Saad and Secretary, Department of Families, Housing Community Services and Indigenous Affairs
[2010] AATA 325
•4 May 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 325
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/5482
GENERAL ADMINISTRATIVE DIVISION ) Re Charbel Saad Applicant
And
Secretary, Department of Families, Housing Community Services and Indigenous Affairs
Respondent
DECISION
Tribunal Senior Member A K Britton Date4 May 2010
PlaceSydney
Decision
The reviewable decision made on 18 August 2009 is set aside. The calculation of the income maintenance period is remitted to the Secretary in accordance with these reasons.
.....................[SGD]...................
Senior Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – income maintenance period (IMP) – discretion to waive all or part of IMP where person in severe financial hardship due to unavoidable or reasonable expenditure – definition of “severe financial hardship” – “definition of “unavoidable or reasonable expenditure” – discretion not exercised.
Social Security Act 1991
REASONS FOR DECISION
4 May 2010 Senior Member A K Britton 1. Mr Charbel Saad suffers from chronic diabetes and a number of other serious health problems. In June 2009, he was made redundant by his then employer, TeleTech International, and given a redundancy package. He lodged a claim with Centrelink for a disability support pension the following month, and was advised that although he qualified for the pension, he was not eligible to receive it until 11 January 2010. He challenges that decision and contends that he should have received the pension at an earlier date.
2. Under the Social Security Act 1991 (Cth), a person such as Mr Saad who has received a termination payment is disqualified from receiving the disability support pension, throughout what the Act terms, an “income maintenance period” (IMP). Based on a statutory formula to which I shall return, the Secretary’s delegate decided that the length of the IMP in Mr Saad’s case was about 33 weeks, spanning the period, 12 June 2009 to 11 January 2010.
3. The Act gives the decision-maker a discretionary power to determine that part or whole of the IMP is not to apply, if satisfied that a person is in “severe financial hardship” because they have incurred “unavoidable or reasonable expenditure” during the IMP: s 1064-F11. The Secretary’s delegate did not exercise that power in Mr Saad’s case as she had concluded that the preconditions to its exercise had not been met. She reasoned that money spent by him during the IMP on purchasing a property was neither unavoidable nor reasonable. Mr Saad does not agree. He also asserts that he would not have been in “severe financial hardship” but for Centrelink’s failure to issue him with a health card throughout the IMP, and that this should be taken into account in deciding whether the whole or part of the IMP should apply to him.
4. The decision to impose an IMP until 11 January 2010 was affirmed by the Social Security Appeals Tribunal. Mr Saad has now applied to the Administrative Appeals Tribunal for review of that decision.
Issues
5. The issues for determination are:
(a) whether the IMP applied to Mr Saad was correctly calculated;
(b) whether Mr Saad was in severe financial hardship during the IMP and, if so when;
(c) whether his expenditure was unavoidable or reasonable; and
(d) if so, whether I should exercise the discretion under s 1068A-E9 to determine that the whole or part of the IMP does not apply to Mr Saad.
Was the IMP correctly calculated?
6. It is agreed that an IMP applied to Mr Saad and that it commenced on 12 June 2009. The only issue in dispute is whether its length was correctly calculated. This turns on whether “payment in lieu of notice” constitutes a “redundancy payment” within the meaning of the Act.
7. Having received a “termination payment” which is defined to include a redundancy payment and leave payment, Mr Saad was taken to have received ordinary income for a period (the income maintenance period) equal to the “period to which the payment relates”: s 1064-F5. The "period to which the payment relates" is defined by s 1064-F14 to mean:
(a) if the payment is a leave payment--the leave period to which the payment relates; or
(b) if the payment is a redundancy payment and is calculated as an amount equivalent to an amount of ordinary income that the person would (but for the redundancy) have received from the employment that was terminated--the period for which the person would have received that amount of ordinary income; or
8. Mr Saad was paid on termination about $25,000 made up as follows:
Type of payment
Amount paid
Divided by weekly wage ($765.00)
Redundancy payment
$9,179.28
12 weeks
Payment in lieu of notice
$3059.76
4 weeks
Annual leave outstanding
$12,902.15
16.886 weeks
9. The Secretary contends that payments in lieu of notice are “redundancy payments” for the purposes of s 1064-F14 of the Act and submits that that term should be broadly construed to include payments “which share characteristics with what is generally considered a redundancy payment”. The Secretary, however, did not identify the particular characteristics shared by redundancy payments and payment in lieu of notice.
