Secretary Department of Employment and Workplace Relations v Richards [2008] FCAFC 97 (3 June 2008)

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Secretary Department of Employment and Workplace Relations v Richards [2008] FCAFC 97 (3 June 2008)

Last Updated: 5 June 2008

FEDERAL COURT OF AUSTRALIA

Secretary Department of Employment and Workplace Relations v Richards [2008] FCAFC 97

SOCIAL SECURITY – parenting payment – disclosure of income – gross income, "earned, derived or received" – whether net of deductions from wages as part of terms of employment agreement – part time hotel worker – operating TAB agency – no fault deductions from wages where till shortfalls – whether disclosure of income net of deductions suffices for requirements of the Act

HELD: appeal dismissed.






Social Security Act 1991 (Cth) s 8, s 500, s 503 s 1068A, s 1072

Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 cited
Collector of Customs v Agfa Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 cited
Haldane –Stevenson v Director-General of Social Security [1985] HCA 41; (1985) 7 ALD 467 cited
Kear v Secretary, Department of Social Security [1998] FCA 1087 cited
Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60 cited
Marsh v Secretary, Department of Social Security (1986) 12 FCR 100 cited
Rose v Secretary, Department of Social Security (1990) 21 FCR 241 cited
Secretary, Department of Society Security v Garvey (1989) 19 ALD 348 cited
Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35 cited




SECRETARY DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS v KARLA RICHARDS
QUD397 OF 2007

FRENCH, MOORE & LINDGREN JJ
3 JUNE 2008
PERTH (HEARD IN BRISBANE)

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD397 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	SECRETARY DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Appellant
AND:	KARLA RICHARDS Respondent

JUDGES:	FRENCH, MOORE & LINDGREN JJ
DATE OF ORDER:	3 JUNE 2008
WHERE MADE:	PERTH (HEARD IN BRISBANE)

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of the appeal.


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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD397 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	SECRETARY DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Appellant
AND:	KARLA RICHARDS Respondent

JUDGES:	FRENCH, MOORE & LINDGREN JJ
DATE:	3 JUNE 2008
PLACE:	PERTH (HEARD IN BRISBANE)

REASONS FOR JUDGMENT

THE COURT:

Introduction

1 From September 2003 to March 2005, Karla Richards, a single parent with two young children, was working full time and later part time at the Wellington Point Hotel. She was one of the operators of a TAB agency conducted in the hotel. She was also in receipt of parenting payment under the provisions of the Social Security Act 1991 (Cth) (the 1991 Act). Her agreement with her employer at the Wellington Point Hotel provided for the payment of wages at rates specified in a document entitled "Certified Agreement". However it was also a condition of her employment, that she would be liable to repay any shortfalls in the till takings at the TAB agency for which she was responsible while working at the hotel. These shortfalls were deducted from her wages.

2 As the Administrative Appeals Tribunal (the AAT) found Ms Richards informed the Department of Employment and Workplace Relations (the Department) of the arrangement and asked whether, for the purposes of the income based means test applicable to parenting payments, it would be sufficient to declare income she received less deductions payable pursuant to her employment agreement. She was told that it would be. She acted accordingly.

3 Despite advice given by the Department’s officer, a delegate of the Secretary of the Department decided that Ms Richards’ declaration of income involved an understatement and that she should have declared the whole of her wages to which she would have been entitled absent the shortfall deductions. An overpayment was raised against her accordingly.

4 Ms Richards appealed to the Social Security Appeals Tribunal (SSAT). She was successful. The Secretary sought review of that decision in the AAT. He was unsuccessful. The Secretary then appealed to a single judge of this Court from the decision of the AAT. That appeal was unsuccessful. The Secretary now appeals to the Full Court from the decision of the primary judge. Ms Richards was pursued through the SSAT to the AAT by way of administrative review and thereafter to a single judge of this Court and to the Full Court for an overpayment which, as the AAT found, was raised in the face of contrary advice which she had been given by the Department. It is difficult to see what principle of general importance to the administration of the 1991 Act was at stake. In any event the appeal fails. Ms Richards’ income, according to the terms of her employment, was variable by reference to shortfall deductions. She did not understate her income in acting according to the departmental advice. There was no overpayment of benefit. The appeal will be dismissed with costs.

