Green and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 831

ADMINISTRATIVE APPEALS TRIBUNAL          No 2007/5683

GENERAL  ADMINISTRATIVE DIVISION

Re:            TERRY GREEN

Applicant

And:         SECRETARY, DEPARTMENT OF   FAMILIES, HOUSING,   COMMUNITY SERVICES AND   INDIGENOUS AFFAIRS

Respondent

CORRIGENDUM

Tribunal:       Mr Egon Fice, Member

Date:19 September 2008

Place:Melbourne

Mr Fice made a decision under s 43(3) of the Administrative Appeals Tribunal Act1975 (the Act) on 17 September 2008.

It has been brought to the Tribunal's attention that there is an error in the decision.

In accordance with s 43AA(1) of the Act, the Tribunal directs that the Registrar alter the text of the decision by substituting the Respondent’s name from:

Secretary, Department of Education, Employment and
Workplace Relations; to

Secretary, Department of Families, Housing, Community Services and Indigenous Affairs.

(sgd) Egon Fice

Member

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 831

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/5683

GENERAL ADMINISTRATIVE  DIVISION		)
Re		TERRY GREEN

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Mr Egon Fice, Member

Date17 September 2008  

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(sgd) Egon Fice

Member

Social Security – Disability Support Pension – income maintenance period – receipt of termination payment by partner – transfer of employment – date of termination of employment – entitlement to redundancy payment - Federal Court proceedings regarding entitlement to redundancy payment – effect of settlement of proceedings – continuous period of employment – commencement date for application of Module F

Gas Industry Act 1994 (Vic) s 87J

Social Security Act 1991 ss 117 and 1064

Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Act 2005  Item 8 of Schedule 16

Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) (Consequential Amendments) Act 2006  Item 6 of Schedule 14

Amcor Limited v Construction, Forestry, Mining and Energy Union and Ors (2005) 222 CLR 241

Shop, Distributive and Allied Employees’ Association (NSW) v Countdown Stores (1983) 7 IR 273

REASONS FOR DECISION

17 September 2008 Mr Egon Fice, Member      

1.      Mr Green lodged a claim for the disability support pension (DSP) with Centrelink in March 2007.  Centrelink is the agency which provides services for the Department of Education, Employment and Workplace Relations.  In an employment separation certificate accompanying the claim, Mr Green recorded that his wife had received a gross redundancy payment of $130,838.60 on 13 February 2007.  $62,216.78 of the payment was rolled over into Mrs Green's superannuation fund.  Mrs Green received the balance, $68,621.82.  A Centrelink officer determined that because of the termination payment received by Mrs Green, an income maintenance period should be imposed on Mr Green between 21 February 2007 and 5 September 2007.  Mr Green sought a review of that decision. 

2.      On reconsideration of that decision, a Centrelink authorised review officer (ARO) determined that the decision to apply an income maintenance period to the payment of Mr Green's DSP was correct.  However, the ARO observed that the payment of $68,621.82 received by Mrs Green had not been included when the Centrelink delegate calculated the length of the income maintenance period.  The ARO referred the matter back to Centrelink for a recalculation of the length of the period.  That resulted in Mr Green's income maintenance period being extended to 1 April 2008.

3.      Mr Green sought review of the ARO's decision by the Social Security Appeals Tribunal (SSAT).  The SSAT decided that the income maintenance period imposed on Mr Green was correct.  Mr Green now seeks review of the SSAT decision before this Tribunal.

4.      The issues before me are:

(a)      when did Mrs Green's employment terminate;

(b)was Mrs Green paid a lump sum termination payment upon ceasing employment; and

(c)if Mrs Green was paid a lump sum termination payment, when did she become entitled to it and when was she paid?

RELEVANT BACKGROUND

5. Between about 1 February 1988 and 1998 Mrs Green was employed by a company called Gascor. In about 1998 her employment was transferred from Gascor to Multinet Gas (DB 1) Pty Ltd (Multinet Gas) under s 87J of the Gas Industry Act 1994 (Vic) (the Gas Industry Act). Under s 87J of the Gas Industry Act, Mrs Green's service with Gascor, for the purposes of calculating any long service leave, annual leave and redundancy payment, was to be regarded as service with Multinet Gas.

