Forde and Department of Family and Community Services

[2000] AATA 796

DECISION AND REASONS FOR DECISION [2000] AATA 796

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N1999/1947

VETERANS' APPEALS  DIVISION       )          
           Re      CAROLYN FORDE
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       R.P. Handley, Senior Member.     

Date8 September 2000

PlaceSydney

Decision      The Tribunal affirms the decision under review.
  ………………….
  R.P. Handley, Senior Member
CATCHWORDS
Social Security – partner allowance – deemed income – termination payment – financial hardship – income maintenance period  - ordinary income – exempt lump sum

Social Security Act 1991
Acts Interpretation Act 1901

Re Raams and Secretary, Department of Family an Community Services (2000) 30 AAR 557
Re Carruthers v Secretary, Department of Social Security (1993) 31 ALD 567
Secretary, Department of Social Security v Cooper (1990) 21 ALD 155
Muller v Dalgety & Co. Ltd (1909) 9 CLR 693

REASONS FOR DECISION

1. This is an application by Carolyn Forde for a review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 10 November 1999 which affirmed a decision of the Secretary of the Department of Family and Community Services ("the Department") and an authorised review officer not to pay Partner Allowance to Mrs Forde because of her husband's deemed income arising from a termination payment.

2. At the hearing, Ms Forde was represented by Meena Sripathy of the Welfare Rights Centre and the Department was represented by John Kenny of Centrelink. The evidence before the Tribunal comprised the documents produced pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 together with the exhibits tendered by the parties. Neither party called witnesses at the hearing.
   BACKGROUND

1. In December 1997, Mrs Forde's husband, John Forde, was made redundant. He received a termination payment of $41,419.75 comprising accrued sick leave, recreation leave and long service leave. In late February 1998, Mr and Mrs Forde lodged claims for newstart allowance. Payments of allowance to Mrs Forde appear to have been suspended initially, but because the Department has lost Mrs Forde's original file, these details cannot be confirmed. However, It seems likely that a decision not to pay newstart allowance to Mrs Forde was made about April 1998.

2. In February 1999, following a statement by Mr Forde as to their financial circumstances, Mr and Mrs Forde were granted newstart allowance and partner allowance respectively, on the basis of financial hardship, backdated to 9 February 1999. On 22 March 1999, Mrs Forde requested a review by an authorised review officer. On 16 June 1999, a review officer affirmed the decision not to pay Mrs Forde partner allowance as a result of her husband's deemed income arising from his termination payment.

3. On 19 November 1999, this decision was affirmed by the SSAT and on 21 December Mrs Forde lodged an application for a review by the Tribunal.
   THE ISSUE TO BE DETERMINED

4. Section 1068 G of the Social Security Act 1991 ("the Act") provides an income test which is used to determine the effect of a person's and the person's partner's income on the rate of benefit payable to the person. Section 1068 - G7AH states that certain leave payments are taken to be ordinary income of the person if:

   "(a) a person's employment has been terminated; and

   (b) the person receives a leave payment (whether as a lump sum payment, as a payment that is one of a series of regular payments or otherwise);

   the person is taken to have received ordinary income for a period (the income maintenance period) equal to the leave period to which the payment relates."

5. The issue for determination by the Tribunal is whether the rate of partner allowance or newstart allowance payable to a person is affected by that person's partner's income maintenance period during which the partner is deemed to have received ordinary income as a result of having received a termination payment. The facts of the case are not in dispute.
   MRS FORDE'S SUBMISSIONS

1. Ms Sripathy, for Mrs Forde, said the only Tribunal decision which she had been able to identify in which there were similar facts is that of Re Raams and Secretary, Department of Family and Community Services (2000) 30 AAR 557. However, in that case, the issue of whether an income maintenance period applied to a partner was not argued. The Tribunal appears to have assumed that it did so.