Factual and procedural background

5 Karla Richards is a single parent with two young children. In December 2002 she applied for parenting payment under the provisions of the 1991 Act. She was then working part-time for the Queensport Hotel. In September 2003 she ceased work at that hotel and began working at the Wellington Point Hotel. Her work there involved operating a TAB agency conducted at the hotel.

6 Ms Richards was required, under the provisions of the 1991 Act, to provide fortnightly declarations of her income to the Department. The records showed that she attended at a regional office of the Department on 27 August 2003 and provided her payslips from the Queensport Hotel for the weeks ended 10 August and 17 August 2003. Subsequently a Centrelink Service Officer telephoned Ms Richards to advise her that she had also missed the previous fortnight’s declaration of earnings as of the last reporting day of 14 August 2003. Ms Richards agreed to telephone the Department to correctly declare her income as the fortnightly payslips that she had provided did not match with the reporting day.

7 Ms Richards was told by her employer that her employment was governed by a certified agreement. However, her employer required of her that she make good any shortfalls in the till whether or not they were her fault. This requirement was not part of the certified agreement document which she was given. She attended the Wynnum office of Centrelink following this event and explained to an officer of Centrelink the existence of the requirement to make good till shortfalls. She asked whether this was something that would affect her parenting payment and whether, when she telephoned in to report her income, she could deduct shortfalls. She was told that she could do so. From the time of that advice Ms Richards notified Centrelink regularly of the amount of her earnings.

8 From September 2003 through to June 2004 Ms Richards was required to make good till shortfalls on eight occasions covering a total sum of $1,746.50, the largest of which was $1,300. That was a shortfall detected on 8 January 2004. As it turned out it was the consequence of a fraud perpetrated by a third party. Ms Richards had nothing to do with it. Nor was there any suggestion that she benefited in any way or had anything to do with any of the other till shortfalls for which she was penalised. She was nevertheless held responsible. For the financial year ended 2005 she made good shortfalls on at least 11 and perhaps 12 occasions in a total sum of $807.75. By April 2005 she had received from her employer the sum of $27,761.76 by way of wages for the period 20 September 2003 to 9 April 2005. The sum which she would have been entitled to receive under the certified agreement, but for the deductions, was $30,600.

9 Centrelink decided that Ms Richards had understated her income and had been overpaid in an amount of $1,341.87 which had to be recovered. A decision taken by a Centrelink officer to recover the overpayment was affirmed upon an internal review on 27 June 2005. Ms Richards challenged the decision in the SSAT. On 18 October 2005 the SSAT decided to set the decision aside. It remitted the matter to the Secretary with a direction that Ms Richards’ income, for the purpose of determining parenting payment entitlement, should exclude amounts paid to make good till shortfalls. The Secretary then sought review of the SSAT’s decision in the AAT. On 12 May 2006 the AAT affirmed the decision of the SSAT.

10 The Secretary then appealed to a single judge of this Court. On 9 November 2007 Collier J dismissed the Secretary’s appeal from the decision of the AAT. The Secretary now appeals to the Full Court against the decision of Collier J.

Statutory framework

11 The relevant provisions of the 1991 Act are either referred to or set out below. Section 500 of that Act specifies the qualifications for receipt of a parenting payment. Those qualifications require that the person have at least one child, be an Australian resident and satisfy any requirement to enter into an applicable participation agreement. In addition, one of a number of conditions must be satisfied. The relevant condition in this case was that:

the person is not a member of a couple and the person was not a lone parent at the start of the person’s current period as an Australian resident ...

12 Section 503 directs the reader to the provisions of the 1991 Act used for the calculation of parenting payment rates. It provides:

A person’s parenting payment rate is worked out using:

(a) if the person is not a member of a couple – the Pension PP (Single) Rate Calculator at the end of section 1068A (see Part 3.6A); or

(b) [not applicable]

13 The rate of parenting payment is specified in s 1068A which provides, inter alia:

(1) If a person is not a member of a couple, the person’s rate of parenting payment is the pension PP (single) rate.

(2) The pension PP (single) rate is worked out in accordance with the rate calculator at the end of this section.

