Arnold Mann v Secretary, Department of Social Services
[2014] AATA 61
•7 February 2014
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2013/4778
GENERAL ADMINISTRATIVE DIVISION )Re:ARNOLD MANN
Applicant
And:SECRETARY, DEPARTMENT OF SOCIAL SERVICES
Respondent
CORRIGENDUM TO DECISION [2014] AATA 61
The Tribunal amends its decision and reasons for decision of 7 February 2014 as follows:
by deleting “s” in “sections” following “Social Security Act 1947” and then by deleting “, 8(1), 8(5), 8(7), 11(1), 11(4), 20B(b), 43, 55(a), 918, 1061VA(1), 1064, 1070A(b), 1070B, 1070C, 1070V, 1118(1)(a), 1118(1)(e), 1118(1AB), 1121(1), 1121(3), 1121A” following “Social Security Act 1947 section 3(1)” in its list of legislation;
by inserting “Social Security Act 1991 sections 8(1), 8(5), 8(7), 11(1), 11(4), 20B(b), 43, 55(a), 918, 1061VA(1), 1064, 1070A(b), 1070B, 1070C, 1070V, 1118(1)(a), 1118(1)(e), 1118(1AB), 1121(1), 1121(3), 1121A” in its list of legislation and listed in the line immediately after “Social Security Act 1947 section 3(1)”; and
by inserting “Social Security Act 1991” before “SS Act” at the second line of [3(3)] of its reasons for decision.
_[sgd] S A Forgie__
Deputy President
[2014] AATA 61
Division GENERAL ADMINISTRATIVE DIVISION
File Number 2013/4778
Re Arnold Mann
APPLICANT
And Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Deputy President S A Forgie
Date 7 February 2014
Place Melbourne
The Tribunal has decided to affirm the decision of the Social Security Appeals Tribunal dated 15 August 2013.
[sgd] S A Forgie
Deputy President
CATCHWORDS
SOCIAL SERVICES – Age Pension – assets test – home equity conversion agreement under which repayment of loan secured by mortgage on principal home – when proceeds treated as income – whether amount of loan deducted from value of assets other than principal home – value of home unit – decision affirmed.
PRACTICE AND PROCEDURE – statutory interpretation – role of guidelines – role of Tribunal.
LEGISLATION
Acts Interpretation Act 1901 sections 15AA, 15AB(1)-(3)
Administrative Appeals Tribunal Act 1975 sections 39(1), 43
Administrative Decisions (Judicial Review) Act 1977
Copyright Act 1968
Dairy Industry Act 1973
Disability Services Act 1986
Equal Opportunity Act 1984 (WA)
Family Assistance Legislation Amendment (More Help for Families – One-off Payments) Act 2004
Income Tax Assessment Act 1922
Income Tax Assessment Act 1936 section 82(2)
Interpretation Act 1987 section 34(1)
Judiciary Act 1901 section 39B
Migration Act 1958 sections 501(1)
National Health Act 1953
Social Security (Administration) Act 1999 sections 8(f), 179(1)
Social Security Act 1947 sections 3(1), 8(1), 8(5), 8(7), 11(1), 11(4), 20B(b), 43, 55(a), 918, 1061VA(1), 1064, 1070A(b), 1070B, 1070C, 1070V, 1118(1)(a), 1118(1)(e), 1118(1AB), 1121(1), 1121(3), 1121A
Social Security and Veterans’ Affairs Legislation Amendment (No 4) Act 1989 section 21(a)
Superannuation Industry (Supervision) Act 1993
Veterans’ Entitlements Act 1986 sections 52C, 52CA
Social Security Bill 1990CASES
Alexandra Private GeriatricHospital Pty Ltd v Blewett (1984) 2 FCR 368; 56 ALR 265
Australia & New Zealand Banking Group Ltd v Federal Commissioner of Taxation (1994) 48 FCR 268; 119 ALR 727
Australian Securities Commission v AS Nominees Ltd & others [1995] FCA 1663; (1995) 62 FCR 504; 133 ALR 1
British Oxygen Co v Board of Trade [1971] AC 610
Carr v Western Australia [2007] HCA 47; (2007) 232 CLR 138; 239 ALR 415
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; ; 141 ALR 618
Collector of Customs v Savage River Mines (1988) 79 ALR 258
Commissioner of Taxation v Murray (1990) 21 FCR 436; 92 ALR 671
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297; 35 ALR 151
Department of Social Security v McLaughlin [1997] FCA 1456; (1997) 26 AAR 390; 48 ALD 536
Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409; 24 ALR 577; (1979) 2 ALD 60
Federal Commissioner of Taxation v ANZ Savings Bank Ltd (1994) 181 CLR 466
Federal Commissioner of Taxation v Wade (1951) 84 CLR 105
Fischer v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 441
Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380
Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363
IW v The City of Perth [1997] HCA 30; (1997) 191 CLR 1; 146 ALR 696
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309; 60 ALR 509
Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622
Kioa v West [1985] HCA 81; (1985) 159 CLR 550
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299
Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139
Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323; 180 ALR 1; 62 ALD 225
Minister for Immigration and Multicultural and Indigenous Affairs v SZAYW [2005] FCAFC 154; (2005) 145 FCR 523; 223 ALR 1
Re Berry and Secretary, Department of Social Security [1995] AATA 238
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Re Hill and Repatriation Commission (1996) 45 ALD 347
Re Mann and Capital Territory Health Commission (No. 2) (1983) 5 ALN N261
Re McDicken and Secretary, Department of Family and Community Services [1999] AATA 169
Re Phillips and Inspector-General in Bankruptcy [2012] AATA 788; (2012) 58 AAR 452; 131 ALD
Re Rana and Military Rehabilitation and Compensation Commission [2008] AATA 558; (2008) 48 AAR 385; 104 ALD 595
Re Wertheim and Department of Health (1984) 7 ALD 121
Repatriation Commission v Harrison [1997] FCA 956
Singh v The Commonwealth [2004] HCA 43; (2004) 222 CLR 322; 209 ALR 355
Smith v Repatriation Commission (1987) 74 ALR 537
Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397
Stevens v Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58; (2005) 224 CLR 193; 221 ALR 448
Wood v Australian Community Pharmacy Authority [2002] FCA 1592
Woodside Energy Ltd v Commissioner of Taxation [2007] FCA 1961; (2007) 69 ATRSECONDARY MATERIALS
Guide to Social Security Law
Second Reading Speech in relation to the Social Security Bill 1990 by the then Minister for Community Services and Health: Hansard, House of Representatives, 6 December 1990 at 4641
REASONS FOR DECISION
The issues in this case centre on two matters relating to the calculation of the Age Pension payable to Dr Mann and, in particular, on the application of the assets test. The first relates to a unit owned by Mrs Mann and its value before it was sold on 20 December 2012. The second focuses on a loan that Dr Mann obtained and whose repayment was secured by a mortgage over their principal home. That mortgage remained in place from 20 July 2011 to 11 January 2013. As no regard is had to the principal home in assessing the value of a person’s assets for the purposes of the assets test, the amount secured by the mortgage over it was not deducted from Dr Mann’s assets. Dr Mann contends that the value of the liability secured by that mortgage should be deducted from the value of those of his assets that are taken into account for the purposes of the assets test regardless of the fact that it is secured by mortgage on his principal home that is disregarded. He used the loan to purchase shares, which are taken into account as assets, and to meet expenses he incurred from time to time.
I have decided that the decision made by the Social Security Appeals Tribunal (SSAT) is the correct decision and have affirmed it. It declined to offset the value of Dr Mann’s assets, which are subject to the assets test, by the value of the mortgage over the principal home, which is a disregarded asset. It determined the value of Mrs Mann’s unit and set out the asset value to be taken into account from time to time by the delegate of the Secretary to whom it remitted the matter to recalculate the rate of Age Pension payable to Dr Mann. If that recalculation should reveal that Age Pension was overpaid to Dr Mann, I also affirm its decision to waive recovery of that amount just as I affirm its decision to pay him any arrears that arise from the recalculation.
THE ISSUES
At the heart of the matters in dispute in this matter lie the following issues:
(1)What was the value of a unit owned by Mrs Mann until 20 December 2012 and did it change from time to time?
(2)How should the proceeds received by Dr Mann from the “reverse mortgage” held by the Bank of Melbourne (BoM) be treated in the calculation of the rate of his Age Pension?
(3)Is the Secretary estopped from questioning the approach taken by the SSAT in applying ss 1118 and 1121 of the SS Act when he did not apply to this Tribunal for review of its decision?
(4)Is the Tribunal permitted to act in the interests of justice by taking into account what Dr Mann described as “… real, not … mythical financial assets: that is assets minus liabilities while zeroing the value of the domicile.”[1]
[1] The Appellant’s Reply to the Respondent’s Statement of Facts and Contentions lodged on 20 January 2014 at [21].
BACKGROUND
Home equity conversion loan
Centrelink treated the loan as having been paid in full under a home equity conversion agreement. It then disregarded $40,000.00 of it as an asset for the purposes of the asset test for the first 90 days. Thereafter, it regarded the remaining unspent portion as an asset. Based on information provided by BoM, Centrelink understood that Dr Mann had obtained an amount of $127,000.00 under the loan agreement. The SSAT found that BoM had provided incorrect information to Centrelink and that Dr Mann had not drawn down the full amount approved by BoM. Instead, he had drawn down various amounts from time to time:
Date
Amount
Total
1 September 2011
$36,450.00
$36,450.00
25 January 2012
$ 5,000.00
$41,450.00
5 March 2012
$15,000.00
$56,450.00
15 June 2012
$ 1,000.00
$57,450.00
6 July 2012
$10,000.00
$67,450.00
1 August 2012
$ 7,000.00
$74,450.00
8 October 2012
$ 5,000.00
$79,450.00
Dr Mann used the money he drew down for living expenses, for a holiday and to purchase shares. The SSAT found that to be the case and that any of that money that had not been spent had found its way into bank accounts that were regarded as assets. Except in so far as the money appeared in those bank accounts, the SSAT did not take account of money lent by BoM.
