Re Frederick George Rose v Secretary, Department of Social Security [1990] FCA 52 (2 March 1990)

FEDERAL COURT OF AUSTRALIA

Re: FREDERICK GEORGE ROSE
And: SECRETARY, DEPARTMENT OF SOCIAL SECURITY
No. G297 of 1988
FED No. 59
Social Security Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart(1), Gummow(1) and Einfeld(1) JJ.

CATCHWORDS

Social Security Law - Meaning of "income" in s. 3 Social Security Act 1947 - consideration of the principle of construction that remedial legislation should be construed beneficially - meaning of "within or outside Australia" in s. 3 - should the words "earned, derived or received" be construed as meaning "realised" - are monies received outside Australia nonetheless realised - whether the application of the definition of "income" depends on the circumstance that an applicant for a pension may choose in which country to live.

Social Security Act 1947: ss. 3, 25, 33.

HEARING

SYDNEY
2:3:1990

Counsel for the Appellant: Mr. H. Bell

Solicitors for the Appellant: W. Robinson, Director, Legal

Aid Commission of NSW

Counsel for the Respondent: Mr. A.H. Slater

Solicitors for the Respondent: Australian Government Solicitor

ORDER

1. The appeal be dismissed.
2. The appellants pay the costs of the respondents of the
appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This appeal from a decision of the Administrative Appeals Tribunal, General Administrative Division (Purvis J.), concerns a short point of construction of the Social Security Act 1947 ("the Act"), namely, the definition of "income" in s. 3 (the interpretation section).

2. Before turning to that definition and the statutory scheme in which it is placed a brief statement of the relevant facts, all of which are agreed, is necessary.

3. The appellant is an Australian citizen and an Australian resident for the purposes of s. 25 of the Act. He is also a resident of the German Democratic Republic ("the GDR"). He is an unpaid member of a working group of scientists in the GDR. The appellant lives in the GDR most of the year and travels to Australia once a year, usually for a period of months at a time for reasons relating to his work and health. When residing in the GDR the appellant is paid a superannuation pension to which he is entitled consequent upon his retirement as a Professor of Social Anthropology. The pension is paid into a cheque account in the GDR on a monthly basis; it is not transferable or payable to the appellant anywhere outside the GDR.

4. When the appellant lives in Australia he is without funds other than a small royalty of $10 to $15 per week which is payable to him from sources within Australia. The amount of the GDR pension payable to the appellant when residing in the GDR is such as would disqualify him from entitlement to an age pension under the Act.

5. The appellant is 73 years of age. On 2 December 1986 he lodged a claim for an age pension under the Act. He there stated that he was in receipt of the superannuation benefit payable in the GDR of 2,000 marks per month ($A18,045 per annum) and that those moneys were not transferable out of the GDR. On 4 February 1987 the application was rejected by a delegate of the respondent. The appellant appealed against the rejection by the respondent's delegate to the Social Security Appeals Tribunal which recommended that the appeal be dismissed, a decision which was affirmed by another delegate of the respondent on 23 May 1988. The appellant then sought, before the Administrative Appeals Tribunal ("the Tribunal"), a review of the decision of 23 May 1988. The Tribunal affirmed the decision of the delegate. It is from that decision of the Tribunal that this appeal is brought to this Court pursuant to s. 44 of the Administrative Appeals Tribunal Act 1975. The jurisdiction of this Court is exercised by the Court constituted as a Full Court (sub-para. 44(3)(c)).

6. The appellant's claim was lodged on 2 December 1986, that is to say, before the renumbering of various provisions of the Act which was effected by the Social Security Amendment Act 1987. The appeal was conducted before this Court on the footing that regard should be had to the Act reprinted as at 1 January 1989 and we shall deal with the statute in this fashion.

7. The preamble to the Act states that it is an Act "to provide for the payment of certain pensions, benefits and allowances and for related purposes". Division 2 of Part IV deals with age pensions. The qualification of a person to receive an age pension arises from s. 25, sub-section (1) of which provides that, subject to Part IV, a person who is not receiving an invalid pension and, being a man, who has attained the age of 65 years or, being a woman, the age of 60 years and "is an Australian resident and is in Australia on the day on which he or she lodges the claim for an age pension and has, at any time, been an Australian resident for a continuous period of not less than 10 years" shall be qualified to receive an age pension.

8. Section 33 appears in Division 4 of Part IV of the Act and it is one of a number of sections concerned with the rate of pension payable. Sub-section 33(12) operates to reduce the amount of the age pension that would otherwise be payable to a person by certain amounts including an amount measured with reference to "the annual rate of income" of the person so far as it exceeds $2,080 in the case of an unmarried person and $1,820 in the case of a married person.

