Barry v Repatriation Commission

[1993] FCA 197

Re: BRIAN ROBERT BARRY
And: REPATRIATION COMMISSION
No. SG19 of 1992
FED No. 197
Number of pages - 14
Veterans
(1993) 113 ALR 461
(1993) 17 AAR 240
(1993) 41 FCR 529
(1993) 29 ALD 670

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J(1)

CATCHWORDS

Veterans - service pension - entitlement to receive - meaning of "income" - whether fortnightly compensation payment made as a consequence of a work related injury constitute "income".

Compensation (Commonwealth Government Employees) Act 1971 (Cth) s99

Commonwealth Employees' Rehabilitation and Compensation Act 1988 (Cth) s48, s125

Veterans' Entitlement Act 1986 (Cth) s35

Secretary to Department of Social Security v Read (1988) 15 FCR 456;

Read v The Commonwealth of Australia (1989) 167 CLR 57

Secretary, Department of Social Security v Garvey (1989) 22 FCR 132

Rose v Secretary, Department of Society Security (1990) 21 FCR 241

Marsh v Secretary to the Department of Social Security (1986) 12 FCR 100

Re Zolotenki and Secretary, Department of Social Security (1986-1987) 12 ALD 349

Kelleners v Secretary to the Department of Social Security (1988) 20 FCR 53

Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307

Redding v Lee (1983) 151 CLR 117

Tinkler v Federal Commissioner of Taxation (1979) 29 ALR 663

Commissioner of Taxation v Inkster (1989) 24 FCR 53

HEARING

ADELAIDE, 4 September 1992

#DATE 31:3:1993

Counsel for the Appellant : Mr R.W. Evans

Solicitors for the Appellant : Messrs Armour and Co

Counsel for the Respondent : Mr P. Hanks

Solicitors for the Respondent : Australian Government Solicitor

ORDER

THE COURT ORDERS THAT:

The appeal be dismissed with costs

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

O'LOUGHLIN J The appellant, Brian Robert Barry, who was born in South Australia on 6 May 1923, served as a navigator in the Royal Australian Air Force in the New Guinea theatre during World War II.

1. On 1 April 1985, during the course of his employment with Australia Post, he sustained personal injuries in a motor vehicle accident. On 1 July 1986 he retired from his employment having managed only one brief return to work since the accident. Following upon the accident and until 3 January 1986 the applicant had received sick pay. Thereafter he received fortnightly compensation payments of $433.60, originally pursuant to the provisions of the Compensation (Commonwealth Government Employees) Act 1971 (Cth) ("the 1971 Compensation Act") and, since 1 December 1988, pursuant to the provisions of the Commonwealth Employees' Rehabilitation and Compensation Act 1988 (Cth) ("the 1988 Compensation Act").

2. On 4 June 1986, not long before his retirement, the appellant lodged with the Department of Veteran Affairs ("the Department") an application for a service pension pursuant to the provisions of the Veterans' Entitlement Act 1986 (Cth) ("the Act"). That application was rejected on 1 July 1988 on the ground that the total of his and his wife's income exceeded the permitted maximum. In making that determination the department took into account, as income for the purposes of s35 of the Act, the amount of the applicant's compensation payments. As the entitlement to the pension was means-tested the inclusion of the compensation payments, as part of the appellant's income, rendered him ineligible for the service pension in the period under review. On 5 January 1990, a delegate of the Repatriation Commission affirmed the department's determination and, on 4 March 1992, the Administrative Appeals Tribunal affirmed the delegate's decision. The appellant now appeals to this Court from the decision of the Tribunal.

3. It was common ground that the appellant, at the time when he applied for the service pension, was to be assessed as a married man who met the requirements of the Act with respect to his war service and age. It was also common ground that the sole issue in dispute in this appeal was the correct treatment of the compensation payments that the appellant received from 3 January 1986 until 24 June 1991. On the last mentioned date the appellant settled his common law claim arising out of the 1985 motor vehicle accident for $140,000. The net benefit of that settlement to the applicant was, however, only $1,000; he had to pay Australia Post $110,000 in reimbursement of the compensation payments, and legal costs amounted to $29,000. The applicant's complaint is that his compensation payments (which were always liable to be repaid) should not have been taken into account in determining his eligibility for a service pension.