Dr Mann referred to a statement by the Tribunal in Re Berry and Secretary, Department of Social Security[2] (Berry) when it said:
“… We are therefore left with the borrowed money as an asset in the hands of the applicants but the corresponding liability is ignored because of it being secured against a disregarded asset. The Tribunal believes this is grossly unfair and suggests that this inequity be addressed by those entrusted with the power of amendment.”[3]
[2] [1995] AATA 238; Senior Member Kiosoglous, Mr Lock and Mr Trowse, Members
[3] [1995] AATA 238 at [12]
He submitted that regard should be had, instead, to a passage from the reasons for decision of the Tribunal in Re McDicken and Secretary, Department of Family and Community Services[4] (McDicken) when it said of the definition of a “home equity conversion agreement” found in s 8(1) of the SS Act:
“30. In the Tribunal’s view, the definition of HEC agreement in s 8(1) of the
1991 Act must be read down in line with the ordinary meaning of the term ‘home equity conversion’ used in the definition. To not do so, produces an absurd result which fails to promote the purpose or object expressed in the Explanatory Memorandum when the relevant provisions were originally introduced. Thus, the definition of an HEC agreement should be interpreted as excluding agreements such as that entered into by the Applicant which are ordinary loan agreements, requiring ongoing periodic interest payments, secured by a mortgage on the Applicant's principal home.”[4] [1999] AATA 169; Senior Member RP Handley (as he then was)
In his written submissions dated 21 November 2013, Dr Mann explained the absurdity that he saw arising from the application of the law in accordance with the Berry case rather than the McDicken case:
“2. This is glaringly illustrated by any pensioner who has property in which he does not live, but available to mortgage, and is consequently placed in a very substantially better financial position than the one who does not have such a second property contrary to the whole bent of the Social Security Act which is to reduce [not increase] benefits to those more affluent than others. As explained in my submissions I deemed this and other ‘absurdities’ [to use the words used by the AAT] to have been the cause of a reduction in our pensions, now half corrected by the SSAT’s decision. …”
On behalf of the Secretary, Ms Bramley submitted that no amount was included in Dr Mann’s assets for the purpose of the assets test. The Secretary accepted that Dr Mann had drawn down the amounts of the loan as found by the SSAT and had spent them. In doing so, Ms Bramley submitted that I should accept Departmental policy rather than apply a literal reading of s 1118(1)(e) of the SS Act. In her written submission lodged on 6 January 2014, she submitted:
“99. A literal reading of paragraph 1118(1)(e) of the Act would require the total amount borrowed to be maintained as an asset 90 days after the amount was received. This would result in the value of Mr Mann’s assets including an amount of $43,000 from 27 January 2012, and an amount of $76,992 from
23 August 2012.100.Departmental policy on amounts borrowed under home equity conversion agreements is given at 4.6.5.90 of the Guide that states:
4.6.5.90 Assessing Home Equity Conversion Loans
Summary
The first $40,000 of an unspent home equity conversion loan is an exempt asset [1.1.E.170) for 90 days ONLY. IF after 90 days a customer has not spent the loan, the amount is an assessable asset (1.1.A.290).
Example 1: A customer gets a home equity conversion loan of $40,000 and spends the loan in 45 days. The loan is not counted as an asset for the full
45 days but is subject to the deeming provisions while it is held as a financial investment (1.1.F.135).Example 2: A customer gets a home equity conversion loan of $70,000. S/he does NOT spend the loan within 90 days. Therefore:
• $40,000 is exempt for 90 days.
• $30,000 is assessable immediately.
•after 90 days the total loan amount is assessable under the assets test.
•The full $70,000 loan is subject to deeming provisions from the date of receipt of the loan while it is held as a financial investment.”
101.The Secretary contends that it is preferable for the Administrative Appeals Tribunal to accept the Departmental policy in the assessment of the amount borrowed by Mr Mann from the Bank of Melbourne.”
Net assets or not net assets
Dr Mann submitted that the amount used in assessing the value of his assets should be the net value of those assets arrived at after deducting his liabilities from their gross value.
On behalf of the Secretary, Ms Bramley submitted that the correct approach was to apply
s 1121 of the SS Act. Section 1121 permits the value of certain assets to be reduced by the value of any charge or encumbrance. If that section does not permit their reduction (or
s 1121A in the case of certain liabilities related to a person’s carrying on primary production and having assets used for the purposes of carrying on that primary production), the assets must be taken into account at their full value. In the case of Dr Mann’s shares, which he purchased from the loan moneys secured by his principal residence, their value could not be reduced by the amount he had borrowed to purchase them as they were not subject to an encumbrance. The encumbrance over his principal residence was disregarded as his principal residence was disregarded in working out the value of his assets.
Ms Bramley referred to the judgment of Tamberlin J in Repatriation Commission v Harrison[5] (Harrison) when he examined similar provisions found in the Veterans’ Entitlements Act 1986 (VE Act). His Honour concluded:
“… that the valuation of particular assets is to be made and a total value determined without taking into account liabilities. Liabilities can be taken into account but only to the limited extent provided for in ss 52C and 52CA.”
Section 52C of the VE Act deals with the effect of a charge on the value of assets and
s 52CA with the effect of certain liabilities on the value of assets used in primary production.
[5] [1997] FCA 956
Dr Mann’s response was set out in his written submissions of 20 January 2014:
“… The Respondent argues that in the land of Centrelink, there is nothing such as NET assets in relation to the domicile. But the debt must be serviced by payments in the long run and the whole issue would not have arisen had … [Mrs Mann’s unit] been used as the security.
… Irrational law has no place in Australia.
… The puzzle is: why does the Respondent seek to enforce such doubly damned provisions? What have I attempted to steal from the taxpayer?
…
… [Referring to s 1121A] The section was intended not to disadvantage those farmer-pensioners whose home was also an income earning farm. In satisfying the Country Party, an unfortunate side effect has been the punishment of pensioners with only one property, and those ignorant of the meaning of ss 1121 and 1118, who fall into this trap. It raises the question of whether Parliament has the power to discriminate in this way. I could claim without difficulty what I am claiming, were I a farmer.”
Mrs Mann’s unit
Initially, Mrs Mann’s unit was valued at the sum of $370,000.00 for the purposes of the assets test. It was sold in December 2012 for $350,000.00. The SSAT accepted that, until that sale, the unit should have been valued at $300,000.00. The valuation of $370,000.00 was supported by a valuation from the Australian Valuation Office on 9 November 2012. Despite that, the Secretary does not challenge a valuation of $300,000.00 as adopted by the SSAT and I see no reason to vary it.
CONSIDERATION
Estoppel
I will begin with the issue of estoppel raised by Dr Mann for it colours the approach that I am required to take, and have taken, in reviewing the decision. He has submitted that I have to rely on his analyses of the evidence and those made by the SSAT because the Secretary has not lodged an application to review its decision. In addition, principles of estoppel prevent me from applying provisions of the SS Act that are “absurd”.
I have considered estoppel in earlier cases and adopt the analysis I have given in those cases in this.[6] It is a common law notion. In summary, the relevant principles for the purposes of this case may be summarised as:
[6] See particularly Re Rana and Military Rehabilitation and Compensation Commission [2008] AATA 558; (2008) 48 AAR 385; 104 ALD 595 at [24]-[92]; 395-420; 603-627 and Re Phillips and Inspector-General in Bankruptcy [2012] AATA 788; (2012) 58 AAR 452; 131 ALD 564 at [450]-[464]; 580-585; 689-694
(1)Notions of estoppel do not apply to administrative decisions made under legislative powers of the sort made by the Commissioner.
(a)The administrative decision-maker’s powers are defined and circumscribed not by common law notions but by the relevant legislation.
(b)If the administrative decision-maker has already made a particular decision on a particular application, request, return or so on, he or she may not make the same decision again, revisit or modify it unless an enactment provides to the contrary.
(i)The reason is that the administrative decision-maker will have used all of his or her powers to make that decision in the first place and will have none left to use i.e. he or she will be regarded as functus officio.
(2)There is a distinction between the grounds that must exist before a particular decision may be made and the basis on which those grounds are found to exist and so the reasons for making that decision.
(a)Provided the relevant enactment permits it,[7] the decision-maker may choose to rely on reasons for making the decision different from those relied on in making the decision.
(b)Unless the relevant enactment provides to the contrary, the Tribunal reviews the decision looking at the matter afresh and must satisfy itself that the decision it reaches on that review is objectively the right one to be made on the facts of the case and according to the law.[8]
(i)That means that the decision-maker is not “defending” either the decision or the reasons for making that decision but is putting forward reasons, whether the same as before or not, why the Tribunal should make a decision that is either the same as the decision before or a different decision.[9]
(ii)Just like the person seeking review of the decision, the decision-maker is generally required to give notice of those grounds or reasons in the course of the review process.[10]
[7] A decision made under s 501(1) of the Migration Act 1958 to refuse to grant a person a visa, for example, can only be made if the person does not satisfy the Minister that he or she passes the character test. If the person seeks review of a decision made under s 501(1) by a delegate of the Minister, the decision cannot be justified on another basis if the person does pass the character test. It may be that another provision in the migration law may justify refusal but that would lead to the making of a separate decision under that provision and, if permitted under the enactment, a separate right to seek its review.
[8][9] See, for example, Federal Commissioner of Taxation v ANZ Savings Bank Ltd (1994) 181 CLR 466; Brennan, Deane, Dawson, Toohey and McHugh JJ at 479 per Brennan, Deane, Dawson and Toohey JJ and see also the earlier case of Federal Commissioner of Taxation v Wade (1951) 84 CLR 105; Dixon, Fullagar and Kitto J at 116-117 per Kitto J
[10] The scope of that obligation and precisely what it entails depends on the construction of the enactment under which the decision is made: Wood v Australian Community Pharmacy Authority [2002] FCA 1592; Lee J citing Kioa v West [1985] HCA 81; (1985) 159 CLR 550 at 584-585 per Mason J. The Tribunal’s obligation under s 39(1) of the AAT Act to ensure that every party to a proceeding is given a reasonable opportunity to present his or her case including an opportunity to inspect documents, to which the Tribunal intends to have regard in reaching a decision, and to make submissions on those documents, may also be modified by the particular enactment.
At Attachment A, I have set out the role of the Tribunal. That is the role of an independent decision-maker reviewing afresh all of the material in light of what the law requires and making its own decision. It is not bound by what the original decision-maker has decided or what an independent review tribunal such as the SSAT has decided. It is a role that is consistent with the fact that principles of estoppel do not apply to its review or to its decision-making processes unless Parliament has enacted a provision to that effect. It has not done so in the SS Act or in the Social Security (Administration) Act 1999 (SSA Act).
What is the place of justice and policy in interpreting and applying the SS Act?