6.      On or about 15 May 2003 Mrs Green entered into a contract of employment with Multinet Gas.  It was a term of the contract that in the event of redundancy, she would receive certain termination payments.  In May 2003 Multinet Gas entered into an enterprise agreement which was certified by the Australian Industrial Relations Commission in October 2004.  In the event that Mrs Green was made redundant, she was entitled to six weeks pay in lieu of notice of termination of service; three weeks salary per completed year of service by way of severance payment; accrued annual leave and accrued long service leave.

7.      On 14 December 2005, following a takeover of the business of Multinet Gas by Alinta Network Services Pty Ltd (ANS), Mrs Green received notification that she would be employed by ANS with effect from 19 December 2005.  The letter stated that her previous service with Multinet Gas would be taken into account for the calculation of her accrued service and leave entitlements and any service related benefits. The letter confirmed that Mrs Green's service with Multinet Gas commenced on 1 February 1988.

8.      On 24 December 2005 Mrs Green wrote to Multinet Gas referring to the letter received from ANS.  She sought Multinet Gas's confirmation that she remained an employee of Multinet Gas.  In other words, she did not accept that her employment could simply be transferred by Multinet Gas to ANS.  Mrs Green maintained that she continued to be employed by Multinet Gas.  She also maintained that she was entitled to redundancy payments from Multinet Gas.

9.      Mrs Green consulted her lawyers, who then commenced proceedings in the Federal Court of Australia seeking damages for breach of her contract of employment.  The claim filed on behalf of Mrs Green pleaded alternative dates for termination of her employment with Multinet Gas, being 19 December 2005, 19 January 2006 or 17 March 2006.

10.     On 17 March 2006 Mrs Green accepted the repudiation of her contract of employment by Multinet Gas and she accepted the offer of employment from ANS.

11.     Mrs Green settled her claim against Multinet Gas for $187,288.06 prior to the matter being heard by the Court. The amount was calculated by reference to the termination payments which she claimed she was entitled to up to the date of termination of her employment on 2 February 2007; including severance pay, termination in lieu of notice, accrued annual leave, accrued long service leave and accrued rostered days off/time in lieu.  It is also apparent from the Deed of Release that the settlement sum included a redundancy payment in respect of Mrs Green's subsequent employment with ANS, which she accepted on 17 March 2006.

12.     Mr Green lodged his application for the DSP on 13 March 2007.

LEGISLATIVE SCHEME

13. Section 117 of the Social Security Act 1991 (the Social Security Act) sets out the way in which a person's DSP rate is worked out. Where a person is not permanently blind and is 21 years or more of age, the DSP rate is worked out using Pension Rate Calculator A, which is located at the end of s 1064 of the Social Security Act.

14.     Module A (of the Pension Rate Calculator) was modified by the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Act 2005 (the Welfare to Work Act) which was assented to on 14 December 2005. The effect of the amendments introduced by the Welfare to Work Act on Module A was to introduce a note after step 5 which required the application of the ordinary income test using Module F to work out the income reduction. The note stated:

Note:Module F contains provisions that may apply to working out the ordinary income of a person, and the ordinary income of a partner of the person, for the purposes of disability support pension.

15. Item 8 of Schedule 16 of the Welfare to Work Act provided:

8  Application provision  

The amendments made by this Schedule apply in relation to claims for social security payments made on or after 20 September 2006.

16. The commencement date for Schedule 16 was 20 September 2006.

17. Prior to 20 September 2006, Schedule 16 of the Welfare to Work Act was amended by the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) (Consequential Amendments) Act 2006 (Consequential Amendments Act) which was assented to on 22 June 2006. Item 6 of Schedule 14 of the Consequential Amendments Act, which came into effect immediately after the commencement of Schedule 16 of the Welfare to Work Act, that is on 20 September 2006, provided:

6 Item 8 of Schedule 16

Omit "claims for social security payments made", substitute "termination payments or leave payments to which a person becomes entitled, or that a person receives.

18. The effect of the amendment to Item 8 of Schedule 16 of the Welfare to Work Act was that Module F, rather than applying to DSP claims made on or after 20 September 2006, applied to termination payments or leave payments to which a person became entitled after that date.