9. The expression "annual rate of income" in sub-s. 33(12) takes one to the definition of income in s. 3 which is in the following terms:

"'Income', in relation to a person, means personal
earnings, moneys, valuable consideration or
profits, whether of a capital nature or not,
earned, derived or received by that person for the
person's own use or benefit by any means from any
source whatsoever, within or outside Australia,
and includes a periodical payment or benefit by
way of gift or allowance and any income that the
person is taken to receive because of section 12C
or 12D, but does not include ..."

There then follow paragraphs (a) to (y) which exclude from the definition of "income" a large number of diverse categories of payments or benefits of which we shall mention a few to illustrate that diversity:
. a payment under the Act (para. (a));
. a payment made to the person for or in respect of a dependent child of the persons (para. (h));
. a periodical payment or benefit by way of gift or allowance from the father, mother, son, daughter, brother or sister of the person (para. (t)); and
. "so much of a payment received by the person as is, in accordance with an agreement between the Commonwealth and a foreign country, applied in reduction of the amount of pension, benefit or allowance that would otherwise be payable to the person under this Act" (para. (w)).

10. As would be expected with social welfare legislation of which the Act is an important example, providing for the payment of pensions, benefits and allowances out of Commonwealth Revenue, the Parliament is concerned to ensure that persons whom it regards as eligible for pensions, benefits and allowances are included within the statutory criteria, but concerned also to ensure that persons who do not meet those criteria are excluded.

11. Entitlement of a person to receive the age pension is thus expressed in s. 25 in general and wide terms and is dependent upon the person simply having attained the prescribed minimum age, being an Australian resident and in Australia on the day on which he or she lodges the claim for the pension and having at any time been an Australian resident for a continuous period of not less than ten years.

12. Section 33 is one of a number of excepting provisions designed to disqualify for age pensions, in whole or in part, persons in the perception of the legislature who do not need the age pension or all of it because they are entitled to receive "income" from other sources. Thus, the definition of "income" plays a critical role in the excepting or exclusionary provisions. Parliament chose to define "income" in the initial part of the definition in terms of considerable width to ensure that it brought within its net as wide a range of categories and sources of income as possible, thus giving full scope to the exclusionary provisions of the Act such as s. 33. The broad definition, having an exclusionary operation, is then followed by the numerous and eclectic paragraphs (a) to (y) which express Parliament's will that persons coming within them are not to be treated as disqualified from the age pension notwithstanding that they derive income which would otherwise be caught by the opening provisions of the definition of "income". In short Parliament confers a general entitlement to an age pension under s. 25, but excludes certain categories of persons from that entitlement by operation of sub-s. 33(12) and the definition of "income". Parliament from time to time has added to or removed from the various categories of payments or benefits (paras. (a) to (y) in the definition of "income") which are not to be taken into account as part of a person's "income" for the purpose of reducing his or her entitlement to the age pension.

13. We were referred in argument to various principles of construction of statutes including the principle that remedial legislation should be construed beneficially. The Act is a remedial provision in that it gives benefits to persons and thereby remedies Parliament's perceptions of injustice. It calls for no narrow or pedantic construction; but, as mentioned earlier, it contains both enabling and excepting provisions which do not therefore necessarily require beneficial interpretation. It depends on the particular statutory provision and an analysis of its language and purpose. Aids to construction, including the principle of liberal interpretation of remedial provisions, are generally invoked when there is some ambiguity on the fact of the particular statutory provision. That is not the case here with the definition of "income" in its introductory general words with which this case is concerned.

14. Much was made in argument of the words "within or outside Australia" in the definition of income. In our opinion it is plain that those words are governed by the words that immediately precede them "from any source whatsoever", and not directly by each of the integers of the definition that precedes those words. The reference to source requires reference back to the preceding integers, however, because those integers constitute the income derived from the particular source.

15. Absence of the words "within or outside Australia" may have enlivened an argument that the source must be limited to a source within Australia. The Legislature was concerned to ensure that it mattered not whether the source of derivation or receipt of the moneys was within or outside Australia because it is a definition which forms part of a scheme designed to exclude persons from qualification for pensions under the Act who have access to other forms of "income" irrespective of the territorial location of the source. The words "within or outside Australia" are designed to ensure that there is no reading down of the section to exclude only persons who earn, derive or receive moneys etc. payable from sources within Australia.

16. Counsel for the appellant submitted that the words "earned, derived or received" where appearing in the definition of "income" should be construed in the sense of "realised" because for income to be "earned, derived or received" by a person for his or her own use or benefit, it had to be "realised" in the sense of being available for the person for use in Australia. It was argued that in this case until the appellant returns to the GDR there is no realisation of income derived from his pension entitlement there, an entitlement which is confined to the GDR. In support of this submission counsel relied upon the judgment of the High Court in Read v The Commonwealth [1988] HCA 26; (1988) 62 ALJR 354 where consideration was given to the meaning of "income" in s. 18 of the Act in the form in which it then stood. Section 18 defined "income" in relation to a person as meaning:

"any personal earnings, moneys, valuable
consideration or profits earned, derived or
received by that person for his own use or benefit
by any means from any source ...."