4. At the time when the appellant first received fortnightly compensation payments in January 1986 he had a contingent liability to repay some or all of those payments by virtue of the provisions of s99 of the 1971 Compensation Act. Subsection (3) of that section provided that an injured employee, who had been in receipt of compensation, was liable to pay to the Commonwealth the amount of the compensation from any award of damages. With the repeal of the 1971 Compensation Act (and the prima facie repeal of this contingent liability), s48 of the 1988 Compensation Act was introduced; it had the same effect as s99 of the repealed Act. Leaving aside the reference to benefits payable to dependants as a consequence of death, subs 48(3) provided:
   

"(3) If, before the recovery of the damages by, or for the benefit of, the employee ... any compensation under this Act was paid to the employee in respect of the injury, ... the employee ... is liable to pay to the Commission an amount equal to:

(a) the amount of that compensation; or

(b) the amount of the damages;

whichever is less."

1. In addition to subs 48(3), subs 125(1) of the 1988 Compensation Act dealt with earlier payments that had been made to an injured employee under the 1971 Compensation Act (and earlier legislation) by providing that all such payments are "deemed to have been made by the relevant authority in respect of the corresponding liability of that relevant authority to make such a payment under this Act for that injury".

2. It was submitted by the appellant that, as his application for a pension had been refused in July 1988 (whilst the 1971 Compensation Act was still in force), no regard should be had to the provisions of the 1988 Compensation Act. That can not be right. What must be determined in this case is whether the lump sum payment, which occurred after the 1988 legislation had come into force, had any effect upon the rights and entitlements of the appellant. In my opinion, the correct approach to a resolution of this problem is to recognise that, in the circumstances of this case, subs 48(3) and subs 125(1) of the 1988 Compensation Act combine to impose on the appellant a liability to pay to Australia Post the lesser of the amount of either his fortnightly compensation payments or his damages of $110,000.

3. The definition of "income" in s35 of the Veterans' Entitlement Act, so far as it is material for present purposes means:
   

"... any personal earnings, moneys, valuable consideration or profits, whether of a capital nature or not, earned, derived or received by that person for his or her own use or benefit by any means from any source whatsoever, within or outside Australia, and includes a periodical payment or benefit by way of gift or allowance and any income that the person is taken to receive because of section 37C, 37D, 50B, 50C or 52A, but does not include: ..."

1. There then follows a list of numerous exceptions to the definition but none of them is applicable to the circumstances of this case.

2. It would seem that the word "income", appearing in s35 of the Act, has not been earlier considered. On the other hand, save for the absence of the phrase "whether of a capital nature or not", the word is similarly defined in the Social Security Act 1947 (Cth) and there are several decisions of the Courts that offer help in understanding its breadth and impact. One of the first of those that warrant consideration is Secretary to Department of Social Security v Read (1988) 15 FCR 456; (on appeal to the High Court sub-nom: Read v The Commonwealth of Australia (1989) 167 CLR 57). In that case a person in receipt of an age pension had received additional units under a commercial unit trust scheme. A delegate of the Secretary to the Department valued the additional units, treated the value as income, and reduced the pension. In the Administrative Appeals Tribunal, Davies J took the view that the additional units were an accretion of capital and not a derivation of income. On appeal the Full Court (Fisher J dissenting) allowed the appeal, holding that the additional units were within the scope of the definition of "income" as constituting "valuable consideration". On appeal to the High Court the majority, Mason CJ, Dean and Gaudron JJ, allowed the appeal on the ground that the additional units were not "valuable consideration... earned, derived or received" within the interpretation of "income" since they were not capable of being treated as separate from the original asset. The majority further held that the additional units were not "profits... earned, derived or received" since a profit connotes an actual gain and a gain is not earned, derived or received until it is realized (67).

3. Brennan J in his dissenting judgment explained the philosophy of the legislation and the meaning of the word "income" in these terms:
   

"The definition is couched in the widest terms, presumably to ensure that public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide. The definition is wide enough to embrace receipts of a capital nature as well as receipts of income, for 'income' is defined to mean, inter alia, any moneys, valuable consideration or profits irrespective of the means by which or the source from which those moneys, etc. are received." (69)

1. The views of Brennan J have been quoted and followed by a Full Court of this Court in Secretary, Department of Social Security v Garvey (1989) 22 FCR 132 which was another case dealing with "income" and the provisions of the Social Security Act. In that case the respondent had sought, in his application for an invalid pension, to set off his losses from his four residential properties against his wife's salary. The Court said:
   

