Secretary to the Department of Family and Community Services and Nixon
[2002] AATA 428
•5 June 2002
DECISION AND REASONS FOR DECISION [2002] AATA 428
ADMINISTRATIVE APPEALS TRIBUNAL Nº N2002/85 and 2002/86
GENERAL ADMINISTRATIVE DIVISION
Re: Secretary to the Department of Family and Community Services
Applicant
And: George Nixon
Mavis NixonRespondent
DECISION
Tribunal: Mr P.J. Lindsay, Senior Member
Date: 5 June 2002
Place: Sydney
Decision:(a) That the application by the Secretary to the Department of Family and Community Services for an extension of time within which to lodge an application for review of a decision by the Social Security Appeals Tribunal dated 5 December 2001 be granted;
(b) That the time for the making of that application for review be extended up to and including 17 January 2002.
[SGD] Mr.P.J.Lindsay
Senior Member
CATCHWORDS
Social Security – Secretary's application for extension of time for making application for review of decision – principles to be applied in exercising discretion – application granted.
Administrative Appeals Tribunal Act 1975 - s.29
Administrative Decisions (Judicial Review Act) 1977 - s.11
Social Security Act 1991 - ss. 11, 1078, 1084
Australian Foreman Stevedores Association v Crone (1988) 20 FCR 377
Comcare v A'Hearn (1993) 119 ALR 85
Commissioner of Taxation v Brown 99 ATC 4,852
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344
Zizza v Commissioner of Taxation 99 ATC 4,711
REASONS FOR DECISION
Mr P.J. Lindsay, Senior Member
This is an application by the Secretary to the Department of Family and Community Services (the Secretary) for an extension of time to lodge an application to the Tribunal for review of a decision made by the Social Security Appeals Tribunal (SSAT) on 5 December 2001. The SSAT's decision, which set aside a decision made on 22 September 2001 by an authorised review officer within Centrelink, was to treat loans made by Mr and Mrs Nixon to a company in which they are the sole directors and shareholders, as exempt from the deemed income provisions of the Social Security Act 1991. Accordingly, the rates of Newstart Allowance and Partner Allowance paid to them were unaffected by deemed income from the loans.
At the hearing, Mr Kenny, a Centrelink advocate, represented the Secretary and Mr Nixon addressed the Tribunal. In making its decision, the TribunaI has had regard to documents lodged at the Tribunal relating to the Secretary's proposed application for review of the SSAT's decision. Mr and Mrs Nixon had been provided with copies of these documents. Mr Nixon tendered two exhibits: a copy of a letter dated 16 November 2001 from Mr Nixon to the managing director of Hanicorn Pty Limited (Exhibit R1) and a copy of a reply dated 20 November 2001 from Hanicorn Pty Limited to Mr Nixon (Exhibit R2).
issueThe issue is whether the Tribunal should exercise its discretion to extend time for the Secretary's applying to the Tribunal for a review of the SSAT's decision.
backgroundIn setting out the background to the SSAT's decision and the current application, the Tribunal has made findings of fact solely for the purposes of considering the Secretary's current application. The findings are based on the documents lodged in relation to the Secretary's proposed application for review and the material presented at the hearing.
Hanicorn Pty Limited commenced commercial activities in Saudi Arabia, Oman and the United Arab Republic, in the latter part of the 1980s. The company was involved in agriculture, and one of its aims was to develop a market for Australian saltbush in the Middle East. To that end the company outlaid over $1m in advertising and marketing. In the course of its activities, the company invested in a number of businesses in the region, such as nurseries, and also made loans to businesses in the region. Mr Nixon told the Tribunal that these businesses "no longer exist". It entered into large, purchase contracts with local companies for the supply of seedlings and other stock. The Gulf War in 1991 severely disrupted the company's business and that of G E Nixon Pty Limited, another company in which Mr and Mrs Nixon have a substantial interest. Mr and Mrs Nixon made unsecured loans to Hanicorn Pty Limited in an endeavour to keep its Middle East business going.