10. The Act is of little assistance in determining the question. It defines “redundancy payment” somewhat unhelpfully to mean: to mean
"redundancy payment" does not include a directed termination payment within the meaning of section 82-10F of the Income Tax (Transitional Provisions) Act 1997.
11. The Secretary submits that payments in lieu of notice were included in income maintenance period calculations in at least two decisions of the Tribunal: see Ergin and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 740 and Green and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 831. It is implied in the Secretary’s written submissions — if not expressly argued — that those decisions are persuasive precedents that ought be followed.
12. The flaw in that submission, however, is that in neither case was the question whether payments in lieu of notice are “redundancy payments” for the purpose of the section specifically argued. The applicants apparently did not take the point and the respondent did not raise it. On the other hand, in Finch and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 745 the Tribunal was required to address this issue.
13. Deputy President Jarvis said:
28. In ordinary parlance, it could be said that a payment in lieu of notice would be a termination payment, since such a payment is made at the time of, or as a consequence of, the termination of employment. However, the expression “termination payment” is defined in the Act, and in my opinion a payment in lieu of notice is not a “termination payment” within the meaning of the statutory definition. It was not a leave payment. It was a lump sum payment which Ms Finch’s employer chose to make instead of giving her one month’s notice requiring her to undertake her normal duties during the one month notice period specified in her contract of employment, a copy of which is included as T4 in exhibit R1. This provides in effect that either party may terminate employment on one month’s notice to the other, but there is also provision for summary dismissal in the event of gross misconduct, and for the employer, in its discretion, to be able to terminate by making a payment in lieu of notice.
29. The definition of “termination payment” in s 1068A-E12 also includes a redundancy payment. In my view, a payment in lieu of notice could not be said to be a redundancy payment, but is an entitlement arising under her contract of employment when her employment is terminated, for any reason, with less than the agreed prior notice. However, a redundancy payment is a payment made by an employer in consequence of the redundancy of an employee, calculated by reference to a formula that is customarily dependent on the number of years of service of the employee who is being made redundant.
30. Whilst other paragraphs of Module E of s 1068A of the Act deem certain payments, such as leave payments, to be treated as income of the person receiving the payment for the period to which the payment relates (see for example s 1068A-E3), no such provision applies to payments in lieu of notice. As mentioned above, s 1068A-E4, which deems certain payments to be income for the period to which the payment relates, only applies where a person has received a “termination payment”. I consider that in the absence of any such deeming provision, a payment in lieu of notice should be treated as a payment of income paid to the person concerned on the day on which it was received. In my opinion, Ms Finch’s IMP should not have included the period to which the payment in lieu of notice related.
31. Mr Visser referred to Re Thorpe and Secretary, Department of Workplace Relations [2007] AATA 2013, in support of his argument for the contrary. I agree with respect with the Tribunal’s decision in that case that the removal on medical grounds of an employee constituted a termination of employment. However, the payment in question in that case was for accrued annual leave and long service leave; such payments are expressly included in the definition of “termination payment”. The case did not relate to a payment in lieu of notice.
32. Centrelink’s internal policy guide states that:
“Leave and redundancy payments can include:
...
• Payment in lieu of notice.”
While the tribunal is not required to adhere to a policy guide, it should do so unless there is a cogent reason to do otherwise (Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 2 ALD 60), but for the above reasons I consider that the Centrelink guide does not reflect the correct legal effect of the relevant sections of the Act, and I decline to follow it.
14. For the reasons given by the Deputy President, I agree with that determination. I would only add that the word “redundant” is defined by the Compact Oxford Dictionary (Online edition) as follows: “1. not or no longer needed or useful; superfluous. 2. chiefly Brit. made unemployed because one’s job is superfluous to requirements.” The Collins Australian Dictionary (6th ed) offers similar definitions and defines “redundancy” as “the state or condition of being redundant or superfluous, esp. superfluous in one’s job”.
15. The key characteristic of a redundancy payment, which it does not necessarily share with a payment in lieu of notice, is that a person is “superfluous” to requirement in his or her place of employment. In my view, it would distend the ordinary meaning of the term “redundancy” to stretch it to include all payments made in lieu of notice.
16. For these reasons I conclude that the $3059.76 paid in lieu of notice does not constitute a termination payment. Accordingly, the “period to which the [termination] payment relates” consists of 12 weeks (redundancy payment) and 16.886 (annual leave) a total of 28.886 weeks, which rounded down totals 28 weeks.