14 The pension PP (single) rate calculator is set out at the end of s 1068A and comprises a number of modules. Module A sets out the overall rate calculation process which involves the following steps:

Step 1. Work out the person’s maximum basic rate using Module B below.

Step 1A. Work out the amount of pension supplement using Module BA below.

Step 2. Work out the amount per year (if any) of pharmaceutical allowance using Module C below.

Step 3. Work out the amount per year (if any) for rent assistance using Module D below.

Step 4. Add up the amounts obtained in Steps 1, 1A, 2 and 3: the result is called the maximum payment rate.

Step 5. Apply the ordinary income test using Module E below to work out the income reduction.

Step 6. Take the income reduction away from the maximum payment rate: the result is called the provisional annual payment rate.

[emphasis in original]

15 Module E is entitled "Ordinary income test" and provides as follows:

Effect of income on maximum payment rate

1068A-E1 This is how to work out the effect of a person’s ordinary income on the person’s maximum payment rate:

Step 1. Work out the amount of the person’s ordinary income on a yearly basis.

Step 2 Work out the person’s ordinary income free area (see points 1068A-E14 to 1068A-E18 below).

Note: A person’s ordinary income free area is the amount of ordinary income that the person can have without any deduction being made from the person’s maximum payment rate.

Step 3. Work out whether the person’s ordinary income exceeds the person’s ordinary income free area.

Step 4. If the person’s ordinary income does not exceed the person’s ordinary income free area, the person’s ordinary income excess is nil.

Step 5. If the person’s ordinary income exceeds the person’s ordinary income free area, the person’s ordinary income excess is the person’s ordinary income less the person’s ordinary income free area.

Step 6. Use the person’s ordinary income excess to work out the person’s reduction for ordinary income using points 1068A-E19 and 1068A-E20 below.

Note 1: See point 1068A-A1 (Steps 5 and 6) for the significance of the person’s reduction for ordinary income.

Note 2: The application of the ordinary income test is affected by provisions concerning the following:

(a) the general concept of ordinary income (sections 1072 and 1073);

(b) business income (sections 1074 and 1075);

(c) deemed income from financial assets (sections 1076 to 1084);

(d) income from income streams (sections 1095 to 1099D);

(e) disposal of income (sections 1106 to 1112).

16 The term "ordinary income" is referred to in s 1072 which appears in Part 3.10 – "General provisions relating to the ordinary income test". Section 1072 provides:

General meaning of ordinary income A reference in this Act to a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 2 or 3. Note 1: For ordinary income see subsection 8(1).

Note 2: For other provisions affecting the amount of a person’s ordinary income see sections 1074 and 1075 (business income), sections 1076 to 1084 (deemed income from financial assets) and sections 1095 to 1099D (income from income streams).

17 There are a number of relevant definitions in s 8 of the Act:

income, in relation to a person, means:

(a) an income amount earned, derived or received by the person for the person’s own use or benefit; or

(b) a periodical payment by way of gift or allowance; or

(c) a periodical benefit by way of gift or allowance;

but does not include an amount that is excluded under subsection (4), (5) or (8).

income amount means:

(a) valuable consideration; or

(b) personal earnings; or

(c) moneys; or

(d) profits;

(whether of a capital nature or not).

ordinary income means income that is not maintenance income or an exempt lump sum.

18 The concept of income earned, derived or received is defined to cover any income from any means and any source in s 8(2):

A reference in this Act to an income amount earned, derived or received is a reference to: (a) an income amount earned, derived or received by any means; and

(b) an income amount earned, derived or received from any source (whether within or outside Australia).

The certified agreement

19 The evidence before the AAT concerning the "certified agreement" said to govern Ms Richards’ employment at the Wellington Point Hotel was not particularly satisfactory. It appeared from Ms Richards’ evidence that she was shown the agreement in the first week after she began working at the hotel. According to clause 1.1 of the document its title was the "CW Hogan Pty Ltd – Certified Agreement 2003". The header on each page was "CW Hogan Pty Ltd – Certified Agreement 2002". The document bore no indication and there was no evidence that it had been approved by the Australian Industrial Relations Commission.