As a consequence of G E Nixon Pty Limited's going into voluntary receivership, Mr and Mrs Nixon had to sell their family home and cash-in policies of life insurance. They now live in rental accommodation and receive most of their income from Centrelink payments.
At 10 November 2001 Hanicorn Pty Limited owed Mr and Mrs Nixon jointly the sum of $235,405.64, which it cannot repay and nor can it pay them interest on the debt. The loan balance had been greater at 30 June 2000 but has been reduced to take account of the company's paying for repairs to Mr Nixon's motor vehicle. The company still operates in Australia, acting as a distributor of seed and seedling trays to nurseries around the country. According to Hanicorn Pty Limited's trading account for the year ended 30 June 2000, it had sales of $62,758 and earned a trading profit of $1,733. The company's balance sheet as at 30 June 2000 showed a deficit in shareholders' funds of $124,833.
Mr Nixon is working for Hanicorn Pty Limited, helping it find seed, in an endeavour to make the company trade profitably. If and when the company prospers, he expects it will repay the debt due to him and Mrs Nixon. In a letter from Hanicorn Pty Limited dated 20 November 2001, that he signed in his capacity as director, Mr Nixon was informed that the total amount of his and Mrs Nixon's loan was $235,405.64 but " … the difficulty is that Hanicorn Pty Limited is unable to pay any of this amount at this stage. All the moneys have been invested in the Middle East and all are considered unrecoverable. It is regrettable but owing to the lack of liquid assets, any legal action that is taken [against Hanicorn Pty Limited] will only add additional cost" (Exhibit R2). Mr and Mrs Nixon have not commenced legal action against Hanicorn Pty Limited to recover their debts as they believe it would be futile. Mr Nixon said that Hanicorn Pty Limited had not written off the debts that it is owed because he wanted the company to keep the loans on the balance sheet in the belief that this might have made bank finance easier to obtain at some point in the future, had the company's Middle East activities flourished. Mr Nixon did not provide the Tribunal with an explanation for the company's currently recording the loans as assets in its balance sheet, instead of writing them off.
In June 2001 as part of a general data collection exercise concerning trusts and companies, officers in the Secretary's department examined Mr and Mrs Nixon's involvement in Hanicorn Pty Limited. It resulted in Mr and Mrs Nixon's loan to Hanicorn Pty Limited being assessed as a financial asset. For the purposes of the income test, they were deemed to receive income from the loan in an amount that resulted in their social security entitlements being reduced. Mr Nixon requested a review of the decision to reduce his rate of Newstart Allowance and Mrs Nixon sought review of the decision to reduce her rate of Partner Allowance. The result of their requests was that Centrelink's authorised review officer affirmed the earlier decisions on the basis that Hanicorn Pty Limited was still trading, the balance owing to them had been reduced and Mr and Mrs Nixon had not taken legal action against the company to recover their debt.
The matter was then considered by the SSAT and it concluded that the loan to Hanicorn Pty Limited was an "unrealisable asset" as defined in s.11(12) of the Social Security Act 1991 (the Act) which states:
11(12) An asset of a person is an unrealisable asset if:
(a) the person cannot sell or realise the asset; and
(b) the person cannot use the asset as a security for borrowing.
The SSAT concluded that the loan was exempt from s.1078 of the Act, which deals with deemed income from financial assets, by virtue of s.1084 (2) which provides:
1084(2) If a financial investment is an unrealisable asset for the purposes of section 1129, 1130B or 1131, the financial asset is not to be regarded as a financial asset for the purposes of section 1076, 1077 or 1078.
Consequently, on 5 December 2001 the SSAT decided to set aside the authorised review officer's decision, and Mr and Mrs Nixon's rate of Newstart Allowance and Partner Allowance would not be affected by deemed income from their loans to Hanicorn Pty Limited.