A. Interpretation of an enactment
At Attachment B, I have summarised some of the principles that I must apply in interpreting the provisions of any enactment, including the SS Act. It is clear from those principles that I am obliged to interpret the words of an enactment and each of its provisions having regard to Parliament’s object in enacting it. Parliament’s object must be gleaned from a reading of the enactment as a whole and of each of its provisions. It is an object that is found after an objective analysis of that sort and not by trying to divine Parliament’s subjective intention.[11]
[11] See, for example, Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380 at [159]-[162]; 398-399 per Mason J and at [203]; 513 per Spigelman CJ and [63]-[72] below
Even where an enactment might be described as beneficial legislation - as is the case with the SS Act – it cannot be interpreted according to concepts of justice that might appeal to the decision-maker unless they also find expression in the words of the particular provision under consideration. That is clear from the following passage from the judgment of Brennan CJ and McHugh J in IW v The City of Perth.[12] The case concerned the interpretation of the Equal Opportunity Act 1984 (WA) and their Honours explained that there is a:
“… rule of construction that beneficial and remedial legislation, like the Act, is to be given a liberal construction …. It is to be given ‘a fair, large and liberal’ interpretation rather than one that is ‘literal or technical’ …. Nevertheless, the task remains one of statutory construction. Although a provision of the Act must be given a liberal or beneficial construction, a court or tribunal is not at liberty to give it a construction that is unreasonable or unnatural. …”[13]
[12] [1997] HCA 30; (1997) 191 CLR 1; 146 ALR 696; Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ
[13] (1997) 191 CLR 1; 146 ALR 696 at 12; 702
That is to say, it cannot be given a construction that is unreasonable or unnatural having regard to the words of the provision and the context of the enactment in which it appears. As Mason, Brennan, Deane and Dawson JJ said in Khoury v Government Insurance Office (NSW)[14] of a provision that was remedial in character:
“… [I]ts language should be construed so as to give the most complete remedy which is consistent ‘with the actual language employed’ and to which its words ‘are fairly open’ … [T]he rule that remedial provisions are to be beneficially construed so as to provide the most complete remedy of the situation with they are intended to deal must, as has been said, be restrained within the confines of ‘the actual language employed’ and what is ‘fairly open’ on the words used. …”[15]
[14] (1984) 165 CLR 622; Mason, Murphy, Brennan, Deane and Dawson JJ
[15] (1984) 165 CLR 622 at 638 (citations omitted)
There is no question that, when the words of a provision are open to more than one interpretation and the enactment in which they appear or the provision itself is intended to be beneficial, the interpretation that accords with that beneficial character is to be preferred to another. If there is no such ambiguity, there will be cases in which an interpretation that is less than beneficial may be the only interpretation fairly open on the words used even though it is apparent that Parliament intended the enactment or the provision to be beneficial. If that is the case and the interpretation consistent with the other enactment in which it appears and can be applied to the subject matter with which it deals, the words must be given their ordinary and grammatical meaning. That is so even if the result seems unjust.[16]
[16] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297; 35 ALR 151; Gibbs CJ, Stephen, Mason, Aickin and Wilson JJ at 305, 157 per Gibbs CJ and see [52]-[55] below
An apparently unjust outcome rankles with an administrative decision-maker just as it does with a person affected by the administrative decision that he or she makes. To try, however, to interpret an enactment or provision so that it has a meaning that does not sit with the ordinary meaning of the words used may lead to a just outcome but is fraught with danger. It is danger that comes from various quarters. In the case of this Tribunal, one danger is that it will not survive an appeal because an appellate court might well say that it is not the meaning supported by the words of the enactment when interpreted according to the rules of statutory interpretation. That is an outcome that means that the resources used in making the decision are lost, those of the court have been expended and there is a loss to the parties in terms of the resources they have expended at each stage of the process. Even if the decision is not taken to an appellate court, there is a danger that the decision will be relied upon in other matters when it will not be followed. That leads to an inconsistency in decision-making.
A further danger in searching for a just outcome in a particular set of circumstances is that the searcher may not fully understand the environment in which he or she searches. What may appear to be a just outcome in the circumstances of one particular person may not be a just outcome when the circumstances of that one person is viewed against the myriad of circumstances with which an enactment such as the SS Act is concerned. It is an enactment that is directed to income maintenance but it is clear that it is directed to that end in a context that must have regard to a number of social and economic matters. It involves a balancing of considerations such as the community’s obligations to support those who, by reason of age or infirmity, cannot support themselves adequately with the community’s ability to offer that support and with considerations of whether that support should be in the form of income maintenance alone or mixed with other avenues of support. It involves considerations relating to social change and changing economic circumstances whether in a particular region or nationally. Income maintenance can be one of a suite of tools used to respond to such changes or even to bring them about.
Matters such as these may be among the matters on which executive government deliberates before introducing a Bill relating to social security law to Parliament for its consideration. They may be among the matters that Parliament takes into consideration in enacting or amending social security legislation. Even though the words used by Parliament in a particular enactment are the place in which to begin the search for its object and the search can only be assisted by legitimate external material to which I have referred in Attachment B below, it is important to bear these wider considerations in mind before declaring that a particular provision of the SS Act is unjust or unfair.
B. Guide to Social Security Law
It is equally clear that any enactment, including the SS Act, cannot be interpreted according to policy or guidelines of the decision-maker. That is not to say that policy or guidelines of that sort are not relevant in exercising discretions provided for in an enactment. Provided they are consistent with the enactment, they are very relevant as appears from the cases to which I have referred at [73]-[76] below. They must be drawn from the provision itself and from the enactment in which it appears. It is the words that Parliament that has used and the object it is trying to achieve that are at the heart of that exercise and not what might have been intended or what might be thought should have been intended.
Reference has been made to the Guide to Social Security Law (GSSL) in the SSAT’s reasons for decision. It has also been made in submissions made on behalf of the Secretary when it was contended that the interpretation of s 1118(1)(e) of the SS Act given in the GSSL was to be preferred to a literal reading of the provision. In view of the principles of statutory interpretation that I am bound to apply, I cannot adopt an interpretation appearing in the GSSL unless it is supported by the words of the SS Act.
Assets test
A. Identifying an “asset”
At Attachment C I have set out the method by which the rate at which an Age Pension is to be paid to a particular recipient is to be calculated. Step 9 requires the application of the assets test by using Module G. The first step to be taken under Module G is to work out the “person’s assets”. An “asset” is defined in s 11(1) of the SS Act as “… property or money (including property or money outside Australia)”. No reference is made in that definition to the source of that property or money. No reference is made in Module G at point 1064-G1 as to how that asset came to be an asset of the person and so the “person’s assets”. Therefore, a sum of money borrowed by a person is that person’s asset just as much as a sum of money saved by that person from wages or salary or inherited is that person’s asset. Once the person has spent the money, the money is no longer the person’s asset. If the money was spent on something else that is “property or money”, that thing becomes an asset. If it was spent on such things as living expenses or enjoying an experience through, for example, travel, there is nothing that becomes the person’s asset in place of the money.
B.Partial exclusion of loans obtained under home equity conversion agreements
Having identified the person’s assets, they then have to be assessed against the terms of s 1118 of the SS Act. It must be remembered that the rate at which Age Pension is paid to a person is the subject of constant adjustment and considered at specific points in time. It may be that a person has since spent an amount of money but had not done so at the relevant time. If, at a particular point in time, a person’s assets come within the terms of s 1118, they are to be disregarded for the purposes of applying the assets test. The particular exception at the centre of this case is s 1118(e). I have set it out below but will repeat it here. What is excluded by s 1118(1)(e) is:
“any amount that is:
(i)received by the person within the immediately preceding period of 90 days: and
(ii)is excluded from the definition of income in subsection 8(1) by subsection 8(4) or (5)”.
The sum of money must have both of these characteristics if it is to be disregarded but it must be remembered that, before the exclusion is considered, a sum of money must be an asset. Only if it is an asset is consideration given to the exclusion provisions. Therefore, I respectfully disagree with those who would contend that a literal reading of s 1118(1)(e) requires the total amount to be borrowed to maintained as an asset 90 days after it is received.[17] If a loan has been obtained but, at the time that a person’s assets are being assessed, has been spent, it cannot amount to an asset. In those circumstances, s 1118(1)(e) has no work to do.
[17] Secretary’s submission lodged on 6 January 2014 at [99]
Assuming that s 1118(1)(e) does have work to do because not all of the loan moneys have been spent, I note that it refers to “income”. I have set out the definition of “income” at [89] below. When read with the related definition of “income amount”, it is clear that it is a very wide definition. It bears no relation to what is considered income for the purposes of the assessment of taxable income under the income tax legislation. It is clearly intended to capture all moneys or their equivalent that a person has received for his or her own use or benefit. In the case of money, its source is not prescribed or limited by the definition. Therefore, moneys obtained by way of a loan to the person are equally regarded as “income” as moneys earned by employment.
That is clear from the definition itself but is reinforced by ss 8(4) and (5) whose purpose is to exclude certain amounts obtained by a person as a loan in certain circumstances. If loans had not been captured as “income” by the definition, there would have been no need to exclude them. For this reason, I respectfully disagree with the comment made by French J in Department of Social Security v McLaughlin[18] when he acknowledged that the concept of “income” is different for the purposes of social security law than it is for income tax law but suggested that, however wide the scope of the term ‘income”, it would not extend to a bona fide loan. I have discussed this further at [88]-[95] below. It seems to me that Parliament has chosen to extend it in that way and it cannot be fettered in its choice to do so.
[18] [1997] FCA 1456; (1997) 26 AAR 390; 48 ALD 536
If the person is a member of a couple as is Dr Mann, the amount that is excluded under
s 8(5) is “… an amount paid to or on behalf of the person under a home equity conversion agreement … to the extent that the total amount owed by the person from time to time under home equity conversion agreements does not exceed $40,000.” The expression “home equity conversion agreement” is defined in s 8(1) to mean:“… in relation to a person, means an agreement under which the repayment of an amount paid to or on behalf of the person, or the person’s partner, is secured by a mortgage of the principal home of the person or the person’s partner;
Note: see also subsection (7).”
It was said by the Tribunal in McDicken that this definition:
“…is sufficiently wide to cover any loan agreement under which the repayment of the loan is secured by a mortgage on the principal home of a person or the person’s partner. This could, for example, include a business loan … “[19]
[19][1999] AATA 169 at [26] The extended passage is reproduced at [121] below.
While I agree that the definition is broadly drafted and could well include a loan obtained for a business purpose, I do not see the relevance of raising that as an issue. The provisions in the SS Act relating to home equity conversion agreements are not directed to the reasons why a person entered them just as the income and asset provisions are not concerned with how the income and assets came to be in the person’s hands. They are concerned with the fact that the agreement has been entered and that the income and assets are in those hands. Equally, the provisions relating to home equity conversion agreements, including the definition, are not concerned with how or when the amount is to be repaid or the terms on which it is to be repaid. The expression “home equity conversion agreement” is not defined in those terms and there is no basis for reading them in when they have been omitted.
The definition has to be read in light of s 8(7). That means that the amount paid to or on behalf of the person is secured by a mortgage of the principal home being a home in which the person, or the person’s partner, “… has a beneficial interest …” (emphasis added). This very much suggests that the principal home used as security is already the principal home of the person or the person’s partner before it becomes subject to a mortgage. It does not suggest that the loan is obtained in order to acquire a beneficial interest in the person’s principal home. Therefore, a loan agreement under which the person directs the money to be paid to the vendor of the property he or she is purchasing does not sit comfortably with the definition of a “home equity conversion agreement” when that definition and the qualification in s 8(7) are read together as they must be read.
