Secretary, Department of Social Security v Knight
[1996] FCA 1177
•23 DECEMBER 1996
CATCHWORDS
ADMINISTRATIVE LAW - application for review of decision of the Administrative Appeals Tribunal ("the Tribunal") - Tribunal upheld decision of Social Security Appeals Tribunal that respondent entitled to rent assistance at an increased rate from 16 February 1995 - whether the Tribunal erred in characterising the periodic payment of entry contribution as "rent" within the meaning of the Social Security Act 1991 (Cth) - Social Security Act 1991 (Cth) ss 1064-D1, 1064-D3, 13(2), 1147 - periodic entry contribution pursuant to a licence agreement with a Retirement Village - "rent" to be construed broadly - Act of remedial or beneficial nature - whether payments ought to be characterised as a "debt" - whether payment is a capital sum - payments related to occupancy - direct legal nexus between occupancy of premises and obligation to make contribution payments.
Social Security Act 1991 (Cth) ss 1064-D1, 1064-D3, 13(2), 1147
Bull v Attorney-General for New South Wales (1913)
17 CLR 370, considered
Re Secretary, Department of Social Security and Underwood (1991) 25 ALD 343, cited
Minister for Resources v Dover Fisheries Pty Limited (1993)
116 ALR 54, cited
Samuel v Salmon and Gluckstein Limited (1946) 1 Ch. 8, cited
Nixon v Doney (1961) SR (N.S.W.) 311, cited
THE DEPARTMENT OF SOCIAL SECURITY - v - HELEN THIELE KNIGHT
No NG 286 of 1996
Tamberlin J
Sydney
23 December 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 286 of 1996
GENERAL DIVISION )
On Appeal from the General Division
of the Administrative Appeals Tribunal
constituted by Deputy President Chappell
BETWEEN: THE DEPARTMENT OF
SOCIAL SECURITY
Applicant
AND: HELEN THIELE KNIGHT
Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 23 DECEMBER 1996
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The application be dismissed.
The applicant pay the respondent's costs.
NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 286 of 1996
GENERAL DIVISION )
On Appeal from the General Division
of the Administrative Appeals Tribunal
constituted by Deputy President Chappell
BETWEEN: THE DEPARTMENT OF
SOCIAL SECURITY
Applicant
AND: HELEN THIELE KNIGHT
Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 23 DECEMBER 1996
REASONS FOR JUDGMENT
TAMBERLIN J:
This is an appeal from a decision of the Administrative Appeals Tribunal ("the Tribunal") given on 14 March 1996, affirming a decision of the Social Security Appeals Tribunal, dated 10 May 1995.
The Social Security Appeals Tribunal decided that rent assistance was payable to Mrs Knight from 16 February 1995 at an increased rate arising from certain payments made by her on a four week periodic basis relating to the grant of a licence to occupy a unit in a retirement village.
The proceeding arises in this way.
Mrs Knight is a 76 year old pensioner. She has received the aged pension since 15 January 1981. In July 1994 she took up accommodation in the Avondale Retirement Village ("the village"). On 14 July 1994 she lodged a letter with the Department of Social Security ("the Department"). The letter stated that she paid rent of $320.50 per month. These payments were made up of "maintenance fees" of $167.50 per month and what was described as the balance of her "entry contribution" of $154.00 per month.
On 1 September 1994 she wrote to the Department requesting that in addition to the maintenance fees, regard be had to the entry contribution payments of $154.00 per month in determining the amount of rent assistance that she be paid. Accordingly, she requested that she be paid full rent assistance.
On 9 September 1994 a delegate of the Department wrote to her and advised that rent assistance was payable on the amount of maintenance fees paid for services but not with respect to the periodic payments of the entry contribution. Mrs Knight sought a review of this decision on 12 October 1994. On 19 October 1994 the authorised review officer decided to affirm the decision of the delegate of the Department and on 16 February 1995 she lodged an appeal with Social Security Appeals Tribunal which upheld her appeal.
The Issue
The issue before the Court is whether the Tribunal erred in law in deciding that the four-weekly payments attributable to the entry contribution could be properly characterised as rent, for which Mrs Knight is entitled to receive rent assistance under the provisions of s1064 of the Social Security Act (1991) (Cth) ("the Act").
Background
The total entry contribution payable to secure residence in the village was $30,000. The son-in-law of Mrs Knight paid $10,000 as a gift to her and she paid a further $5,000. The balance of the entry contribution was agreed to be paid off by regular monthly instalments over ten years. Initially the entry contribution was $154.00 for each four-week period up to February 1995. She was informed that from February 1995 this figure would reduce to approximately $127.00 per payment.