Was Mr Saad in severe financial hardship?
17. It is agreed that Mr Saad was in “severe financial hardship” during the IMP. He contends he was in severe financial hardship from 7 October 2009, the day the balance of one of two bank accounts held in his name dropped below the limit set in s 19C(2) of the Act. The Secretary contends that he was not in severe financial hardship until 26 October 2009, the day his second bank account fell below that amount
18. Section 19C(2) provides that a person is in severe financial hardship if the value of their liquid assets is less than the relevant fortnightly pension rate that they would receive if an IMP did not apply. In June 2009 the pension rate payable to Mr Saad, were it not for the IMP, was $569.80 which increased to $615.80, on 20 September 2009.
19. The term “liquid assets” is defined in s 14A(1) of the Act relevantly as follows:
liquid assets, in relation to a person, means the person’s cash and readily realisable assets, and includes:
…
(b) amounts deposited with, or lent to, a bank or other financial institution by the person (whether or not the amount can be withdrawn or repaid immediately); and
…
20. When Mr Saad found himself in severe financial hardship turns on whether the funds held in the second account, “the ESaver account”, constitutes “liquid assets” as defined by the Act. There is no argument that those funds were liquid assets; the only issue is whether they were Mr Saad’s liquid assets. He contends that they were not as most of the funds had been deposited by his brother and sister. Mr Saad was the account’s sole signatory and it was in his name alone. He testified that he and his siblings had set up the account in 2005 to raise funds to purchase a home for their family to live in. He claims that by the end he had deposited about $20,000 of the $110,000 held in the account as at October 2009. The Secretary claims that the whole of the account was a liquid asset of Mr Saad and points out that his claim to the contrary was entirely uncorroborated and inconsistent with earlier advice he had given to Centrelink.
21. Whether all of the funds, or only $20,000 had been deposited by Mr Saad, makes no difference to when he found himself in severe financial hardship, namely, 26 October 2009, the date all funds were withdrawn. Nor is the purpose for which the funds were deposited relevant. Even if accepted that Mr Saad and his siblings had entered into an informal agreement that the money would only be used to purchase a property, nonetheless the funds constituted a “liquid asset”, being “amounts deposited with, or lent to, a bank or other financial institution by the person:s 14A(1)(b).
WAS Mr Saad’s expenditure unavoidable or reasonable
22. The power conferred by s 1064-F11 to treat the whole or part of the IMP as not applying to Mr Saad can only be exercised if he was in severe financial hardship because he incurred “unavoidable or reasonable expenditure” while the IMP applied.
23. On Mr Saad’s evidence, at the commencement of the IMP, he had about $24,600 in his regular savings account and another $20,000 in the ESaver account. By late October 2009, all his savings were depleted. Of the $45,000 held by Mr Saad at the start of the IMP, about $28,000 was used to purchase the subject apartment. The balance, about $17,000, was used to meet Mr Saad’s day-to-day living expenses-food, bills medical costs etc. The Secretary accepts that the $17,000, constituted “unavoidable or reasonable expenditure” but disputes that the $28,000 spent on the purchase of the apartment could be so characterised.
24. Section 19C(4) of the Act sets out a non-exhaustive list of categorises of “unavoidable or reasonable expenditure”. It includes “reasonable costs of living” which are defined by s 19C(5) to include “rent or mortgage payments”. While purchase of a residential property is not listed as a category of “unavoidable or reasonable expenditure” or as a “reasonable cost of living”, this is not determinative as the categories of expenditure listed by ss 19C(4) and 19C(5) are non–exhaustive, and each includes a catch-all category — “any other costs that the [decision-maker] determines are unavoidable or reasonable expenditure in the circumstances in relation to a person”: ss 19C(4)(k) and 19C(4)(h). The terms “unavoidable” and “reasonable” expenditure are not defined by the Act. I agree with the interpretation adopted in Re Finch and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 745 and Re Vaszolyi and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 268 that the expenses referred to in s 19C can be characterised as having a “high degree of necessity”. I also agree with DP Jarvis’ caution that the two terms — “unavoidable” and “reasonable” — should not be conflated: Re Vaszolyi at [32].