This seems to me to be the ordinary meaning of ss 8(1), (5) and (7) but, relying on s 15AB(1)(a) of the Acts Interpretation Act 1901 (AI Act), I have looked at the relevant material beyond the words of the SS Act. The first is the Explanatory Memorandum accompanying the Social Security Bill 1990, which was to be enacted as the SS Act. It says of the definition:
“‘Home equity conversion agreement’ would be an agreement under which a person or his or her partner has offered the mortgage of his or her ‘principal home’ (as defined in clauses 11 and 8(7)) as security for the repayment of an amount paid to or on behalf of the person or partner. …”
Offering a mortgage on a principal home suggests that the principal home is a home in which the person already has a beneficial interest but it is no more than a suggestion. It must be remembered, though, that the SS Act is a redrafting, in what was intended to be plain English, of the social security law.[20] The Explanatory Memorandum was written in that light rather than as an explanation of the object or policy underpinning the provision. For that, reference has to be made to the Explanatory Memorandum that accompanied the Social Security and Veterans’ Affairs Legislation Amendment (No 4) Act 1989 (SSVAL Act). Section 21(a) inserted two additional exemptions to the definition of “income” in s 3(1) of the then Social Security Act 1947. One related to unmarried persons and the other to those who are married. Both are in similar terms but I will set out the latter for it is relevant in the context of a person who is a member of a couple. It excluded from the definition of “income”:
“in the case of a married person – an amount or amounts paid to or on behalf of the person or his or her spouse on or after 1 November 1989 under an agreement under which repayment of the amount is secured by a mortgage of the principal home of the person or the spouse, to the extent that the total amount owed by the person and the spouse from time to time under such agreements does not exceed $40,000;”
[20] See the Second Reading Speech in relation to the Social Security Bill 1990 by the then Minister for Community Services and Health: Hansard, House of Representatives, 6 December 1990 at 4641.
The Explanatory Memorandum to the SSVAL Bill explains that:
“… These paragraphs would apply to amounts to which a person or spouse becomes entitled on or after 1 November 1989 under an agreement, or more than one agreement, whereby repayment of the amount is secured by a mortgage of the person’s or the spouse’s principal home.
The intention is that the pensioner would remain in the same house and convert some of his or her equity to a form assisting in lifestyle improvements.”
In his Second Reading Speech introducing the SSVAL Bill, the then Minister for Social Security on 2 November 1989 said:
“… The Bill also recognises the needs of older home owners who, though not having the costs of private rents, often need to find money for house repairs or alterations. Home equity conversion is a mechanism by which a home owner may convert all or part of the equity he or she has locked up in the family home into cash or a stream of income. The Act at present discourages pensioners from embarking on these schemes because the money raised may be treated as income. This Bill relaxes the income and assets tests to allow pensioners access to home equity conversion products without penalty. They will therefore be able to draw a loan of up to $40,000 on what is probably their most valuable asset to carry out home improvements or to raise their standard of living. The draw downs on a home equity conversion will be exempt from the assets test for up to 90 days.”[21]
[21] Hansard, House of Representatives, 2 November 1989 at 2398
These passages from the relevant Explanatory Memoranda and Second Reading Speech confirm what I consider to be the ordinary meaning of the provisions of ss 8(1), (4) and (5). The changes in language from “married” and “unmarried” to “a member of a couple” and “not a member of a couple” are of no consequence in this context. That ordinary meaning is, in my view, consistent also with the way in which a home equity conversion agreement has been described and with the way in which its proceeds have been treated in the following passages from the GSSL. Where I differ is in its reference, following McDicken, that the SS Act has a much wider definition of a home equity agreement. The passages are:
“1.1.H.70 Home equity conversion agreement
Usage
This definition applies to all payments under the SSAct, except DOP.
Definition
A home equity conversion agreement (loan) is a mechanism which allows a homeowner to convert all or part of the equity locked up in their home into cash or a stream of income. A key feature of a home equity conversion agreement is that the loan (including interest) is generally not repayable until the homeowner moves out or dies.
The SSAct has a much wider definition of home equity conversion agreement. The AAT found in McDicken (1999) that to read the definition literally would give an absurd result.
Note: A home equity conversion agreement is NOT income.
Information on the assessment of home equity conversion loans under the assets test is in 4.6.5.90.”
“4.6.5.90 Assessing Home Equity Conversion Loans
Summary
The first $40,000 of an unspent home equity conversion loan is an exempt asset (1.1.E.170) for 90 days ONLY. IF after 90 days a customer has not spent the loan, the amount is an assessable asset (1.1.A.290).
Example 1: A customer gets a home equity conversion loan of $40,000 and spends the loan in 45 days. The loan is not counted as an asset for the full 45 days but is subject to the deeming provisions while it is held as a financial investment (1.1.F.135).
Example 2: A customer gets a home equity conversion loan of $70,000. s/he does NOT spend the loan within 90 days. Therefore:
·$40,000 is exempt for 90 days.
·$30,000 is assessable immediately.
·After 90 days the total loan amount is assessable under the assets test.
·The full $70,000 loan is subject to deeming provisions from the date of receipt of the loan while it is held as a financial investment.”[22]
[22] The last point emphasises that the full amount of the loan will only be treated as an asset while the full amount remains unspent. Once some of the moneys obtained from the loan have been spent, the amount spent is no longer an asset. The thing bought may be an asset or if it is spent on consumables or intangibles, there will be no asset that is obtained as a consequence of the expenditure.
C.Dr Mann’s mortgage
There is no question that Dr Mann obtained the loan when he already owned his principal home and its repayment was secured by a mortgage over that principal home. For the purposes of the SS Act, it is a loan obtained under a home equity conversion agreement. As I have said, the reasons for his obtaining that loan and the purposes for which he obtained it are irrelevant. The shares he purchased with part of the loan moneys become assets and, once it has been paid, that part of the loan moneys is no longer an asset. While the remainder of the loan moneys remained unspent in the first 90 days after their receipt, they were to be excluded from his assets to the extent that they came within the criteria set out in s 8(5). Once the 90 day period had passed, they were no longer regarded as an excluded asset under s 1118(1)(e).
This is the approach taken by the SSAT. It found, as I do, that Dr Mann spent all the loan monies and they were not treated as an asset under s 1118(1) unless recorded in one of his bank accounts.
D. Deduction of liability from value of assets
At [105]-[106] in Attachment C below, I have summarised the provisions of s 1121. Section 1121(3) expressly states that s 1121(1) does not apply to a charge or encumbrance, such as a mortgage, over assets that are to be disregarded under s 1118. A right or interest that a person has in real property is an asset. If that real property is the person’s principal home, the value of that right or interest is excluded under s 1118(1)(a). It then becomes an asset that is to be disregarded under s 1118. The effect of s 1121(3) is that the value of the principal home is not reduced by the value of any mortgage over it.
The logic of its not being reduced comes from the fact that the value of the principal home is not included in an assessment of a person’s assets. I agree with Dr Mann that the mortgage is a liability that he carries but it is not a liability that the SS Act permits me to take into account. The SS Act prescribes those assets whose value may be reduced by the value of a charge or encumbrance over them. Disregarded assets are not among them. The SS Act does not permit me to look at Dr Mann’s overall situation and have regard to his net assets after the deduction of his liabilities.
Conclusion
Applying these principles to Dr Mann’s circumstances, I have concluded that the decision reached by the SSAT is the correct decision on the evidence that I have. This is not a case in which I have to determine the preferable decision for the application of the assets test and the benefit rate calculator does not leave open any matters on which I may make a discretionary decision. Therefore, I affirm the decision of the SSAT dated 15 August 2013.
THE ROLE OF THE TRIBUNAL IN REVIEWING DECISIONS
The Tribunal’s role[23] in reviewing decisions made under the SS Act is shaped both by that legislation and the Administrative Appeals Tribunal Act 1975 (AAT Act). That follows from the fact that the AAT Act sets out the broad framework within which the Tribunal operates but that framework may be varied and amended by the legislation which provides that an application may be made to it for the review of particular decisions.[24] Unless amended by other legislation, s 43 is pivotal in determining the role. It gives the Tribunal power to exercise all the powers and discretions conferred on the decision-maker by the relevant enactment;[25] requires the Tribunal to give oral or written reasons in most instances;[26] and tells it that it must meet three criteria in preparing those reasons.[27] Among its other provisions are those regulating how the Tribunal’s decision is made[28] and when it comes into operation.[29] Unless varied by another enactment, the Tribunal makes any findings of fact on the basis that it is reasonably satisfied of them.[30] This equates with its doing so on the civil standard of proof and so on the basis of the balance of probabilities.[31]
[23] Although I have focused only on the review of decisions, review is only one aspect of the Tribunal’s functions. Its functions are more properly described as resolving applications made to it for review of decisions made in the exercise of powers conferred by an Act of the Commonwealth, an Ordinance of a Territory (other than the Northern Territory), an instrument made under either an Act or an Ordinance or, if permitted by the Regulations made under the AAT Act, a Norfolk Island enactment. Resolution may be reached by the parties themselves with the Tribunal’s assistance: AAT Act; ss 25(1) and (2). That assistance is given in various forms but all forms come within the general description of “alternative dispute resolution”. If not resolved in that way, resolution will be by the Tribunal’s deciding what decision should have been made having regard to the law and the evidence. In carrying out its functions, it must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick: AAT Act; s 2A.
[24] In this case, s 179(1) of the Social Security (Administration) Act 1999 provides that, if a decision has been reviewed by the SSAT and either affirmed, varied or set aside by it, an application for its review may be made to the Tribunal.
[25] AAT Act, s 43(1)
[26] AAT Act, s 43(2) and (2A)
[27] AAT Act, s 43(2B)
[28] AAT Act, s 43(1)
[29] AAT Act, s 43(5A)
[30] Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139
[31] Smith v Repatriation Commission (1987) 74 ALR 537
When it reviews a decision in this way, the Tribunal is often said to be engaged in “merits review”. Under the Commonwealth Constitution, that task is categorised as an administrative task and not a judicial task. It is a task that differs in significant respects from that facing a court engaged in judicial review of a decision. The Tribunal’s task is not to enquire whether the decision-maker made an error in making the decision. That is the task of courts under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) or under s 75 of the Constitution or s 39B of the Judiciary Act 1901 when they review administrative decisions for errors within the scope of the powers given under those provisions. If there is no such error, the courts cannot take the matter further and consider whether they would have made a different decision on the merits of the matter.[32]
[32] As Bowen CJ and Deane J said in Drake v Minister for Immigration and Ethnic Affairs, “… it is not ordinarily part of the function of a court … to determine what decision should be made in the exercise of an administrative discretion in a given case …”: (1979) 46 FLR 409; 24 ALR 577; 2 ALD 60 at 419; 589; 68 per Bowen CJ and Deane J
The Tribunal’s task is to undertake the task that the courts cannot. It is not to adjudicate upon whether the decision-maker is able to defend the decision he or she made[33] and:
“… the Tribunal is not, in the absence of specific statutory provision, entitled to abdicate its function of determining whether the decision made was, on the material before the Tribunal, the correct or preferable one in favour of a function of merely determining whether the decision made conformed with whatever the relevant general government policy might be.”[34]
[33] Re Mann and Capital Territory Health Commission (No. 2) (1983) 5 ALN N261 as set out and adopted in[34] Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409; 24 ALR 577; (1979) 2 ALD 60 at 420; 590; 70 per Bowen CJ and Deane J
A.What is the “correct or preferable decision”?