Section 29 of the Administrative Appeals Tribunal Act 1975 (the AAT Act) lays out the rules that apply to the making of an application for review and deal with such matters as the form and content of an application, and the time period within which the application should be lodged. The following provisions are relevant:
(1) An application to the Tribunal for a review of a decision:
…(d) if the terms of the decision were recorded in writing and set out in a document that was furnished to the applicant or the decision is deemed to be made by reason of the operation of subsection 25(5)—shall be lodged with the Tribunal within the prescribed time.
(2) Subject to subsection (3), the prescribed time for the purposes of paragraph (1)(d) is the period commencing on the day on which the decision is made and ending on the twenty-eighth day after:
(a) if the decision sets out the findings on material questions of fact and the reasons for the decision—the day on which a document setting out the terms of the decision is furnished to the applicant;
…
Subsection 29(3) of the AAT Act has no application to this matter.
Mr Nixon informed the Tribunal that he received a copy of the SSAT's decision early in January 2002. The Secretary has lodged a copy of the SSAT's decision with the Tribunal in relation to the proposed application for review of that decision. The date stamp on that document indicates that the SSAT's decision was delivered to the Secretary on 18 December 2001, the decision having been despatched by the SSAT on 17 December. In Australian Foreman Stevedores Association v Crone (1988) 20 FCR 377 (at 385) Pincus J explained the meaning of 'furnished to the applicant' as it occurs in s.11 (1)(c) of the Administrative Decisions (Judicial Review) Act 1977 in the following terms "In my opinion, in its context, the expression 'furnished to the applicant' appears to contemplate delivery of a document specifically to the applicant rather than a general publication of it." The Tribunal accepts Mr Kenny's advice that the reasons were furnished to the Secretary, that is, received by the Secretary, on 18 December 2001.
Accordingly, the Secretary was required by ss.29 (1) and (2) of the AAT Act to lodge the application for review of the SSAT's decision with the Tribunal by the twenty-eighth day after the day on which the document setting out the terms of the SSAT's decision was furnished to the Secretary. However, the Secretary lodged the application on 17 January 2002, not on the due date of 15 January 2002.
Mr Kenny referred to a statutory declaration made on 18 April 2002 by Alan Jones, an advocate in Centrelink's administrative law team, who declared that he was part of a small team comprising two advocates, supported by an administrative officer with little experience in administrative law work. The team, which is based in Perth, was involved in analysing decisions by the Sydney SSAT and recommending appeals where appropriate. Mr Jones declared that he thought that, by lodging the application for review on 17 January 2002, it had been lodged early. Mistakenly, the team had calculated the lodgment period as expiring on 18 January. Mr Jones apologised to the Tribunal and to Mr and Mrs Nixon for any inconvenience due to the error in the dates.
On 21 February 2002, the Secretary lodged an application with the Tribunal seeking an extension of time for applying for review of the SSAT's decision. Pursuant to s.29(7) of the AAT Act, the Tribunal may grant such an extension of time:
(7) The Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for a review of a decision (including a decision made before the commencement of this section).
consideration
Principles to guide the Tribunal in considering whether to exercise the discretion to grant an extension of time may be found in the judgment of Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344:
Prima facie, proceedings should be commenced within the prescribed period and an applicant must advance an acceptable explanation for the delay.
Any action that the applicant has taken, apart from applying for the extension, is relevant in considering whether there is an acceptable explanation for the delay.
Prejudice to the respondent, if any, is a relevant factor although its absence is not enough to justify granting an extension.
Public considerations, including the unsettling of established practices or of other people, may be taken into account.
It is relevant to have regard to the merits of the application for review.
Considerations of fairness as between the applicant and others in a similar position are relevant.
The Tribunal notes the Full Federal Court's caution that the Tribunal would fall into error if it regarded the principles in Hunter Valley Developments as complete or to treat each principle as necessarily applicable in every application for an extension of time: Zizza v Commissioner of Taxation 99 ATC 4711.