2. Ms Sripathy submitted that an income maintenance period applied to a person does not affect the payability of an allowance to that person's partner. Ms Sripathy said that neither of the sections of the Act which provide for leave payments being treated as ordinary income, sections 1068–G7AG and 1068–G7AH, make any mention of the person's partner being affected. Ms Sripathy said these sections are specific provisions that extend the definition of "ordinary income" in section 8 by using a deeming device: the person is "taken to have received ordinary income for a period".

3. Ms Sripathy referred the Tribunal to the discussion of "deeming" in D. Pearce and H. Geddes, Statutory Interpretation in Australia (4th ed. 1996) at paragraph 4.28, and, in particular, the discussion of Griffith CJ's judgement in Muller v Dalgety& Co. Ltd (1909) 9 CLR 693 at 696. Griffith CJ said that the word "deemed" is commonly used for the purpose of creating a "statutory fiction",

   "that is, for the purpose of extending the meaning of the term to a subject matter which it does not properly designate. When used in that sense it becomes very important to consider the purpose for which the statutory fiction is introduced."

Pearce and Geddes point out that the fictitious use of the word is only applicable in its particular context. Deeming provisions must be construed strictly and only for the purpose for which they are resorted to.

1. Similarly, Ms Sripathy submitted that in the present case, section 1068 – G7AH only extends the meaning of "ordinary income" to Mr Forde. The section should be construed strictly and should not be interpreted as also extending to the person's partner since no mention of the person's partner appears in the section.

2. The method to be used in calculating the rate of benefit or allowance payable to a person is set out in the Method Statement in section 1068 – A1. Step 5 requires that the Income Test using Module G should be used to work out how a person's income affects the rate of benefit or allowance payable. Section 1068 – G1, in turn, sets out a Method Statement for working out

   "the effect of a person's ordinary income and the ordinary income of a partner of the person, on the person's maximum payment rate."

1. Step 2 of the Method Statement says:

   "If the person is a member of a couple, work out the partner income free area using point 1068 – G9.
    Note: The partner income free area is the maximum amount of ordinary income the person's partner may have without affecting the person's benefit."

Ms Sripathy said that for the relevant period in 1998/1999, the partner income free area was $499.71. (For the current period the amount is $510.14.)

1. Ms Sripathy noted that in working out whether the person's partner has an income which exceeds the partner income free area, section 1068-G10 specifies that the relevant calculation is paragraph (c) whether  

   "the partner's ordinary income exceeds the partner income free area for the partner".

Of significance is that it is "ordinary income" to which reference is made. This is defined in section 8 and is not affected by the deemed extension of the definition in section 1068 – G7AH.

1. Ms Sripathy said that if Parliament had intended section 1068 – G7AH to also apply to partners, then the words "or a person's partner" would have been included. She noted that in the case of the treatment of lump sums for remunerative work, section 1068 – G7C makes specific reference to the person's partner receiving a lump sum so that the person's rate of benefit or allowance is affected.

1. Ms Sripathy noted that it was a principle of statutory interpretation that statutes should be strictly construed when penalties apply: Re Carruthers v Secretary, Department of Social Security (1993) 31 ALD 567. Thus, Ms Sripathy contended, provisions in beneficial legislation excluding benefits should also be construed narrowly. In Secretary, Department of Social Security v Cooper (1990) 21 ALD 155, the Full Federal Court spoke, at 160, of construing the language of beneficial legislation generously.

2. Ms Sripathy said that in the event of an ambiguity in the meaning of a legislative provision, in accordance with section 15 AB of the Acts Interpretation Act 1901, it was permissible to refer to extrinsic material to clarify the meaning. In this instance, neither the Explanatory Memorandum nor the Second Reading Speech in the House of Representatives for the Social Security Legislation Amendment (Budget and other Measures) Bill 1996, which amended the Act to include the income maintenance period provisions section 1068 - G7AG and AH, made any reference to these provisions affecting the person's partner. The fact that no such reference was made should be taken as an indication that these provisions should only be applied to the person receiving the leave payments and not to the person's partner. Ms Sripathy said that the same amending legislation also changed the rules so that a compensation preclusion period applied to a person did not also affect the person's partner.