The expression “correct or preferable decision” used by their Honours requires some further explanation for, without it, it might be understood as meaning that the Tribunal may make the decision it thinks is, to use Dr Mann’s expression, “in the interests of justice”. In summary, what it means to make the “correct or preferable decision” is to make the decision that is correct in law and on the evidentiary material. If more than one decision is correct both in law and on the evidentiary material, the Tribunal must choose the preferable decision and make it. There are, then, two steps to decide upon what is the “correct or preferable decision”. They are not steps taken in isolation and according to the reviewing tribunal’s whims. They are steps taken against and within the framework of the AAT Act and of the enactment under which the decision has been made. That is so whether deciding the decisions that may be correctly made and, if the decision permits a discretionary decision to be made, selecting the decision that is to be preferred in the particular situation.
As the Tribunal must work within that framework, its task begins with its determining the correct process it should itself follow and follow it. That process may be found in the enactment under which the decision is made, the enactment (if different) providing that an application may be made to the Tribunal for its review and the AAT Act. The first enactment and, if relevant, the second, will then be used to identify the issues that will be relevant in reviewing the decision and, from them, findings of fact that will need to be made in relation to each of those issues.[35] Identification of those issues and findings of fact will be relevant in determining which of the evidentiary material that it has will be relevant and probative. Once that has been done, the probative evidence evaluated and the findings of fact made, the next step is to ascertain the decision or range of decisions that can correctly be made in light of the law and those facts.
[35] The issues that the Tribunal must decide are not determined by the matters in dispute between the parties. In their joint judgment in Minister for Immigration and Multicultural Affairs v Yusuf, McHugh, Gummow and Hayne JJ made this point saying: “The considerations that are, or are not, relevant to the tribunal’s task are to be identified primarily, perhaps even entirely, by reference to the Act rather than the particular facts of the case that the tribunal is called on to consider.”: [2001] HCA 30; (2001) 206 CLR 323; 180 ALR 1; 62 ALD 225 at [73]; 347-348, 19, 242
If only one decision can be made, that is the decision that the Tribunal will make on review. If more than one decision can be correctly made, it should then choose the decision that is the preferable decision. Again, the choice of the preferable decision is made within the framework established by the enactment under which it is made and any other relevant enactments. Within that framework, whether expressly stated or implicit within it, will be the factors or considerations that will be relevant in determining which of the range of correct decisions is the preferred decision. Those factors or considerations will be identified by reference to the subject matter of the enactment under which the decision is made as well as from its object and underlying policy.[36]
GENERAL PRINCIPLES RELATING TO INTERPRETATION OF LEGISLATION
[36] Alexandra Private GeriatricHospital Pty Ltd v Blewett (1984) 2 FCR 368; 56 ALR 265 at 375; 272 per Woodward J and see also Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299; Gibbs CJ, Mason, Brennan, Deane and Dawson JJ at 39-40; 308-309 per Mason J with whom Gibbs CJ and Dawson J agreed
Context and object
In this section of my reasons, I will give only a broad outline of those principles that have relevance in understanding the issues that arise in this case. At the heart of them all is “… the cardinal rule of statutory interpretation that requires the words of a statute to be read in their context …”[37] As explained by Viscount Simonds in Prince Ernest Augustus of Hanover:[38]
“… The real question which we have to decide is: What does the word mean in the context in which we find it here, both in the immediate context of the sub-section in which the word occurs and in the general context of the Act, having regard to the declared intention of the Act and the obvious evil that it is designed to remedy?”[39]
[37] K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309; 60 ALR 509 at 315, 514 per Mason J
[38] [1957] AC 436 at 461
[39] [1957] AC 436 at 461 Quoted with approval by Mason J in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309; 60 ALR 509 at 315, 514
The same principle was expressed in this way by Mason and Wilson JJ in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation[40] (Cooper Brookes):
“… The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.”[41]
[40] (1981) 147 CLR 297; 35 ALR 151
[41] (1981) 147 CLR 297; 35 ALR 151 at 320, 169
In the same case, Gibbs CJ expanded upon this principle and, in doing so, sounded a note of caution:
“ It is an elementary and fundamental principle that the object of the court, in interpreting a statute, ‘is to see what is the intention expressed by the words used’ … It is only by considering the words used by the legislature that the court can ascertain its intention. And it is not unduly pedantic to begin with the assumption that words mean what they say … Of course, no part of a statute can be considered in isolation from its context – the whole must be considered. If, when the section in question is read as part of the whole instrument, its meaning is clear and unambiguous, generally speaking ‘nothing remains but to give effect to the unqualified words’ … There are cases where the result of giving words their ordinary meaning may be so irrational that the court is forced to the conclusion that the draftsman made a mistake, and the canons of construction are not so rigid as to prevent a realistic solution in such a case … However, if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient and unjust. To say this is not to insist on too literal an interpretation, or to deny that the court should seek the real intention of the legislature. The danger that lies in departing from the ordinary meaning of unambiguous provisions is that ‘it may degrade into mere judicial criticism of the propriety of acts of the Legislature’ …; it may lead judges to put their own ideas of justice or social policy in place of the words of the statute. On the other hand, if two constructions are open, the court will obviously prefer that which will avoid what it considers to be inconvenience or injustice. Since language, read in its context, very often proves to be ambiguous, this last mentioned rule is one that not infrequently falls to be applied.”[42]
[42] (1981) 147 CLR 297; 35 ALR 151 at 305, 157 per Gibbs CJ (citations omitted)
Shortly after, Parliament amended the Acts Interpretation Act 1901 (AI Act) by inserting
s 15AA:“In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.”
Material to which regard may be had in addition to the words of the legislation
Apart from the words themselves in a provision and the remaining words of the relevant legislation, there is other material to which reference may be made in discovering Parliament’s intent. This appears in the judgment of Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Ltd[43] (CIC Insurance):
“ It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure …. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy …. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain meanings of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent …”[44]
[43] (1997) 187 CLR 384; 141 ALR 618
[44] (1997) 187 CLR 384; 141 ALR 618 at 408; 634-5
Over the years, reference has been made to Second Reading Speeches made by a Minister in relation to a Bill and Explanatory Memoranda in seeking the purpose or object underlying statutes or a provision of them. Reference has been made to other legislation when it is seen as a reflection or emanation of established common law rules[45] and, at times, Parliamentary Debates. What has not been seen as relevant is the evidence of a public servant regardless of how closely he or she was involved in developing the legislation and advising the Minister:
“… Direct evidence from a public servant as to the policy of legislation is unlikely to be helpful in the process of statutory construction. It is difficult to envisage any circumstances in which such evidence could rely above the level of one person’s opinion on the matter. …”[46]
[45] See, for example, Australian Securities Commission v AS Nominees Ltd & others [1995] FCA 1663; (1995) 62 FCR 504; 133 ALR 1; Finn J used provisions of the Superannuation Industry (Supervision) Act 1993 dealing with the keeping of minutes and records, ensuring that investments were made on an arm’s length basis and accounting records as part of the extrinsic material to identify whether public interest was a proper matter on which to rely to justify winding-up a company under the Corporations Law.
[46] Collector of Customs v Savage River Mines (1988) 79 ALR 258 at 263; Fox, Davies and French JJ
Section 15AB of the AI Act, which came into operation in 1984 and so before CIC Insurance was decided, also permits regard to be had to material not forming part of the Act in order to ascertain the meaning of a provision. There are, however, limits on the circumstances in which s 15AB can be relied on. Those limits are set out in s 15AB(1) and are:
“(1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to the material:
(a)to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or
(b)to determine the meaning of the provision when:
(i)the provision is ambiguous or obscure; or
(ii)the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.”
The material to which regard may be had is the subject of s 15AB(2). In so far as it is relevant in this case, it provides:
“Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of an Act includes:
(a)all matters not forming part of the Act that are set out in the document containing the text of the Act as printed by the Government Printer;
(b)(d)…
(e)any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted;
(f)the speech made to a House of Parliament by a Minister on the occasion of the moving by that Minister of a motion that the Bill containing the provision be read a second time in that House;
(g)-(h)…”
60. It follows that, for the purposes set out in s 15AB(1), regard may be had to a wider range of material than that described in s 15AB(2). In determining whether material is of the sort that may be considered, regard must be had to s 15AB(3) when it provides:
“In determining whether consideration should be given to any material in accordance with subsection (1), or in considering the weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to:
(a)the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; and
(b)the need to provide prolonging legal or other proceedings without compensating advantage.”
In deciding what might be “other relevant matters” in considering the weight to be given to material, the task at hand must be kept in mind. That task is, as Gibbs CJ said in Cooper Brookes, to “… see what is the intention of expressed by the words used”. As appears from the authorities to which I refer in the following section of these reasons, that is Parliament’s intention and not of those who might have advised or lobbied Executive government to introduce legislation of the sort under consideration. That means that the material to which regard is had must reflect on Parliament’s intention and not to the intention of those who recommended it or of those who now interpret and apply it.
That is not to say that the material must always predate the passage of the legislation if its use is restricted to identifying the mischief that the legislation or particular provision sought to rectify. This appears from the judgment of Hill J, with whom Northrop and Lockhart JJ agreed, in Australia & New Zealand Banking Group Ltd v Federal Commissioner of Taxation.[47] His Honour had regard to an explanatory handbook that had been issued by authority of the Commonwealth Treasurer on 31 August 1936 and so after the passage of the Income Tax Assessment Act 1936 (ITAA36), in which s 82(2) appeared. That handbook set out the differences between the relevant provisions of ITAA36 and its predecessor, the Income Tax Assessment Act 1922. Hill J said:
“… That handbook does not stand in the same position as Explanatory Memoranda to legislation to which regard may be had in interpreting that legislation, at least in the case of ambiguity under s 15AB(2)(e) of the Acts Interpretation Act (1901) (Cth). Publication of the handbook post dated the assent to the Income Tax Assessment Act 1936 on 2 June 1936. Nevertheless, regard might be had to that publication as indicating the mischief to which s 82(2) was directed, that subsection having no counterpart in the prior legislation. …”[48]
[47] (1994) 48 FCR 268; 119 ALR 727
[48] (1994) 48 FCR 268; 119 ALR 727 at 291; 752
Relevant purpose or object is that of Parliament in enacting legislation
Care must always be taken, though, to ensure that the search is directed to Parliament’s purpose or object and not to that intended by those who recommended the legislation, those who were its proponents and those who are called upon to administer it. As Kitto J said in Sovar v Henry Lane Pty Ltd:[49]
“… The legitimate endeavour of the courts is to determine what inference really arises, on a balance of considerations, from the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation …. It is not a question of the actual intention of the legislators, but of the proper inference to be perceived upon a consideration of the document in light of all its surrounding circumstances. …”[50]
[49] (1967) 116 CLR 397; McTiernan ACJ, Kitto and Owen JJ; Taylor and Windeyer JJ dissenting
[50] (1967) 116 CLR 397 at 405
This is also the position adopted by Hill J in Commissioner of Taxation v Murray[51], Hill J said:
“… the intention of the Commissioner in submitting a matter for consideration of a governmental committee and the deliberations of that committee will … tell little at all of the parliamentary intention. At best such material may suggest the mischief some person had in mind when framing a Bill before it is put before Parliament. But if the Parliament is not appraised of that mischief by the proponent of the Bill in a second reading speech, by an explanatory memorandum in debate, it will be hard to be sure that the mischief was in truth that which Parliament sought to overcome. A surer guide in such a case will be the words of the statute themselves. Particularly will that be the case where the words to be construed are ordinary English words not attended with ambiguity.”[52]
[51] (1990) 21 FCR 436; 92 ALR 671
[52] (1990) 21 FCR 436; 92 ALR 671 at 449; 685
As the affairs of people and communities become more complicated, a further difficulty arises as legislators try to regulate those affairs. The result often represents a balancing of interests of which the public interest may be but one. That balancing may be required to bring about certain outcomes that could affect any one or more of a variety of, to state them broadly, social, economic or national security interests. It may be that a single piece of legislation is intended to achieve more than one of those interests or subsets of them. When that is the case, any attempt to find a single purpose or object in the enactment concerned is not possible. Efforts are better focused upon the individual suite of provisions relating to a single subject dealt with in legislation of that sort.