In relation to the first criterion above, Mr Kenny submitted that the delay in lodging the application for review was due to human error. During the eighteen working days in December 2001, the Centrelink team in Perth received 49 cases for scrutiny, 32 of them from Sydney. The workload was said to have contributed to the officer's miscalculating the deadline, which was thought to be 18 January 2002 instead of 15 January. While the Tribunal does not find this an entirely satisfactory explanation, especially when bearing in mind the expertise of the personnel within the department who deal with such matters, in the context of a two day delay, the explanation is not unreasonable. The lack of a satisfactory explanation alone, is not fatal to the application: Comcare v A'Hearn (1993) 119 ALR 85. Further, in the circumstances of this delay, there is no basis for finding that the Secretary simply rested on his rights without taking the necessary steps to initiate review of the decision.
As a result of the decision that was affirmed by the authorised review officer on 22 September 2001, Mr Nixon said he and his wife are receiving $87 less per fortnight in Newstart Allowance and Partner Allowance. Mr Nixon emphasised that this prejudice will be prolonged if the Tribunal grants the extension of time sought. Mr Kenny submitted that prejudice to Mr and Mrs Nixon in the form of lost evidence, death of witnesses or reliance on monies awarded does not arise in a case where an application for review of a decision is lodged late by a matter of days. He referred the Tribunal to a letter dated 8 January 2002 that Centrelink sent to Mr and Mrs Nixon that put them on notice of Centrelink's contemplating an appeal against the SSAT's decision. In the circumstances of this case, the Tribunal accepts Mr Kenny's submission that, where a party has been given advance warning of the possibility of an application for review and the application has in fact been lodged albeit two days late, there is little prejudice to Mr and Mrs Nixon.
As to the merits of the application for review, the Tribunal is mindful that the relevant consideration is whether the Secretary can show an arguable case on the merits, taking the Secretary's case at its highest: Commissioner of Taxation v Brown 99 ATC 4,852. Mr Kenny submitted that the SSAT decided in error that the loans made by Mr and Mrs Nixon to Hanicorn Pty Limited amounting to $235,407 are unrealisable assets. He emphasised that such a decision did not take proper account of the facts that formal action has not been commenced in an effort to recover the debt, the debtor company is still operating and Mr Nixon's stated intention to keep the company going. In Mr Kenny's submission, Mr and Mrs Nixon have not taken adequate action to recover their loan assets, nor to realise them, as they had not attempted to factor the debts. Mr Nixon, however, referred to the letter he received from Hanicorn Pty Limited dated 20 November 2001 (Exhibit R2) which stated that the company is unable re-pay the loans because it has invested "all the moneys" in the Middle East and the funds are considered irrecoverable. On the material available, the Tribunal finds that the Secretary's contention that the loans are not unrealisable assets is an arguable case.
In relation to issues affecting wider public interests, the Tribunal is satisfied that the present is not a case where a broader group of people could necessarily be affected if the Secretary's application were granted. There was no material on which the Tribunal could find that if the Secretary's application were to succeed, there would be unfairness to others in a similar position. Although failure to comply with a statutory time limit raises a matter of public administration, the Tribunal is satisfied on the material before it, including Mr Jones' statutory declaration, that granting the application would not unsettle established administrative practices. Further, the Tribunal accepts Mr Kenny's submission that potentially the SSAT's decision could have a deleterious financial impact on the public purse, that is out of proportion with the minor delay on the part of the Secretary in making the application for review.
In exercising the unfettered discretion found in s.29 (7) of the AAT Act, the Tribunal must be satisfied " … that it is 'fair and equitable in the circumstances' to extend time": Hunter Valley Developments (at 348). Each application for an extension must be determined by reference to its own facts. For the reasons given above, the Tribunal is satisfied that this is a case where the discretion should be exercised and accordingly grants the Secretary's application for an extension of time.
I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: L Houston .....................................................................................
AssociateDate of Hearing 19 April 2002
Date of Decision 5 June 2002
Solicitor for the Applicant Mr J. Kenny (Departmental Advocate)
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