3. In conclusion, Ms Sripathy submitted that the ordinary meaning of the wording of section 1068 – G7AH should be applied. Mr Forde's termination payment was received in December 1997 and, for the purpose of determining the rate of allowance payable to Mrs Forde, should be treated as income in the fortnight when it was received only. Mr Forde's "ordinary income" in February 1998 was nil and should not, therefore, have affected the rate of allowance payable to Mrs Forde.
   THE DEPARTMENT'S SUBMISSIONS

4. Mr Kenny, for the department, submitted that Mr Forde's termination payment was income for the purposes of the Act. The only lump sum payment excluded from the definition of "ordinary income" in section 8(1) of the Act is an "exempt lump sum". An "exempt lump sum" is defined in section 8(11) as not including a leave payment within the meaning of section 1068 – G7AR. That section defines "leave payment" as used in section 1068 – G7AA to 1068 – G7AQ (inclusive) – which thereby includes the relevant section in this matter, section 1068 – G7AH, as a payment that "includes a payment in respect of sick leave, annual leave, maternity leave and long service leave". Thus, the definition of "exempt lump sum" specifically excludes termination payments such as those received by Mr Forde.

5. With regard to the general definition of ordinary income set out in section 1072, Mr Kenny noted that this section is concerned only with the concept of ordinary income for a period. In section 1068 – G7AH, however, the word "period" is given a special meaning in relation to receipt of leave payments. The "income maintenance period", in respect of which the person is taken to have received ordinary income, is "equal to the leave period to which the payment relates". Thus, as Mr Kenny stated at paragraph 5 of his statement of Facts and Contentions, section 1068 – G7AH (and the sections that follow) provide:

   "simple rates for commencing the income maintenance period and deriving fortnightly rates from lump sums which would have been ordinary income in any event."

6. Mr Kenny said that with regard to the calculation of partner income excess, provided for in section 1068 – G10, the reference in paragraph (c) to the "partner's ordinary income" necessarily includes, in Mrs Forde's case, her husband's leave payment spread over the income maintenance period provided for in section 1068 – G7AH. Similarly, section 1068 – G9, which provides for the calculation of the partner income free area, in referring to the "income of the partner" must require a meaning which allows the comprehensive income of the partner to be considered.

7. With regard to Ms Sripathy's contention as to the beneficial nature of the legislation, Mr Kenny said it was not apparent in this instance that any benefits were to be extended. In any event, the exclusion of Mrs Forde from receiving a benefit by virtue of the operation of the rules requiring a partner's income to be taken into account, could not be compared with penalties or deterrents which operate when a person fails to comply with notification requirements.

8. Mr Kenny sought to distinguish the effect of section 1068 – G7B and G7C, which are of later enactment than section 1068 – G7AH, because section 1068 – G7B and G7C relate to "a person whose claim for an allowance has been granted".

9. Mr Kenny submitted that whereas, generally, this "plain English" Act achieves clarity of expression at the expense of brevity, frequently displaying some degree of redundancy or repetition, some parts of the Act "reflect a more economical style and point 1068 – G7AH is one such provision". He said that the Explanatory Memorandum and the Second Reading Speech for the relevant 1996 Amendment Bill, help neither party because they say nothing about the provision in issue.
   CONSIDERATION OF THE LAW 

10. There is no dispute between the parties as to the facts. The following discussion will therefore be limited to a consideration of the relevant law and its application in this case. In particular, the issue to be determined is whether the rate of newstart allowance or partner allowance payable to Mrs Forde is affected by the income maintenance period applied in determining Mr Forde's income for the purpose of calculating the rate of allowance payable to him. This income maintenance period, provided for in section 1068 – G7AH, is the period in respect of which a person has received leave payments on termination of his/her employment. The person is taken to have received those leave payments as ordinary income over that period.