The problem and the proper approach was described by McHugh J in Stevens v Kabushiki Kaisha Sony Computer Entertainment[53] in the context of the Copyright Act 1968. That legislation is very different from the SS Act and firmly grounded in the commercial world but the principles of interpretation are equally applicable to the SS Act. His Honour said:
“ Much modern legislation regulating an industry reflects a compromise reached between, or forced upon, powerful and competing groups in the industry whose interests are likely to be enhanced or impaired by the legislation. In such cases, what emerges from the legislative process is frequently not a law motivated solely by the public interest. It reflects wholly or partly a compromise that is the product of intensive lobbying, directly or indirectly, of Ministers and parliamentarians by groups in the industry seeking to achieve the maximum protection or advancement of their respective interests. The only purpose of the legislation or its particular provisions is to give effect to the compromise. To attempt to construe the meaning of particular provisions of such legislation not solely by reference to its text but by reference to some supposed purpose of the legislation invites error.”[54]
[53] [2005] HCA 58; (2005) 224 CLR 193; 221 ALR 448; Gleeson CJ, McHugh, Gummow, Kirby, Hayne and Heydon JJ
[54] [2005] HCA 58; (2005) 224 CLR 193; 221 ALR 448; Gleeson CJ, McHugh, Gummow, Kirby, Hayne and Heydon JJ at [126]; 231; 476 per McHugh J
Gleeson CJ gave an example of the issue in Carr v Western Australia:[55]
“… [I]t may be said that the underlying purpose of an Income Tax Assessment Act is to raise revenue for government. No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose. Interpretation of income tax legislation commonly raises questions as to how far the legislation goes in pursuit of the purpose of raising revenue. In some cases, there may be found in the text, or in relevant extrinsic materials, an indication of a more specific purpose which helps to answer the question. In other cases, there may be no available indication of a more specific purpose. Ultimately, it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling.”[56]
[55][2007] HCA 47; (2007) 232 CLR 138; 239 ALR 415; Gleeson CJ, Gummow, Kirby, Heydon and Crennan JJ
[56] [2007] HCA 47; (2007) 232 CLR 138; 239 ALR 415; Gleeson CJ, Gummow, Kirby, Heydon and Crennan JJ at [6]; 143; 418
The meaning must be properly discerned from the words used in the legislation
Referring to CIC Insurance, Weinberg J expressed a similar principle in Minister for Immigration and Multicultural and Indigenous Affairs v SZAYW[57] when he noted:
“… There are some statements in the authorities that suggest that there must be ambiguity in the provision under consideration before the purpose of the statute, or reference to extrinsic material, becomes relevant. However, the current position is not so constrained. Rather, it requires that purpose and context be considered at the outset, when construing any statutory provision. …
It goes without saying that this focus on the purposive approach does not authorise the courts to legislate a meaning to promote the purpose or object underlying a statute unless that meaning can be properly discerned from the words of the Act itself. In a recent paper, ‘Statutes: The Sir Maurice Byers Annual Address’, (2005) 26 Australian Bar Review 121, Gummow J cautioned against a reading of a ‘purposive’ construction as releasing the drafter from the requirements of precision of thought and expression. A similar admonition can be directed towards the courts.”[58]
[57] [2005] FCAFC 154; (2005) 145 FCR 523; 223 ALR 1; Moore and Weinberg JJ; Kiefel J dissenting
[58] [2005] FCAFC 154; (2005) 145 FCR 523; 223 ALR 1 at [62]-[63]; 537-538; 15-16
As important as the purpose or object of legislation is, the need to maintain focus upon the words used by Parliament in the particular legislation was underlined by Gleeson CJ in Singh v The Commonwealth,[59] Gleeson CJ said:
“… As Kitto J said [in Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 405], references to intention must not divert attention from the text, for it is through the meaning of the text, understood in light of the background, purpose and object, and surrounding circumstances, that the legislature expresses its intention, and it is from the text, read in that that light that intention is inferred. …”[60]
[59] [2004] HCA 43; (2004) 222 CLR 322; 209 ALR 355; Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ; McHugh and Callinan JJ dissenting
[60] [2004] HCA 43; (2004) 222 CLR 322; 209 ALR 355 at [19]; 226; 363
More recently, Mason P said in Harrison v Melhem:[61]
“ There are many authoritative statements that legislation must be construed by reference to what Parliament has said through its enactment, as distinct from what others, including ministers, may wish or think Parliament intended ….
It does not follow that reference to the intention of Parliament is meaningless. On the contrary, the duty of courts is to give effect to that intention, but only as it is expressed in legislation … Lord Reid expressed it pithily in Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591 at 613: ‘We often say that we are looking for the intention of Parliament, but that is not quite accurate. We are seeking the meaning of the words which Parliament used. We are seeking not what Parliament meant but the true meaning of what they said.’
There will always be situations in which a court can be satisfied that the intention of the maker of a document is not reflected in the text chosen. Sometimes even Parliament can miss its intended target in a manner where that target is nevertheless plain, in which event a court should endeavour, if possible, to do more than record that the target has been missed …
Statements in Parliament, even by ministers during the Second Reading debate, will however seldom be available to elucidate the meaning of the later enacted text. Identification of mischief and purpose is one thing, statement of meaning is another. …”[62]
[61] (2008) 72 NSWLR 380; Spigelman CJ, Mason P, Beazley, Gyles and Basten JJA
[62] [2008] NSWCA 67; (2008) 72 NSWLR 380 at [159]-[162]; 398-399 (citations omitted)
In the same case, Spigelman CJ agreed with Mason P saying:
“… Statements of intention as to the meaning of words by ministers in a Second Reading Speech, let alone other statements in parliamentary speeches are virtually never useful. Relevantly, in my opinion, they are rarely, if ever, ‘capable of assisting in the ascertainment of the meaning of the provisions’ within s 34(1) of the Interpretation Act 1987. I only refrain from using the word ‘never’ to allow for a truly exceptional case, which I am not at present able to envisage.
Of course, other statements in the course of a Second Reading Speech by a minister, bearing in mind the fact that s/he will almost always be speaking on behalf of, at least, the Lower House of Parliament by reason of the operation of our party system, will be of use on matters such as the purpose, which used to be referred to as mischief.
However, the subjective intention of the Parliament, let alone of Ministers or Parliamentarians, is not relevant. What is involved is the search for an objective intention of Parliament, not the subjective intention of Ministers or Parliamentarians. … Indeed, often there is no relevant subjective intention at all. The words used may represent a compromise, without consensus, so that, in substance, the decision has been left to the courts. … Even more frequently, indeed almost always in cases of difficulty, the circumstances in which the statute falls to be applied were not actually contemplated by anybody. Even if they were contemplated, a statement of intention in a Ministerial Second Reading Speech will not prevail over the words of the statute. …
The authoritative determination of the meaning of a statutory provision is an exercise of the judicial power, not of the legislative power, let alone of the executive power. In the Australian system of the separation of powers, it is the courts which determine what the legislative intention when enacting a particular provision was.
The task of the court is to interpret the words used by Parliament. It is not to divine the intent of the Parliament. … The courts must determine what Parliament meant by the words it used. The courts do not determine what Parliament intended to say. …”[63]
[63] [2008] NSWCA 67; (2008) 72 NSWLR 380 at [12]-[16]; 384-385 (citations omitted)
Finally, I will refer to a passage from a judgment of French J in Woodside Energy Ltd v Commissioner of Taxation:[64]
“ An assumption that legislation which uses economic terms or concepts related to a particular economic theory or model, thereby applies the theory or model, whether it be for the purpose of regulation or tax collection, is an assumption which requires close scrutiny. Particular statutes may be based upon or inspired by economic theories or models. Their precise terms, however, may reflect policy choices or political compromises inconsistent with a complete acceptance or application of the theory or model concerned. …”[65]
[64] [2007] FCA 1961; (2007) 69 ATR 465
[65] [2007] FCA 1961; (2007) 69 ATR 465 at [203]; 513
The role of policy in determining the limits on the exercise of a discretionary power
In Re Drake and Minister for Immigration and Ethnic Affairs (No. 2)[66] (Drake (No 2), Brennan J, President, said that the decision-maker:
“… is equally free, in point of law, to adopt such a policy in order to guide him in the exercise of the statutory discretion, provided the policy is consistent with the statute.”[67]
This is consistent with the earlier judgments of the Full Court of the Federal Court in Drake v Minister for Immigration and Ethnic Affairs[68] and Smithers J.[69] Brennan J explained in Drake (No 2) the reason for adopting a policy in relation to decision-making:
“… It can serve to focus attention on the purpose which the exercise of the discretion is calculated to achieve, and thereby to assist the Minister and others to see more clearly, in each case, the desirability of exercising the power in one way or another. Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with the fairness and continuity of the administrative process.”[70]
A.1.1Section 1118(1)(e): amount paid under home equity conversion agreement excluded from definition of “income”
I will expand on two of these. The first is s 1118(1)(e) and it is directly relevant in this case. An amount is only disregarded under that provision if it has been received within the immediately preceding 90 days and it is excluded from the definition of “income” in s 8(1) by either s 8(4) or 8(5). The definition of “income” in s 8(1) is:
“income, in relation to a person, means:
(a)an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).
Note 1:see also sections 1074 and 1075 (business income), sections 1076-1084 (deemed income from financial assets), sections 1095 to 1099DAA (income from income streams), section 1099F (exempt bond amount does not count as income) and section 1099K (refunded amount does not count as income).
Note 2:where a person or a person’s partner has disposed of income, the person’s income may be taken to include the amount which has been disposed of – see sections 1106 and 1112.