On 5 May 1994, the administrative officer of the village wrote to Mr Des Cooke, the son-in-law of Mrs Knight, as follows:
"RE: APPLICATION FOR MRS. H. KNIGHT
Further to our discussion with you and Mrs. Knight of last week, I have spoken to Pastor Shirley as to the best method of processing the application of Mrs. Knight's for a two (2) bedroom unit in Avondale Retirement Village, particularly if a major portion of the income funding is to be spread over a number of years.
The following is a formula which we would require as a minimum for consideration:
(a)A deposit of $10,000.00 upon entry into the Village (say, July 1994).
(b)A further amount in February 1995 of $5.000.00, making a total incoming of $15,000.00.
(c)Monthly payments of maintenance fees of $167.50 per every four weeks at present, plus an additional rental fee of $154.00 per every four weeks from July 1994 tp February 1995.
(d)From February 1995 to completion (say, ten years in total), the rental would reduce to $126.50 per every four weeks, plus a maintenance fee of $167.50 per every four weeks currently applying to Kressville Home Units.
...."
By letter dated 25 July 1994, the administrative officer wrote to the Department stating:
"We wish to advise that MRS HELEN KNIGHT is a resident of Unit 52 in Avondale Retirement Village and pays $321.50 every four weeks made up as follows:
Unit Fees$167.50
Repayment of
Loan $154.00"
In a further letter of 15 August 1994 to the Department, an administrative officer wrote:
"I refer to our letter dated 25 July, 1994 concerning MRS. HELEN KNIGHT, a resident in Unit 52 in the Avondale Retirement Village.
The advice given in this letter was not strictly correct in that the amount shown as a loan is actually a payment of money as her contribution to the balance of entry contribution not paid at the time of her admission. These payments are made to enable her to remain a resident of the Requirement Village.
The total entry contribution due and payable was $30,000, however %(sic)15,000 is being paid by Mrs. Knight over a period of approximately 10 years commencing on 1st July, 1994.
Mrs. Knight is paying $321.50 every four weeks made up as follows:
Unit Fees $167.50 $41.87
per week
4 x Weekly Contribution
for payment of the
balance of the
Entry Contribution $154.00 $38.60
per week
..."
In a facsimile dated 1 February 1996 from the Manager of the village to the Department, Mr Leon Olsen recorded:
"Mrs. Helen Knight occupies a Kressville Home Unit (built with the assistance of Government funding).
The financial terms to occupy this particular type of unit is payment of a preset lump sum amount which is normally but not exclusively payable at the time of a Resident first occupying the unit and which is non refundable.
If Mrs. Knight was to leave the unit for any reason prior to the preset date for the payment of the agreed amount outstanding, the Village would not request payment of the balance not previously paid.
Mrs. Knight's lump sum payment consisted of a substantial contribution being paid by her daughter and husband. The Village, at the time of Mrs. Knight taking up accommodation, was not offering accommodation on a purely rental basis as is currently being offered.
Because of the assistance in the original Government funding, which recognised the less able to contribute to the normal cost of retirement living, we also offer these units to prospective Residents who are unable to pay the requested amount at the time of first occupying the unit but allow them to pay the set amount over a period of time understanding that because they are financially disadvantaged in their not being able to pay the full contribution at the commencement of their occupancy.
The amount of the contribution to be paid over a period of time is comparative to the Resident who does not pay any lump sum payment but is charged a rental fee which is greater than the normal maintenance fee paid by those who actually paid a lump sum amount.
..."
The Licence Agreement
By Deed of Agreement, dated 8 September 1994, the Australasian Conference Association Limited (trading as the Avondale Retirement Village) granted a licence of unit 52 to Mrs Knight. The deed contained the following relevant provisions:
"4. GRANT OF LICENCE
The Licensee shall pay ACA [Australasian Conference Association Limited] the sum of ... $30,000 ... and ACA shall grant to the Licensee the right to use occupy and reside in the Unit ....
MAINTENANCE FEE
The Licensee shall during the continuance of this Licence pay to ACA a weekly maintenance fee of the amount specified ... which amount may be varied by ACA from time to time..."
The maintenance fee covered a wide range of matters including rates, insurance, repairs, cleaning and the like.
The Licence is expressed to be terminable by the licensee on death, or upon giving one month's written notice, abandonment of the unit, or termination under the Act (cl13).
The licensor is entitled to terminate the licence agreement in the event the licensee suffers physical or mental incapacity, breaches the agreement, or causes damage to the village or in circumstances where the licensor would suffer undue hardship if the agreement was not terminated. (cl14).