"The purpose of the relevant part of the Act was very clear, namely to maintain a basic level of income for those who were unable to receive sufficient income to provide for themselves. It was not the purpose of the Act to provide a further source of income for a person who had applied his or her income to maintain a business conducted at a loss or upon outgoings incurred in acquiring or maintaining assets." (136)

1. Similar statements are to be found in the decision of a differently constituted Full Court in Rose v Secretary, Department of Society Security (1990) 21 FCR 241 at 243-4:
   

"Thus, the definition of 'income' plays a critical role in the excepting or exclusionary provisions. Parliament chose to define 'income' in the initial part of the definition in terms of considerable width to ensure that it brought within its net as wide a range of categories and sources of income as possible, thus giving full scope to the exclusionary provisions of the Act such as s33. The broad definition, having an exclusionary operation, is then followed by the numerous and eclectic pars (a)-(y) which express Parliament's will that persons coming within them are not to be treated as disqualified from the age pension notwithstanding that they derive income which would otherwise be caught by the opening provisions of the definition of 'income'."

1. In Marsh v Secretary to the Department of Social Security (1986) 12 FCR 100 Burchett J held that a training allowance that had been paid to the applicant, as a part-time trainee under a Labour Force Program, was "income". His Honour discussed and emphasised the width of the definition of the word at 103 where he said:
   

"The structure of the definition seems to me to require a wide meaning to be given to the second part of it. It breaks naturally into three sections, the first introduced by the word 'means', the second by the words 'and includes', and the third by the words 'but does not include'. Having given in the first section a broad definition, the legislature goes on in the second to ensure that, even if some 'periodical payment or benefit by way of gift or allowance' escapes the net of the first section, it will, unless falling into one or other of the specific categories nominated in the third section, be caught by the second. The diversity of the items referred to in the third section further confirms the width of the first and second, or at least of the second..."

1. In Re Zolotenki and Secretary, Department of Social Security (1986-1987) 12 ALD 349 the Administrative Appeals Tribunal (Fisher J presiding) dealt with payments made by the West German Government to the applicant, a former inmate of a concentration camp. Although the payments were by way of compensation for his loss of earning capacity, the Tribunal nevertheless concluded that they were "income" within the Social Security Act and that the rate of age pension otherwise payable to the applicant should be appropriately reduced. Ryan J arrived at the same conclusion in Kelleners v Secretary to the Department of Social Security (1988) 20 FCR 53. Payments had been made to the applicant, who was in receipt of a widow's pension, by the Kingdom of the Netherlands by virtue of her status as a "persecuted person unable to earn an average income as a consequence of an illness or disability caused or aggravated by persecution". His Honour classified them as payments received by way of "allowance" to be taken into account in assessing her entitlement to her Australian pension.

2. Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307 was concerned with an applicant who was in receipt of an Australian invalid pension and who was also entitled to an Italian pension which, on his instructions, was paid to relatives in Italy. In deciding that the Italian pension had been "derived" by the applicant, although not received by him, Sheppard J recognised the width of the definition of "income" when he said that it was the intention of the legislature "to catch a wide range of accruals and receipts which are to be treated as income for the purposes of the (Social Security) Act" (310).

3. Notwithstanding the impact of these decisions, counsel for the appellant argued that the definition of "income" in s35 of the Act had to be read down. It was submitted that the thrust of the appellant's case was the following passage from the dissenting judgment of Fisher J in the Full Court of the Federal Court in Read's case.
   

"The question for determination in this matter is whether by definition the word 'income' encompasses everything that comes in to the pensioner whether or not that which comes in is of a periodical or non-recurring lump sum nature, whether or not it is essentially of a capital nature, whether or not it comprises 'property' (being the word introduced by the Assets Test legislation) or the proceeds of conversion of that property. In my opinion if there be no limitation on the word 'income' and it encompasses every receipt of the pensioner, an absurdity results. It could not seriously be contended that the proceeds of sale of a motor vehicle or an item of furniture, moneys borrowed, a legacy under a will or the proceeds of sale of shares would comprise 'income' for the purposes of this Act. Of course that which is periodically returned to the pensioner consequent upon the investment of these proceeds would be income." (458).

1. In my opinion these observations can not assist the appellant. They relate to entirely different circumstances. Read's case was dealing with a subject which, in commercial terms, would best be described as an accretion to capital and that can hardly be compared with regular fortnightly payments of workers compensation.