Note 3:income is equivalent to ordinary income plus maintenance income.”
The expression “income amount” means:
“(a) valuable consideration; or
(b)personal earnings; or
(c)moneys; or
(d)profits; (whether of a capital nature or not).”[90]
[90] SS Act; s 8(1)
The expression “earned, derived or received” is the subject of s 8(2):
“A reference in this Act to an income amount earned, derived or received is a reference to:
(a)an income amount earned, derived or received by any means; and
(b)an income amount earned, derived or received from any source (whether within or outside Australia).”
A.1.2Section 1118(1)(sa): amount paid as insurance or compensation for damage or loss to building or plant excluded from definition of “income”
The second provision of s 1118 on which I will expand is s 1118(1)(sa). It refers to
s 1118(1AB), which applies if:“(a) a person receives any insurance or compensation payments because of loss of or damage to a building (including the person’s principal home) or plant; and
(b)either:
(i)if the building or plant was lost – the person applies the whole or a part of those payments to build another building or plant to replace the building or plant that was lost; or
(ii)if the building or plant was damaged – the person applies they whole or a part of those payments to rebuild, repair or renovate the building or plant.”[91]
[91] SS Act; s 1118(1A)
The amount that may be disregarded is worked out according to s 1118(1AB) when it provides:
“For the purposes of paragraph (1)(sa), the amount that may be disregarded is:
(a)the value of the building or plant that is being built, rebuilt, repaired or renovated, to the extent that those payments are so applied; and
(b)if a building whose value is being disregarded under paragraph (a) of this subsection is to be the person’s principal home:
(i)the value of the land on which the building is being built, rebuilt, repaired or renovated to the extent that, once the building becomes the person’s principal home, the land will, under section 11A, be included in a reference to the principal home; and
(ii)the value of any other structure, on that land, that is to be the person’s principal home to the extent that the structure was built before the person began applying the payments.”
The period during which the amount paid as compensation or insurance may be disregarded is the subject of s 1118(1AB):
“For the purposes of paragraph (1)(sa), the amount worked out under subsection (1AB) may be disregarded during the period:
(a)beginning when the payments are received; and
(b)ending at the earlier of the following times:
(i)12 months, or such longer period as the Secretary determines for any special reason, after that time;
(ii)when the building, rebuilding, repair or renovation of the building or plant is complete.”[92]
[92] Similar provisions apply in relation to the sale of a person’s principal home when the person intends to apply the whole or part of the proceeds to build, rebuild, repair or renovate another residence to be the person’s principal home or to purchase a residence for that person: SS Act; s 1118(1B)
A.2 Value of assets
If there is a charge or encumbrance over a particular asset, the value of that asset is, for the purposes of the assets test, generally reduced by the value of that charge or encumbrance. That is the effect of s 1121(1) but that provision does not apply in all circumstances. It does not, for example, apply:
(1)for the purposes of “… Division 1B of Part 3.10”.[93]
[93] SS Act; s 1121(1)
(a)Division 1B of Part 3.10 is concerned with income deemed to have been earned from financial assets.
(b)A “financial asset” is a financial investment or a deprived asset.[94] A “deprived asset” is an asset which the person has disposed of and its value must be included in that person’s assets by virtue of ss 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC or 1126AD or an amount is included in the value in respect of its disposal under
s 1126E in so far as that section relates to ss 1126AA, 1126AB, 1126AC or 1126AD. [95][94] SS Act; s 9(1)
[95] SS Act; s 9(4)
(2)“…to a charge or encumbrance over an asset of a person to the extent that:
(a)the charge or encumbrance is collateral security; or
(b)the charge or encumbrance was given for the benefit of a person other than the person or the person’s partner.”[96]
(3)“… to a charge or encumbrance over assets that are to be disregarded under section 1118.”[97]
[96] SS Act; s 1121(2)
[97] SS Act; s 1118(3)
If a person has assets comprising both assets whose value is to be disregarded under s 1118 and other assets but the relevant charge or encumbrance does not arise under s 1138 as a consequence of the pensions loan scheme, the amount to be deducted under s 1121(1) is calculated according to the following formula:
“value of the charge or encumbrance x value of the other assets value of all the assets”[98]
[98] SS Act; s 1121(4)
B. Work out the person’s assets value limit
A person’s assets value limit is worked out by reference to Table G-1 set out at point 1064-G3. That table has regard to whether a person is a member of a couple or not and whether the person, or if a member of a couple, the person’s partner is a homeowner. Where the person, or the person’s partner, is a homeowner, the assets value limit is set at a lower level than if that were not the case. The relevant rates for a member of a couple where one member is a homeowner are:
1 July 2009: $252,500.00
1 July 2010$258,000.00
1 July 2011$265,000.00
1 July 2012$273,000.00
C.Work out whether the value of the person’s assets affects the person’s pension rate
Step 3 in the Assets Test at Module G in point 1064-G1 requires an assessment of whether the value of the person’s assets exceeds that person’s assets value limit. This step is necessary because the assets value limit represents the maximum value of the assets that a person can have before his or her pension rate is reduced. If it is the case that the value of the person’s assets does not exceed that assets value limit, the person’s assets excess if nil. If it is the case that it does exceed it, then “… the person’s assets excess is the value of the person’s assets less the person’s assets value limit.”[99]
[99] SS Act; point 1064-G1, Step 5 and see also SS Act; point 1064-G5
D. Work out the person’s reduction for assets
A person’s reduction for assets is worked out using Table G-2 set out in point 1064-G4. Where, as in this case, a person’s partner is receiving a pension or benefit, Item 3 of that table applies. It provides that the reduction for assets for the person is worked out according to the following formula:
Assets excess x 9.75 250
This figure works out the reduction for assets on a yearly basis. When viewed on a fortnightly basis, it means that rate of pension is reduced by $1.50 per fortnight for each $1,000.00 by which the value of a person’s assets exceeds that person’s assets value limit. Using the assets value limits set out for each of the years from 2009 to 2012, this means that the rate of pension is reduced to nil are:
1 September 2011: $998,000.00
20 September 2011 $1,018,000.00
1 July 2012$1,032,500.00
20 September 2012 $1,050,000.00
Step 10: calculate assets reduced rate
A person’s assets reduced rate is calculated by taking the figure calculated as the amount for the reduction for assets from the maximum payment rate.
Step 11: compare the income reduced rate and the assets reduced rate
A person’s maximum rate of pension is not reduced by reason of both assets and income. It is reduced by one or the other. That means that the income reduced rate and the assets reduced rate must be compared. If they are different, the lower of the two rates becomes the provisional annual payment rate. If they are the same, that is the provisional annual payment rate.
If it should be the case that the assets reduced rate is the lower of the two, consideration may need to be given to whether the financial hardship rules set out in s 1130 can be applied. Those rules only apply if a social security payment, which includes an Age Pension,[100] is either not payable because of the application of the assets test or is payable at a reduced rate determined by the application of that test. Other criteria, set out in s 1129, must also be met before those rules may be applied. They include the person, or the person’s partner, having an unrealisable asset and the provisions relating to the disposal of assets not being applicable.
[100] SS Act; s 23(1)
Step 12: calculate the rate of pension
The final step, calculating the rate of pension is worked out by:
“(a) subtracting from the provisional annual payment rate any special employment advance deduction (see Part 3.16B); and
(b)if there is any amount remaining, subtracting from that amount any advance payment deduction (see Part 3.16A); and
(c)adding any amount payable by way of remote area allowance (see Module H).”
PREVIOUS AUTHORITIES
The parties referred to several earlier cases decided by the Tribunal and appeals determined by the Federal Court. I will briefly summarise only four of them. The first two are decisions of the Tribunal and considered by Dr Mann to be the only cases that are relevant to the issues in this case. The others are judgments of the Federal Court. All of them have been referred to by Ms Bramley. She referred to others but I think that those I have summarised provide a fair representation of all the cases.
Re Berry and Secretary, Department of Social Security[101]
[101] [1995] AATA 238; Senior Member Kiosoglous, Mr Lock and Mr Trowse, Members
The Tribunal considered whether Mr and Mrs Berry’s combined assets exceeded the prescribed level at which they were entitled to be paid some quantum of Age Pension. The Secretary’s delegate had decided that they did not. In doing so, the delegate had not deducted a loan of $250,000.00 from their overall assets as it was a loan secured by a mortgage over the house that was Mr and Mrs Berry’s principal residence. That was, the delegate had decided, required by s 1118 and 1121(3). Mr and Mrs Berry submitted that they had substantial interest payments to make on the loan which they had obtained for the purposes of lending to a business that was under their control and being carried on for their benefit. They had wanted the loan secured by a mortgage over another property they owned but the lender would accept only a mortgage only over their principal residence.
The Tribunal considered that the delegate had arrived at the correct result but thought the law led to an unjust outcome saying:
“ In reaching this conclusion the Tribunal has found that the legislation makes no allowance for the situation where a disregarded asset provides the security for a loan of money which is used for a purpose which has absolutely no connection with that disregarded asset. In those circumstances the provisions of the legislation stating that the encumbrance can be related only to the disregarded asset makes little sense because whilst the value of the asset, and necessarily the debt, is disregarded, in reality the applicant for pension is still indebted to a large extent. Consequently, in such circumstances, the method of calculation of the value of assets advocated by the legislation does not accurately reflect an applicant's true financial position.
In the applicant’s circumstances, the result is patently unfair. The loan of $250,000 was obtained to readjust the financial position of a related business entity. It was used to discharge existing debts of the business, the applicants' indebtedness to that business and the balance as working capital for that business. The Department has taken into account the sum of $129,000, which is the amount of the loan owed to the applicants following their on-lending, as an asset of the applicants but has completely ignored the liability of $250,000 because, at the bank’s insistence, that loan was secured on an asset disregarded under s. 1118. Generally one would imagine that the amount of money represented by the encumbrance associated with a disregarded asset has been spent on that asset and therefore when the asset disappears from the equation so must the liability. In this case, however, the disregarded asset was not an asset purchased with the borrowings. We are therefore left with the borrowed money as an asset in the hands of the applicants but the corresponding liability is ignored because of it being secured against a disregarded asset. The Tribunal believes this is grossly unfair and suggests that this inequity be addressed by those entrusted with the power of amendment.