The Licence Agreement also provided for detailed rules and regulations relating to occupancy of the units and common property.
Annexure B to the Licence Agreement contained the following statement:
"FINANCIAL FORMULA
The incoming cost of Unit 52 is THIRTY THOUSAND DOLLARS ($30,000) and the said sum of Thirty Thousand Dollars is non-refundable and is negotiated as follows:
a)An initial sum of TEN THOUSAND DOLLARS ($10,000) to be paid by July 1, 1994.
b)A further sum of FIVE THOUSAND DOLLARS ($5,000) to be paid by February 28, 1995.
The balance of FIFTEEN THOUSAND DOLLARS ($15,000) to be paid as follows:
a)A sum of ONE HUNDRED AND FIFTY-FOUR DOLLARS ($154.00) to be paid every four (4) weeks to date from July 1, 1994 to February 28, 1995.
b)A sum of ONE HUNDRED AND TWENTY-SIX DOLLARS ($126.00) to be paid every four (4) weeks subject to fluctuation in bank interest rates, to date from March 1, 1995 for a period of NINE YEARS AND FOUR MONTHS terminating on June 30 in the year 2003 or upon vacating the said Unit, whichever comes first.
MAINTENANCE
Maintenance fees are paid in advance in four (4) weekly increments. The current fee for Unit 52 is $167.50 per four weeks. This fee is based on 26.33% of the Aged Pension and is subject to indexation of the Aged Pension and/or as determined by Management of Avondale Retirement Village.
..."
Statutory Provisions
Section 1064-D1 of the Act is entitled "Qualification for rent assistance" and provides:
"An additional amount to help cover the cost of rent is to be added to a person's maximum basic rate if:
(a)the person is not an ineligible homeowner; and
(c)the person pays, or is liable to pay, rent (other than Government rent); and
(d)the rent is payable at a rate of more than the rent threshold rate; and
(e)the person is in Australia; and
(f)either:
(i)neither the person nor the person's partner is qualified for additional family payment for a dependant child of the person; or
(ii)the person is a member of an illness separated or respite care couple or a temporarily separated couple and is the partner of a person who is receiving additional family payment."
Section 1064-D3 is headed "Factors affecting rate of rent assistance" and reads:
"The rate of rent assistance depends on:
(a)the annual rent paid or payable by the person;..."
Mrs Knight's case is that she qualifies for an increased amount of rent assistance to help defray the costs of her residency at the village by reason of the periodic contribution payments. The disagreement between the parties concerns the meaning of the term "rent" in s1064.
The Act contains a definition of "rent" in subs13(2) which relevantly provides;
"(2) Amounts are rent in relation to the person if:
(a)the amounts are payable by the person:
(i)as a condition of occupancy of premises, or of a part of premises, occupied by the person as the person's principal home; or
(ii)for service provided in a retirement village that is the person's principal home; or
(iii) if the person is residing in a
nursing home that is the person's principal home - for accommodation in the nursing home; or
(iv)for lodging in premises that are the person's principal home; or
(v)for the use of a site for:
(A) a caravan or other vehicle; or
(B) a structure:
occupied by the person as the person's principal home; or
(vi)for the right to moor a vessel that is occupied by the person as the person's principal home; and
(b)either:
(i)the amounts are payable every 3 months or more frequently; or
(ii)the amounts are payable at regular intervals (greater than 3 months) and the Secretary is satisfied that the amounts should be treated as rent for the purposes of this Act."
(3) Subparagraphs 2(a)(ii) to (vi) (inclusive) do not limit the generality of subparagraph 2(a)(i)."
The latter subsection supports the view that the term "rent" is to be given a broad construction.
One other relevant provision of the Act is s1147 which deals with entry contributions. It provides:
"1147(1) A special resident's entry contribution is:
(a)if the resident is not a member of a couple - the resident's individual residence contribution; ...
(1A)A special resident's entry contribution is the resident's individual residence contribution plus the amount paid, or agreed to be paid, for the resident's current right (if any) to share the resident's principal home with a partner if:
(a)the resident was a member of a couple at the time when the resident took up residence in the retirement village or granny flat; and
(b)the resident has ceased to be a member of a couple.
....
(1C)For the purpose of this Division, the individual residence contribution is:
(a)for a retirement village resident - the total amount paid, or agreed to be paid, for the resident's current right to live in the retirement village; and
(b)for a granny flat resident - the total amount paid, or agreed to be paid, for the resident's current right to live in the granny flat; and
(c)for a sale leaseback resident - the deferred payment amount ...