11. Section 1068 –G1 sets out the method to be used in working out

    "the effect of a person's ordinary income and the ordinary income of a partner on the person's minimum payment rate."

In section 8(1), "income" is defined as including

"an income amount earned, derived or received by the person for the person's own use or benefit."

"Ordinary income" is defined as meaning

"income that is not maintenance income or an exempt lump sum."

1. The Tribunal agrees with Mr Kenny's submission, and the reasons on which he based that submission, set out in paragraph 19 above, that the definition of "exempt lump sum" specifically excludes leave payments, such as those received by Mr Forde, paid on the termination of the person's employment. Thus, the Tribunal considers that such leave payments should be treated as "ordinary income". Given that the termination payment of $41,419.75 was part of Mr Forde's ordinary income, the critical question is whether this affects the operation of section 1068 – G9 and G10.

2. Section 1068 – G9 states that, in a case such as that of Mr and Mrs Forde, the person's "partner income free area" is
   "the amount of income of the partner (rounded up to the nearest dollar) beyond which newstart allowance would not be payable to the partner if the partner was qualified for a newstart allowance,…"
   In 1998/1999, this was $499.71. Section 1067 – G10 provides for the calculation of the "partner income excess". This is the amount by which "the partner's ordinary income exceeds the partner free income free area for the partner" – in Mrs Forde's case, the amount by which her husbands "ordinary income" exceeds $499.71.

3. At issue, is whether the term "ordinary income" in section 1067 – G10 includes the deemed ordinary income provided for in section 1067 – G7AH. The Tribunal notes Mrs Sripathy's point that where a deeming provision is used, the fictitious use of the word is only applicable in its particular context. What then is the context in this instance and the purpose behind the deeming provision? The extrinsic materials referred to by Ms Sripathy, to which reference may be made under section 15 AB of the Acts Interpretation Act 1901 for the purpose of clarifying an ambiguity, make no reference to whether or not the income maintenance provisions set out in section 1068 – G7AG and G7AH affect a person, and are therefore unhelpful.

4. In the Tribunal's view, the fact that section 1068 – G7C extends the application of section 1068 – G7B to a person's partner so that where the partner receives a lump sum amount, that lump sum is then taken to be spread over the next 12 months as weekly income, is also not of any assistance. The Tribunal notes that this provision was inserted by a 1998 amending Act, approximately 2 years after the amending Act which first inserted section 1067 – G7AH.

5. In the Tribunal's view, part of the purpose of the Module G Income Test is to ensure that income referable payments received by a person's partner are taken into account in determining the "income reduction" amount which, by virtue of the Method Statement in section 1068 – A1, is deducted from the maximum rate of benefit payable. This follows from the general statement in section 1068 – G1 that Module G provides how to work out the effect of a person's ordinary income and their partner's ordinary income on the person's maximum payment rate. Broadly speaking, Module G seeks to ensure that both the person's and the person's partner's incomes are taken into account. This is the "context" in which section 1067 – G7AH operates. The Tribunal does not consider the application of section 1067 – G7AH involves the application of a penalty or exclusionary provision which would trigger application of the principle of strict construction in the resolution of an ambiguity.

6. For these reasons, the Tribunal considers that the extension of the meaning of "ordinary income" and the resultant income maintenance period provided for in section 1067 – G7AH apply equally in respect of a person's partner for the purpose of calculating the applicable "income reduction" amount. Thus, the SSAT's application of the law in this matter was correct and its decision must be affirmed.

   I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision of :

   R.P. Handley, Member

   Signed:         .....................................................................................
     Associate

   Date/s of Hearing   21 July 2000
   Date of Decision   8 September 2000
   Self represented Applicant       Meena Sripathy

   Advocate for the Respondent  John Kenny