The Tribunal finds that although it has sympathy for the applicant’s position, it must find that the Department has made the correct decision. It appears to the Tribunal that the terms of the legislation are clear in that s 1121(1) of the Act states that the value of an encumbrance on any asset can be off-set against the value of that asset in calculating its value. Further, the Tribunal finds that the only workable interpretation it can place on s 1121(3) is to find that in relation to a charge or encumbrance over a disregarded asset, sub-s (3) is to find that in relation to a charge or encumbrance over a disregarded asset, sub-s (3) renders sub-s(1) inapplicable and such a charge or encumbrance cannot be used to off-set the value of any non-disregarded assets.”[102]
Re McDicken and Secretary, Department of Family and Community Services[103]
[102] [1995] AATA 238 at [11]-[13]
[103] [1999] AATA 169; Senior Member RP Handley (as he then was)
Ms McDicken had been receiving the Age Pension for the previous three years or so when she borrowed $91,000.00 for a period of 12 months. The loan was secured by a mortgage over her home. She used the proceeds to pay off some debts that had been attracting high interest charges, bought a new hot water system and invested the remaining $61,000 in an investment account. The interest payments due on the loan were paid from the income generated in the investment account together with a further amount of $200.00 paid by Ms McDicken each month from other sources. At the end of the 12 month period, she had the loan refinanced by another lending institution as a result of unforseen costs associated with the loan, the loss of her pension, car repairs, replacement of her dishwasher and home repairs, she increased the amount of the loan to $109,000.00. The income from the investment account continued to be put towards repayment of the loan together with $300.00 each month from Ms McDicken. The term of the loan was 30 years but, on that repayment plan, she expected to repay it in 13 years.
The Secretary’s delegate had treated the agreement under which the loan was made as a home equity conversion agreement and thereby excluded $40,000.00 of it as being included in Ms McDickens’ income for the relevant period in applying the income test. That left the remaining sum of $51,000.00 that it did include as income.
The Tribunal had to consider whether the amount Ms McDicken had borrowed was to be treated as income for the purposes of the income test. Its consideration turned on whether the amount borrowed had been borrowed under a “home equity conversion agreement” within the meaning of s 8(1). I have set out that provision at [32] above. Also relevant were the definitions of “income” and “income amount” in the same section[104] and s 1073 providing that a person who receives a lump sum is taken to receive one fifty second of that amount as ordinary income during each week of the 12 month period commencing on the day on which the person was entitled to receive the amount.
[104] See [100] - [101]
The Tribunal analysed the definition of a “home equity conversion agreement” in the following way:
“26. The definition is in broad terms. The Applicant submitted that the literal interpretation of this definition produces an absurd result – that it could potentially cover any ‘home loan’. In the Tribunal's view, the definition is sufficiently wide to cover any loan agreement under which the repayment of the loan is secured by a mortgage on the principal home of a person or the person's partner. This could, for example, include a business loan, although it should be remembered that these provisions of the 1991 Act are referrable to Social Security pensions and have no relevance to assessing taxable income.
27. Because, in the Tribunal’s view, the literal meaning of the definition requires clarification, in accordance with s 15AA of the Acts Interpretation Act 1901, regard should be had to the purpose or object of the provision so that a construction is adopted which promotes that purpose or object. In so doing, pursuant to s 15AB of the 1901 Act, reference may be made to extrinsic material, including the Explanatory Memorandum furnished to either House of Parliament before the time when the provision was enacted. The relevant Explanatory Memorandum has been quoted above. It seems clear that the Government intended the relevant provisions of the legislation to refer to what are commonly referred to as HEC plans.
28. Although the Australian Housing Research Council Report postdates the inclusion of these provisions in the 1947 Act, in the Tribunal's view, its description of HEC plans appears to be a comprehensive one upon which reliance can be placed. With respect to HEC loan plans, the Report states (at p 1) that:
repayment of the loan and interest is not made until the end of a specified period or the older owner moves out or dies.
29. The Applicant’s loan was not one of this kind. Certainly, approximately two thirds of the money borrowed ($61,000) was invested. However, the principal purpose of the financial arrangement was to enable the Applicant to consolidate and service debts of approximately $30,000. Moreover, interest was payable during the term of the loan which was of a short duration (twelve months).
30. In the Tribunal’s view, the definition of HEC agreement in s 8(1) of the 1991 Act must be read down in line with the ordinary meaning of the term ‘home equity conversion’ used in the definition. To not do so, produces an absurd result which fails to promote the purpose or object expressed in the Explanatory Memorandum when the relevant provisions were originally introduced. Thus, the definition of an HEC agreement should be interpreted as excluding agreements such as that entered into by the Applicant which are ordinary loan agreements, requiring ongoing periodic interest payments, secured by a mortgage on the Applicant's principal home.
31. The result of this approach in the Applicant’s case is that her loan agreement was not an HEC agreement within the meaning of the Act, and $51,000 of the $91,000 advanced to her should not have been treated as ‘income’ for the purposes of the 1991 Act.
32. The 1991 Act does, of course, make provision for assessing the income on investments, so that, in the Applicant’s case, the income from her ASGARD Investment Account will be assessed in calculating the rate of age pension payable. For the Respondent to assess both $51,000 of the loan as income, as well the income from the Applicant's investments procured through the loan would be ‘double dipping’, to use a term often applied by the Respondent to would-be Social Security recipients.
33. The Tribunal notes that support for its approach is afforded by French J’s statement in Secretary, Department of Social Security v McLaughlin, quoted above, that the scope of the term ‘income’ does not extend to a bone fide loan. Discussion of the meaning of the word ‘income’ in Read v Commonwealth (supra at 69) and Re Hill and Repatriation Commission (1996) 45 ALD 347 at 368-369, and of the word ‘loan’ in Re Gordon and Department of Social Security (supra at 103 ff), is also supportive.”
Although he did not expressly state his conclusion in this way, it seems to me that Senior Member Handley considered that the whole of the $91,000.00 was a loan and so excluded from the definition of “income”. Although he referred only to the sum of $51,000.00 in that way, it was the only way he could exclude the sum of $40,000.00 when he had found that the agreement was not a home equity conversion agreement. His finding meant that he could not exclude that $40,000.00 sum under s 8(4) as the delegate had done.
The passage on which Senior Member Handley relied in finding that a loan is not income is found in Department of Social Security v McLaughlin.[105] It is a passage in which French J said, in part:
“ The concept of ‘income’ defined in the Act is entirely different from that embodied in the comparable provisions of the Income Tax Assessment Act 1936 (Cth) …
However wide the scope of the term ‘income’, in my opinion it would not extend to a bona fide loan. Counsel for the secretary argued to the contrary, submitting that even if characterised as a loan the payments made to the respondents were for their immediate benefit, alleviating their need for the support provided by the disability and partner allowances.
It was contended for the respondents that the parties to the deed had agreed it was a loan and that the appeal proceeded on the basis that there was no dispute about the relevant facts. But the relevant facts did not extend to the characterisation of the agreement as a loan. …”[106]
[105] [1997] FCA 1456; (1997) 26 AAR 390; 48 ALD 536
[106] [1997] FCA 1456; (1997) 26 AAR 390; 48 ALD 536 at 397; 542
It is clear from this passage that his Honour’s comment upon whether a loan is to be regarded as income was not an issue that arose for consideration on the facts of the case. His comment must, therefore, be regarded as obiter dicta and not binding upon me.
What was in issue was how an amount of money paid to Mr and Mrs McLaughlin under the Dairy Industry Act 1973 (DI Act) was to be treated. Was it to be treated as income when it was paid in consideration of their having no further involvement in the business of milk distribution or milk vending in Western Australia in the following three years. On that issue, French J said:
“ What the Tribunal has sought to do and the Court is invited now to do is to read down the definition of ‘income’ and ‘income amount’. That reading down involves not just a choice of meanings to be attributed to the existing words of the definitions but the introduction into the definitions of words of limitation which the legislature has not seen fit to enact.
The definition of ‘income’ extends to income amounts ‘received’ by a person. There is no requirement in the Act that such amounts are received in exchange for anything. They may therefore extend to gifts. This is reinforced by the extension of the definition of ‘income’ to ‘a periodical payment by way of gift or allowance’.
There is no requirement in the definition for the payment received to constitute a net gain. Absent such a requirement a payment of money received by a person for that person’s own use or benefit is a payment of an income amount. No doubt examples may be generated and multiplied of apparently startling or unfair results of this construction. The receipt of the proceeds of the sale of a house or a lottery win may constitute ‘income’ for the purposes of the Act. Such debates, however, are best reserved for the legislature. There is, in my opinion, no room in the language of the definitions of ‘income’ and ‘income amount’ for the kind of construction adopted by the Tribunal.
The amounts paid were income and should be treated as such.”
His Honour’s words are equally applicable in this case for they set out the approach that I must take to interpreting the legislation. I must look to the words that have actually been used and not seek to introduce qualifications unless those qualifications have been introduced by Parliament.
Fischer v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs[107]
[107] [2010] FCA 441; Katzmann J
In Fischer v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs, Katzmann J considered the proper method of calculating income deemed to have been derived from financial assets for the purpose of working out Ms Fischer’s disability support pension under the SS Act. The financial assets took the form of shares in various companies listed on the Australian Stock Exchange. Those shares were subject to a margin loan scheme. That meant that Ms Fischer borrowed money to purchase the shares and the shares she purchased then became the security for the repayment of the loan. In the quarter ending 31 March 2004, the shares were estimated to have a market value of $79,843.82. The margin loan secured by those shares was then $47,656.94. In May 2007, Ms Fischer told Centrelink that the shares were then worth $200,856.00. Following an exchange of correspondence between her and Centrelink, Ms Fischer advised that, in December 2007, the “net value” of her shares had been $145,361.00. She explained that the shares were “worth more” but that they were subject to a margin loan.
Using these values, a delegate of the Secretary decided that Ms Fischer had been overpaid during the period from 30 June 2004 to 18 March 2008. The Secretary accepted that some of the overpayment was solely attributable to Centrelink’s error. The debt arising from that overpayment was waived. As for the remainder, Katzmann J decided that, for the purposes of the deeming provisions appearing in Division 1B of Part 3.10 of the SS Act, the value of Ms Fischer’s shares was to be determined without reducing it by the value of the margin loan. Her Honour concluded:
“59. … [T]he purpose of the amendment was to put it beyond doubt that it was gross value of an asset which was to be used for the purpose of deeming income from financial assets and there was to be no set off for any charge or encumbrance upon it. …
…
66. The ordinary English meaning of value in the context in which it appears in the section is ‘the material or monetary worth of a thing’ (Oxford English Dictionary and Macquarie Dictionary). It might well be said that the worth of shares to a shareholder is their net worth, that is, their worth after any loan is set off. But that is not necessarily so. The respondent argued that ‘total value of the person’s financial assets in s 1076 means the aggregate value of all assets without any reduction for any charge or encumbrance. Whilst there may be some ambiguity in the meaning of ‘total value’ …, it is impossible to read s 1121(1) (as amended) with s 1076 and conclude that the value of the financial assets should be reduced by the value of any charge or encumbrance secured over it. That would fly in the face of the decision-maker to assess the gross value of the financial assets without regard for the margin loan. …”[108]
[108] [2010] FCA 441
I certify that the one hundred and twenty eight preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ……[sgd]…......................................................
Shivanthi Herath Associate
Date of Hearing on Papers 23 January 2014
Date of Decision 7 February 2014
Applicant’s representative Self-represented
Respondent’s representative Ms A Bramley
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; 2 ALD 60 at 599; 77 per
Smithers J
Re Wertheim and Department of Health (1984) 7 ALD 121 at 154
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