(2)An amount that is rent for the purposes of this Act is to be disregarded in applying subsections (1), (1A) and (1B)."
Reasoning below
The Tribunal observed that the Act was of a remedial or beneficial nature and should be interpreted liberally. Reference was made to Bull v Attorney-General for New South Wales (1913) 17 CLR 370 at 384 per Isaac J; and Re Secretary, Department of Social Security and Underwood (1991) 25 ALD 343 at 347.
However, the Tribunal commented that this principle provided only a general guide which was of little assistance in discovering an appropriate path through what it described as "the labyrinthine byways" of the Act.
The Tribunal adopted the following submissions as the basis for its decision. These can be summarised as follows:
•Each of the two periodic payments agreed upon by Mrs Knight and the village comprised an amount which was a condition of occupancy of the premises together with an amount paid for the services in the village.
•The periodic nature of the payments is consistent with characterisation as rent.
•The payments could not be properly characterised as "loans" because there was no requirement for the
licensee to repay any outstanding balance, either in a lump sum or by instalment, if she vacated the unit before all payments had been made. The obligation to make payments ceased on vacation of the premises.
•There was no provision for repayment or credit of any of the periodic payments made up to the date the licensee vacates the premises.
•The payments did not result in the licensee acquiring any interest in or rights in respect of the property.
•The provisions of the Act were ambiguous and were sufficiently broad to permit the interpretation advanced on behalf of Mrs Knight.
Submissions on Appeal
The Department conceded that if one applied the definition in s13 literally and in isolation, then the payments of $154.00 which reduced to $127.00 made by Mrs Knight to the village would appear to constitute "rent" within the meaning of the Act, because they are, in a literal form, paid as a condition of occupancy of the premises and are payable every three months or less.
However, it is said that the payments may also properly be considered to be a condition of occupancy while there is a debt outstanding and that therefore, in substance, the payments relate to a debt and not to the occupancy.
It is also submitted that if "rent" is given a broad definition in s13, as submitted for Mrs Knight, it could encompass payments such as mortgage payments, because they can be characterised as a condition of occupancy, in the sense that a mortgagee has a right to possession in the event of default.
I do not accept this submission. It strains the language of the section to suggest that mortgage repayments are a condition of occupancy. Important characteristics of a mortgage are absent, namely that mortgage payments are concerned with a debt, and the payments under a mortgage are secured by way of a charge.
A second submission is that the Act must be read as a whole and interpreted consistently to ensure that provisions are not rendered otiose or futile. See Minister for Resources v Dover Fisheries Pty Limited (1993) 116 ALR 54 at 63. Specifically, it is said that the definition of "rent" must be read in the light of the general provisions of the Act relating to the assets test continued in Part 3.12 of the Act. In particular, reliance is placed on the provisions of s1147 set out earlier which contains definitions of the expression "special resident's entry contribution" and "individual resident's contribution". Section 1147(2) of the Act requires that an amount that is "rent" for the purposes of the Act should be disregarded in determining an individual resident's contribution. For a retirement village resident, an individual resident's contribution is defined as the "total amount paid, or agreed to be paid, for the resident's current right to live in the retirement village."
Accordingly, it is said that there must be a dichotomy between "rent" and "entry" contribution, so that an entry contribution cannot be characterised as "rent." Further, it is said that if "rent" were given a broad meaning in s13(2), then what is essentially a payment of a capital sum would lose its character by the simple device of having it paid regularly for periods less than three months.
A third submission is that because the legislature is presumed to use terms consistently, the inference should be drawn that where different terms are used, as in s1147, a different concept is intended. It is submitted that the entry contribution in substance is a one-off payment, whereas "rental" is a periodic payment commensurate with the period of occupancy. It is also pointed out that in some circumstances it may be that the obligation to make a contribution terminates before the occupation ceases.
I do not think that the lack of exact temporal correspondence between the payment of the maintenance fees and the entry contribution instalments is important in this case. The fact is that during the period over which the periodic entry contribution payments are made, the payments can properly be described as being related to occupancy in the sense that on the occupancy ceasing they are no longer payable and cannot be recovered.
A further argument is that the intent of the Act is that entry contributions are properly treated as a capital payment or an asset of the resident, even though they are not refundable or transferable. It is pointed out that an entry contribution must be taken into account to determine whether some adjustment to the pension should be made.