2. As well as relying upon the passage from Fisher J in Read's case, the appellant pointed to what he claimed would otherwise be a grave injustice; he argued that another victim of an accident, who was not entitled to worker's compensation, could theoretically receive a service pension and thereafter receive and retain (without affect to his pension) a lump sum award of damages. There are two answers to this proposition; the first is that, if it be correct, it is for Parliament to correct any injustice that might be caused from a proper construction of the legislation; the second is that, more likely than not, the hypothetical lump sum would constitute "moneys" received by the injured pensioner such that the payment would come within the definition of "income" in s35 of the Act with a consequential adjustment to the person's pension entitlement.

3. Counsel for the appellant also relied on the decision of the High Court in Redding v Lee (1983) 151 CLR 117 which held that in assessing damages for personal injuries caused by negligence, payments of an invalid pension to the injured plaintiff should be disregarded when calculating the damages payable by the defendant. Mason and Dawson JJ came to their conclusion by having regard to the relevant legislation and its contextual setting. They said:
   

"Section 25(1)(d) (of the Social Security Act 1947 (Cth)) provides, as we have seen, that an invalid pension shall not be granted to a person 'if he has an enforceable claim against any person, under any law or contract, for adequate compensation in respect of his permanent incapacity'. The words 'claim... under any law... for adequate compensation' do not include a common law claim for damages (see Espagne

(18)). By this omission the legislature indicated, and has continued to indicate in a manner now underlined by Espagne, an intention that the grant of an invalid pension to an injured person is for the benefit of that person notwithstanding any common law claim for damages which he might have in respect of his injury and that the invalid pension payments are not to operate in relief of the liability of any person liable to pay those damages. (144)

But these remarks are of no avail to the appellant in this case. The decision in Redding v Lee was dictated by the language of the relevant statutory provision; they do not apply here and they do not assist in arriving at a decision in this matter.

1. In my opinion, the arguments advanced on behalf of the appellant must be rejected. The factual analogies, as well as the dicta in cases such as Rose (where it was held that superannuation benefits in East Germany were to be taken into account in determining an Australian pension entitlement) Marsh, Zolotenki, Kelleners and Inguanti, amount to a formidable array; when there is added to that the explanation of Brennan J in Read's case, "that public expenditure is directed to those who stand in actual need", it becomes apparent that the appellant's need in the period under review was being met by his compensatory payments. The fact that these payments had to be reimbursed out of the lump sum payment is not to the point because at that stage the appellant would have been entitled to call upon the Department to make a fresh assessment of his circumstances; if, at that stage, his "actual need" met the financial tests in the Act, he would then become entitled to a service pension.

2. The conclusion that I have reached is that the fortnightly payments were "moneys... received by (the appellant) for his... own use or benefit..." and thus, according to ordinary concepts, they fell within the first part of the definition of "income". I am also of the opinion that the compensation payments were periodic payments by way of allowance which were related directly to the loss of the appellant's earning capacity.

1. The Tribunal found that the fortnightly payments constituted "earnings" that were derived by the appellant for his own use and benefit; it came to that decision by relying on two Full Court decisions: Tinkler v Federal Commissioner of Taxation (1979) 29 ALR 663 and Commissioner of Taxation v Inkster (1989) 24 FCR 53. It recognised that both cases were concerned with the meaning of the word "income" for the purposes of the Income Tax Assessment Act, 1936 (Cth) but it nevertheless concluded that the rationale of those cases could properly be applied to the relevant provisions of the Veterans' Entitlements Act. In Tinkler's case compensatory payments that had been paid to an injured plaintiff were held to be assessable income as they were a substitute for part of the wages that the plaintiff would have earned but for his accident. In Commissioner of Taxation v Inkster payments of compensation that were received by an injured workman after his retirement were still held to be "income" even though there was no loss of income for which those payments were intended as a substitution.

2. Brennan J sounded a warning note in Read's case; he said:
   

"The definition of 'income' in the Act falls to be construed in its unique context and care must be exercised in applying decisions on the meaning of 'income' in other statutes or in other jurisdictions." (71)

Later at 73, he added:

"There are radical differences between the provisions of the Income Tax Assessment Act and the Social Security Act, to be accounted for by a variety of historical, political and administrative factors, and those differences must often be incongruous in their concurrent operation.

1. With these cautions in mind, I agree with the Tribunal that these two cases add support to the conclusion that the compensation payments were properly taken into account in determining the question of the appellant's entitlement to a service pension. For these reasons, the appeal must be dismissed with costs.