “[a property transaction]” were the agreed payments of the loan arrears under this agreement.

48.  The Tribunal is not wholly convinced of this explanation, as the funds were deposited in late 2016 but the agreement provided was dated May 2017, and the source of the funds appears not to be [Mr A]. These transactions could possibly provide evidence that Mr Vaughn does have access to some “property or financial resources” that could be drawn upon for child support, in addition to his PAYG income, but the evidence scarcely suggests that he has an income for child support purposes of $240,000pa.

49.  These are complex issues which need further investigation and consideration by an objections officer.

50.  All of the above matters can and should now be considered by an objections officer on a full merits review of this matter.

Prejudice to the other party

51.  [Ms A] has not been joined as a party to this review and has not had the opportunity to set out what prejudice she may face if the extension of time is granted. 

52.  Mr Vaughn is significantly in arrears in payment of child support but given the assessed rate has been over $40,000pa against a PAYG income in the high $50,000s, that is not surprising. The CSA has been garnisheeing substantial amounts from his PAYG income for some time.

53.  The Tribunal therefore did identify some potential prejudice to [Ms A] if he is allowed to pursue his objection, but the evidence before the Tribunal discloses some serious issues with the way child support has been assessed in this case, and with the way that the decision under review was actually reached, and his challenge to that decision needs to be allowed to proceed and to be dealt with fairly and on its merits.

Conclusion

54.  The Tribunal had regard to all the factors discussed above and weighed them up carefully.

55.  On balance it concluded that the factors favouring exercising the discretion to extend time significantly outweigh any other factors.

DECISION

The Tribunal sets aside the decision under review and Mr Vaughn is granted an extension of time, pursuant to section 83 of the Child Support (Registration and Collection) Act 1988 (the Act), to lodge an objection to the departure determination made on 21 February 2017.