17. The High Court (Mason C.J., Deane and Gaudron JJ.; Brennan and Toohey JJ. dissenting) held that upon its proper construction s. 18 required that until a gain was "realised" it was not "earned, derived or received". The appellant in that case was the recipient of an age pension under the Act and held units in a capital growth trust. The assets of the trust were revalued whereupon the appellant was issued with additional units which were valued by the Department of Social Security and deemed by it to be "income" within the meaning of the Act for the purpose of ascertaining her entitlement to an age pension. The majority said at 357:

"In our opinion, a mere increase in the value of an
asset does not amount to a capital profit. A
profit connotes an actual gain and not mere
potential to achieve a gain. Until a gain is
realised it is not 'earned, derived or received'.
A capital gain is realised when an item of capital
which has increased in value is ventured, either
in whole or in part, in a transaction which
returns that increase in value."

Their Honours held that as the only relevant gain which was identifiable by reference to the additional units issued to the appellant was an unrealised gain, the additional units did not constitute a "profit" within the definition of "income".

18. We accept that the reasoning of the majority in Read leads to the conclusion that until "profits" are realised they do not answer the description of "profits" "earned, derived or received" for the purposes of the definition of "income" in s. 3 of the Act. But that conclusion does not avail the appellant in this case. The pension to which the appellant is entitled in, and only in, the GDR is paid into his cheque account there each month. It is not transferrable or payable to him outside the GDR; but it is a pension that is available for him to call upon whenever he is in the GDR, as he is for a large part of each year.

19. The entitlement of the appellant to his GDR pension arises at the latest once the pension payments have been paid into the relevant account of the appellant in the GDR. He is then free to draw upon them and spend them in the GDR. His capacity to remove the pension payments from the GDR and to spend them outside the GDR is prohibited by the law of the GDR; the restraint is upon his transfering the moneys outside the GDR.

20. The pension payments made to the appellant in the GDR are moneys "received" by him in the sense of "realised" by him in the GDR. It is not to the point that those moneys are in that sense received by him outside Australia. The payments answer the description of moneys "earned, derived or received" (in the sense of "realised") by him for his own use or benefit from a source outside Australia and fall within the definition of "income" in s. 3.

21. Counsel for the appellant sought to construe the definition of "income" favourably to the appellant by offering five suggested notional linguistic additions to the definition; but we see no useful purpose in mentioning them as in the end this served, not to interpret the definition, but to substantially redraft it, an impermissible activity for courts: see Cooper Brooks (Wollongong) Pty. Limited v The Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 per Aickin J. at 336.

22. The Tribunal, although coming to the conclusion that the decision of the delegate should be affirmed, did so by a path which adopted, in our respectful opinion, an impermissible construction of the definition of "income" in s. 3. As we understand the Tribunal's reasons the conclusion was reached by the learned Presidential Member (see p 9 of the reasons) that the words "within or outside of Australia" are directly governed by the earlier words in the definition "for the person's own use or benefit" as well as the words "from any source whatsoever"; otherwise, according to the Tribunal's reasoning process, a construction of the definition to the effect that only "personal earnings, moneys, valuable consideration or profits" available for the person's "own use or benefit" within Australia should be regarded as "income" would be available. We respectfully disagree. No territorial limitation would be implied into the definition of "income" to achieve the result mentioned by the Tribunal if the words "within or outside of Australia" are governed only by the immediately preceding words "from any source whatsoever". The source to which the definition of income is directed is, of course, the source from which the person's earnings or moneys etc. are earned, derived or received by him for his own use or benefit by any means, and, as mentioned earlier, the draftsman was concerned to ensure that it mattered not whether that source was within or outside Australia. There is no warrant for importing the constraint into the definition which attracted the Tribunal.

23. Further, on page 13 of his reasons the learned Presidential Member adopted a construction of the definition of "income" that appears to attribute to it elements of peripateticism by determining the entitlement of a person to an age pension with reference to the countries in which he chooses to reside from time to time. The Tribunal noted that the appellant has chosen to spend the majority of his time in the GDR but said

"If he resided in Australia and was not able to use
the entitlement or benefit from it (the
superannuation entitlement), then a different
situation might well arise. But that is not the
factual position in this application."

24. The construction and application of the definition of "income" do not depend on the circumstance that an applicant for a pension may choose to live in Australia or another country or both countries.

25. We would dismiss the appeal with costs.