25. In determining whether expenditure on the purchase of a residential property constitutes “unavoidable or reasonable expenditure” it is necessary to have regard to Mr Saad’s circumstances at the time the expenditure was made. Shortly before the property was purchased, Mr Saad and his family had been ordered by the NSW Consumer Trader and Tenancy Tribunal to vacate the apartment they had renting for a number of years 5 October 2009. After those orders were made, the apartment became available for sale. According to Mr Saad, the property was ideal — it was close to Westmead Hospital where he was receiving dialysis; it allowed his family to remain in the community where they had lived for a number of years and avoid the inevitable disruption and costs associated with moving; and, was available at a good price.
26. The property was purchased for the sum $220,000 in the name of Mr Saad’s brother. It was financed by way of an upfront cash payment of $112,000 from the ESaver account together with a mortgage taken out by Mr Saad’s brother. Mr Saad stated that he has no legal interest in the property, but resides there subject to an understanding with his brother that he could live in the property rent-free for an indefinite period.
27. The issue for determination is not whether the purchase of the property was reasonable or unavoidable, but rather whether Mr Saad’s contribution towards its purchase was reasonable or unavoidable.
28. Mr Saad claims that he had a moral obligation to contribute as much as possible towards the financing of the property, as his brother would be taking on a significant mortgage and also made a significant cash contribution. While Mr Saad’s contribution meant that the amount his brother had to borrow was reduced, that did not make it “unavoidable”. It was open to Mr Saad to retain some of the $28,000 to meet his living expenses for the remainder of the IMP. Had he kept say the equivalent of his weekly wage at termination for the balance of the IMP, his brother would have been required to borrow an additional $8000. There is no evidence — and nor was it suggested — that the purchase of the property could not have proceeded on that basis or that this option was explored. Alternatives to purchasing the subject apartment were available, including renting an alternative property or deferring the purchase of a property and finding interim rental accommodation. While these options might not have been ideal or the best financial option available to Mr Saad and his family, this does not render the subject expenditure “unavoidable”.
29. Nor in my view could the subject expenditure be characterised as “reasonable”. While arguable that the purchase of a property to provide accommodation for a family is “reasonable”, the assessment of whether the expenditure was “reasonable expenditure” or a “reasonable cost of living” of Mr Saad must be assessed with reference to the fact that the expenditure was made during an IMP. Mr Saad was on notice when the expenditure was made that he was subject to an IMP and would not receive a pension for a number of months. In my view, the expenditure in those circumstances could not be described as reasonable.
30. For these reasons, I have concluded that Mr Saad’s contribution towards the purchase of the property was neither unavoidable nor reasonable. A sum of $28,000 would have been available to him for the balance of the IMP —about 10 weeks — absent that expenditure. While he incurred “reasonable and unavoidable expenditure” of about $17,000 in the course of the IMP, he was not in severe financial hardship because of that expenditure. Given this finding, the power conferred by s 1064-F11 to treat the whole or part of the IMP as not applying to Mr Saad cannot be exercised.
Centrelink’s failure to Issue a health card
31. In the interests of completeness I will briefly address the argument raised by Mr Saad about his medical costs. He contends that because of an administrative error made by Centrelink, he was not issued with a health card to which he was entitled throughout the IMP and consequently incurred medical expenses beyond those he would have incurred had the card been issued. Based on a letter from Mr Saad’s treating doctor to Centrelink, it would appear that these costs were in the range of between $450 to $550 per month.
32. For current purposes, I will assume rather than decide that Mr Saad was entitled to a health care card throughout the IMP. While that would arguably be one of the factors to be taken into account if the power conferred by s 1064-F11 were to be exercised, as the pre-condition to the exercise of that power was not met, the purported error by Centrelink makes no difference to the ultimate decision. It is not open to me, as I understand Mr Saad to suggest, to waive or reduce the IMP on some other ground because of this purported error.
Summary
33. I am not satisfied that Mr Saad was in severe financial hardship because he incurred unavoidable or reasonable expenditure throughout the income maintenance period and therefore the power conferred by s 1064-F11 to treat the whole or part of the IMP as not applying to him cannot be exercised. The IMP ran for a period of 28 weeks commencing on 12 June 2009.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.
Signed: ......................................[SGD]........................................
Associate to Senior Member BrittonDate of Hearing: 9 April 2010
Date of Decision: 4 May 2010
The Applicant appeared in person.
Representative for the Respondent: Ms S Memmott,
Centrelink Advocacy Section
0
5
0