The Appeal
The Social Security Act 1991 (Cth) is beneficial legislation par excellence. It is designed to assist the needy and the disadvantaged. As Isaacs J pointed in Bull v Attorney-General for New South Wales (1913) 17 CLR 370 at 384, after referring to the Crown Lands Act as being remedial in character, said:
" ... this is a remedial Act, and therefore, if any ambiguity existed, like all such Acts should be construed beneficially ... This means, of course, not that the true signification of the provision should be strained or exceeded, but that it could be construed so as to give the fullest relief which the fair meaning of its language will allow."
Ambiguous provisions are to be interpreted in a manner favourable to those who are to benefit from the legislation. [See Zangzinchai v Milanta (1994) 125 ALR 265 at 272].
However, the interpretation of beneficial provisions must be, as D C Pearce and G S Geddes point out in " Statutory Interpretation Australia" 4th ed. (1996) at para 9.2, kept within the confines of the actual language employed and that which is fairly open on the words used.
In my opinion, the primary and natural significance of the language used in ss13(2) and 1064-D1 should not be read down or interpreted in the light of vague indirect inferences sought to be derived from the general provisions of the Act relating to the assets test.
The references to ss1147 and 1150 of the Act do not provide any indication that the word "rent" where used in s1064-D1 is to be read otherwise than in terms of the definition contained in s13(2). Indeed, the express exclusion in respect of "rent" in s1147 supports the view that, but for the exclusion, there would otherwise be some overlap between the expression "rent" and "entry contribution". This overlap provides some support for the submissions made on behalf of Mrs Knight and is contrary to the suggestion of a firm distinction between the two terms.
Furthermore, if it had been intended that the expression "rent" in s1064-D1 should exclude periodic payments relating to an entry contribution, it would have been a simple matter to insert a qualification to that effect in the section in relation to rent. This was not done.
The clear intention of the parties as evidenced by the Licence Agreement and the correspondence in evidence before the Tribunal, is that in substance the contribution payments were meant to be a condition of occupation of the premises. See Samuel v Salmon and Gluckstein Limited (1946) 1 Ch. 8 at 12-13 applied in Nixon v Doney (1961) S.R. (N.S.W.) 311 at 315. Further, the periodic contribution payments were to cease upon cessation of occupancy, with no resultant residual debt or financial obligation subsisting on the part of either party. Moreover, default in meeting the contribution payments would amount to breach of the Licence Agreement with the consequence that the licensor is entitled under cl14 of the Licence Agreement, to terminate the licence and the occupancy under it.
The entry contribution payments cannot be regarded as payments of a capital nature. The contribution payments do not result in any capital asset or sum being accumulated or any interest being acquired. Nor is there any sum to be refunded to the licensee upon ceasing to occupy the premises. There is no asset fund or interest which can be transferred, mortgaged or otherwise dealt with. Cf cl17 of the Licence Agreement. The contribution payments comprise the consideration for the right to occupation.
The fact that the obligation to make the contribution payments may be satisfied after a certain period and thereafter only maintenance payments are required to be made, does not alter the character of the payment from being rental to being one of a different nature. It is possible for parties to agree that rental payments will reduce during the term of a long term licence. The correspondence of the periodic contribution payments with the occupation of the premises provides a strong indication that the nature of the payments is that of "rent" within both the meaning of the Act and at common law.
I see little force in the in terrorem submission that a broad approach to the meaning of "rent" in s1064-D1 could lead parties to structure their arrangements so as to obtain a greater amount of rent assistance to that which they would otherwise be entitled, by providing for periodic entry contribution payments at intervals of less than three months. There is no suggestion in the present case that the arrangement has such a purpose or that it is a "device" designed to this end. If a problem does arise in this respect then it is open to the legislature by a short simple amendment to remedy the position.
In the circumstances of this matter, the direct legal nexus between the occupancy of the premises and the obligation to make contribution payments, coupled with the regular periodic nature of the payments, leads me to the conclusion that the payments both in form and substance are properly characterised as "rent" within the meaning of ss13(2) and 1064-D1 of the Act. There is nothing in the context, nor in the other provisions of the Act referred to in argument, persuade me to the contrary.
For the above reasons, the Department has not established any error of law in the reasons for decision of the learned assessor.
Accordingly, my conclusion is that this appeal should be dismissed with costs.
I certify that this and
the preceding twenty (20)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 23 December 1996
Counsel for Applicant: Mr G M Elliot
Solicitor for Applicant: Australian Government Solicitor
Counsel for Respondent: Mr M B Smith
Solicitor for Respondent: Welfare Rights Centre
Date of Hearing: 13 December 1996
Date Judgment Delivered: 23 December 1996
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