Department of Social Security, Secretary v Clear, A

[1991] FCA 118

Re: THE SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY
And: AILEEN CLEAR
No. V G306 of 1990
FED No. 118
Social Security - Statutory Interpretation
13 AAR 274/28 FCR 405
23 ALD 22

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION
Heerey J.(1)

CATCHWORDS

Social Security - appeal from the Administrative Appeals Tribunal - claim for Family Allowance Supplement pursuant to Part IX of the Social Security Act 1947 - s.74B(3)(c) Social Security Act 1947 - meaning of "current year of income" within s.74B(3)(c).

Statutory Interpretation - literal meaning unambiguous - use of extrinsic materials.

Social Security Act 1947 ss.72, 74B(3)(c)

Acts Interpretation Act 1901 s.15AB

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxatio n (1981) 147 CLR 297

Tribunal Case 84 (1987) 18 ATR 3608

HEARING

MELBOURNE

#DATE 27:3:1991

Counsel for the applicant: Mr R.M. Downing

Solicitors for the applicant: Australian Government Solicitor

Counsel for the respondent: No appearance

Solicitors for the respondent: No appearance

JUDGE1

This appeal from a decision of the Administrative Appeals Tribunal ("the Tribunal") arises out of an application by the respondent Aileen Clear (Mrs Clear) who on 7 August 1989 lodged a claim for Family Allowance Supplement ("FAS") under Part IX of the Social Security Act 1947 ("the Act").

1. As its name suggests, FAS is an extra benefit payable to persons already in receipt of the Family Allowance under Part X of the Act in circumstances where there has been a reduction of income.

2. The legislation is somewhat complex, but for present purposes it is sufficient to note that Mrs Clear had to show that she had met the test imposed by s.74B(3)(c) in that:
   

"the relevant taxable income of the person for the year of income in which the request is made (in this sub-section called the "current year of income") is at least 25% less than the relevant taxable income of the person for the base year of income"

In s.72(1) it is provided that the "base year of income":

"In relation to a person at a particular time, means the year of income of the person that ended in the preceding calendar year"

1. "Year of income" is defined in s.72(1) as having the same meaning as in the Income Tax Assessment Act 1936, that is to say the year commencing 1 July (ss. 6 and 17 of that Act). Therefore in Mrs Clear's case, since she made her application on 7 August 1989, the base year of income was the year ended 30 June 1988. That is not in dispute. Nor is the fact that in her case the taxable income of herself and her husband for that year was a total of $23,810.

2. For the year ending 30 June 1989 the combined taxable income of Mrs Clear and her husband was $10,617.80, made up entirely of unemployment benefit paid to her husband.

3. On the basis of information provided by Mrs Clear the Department estimated the combined income of her and her husband for the year ended 30 June 1990 as $18,477. In arriving at this figure the Department took into account that Mrs Clear's husband had commenced employment on 7 July 1989 at $362.30 per week and had also received an amount of $52.68 unemployment benefit. In making that estimate, the Department was acting under s.72(2) of the Act which provides:
   

(2) For the purposes of this section, the amount of the taxable income of a person for a year of income of the person shall be taken to be, at a particular time:

(a) if, at that time, the Commissioner of Taxation has, for the purposes of the Income Tax Assessment Act 1936, made an assessment or an amended assessment of the taxable income of the person for the year of income - the amount of the assessment, or the amended assessment, as the case may be;

(b) if paragraph (a) does not apply but either:

(i) the year of income has not ended;

(ii) .....

an estimate, or the most recent estimate, of the person's taxable income within the meaning of the Income Tax Assessment Act 1936 for the year of income made by the person or by the person's spouse and notified in writing to the Department or an officer;

(c) ....."

1. Before the Tribunal, Mrs Clear, who was not represented and did not appear in the appeal before me, did not dispute that estimate. Nor did she argue that the estimate was not notified in writing by her or her spouse, as s.72(2)(b) might seem to require. What in fact happened was that Mrs Clear provided to the Department in writing details, including wage rates, of her husband's new employment which had commenced on 7 July 1989 and the Department made the necessary calculations to extrapolate that figure on a yearly basis. While it is not beyond argument that this was not an "estimate..... made by" Mrs Clear or her husband within the meaning of s.72(2)(b), I conclude that this particular requirement of the Act has been satisfied. Were that not the case of course, Mrs Clear could have had no claim at all for FAS.

2. The conclusion of the Department was that since the estimate for the year ended 30 June 1990 ($18,477) was not less than that for the year ended 30 June 1988 ($23,810) by at least 25% the claim should be rejected.