19.     The relevant sections of Module F provide:

Application of this Module 

1064-F1 This Module applies only for the purposes of working out the rate of disability support pension payable to a person. It so applies to that person and, if the person is a member of a couple, to the person’s partner.

Lump sum payments arising from termination of employment 

1064-F2 Subject to points 1064-F3 to 1064-F14 (inclusive), if: 

(a)a person’s employment has been terminated; and 

(b)as a result the person is entitled to a lump sum payment from the person’s former employer; 

the person is taken to have received the lump sum payment on the day on which the person’s employment was terminated.  ….

Certain payments taken to be ordinary income—employment terminated 

1064-F5 If: 

(a)a person’s employment has been terminated; and 

(b)the person receives a termination 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 period to which the payment relates. 

….

Start of income maintenance period—employment terminated 

1064-F8 If a person is covered by point 1064-F5, the income maintenance period starts, subject to point 1064-F9, on the day on which the person is paid the termination payment. 

Commencement of income maintenance period where there is a second termination payment 

1064-F9 If: 

(a)a person who is covered by point 1064-F5 is subject to an income maintenance period (the first period); and 

(b)the person is paid another termination payment during that period (the second termination payment); 

the income maintenance period for the second termination payment starts on the day after the end of the first period. 

….

Definitions 

1064-F14 In this Module: 

….

redundancy payment does not include a directed termination payment within the meaning of section 82-10F of the Income Tax (Transitional Provisions) Act 1997. √

termination payment means: 

(a)a leave payment relating to a person’s employment that has been terminated; or 

(b)a redundancy payment. 

TERMINATION OF EMPLOYMENT

20. Due to the changes made to the Social Security Act which introduced Module F for the purpose of working out the rate of DSP payable to a person, it is important to establish the precise date of termination of Mrs Green's employment and whether that termination gave rise to an entitlement to a redundancy payment. As is made clear by s 1064-F1 of Module F, the Module applies to Mr Green as a person who has applied for the DSP and his rate of payment will be affected by any termination payments received by Mrs Green.

21. Section 1064-F2 is a provision which deems a person to have received a lump sum payment on the day on which the person's employment was terminated. That section seems to accord with the Item 8 amendment of Schedule 16, which provides for the amendments made by Schedule 16 to commence when a person becomes entitled to termination or leave payments or when that person receives those payments. Therefore, application of the Welfare to Work Act, as amended by the Consequential Amendments Act, makes it clear that if a person becomes entitled to a termination payment by reason of termination of that person's employment, Module F will apply if the termination takes place on or after 20 September 2006. A person will be taken to have received a lump sum payment on the day on which the person's employment was terminated. However, that is to be distinguished from s 1064-F8, which deals with the start of the income maintenance period. The start of that period is on the day on which a person is paid the termination payment. That seems to me, in its context, to mean when the person actually receives the payment and not necessarily the date on which the person's employment was terminated.

22. The Secretary, quite correctly in my opinion, has conceded that Module F of the Social Security Act does not apply to a person whose employment was terminated prior to 20 September 2006. That is, an entitlement to a lump sum payment in respect of termination of employment must occur on or after that date.

23.     Mr Green's argument was that his wife's termination of employment occurred on 19 December 2005.  Mr Green provided documents which disclosed that on 14 December 2005 Mrs Green was notified by ANS that she was to be employed by ANS as of 19 December 2005.  Prior to that date, she was employed by Multinet Gas.  The letter providing that advice also stated:

All terms and conditions contained in your Management Professional Technical Contract will remain unchanged, with the exception that ANS will be deemed to be your employer. …

24.     Mr Green’s argument was that this was so because, after ANS notified his wife on 14 December 2005 that her contract of employment was being transferred from Multinet Gas to ANS, her reply dated 24 December 2005 makes it clear she did not accept that her employment could simply be transferred to ANS without her consent.  According to the pleadings filed in the Victoria Registry of the Federal Court, Mrs Green wrote an email to ANS in which she said:

I write to you at this time because it has been purported that the company Alinta Network Services Pty Ltd intends to transfer, or in fact already has transferred my employment from Multinet Gas and to Alinta Network Services Pty Ltd.  It is my requirement that you confirm that I am, at this time, an employee of Multinet Gas. √

25.     This was despite the fact ANS claimed that all of the terms and conditions in her contract of employment with Multinet Gas would remain unchanged. 