3. Since it was not disputed that the year ended 30 June 1988 was the "base year of income" applicable or that $23,810 was the relevant income for that year, the critical issue is whether the year ended 30 June 1990 is the "current year of income" within the meaning of s.74B(3)(c).
   The Tribunal's Reasons
   The learned Deputy President said:
   

"If the words of the legislation are to be given their literal meaning, the submission of Mr Perdon (who appeared for the Department) is I think correct. The object of the purpose of social security needs no restating. Notions of fairness are fundamental to a social security scheme and an interpretation which would defeat the purpose of the scheme is to be avoided. The literal construction of the legislation produces the result that the applicant is denied FAS during the calendar year 1989 because of the lodgment of her claim after 30 June, whereas if her claim had been lodged prior to 30 June she would have had an entitlement to FAS during 1989

.....

In considering the submission of Mr Perdon, when he referred to the policy of the legislation, it is permissible to refer to the second reading speech of the then Minister Mr Howe to the House of Representatives on 19 October 1988, when the Bill containing the changes to the income testing of benefits was presented to Parliament. What the Minister had to say cannot be determinative but is an aid to interpretation (R v Bolton 70 ALR 225 at 227 High Court per Mason C.J., Wilson and Dawson JJ.). Mr Howe said:

"The basis for income testing of FAS will be changed. Currently the income test, which operates on income received in the previous four weeks, encourages perceptions of the payment as a welfare measure. It is difficult to administer and creates anomalies for many low paid workers whose income fluctuates. The Bill will implement an income test based on the taxable income of the claimant and her or his spouse. This change will substantially simplify understanding of the payment and enable simpler administration. The change highlights the importance of FAS in our tax transfer system - making FAS, in every sense, as good as a tax cut for low income families. The move to taxable income as the basis of income testing from 29 December 1988 effectively indexes the income test threshold for FAS. Payments in 1989 will generally be based on taxable income for the year ended 30 June 1988." It seems to me that if it is intended that the amendments to the legislation are designed to assist a wider number of recipients, the result in the case of the applicant is unreasonable if the words are given their literal meaning. It is not a case of deferring entitlement but of precluding entitlement in the particular circumstances of the applicant. I am not convinced that the legislation is designed to produce the result that in 1989 the applicant in her circumstances is not entitled to benefit."

The Unreasonable Result

1. Where a dispute arises over the meaning of a statute, or a contract, will or other document, each party will usually urge upon the court the argument that the opposing construction will produce a result which could not have been intended by Parliament, the parties to the contract, or the testator because it is unreasonable, capricious, unbusinesslike, absurd or otherwise warranting derogatory description.

2. Such an approach is undoubtedly legitimate and is, as citation will shortly show, supported by high authority, provided there is some foundation in the language of the statute or other document for the construction which is said to be reasonable, non-capricious etc. In Cooper Brookes (Wollongong) Proprietary Limited v Federal Commissioner of Taxation (1981) 147 CLR 297, Gibbs C.J. said (at page 304):
   

"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": River Wear Commissioners v Adamson (1877) 2 App Cas 743, at p 763. It is only by considering the meaning of 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: cf. Cody v J.H. Nelson Pty Ltd (1947) 74 CLR 629, at p 648. 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": Metropolitan Gas Co v Federated Gas Employees' Industrial Union (1925) 35 CLR 449, at p 455. 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 has made a mistake, and the canons of construction are not so rigid as to prevent a realistic solution in such a case: see per Lord Reid in Connaught Fur Trimmings Ltd v Cramas Properties Ltd (1965) 1 WLR 892, at p 899; (1965) 2 All ER 382, at p 386. Examples of that sort of case may be found in Maxwell on the Interpretation of Statutes, 12th ed., (1969) at p 228 et seq., and Craies on Statute Law, 7th ed., (1971) at p 520 et seq. 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 or 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 provision is that "it may degrade into mere judicial criticism of the propriety of the acts of the Legislature", as Lord Moulton said in Vacher and Sons Ltd v London Society of Compositors (1913) AC 107, at p 130; 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."

Mason and Wilson JJ. said at page 319:

"The literal construction rule has been expressed in various ways. In earlier times it was expressed more absolutely than it is today, possibly because the courts, anxious to distinguish between legislative and judicial functions, were at pains to emphasize that it is no part of the judicial function under the cloak of construction to amend statutes merely to overcome shortcomings in their operation. One of the strongest statements of the literal rule is to be found in the judgment of Higgins J. in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129, at pp 161-162: "The fundamental rule of interpretation, to which all others are subordinate, is that a statute is to be expounded according to the intent of the Parliament that made it; and that intention has to be found by an examination of the language used in the statute as a whole. The question is, what does the language mean; and when we find what the language means, in its ordinary and natural sense, it is our duty to obey that meaning, even if we think the result to be inconvenient or impolitic or improbable."