26.     After consulting her solicitors, Mrs Green accepted their advice, which was to the effect that contracts of employment are personal contracts and cannot simply be transferred.  One employment relationship must be terminated and the new relationship must commence by agreement.  Whether that is correct is not for me to determine.  However, despite Mrs Green insisting that her employment with Multinet Gas was terminated, and as a consequence she was entitled to redundancy payment because the termination resulted in her position with Multinet Gas no longer being in existence, she continued to work in the position she was previously in with Multinet Gas, doing the work she had done previously for that company.  Multinet Gas ceased paying Mrs Green's salary on 29 December 2005 and her salary was then paid by ANS.  Mrs Green continued to work and to receive that salary, while at the same time denying she was employed by ANS (until 17 March 2006) and that her contract of employment with Multinet Gas was terminated.  The reason for her doing so appears to be that she was firmly of the view that Multinet Gas was required to pay her redundancy payments as a consequence of her termination of employment with that company.

27.     Convinced that she was entitled to redundancy payments, no doubt upon legal advice, Mrs Green brought proceedings in the Federal Court of Australia against Multinet Gas.  She alleged Multinet Gas had breached her contract of employment because it had terminated her employment but refused to make her a redundancy payment.  She sought damages for loss of that redundancy payment on the basis that the termination with Multinet Gas occurred either on 19 December 2005, 9 January 2006 or 17 March 2006.  In addition, after writing to Multinet Gas on 17 March 2006 stating that she accepted that company's repudiation of her contract of service, she also stated that she accepted the offer of employment with ANS on the same terms and conditions as her employment with Multinet Gas. She then continued to be employed and was paid a salary by ANS until termination of her employment with ANS on 2 February 2007.

28.     Whether Mrs Green was entitled to a redundancy payment as a consequence of the claimed repudiation of her contract of employment by Multinet Gas was never decided by the Court.  This was because the parties reached a mediated agreement prior to trial.  It is of some significance that the parties to the Deed of Release, which was produced as a consequence of the mediated settlement, also included ANS, which had by then changed its name to Alinta Assets Management Pty Ltd (Alinta Assets).  The Deed of Release recited that Mrs Green was then employed by Alinta Assets, and that she had been continuously employed by Multinet Gas and its predecessor organisations since about February 1988.  The Deed also recited that Mrs Green's continuous employment since 1988 was to terminate on 2 February 2007 on the basis that she was made redundant by Alinta Assets.   As a result of the Deed of Release, Mrs Green's claim against Multinet Gas in the Federal Court was to be discontinued within seven days.  The termination payments which were agreed upon settlement were paid to Mrs Green on 13 February 2007.

29.     Mr Green argued that his wife's termination of employment in fact occurred in December 2005 when she refused to accept that her contract of employment could be unilaterally transferred to ANS.  Therefore, irrespective of what is stated in the Deed of Release, the payments made to his wife as a consequence of the settlement of the Federal Court proceedings arose out of Multinet Gas's repudiation of its contract of employment with Mrs Green. 

30.     The problem of course is that when that action was settled, the parties agreed that Mrs Green's employment would terminate on 2 February 2007 on the basis of her redundancy from Alinta Assets.  Implicit in the Deed of Release is the fact that Mrs Green accepted that she was made redundant by Alinta Assets and not Multinet Gas.  If that were not the case, the Deed of Release would have made it clear that Mrs Green’s claim was settled on the basis that she was entitled to two redundancy payments, one in respect of her employment with Multinet Gas and the other with Alinta Assets.  It did not do so.  The Deed of Release also had the effect of discontinuing her claim for a redundancy payment from Multinet Gas.  The consequence of discontinuance must be that Mrs Green ceased to maintain she was entitled to a redundancy payment from that company.

31.     Although Mr Green submitted that the Deed of Release was not indicative of whether, as a matter of law, Mrs Green's employment was terminated by Multinet Gas rather than Alinta Assets, that question was never decided because of the mediated agreement.  While I was invited (and tempted) to pursue the question about the true position in law regarding termination of employment in Mrs Green’s circumstances, that does not appear to be the correct approach.  The reason is that the outcome of this application depends entirely on when Mrs Green became entitled to a redundancy payment, rather than establishing the date on which her employment was terminated.

32.     The difficulty faced by Mr Green is that the commencement date for the introduction of Module F is based on the entitlement of a person to termination or leave payments.  Termination of employment does not necessarily result in an entitlement to a redundancy payment.  This was made clear by the decision of the High Court of Australia in Amcor Limited v Construction, Forestry, Mining and Energy Union and Ors (2005) 222 CLR 241, where Gleeson CJ and McHugh J said, at 246:

There is nothing inherent in the idea of redundancy that justifies an expectation either that redundancy payments will, or that they will not, become payable in the event of a reconstruction, merger, or takeover (Shop, Distributive and Allied Employees’ Association (NSW) v Countdown Stores (1983) 7 IR 273 at 293).

33.     Although Mrs Green claimed she was entitled to a redundancy payment after the takeover of the Multinet Gas business by ANS, that entitlement was never established.  Multinet Gas denied Mrs Green’s entitlement and the legal proceedings she brought to establish her entitlement was discontinued.  Instead, Mrs Green’s entitlement to a redundancy payment arose out of the settlement reached by the parties to the proceedings and Alinta Assets.  The agreement provided that Alinta Assets accepted that it was liable to make a redundancy payment to Mrs Green on the basis she was made redundant from that company on 2 February 2007.

34. It also seems to me that Mrs Green cannot now have it both ways. She cannot, for the purposes of settling her dispute with Multinet Gas, accept that she was made redundant by Alinta Assets, while at the same time, for the purposes of the Social Security Act, claim that her employment was terminated by Multinet Gas, that termination giving rise to an entitlement to a redundancy payment. The provisions of the Social Security Act dealing with termination payments focus on the right or entitlement to receive a termination payment. That right only came to fruition upon settlement of the dispute with Multinet Gas. I therefore find that Mrs Green's entitlement to a termination payment arose on 2 February 2007, as is stated in the Deed of Release.

INCOME MAINTENANCE PERIOD

35.     Section 1064-F5 of Module F provides that where a person receives a termination payment, the person is taken to have received ordinary income for a period (which is defined as the income maintenance period) equal to the period to which the payment relates.  In other words, the Secretary must take into account that the person who has received a termination payment is in fact paid ordinary income for a specified period of time which is reflected by the way in which the termination payment is calculated.  That being the case, a person would not ordinarily be entitled to a social security payment where the person was receiving payments as if his or her employment was continuing.  Another way of putting it is the way the Secretary puts it: Centrelink claimants and partners should use leave and redundancy payments to support themselves before being paid the full rate of a pension or benefit.  That interpretation is further supported by the provisions in 1064-F8, which provide that the income maintenance period starts on the day on which the person is paid the termination payment. 

36. Therefore, in my view the Secretary was correct in applying an income maintenance period because, first, Mrs Green became entitled to a termination payment after the commencement date of Schedule 16 in the Welfare to Work Act, and secondly, because she was paid a termination payment on 13 February 2007. Although there is a difference between the settlement sum indicated in the Deed of Release and the employment separation certificate supplied to the Secretary by Alinta Assets, I am satisfied that the employment separation certificate accurately sets out the payments made in respect of Mrs Green's termination of employment.

CONCLUSION

37. I am satisfied that Module F of the Social Security Act applies to Mr Green's application for the DSP. It affects the rate of DSP payable to him as described in s 1064-F1 of Module F. As Mr Green's partner was paid a termination payment on 13 February 2007, it is correct that an income maintenance period must apply in respect of Mr Green's DSP payments and that period must commence on 13 February 2007. The decision made by the SSAT on 24 October 2007 was correct and must be affirmed.

I certify that the thirty-seven [37] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr Egon Fice, Member

(sgd) Mara Putnis

Clerk

Date of Hearing  5 June 2008
Date of Decision  17 September 2008

Advocate for the applicant           self-represented

Advocate for the respondent        Mr Andrew Carson, Centrelink Legal Services