See also Nolan v Clifford (1904) 1 CLR 429, at p 453. It would have been better had Higgins J. omitted the last clause of the last sentence from the passage which we have quoted. The last clause may be taken to suggest that the operation of a statute is not relevant to the ascertainment of its meaning and this is certainly not now the case, if it ever was. Generally speaking, mere inconvenience of result in itself is not a ground for departing from the natural and ordinary sense of the language read in its context. But there are cases in which inconvenience of result or improbability of result assists the court in concluding that an alternative construction which is reasonably open is to be preferred to the literal meaning because the alternative interpretation more closely conforms to the legislative intent discernible from other provisions in the statute.

There is a similar problem with the related so-called "golden rule" of construction. There are statements of the rule which would confine the courts to the ordinary grammatical sense of the words used unless that produces an absurdity or inconsistency. It is to be noted that Dixon J. in Broken Hill South Ltd v Commissioner of Taxation (NSW) (1937) 56 CLR 337, at p 371 observed that departure from the ordinary grammatica l sense is not legitimate unless there is "some obscurity or some inconsistency", though it may be that "obscurity" was intended to be a reference to "absurdity". For the reason already given in the discussion of the literal rule, departure from the ordinary grammatical sense cannot be restricted to cases of absurdity and inconsistency.

In some cases in the past these rules of construction have been applied too rigidly. The fundamental object of statutory constructions 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.

The rules, as D.C. Pearce says in Statutory Interpretation, p 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative constructions it is because (a) the language is intractable or

(b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature. On the other hand, when the judge labels the operation of the statute as "absurd", "extraordinary", capricious", "irrational" or "obscure" he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.

Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.

Reference should also be made to s.15AB of the Acts Interpretation Act 1901, which was introduced in 1984. Relevantly that section provides:

(1) Subject to sub-section (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 that 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.

(2) .....

(3) In determining whether consideration should be given to any material in accordance with sub-section (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 avoid prolonging legal or other proceedings without compensating advantage."

In a taxation appeal, Tribunal Case 84 (1987) 18 ATR 3608, the Administrative Appeals Tribunal constituted by Mr R.K. Todd, Deputy President, said at page 3611:

"As s.15AB(b) envisages that the "meaning of the provision" must be determined, it presupposes a situation in which the meaning of the provision is ambiguous or obscure. If, however, the provision in question has an "ordinary meaning", which I take to mean a natural or literal reading, there is neither need nor warrant for resorting to extrinsic material, other than for the purpose of confirming that ordinary meaning. The only result of so doing would be to create a doubt that was not present when the "ordinary meaning" of the provision was apparent on its face. The fact is that if the words of the legislation are clear, it is simply not correct to resort to extrinsic materials, or to experience and/or knowledge of the circumstances in which the legislation was drawn, to create a doubt that is not apparent on the face of the legislation. There is no warrant for the use of extrinsic materials to create ambiguities that are not there. There is no ambiguity, for present purposes, in such of the provisions of the 1976 Act as are here under consideration, and it is therefore not open to the applicant to produce extrinsic material in an attempt to show that he "used his lump sum to purchase the additional pension". It follows also that neither is there any room for application of the common law rules as to construction of ambiguous or obscure statutory provisions."

1. I would respectfully agree with the learned Deputy President's comment.
   Conclusion

2. Applying these principles to the critical expression, that is to say, the "current year of income", it seems to me there can be but one answer. The application was made in the year ended 30 June 1990 and the statute clearly indicates that that is the "current year of income" for present purposes. Even if the denial of FAS for Mrs Clear is seen in the abstract as unjust or unreasonable, and I express no opinion one way or the other as to this, the reasoning of the Tribunal discloses no construction of the language, however slight or tenuous, which could be preferred to the obvious and literal meaning so as to achieve the result that her application succeeded. There is no attempt made to deduce such a meaning. It is simply said that the result was unfair and therefore a different result ought to follow.

3. I think such reasoning is not correct. Social security legislation could be drafted so as to confer broad general discretions on administrators so as to achieve what is thought to be just or reasonable results in individual cases. Understandably, the Act is not so structured. It applies quite detailed and at times quite complex rules which govern entitlement to benefits and those rules are the law which has to be applied.

4. I therefore order that the decision of the Tribunal made 19 September 1990 be set aside. No order for costs was sought.