20 The agreement set out various classes of employee and the rate of payment applicable to each class. The class relevant to Ms Richards appeared to be that set out in clause 3.1.4 as follows:

Hotel Employee Level 3 Work at this level requires employees to have gained significant experience in the hospitality industry. Occupants can demonstrate skills to undertake tasks at a medium level of proficiency to perform to the established standards. Positions at this level are typically performed at a relatively autonomous level with a limited amount of decision making responsibility. Basic supervision and training of staff may be involved at this level and lower level duties when required. Full time operation of gaming devices such as PubTab, PubKeno, or Gaming machines, and cellar duties such as the operation of a forklift. Job titles associated with this classification include: Bar Supervisor, TAB/Gaming Machine Operator, Entertainer, Liquor Barn Supervisor/Bottleshop Supervisor, Bar Attendant Supervisor, Cellarperson (with forklift drivers license), Administrative Officer, etc.

21 Schedule 1 to the agreement was entitled "Classification Structure and Wage Rates". It listed the various rates of pay for each class of employee for periods ending 11 February 2002, 11 February 2003, 11 February 2004 and 11 February 2005. Provision was also made for loaded rates and penalty rates.

22 Clause 6.2 provided for the payment of wages weekly or at such other interval as was determined by the employer. They were to be paid by electronic funds transfer into the account of a financial institution nominated by the employee or by cash or cheque. They were to be paid on a nominated pay day each week or other interval as determined by the employer. There was no provision in the agreement for deductions based upon shortfalls in TAB till takings or any other form of shortfall.

The AAT reasons for decision

23 The AAT began by defining the conditions under which Ms Richards was employed at the Wellington Point Hotel. It said, inter alia (at [4]),

Ms Richards [sic] employment is governed by a certified agreement. The term in issue here is not a term of that agreement. Rather it was an oral term of the agreement between Ms Richards and her employer that she was obliged to make good any shortages in the till. Ms Richards said, and I accept, that a term of this nature was common in her experience in this type of employment setting. Ms Richards’ evidence on this point was not disputed. In any event the material before me includes the employer’s response to a questionnaire sent by Centrelink in January 2006. In answer to a question regarding whether there was any formal agreement regarding the repayment of shortages the answer provided was,

It is a condition of employment in the TAB that all shortages are repaid. This is made [clear] to the employee before they begin their employment and their acceptance of the position is taken as their acceptance of the condition.

The AAT found that although Ms Richards said she was not made aware of the condition before her employment she certainly became aware of it and seemingly accepted it at a very early stage.

24 The AAT referred to evidence by Ms Richards that she had informed the Wynnum office of Centrelink of her new position and of the deduction arrangements. She told the AAT that, in explaining the shortfall deduction arrangements, she asked an officer of Centrelink whether it would affect her pension. She asked whether she would be able to deduct it off her income report to the Department. She was told that she could. The AAT was satisfied that the conversation recounted by her took place. The AAT found that Ms Richards notified Centrelink of the amount of her earnings on a regular basis following this advice. It found that in the period from September 2003 to June 2004 she made good till shortfalls on eight occasions in a total sum of $1,746.50. In the next financial year ending 30 June 2005 she made good shortfall on at least 11 and perhaps 12 occasions in the total sum of $807.75.

25 The AAT added that in June 2005 following a prosecution for criminal conduct, the person responsible for the shortfall of $1,300 in January 2004 made good that loss to the hotel, which in turn paid the sum to Ms Richards in mid June 2005.

26 The AAT identified as the critical issue for determination whether Ms Richards’ ordinary income was the nominal amount calculated by reference to a number of hours at an hourly rate or the actual rate, namely the nominal amount less any shortfall that she had to make good. The AAT held that her employment contract was one in which her wages were determined by reference to three factors:
(i) the number of hours worked in a week;
(ii) an hourly rate; and
(iii) any till shortfall.

The AAT continued (at [19]):

It is unnecessary for present purposes to determine whether it was lawful for the employer to oblige Ms Richards to make good the shortfall, rather the question whether in circumstances where she did make good the shortfall her gross ordinary income was the nominal or the actual amount.

27 The AAT drew a distinction between the concept of income as used in the 1991 Act and in the Income Tax Assessment Act 1936 (Cth): citing Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35 at 42. The AAT said (at [22]):

... the key to the present issue is to ask whether the amounts that went to making up the shortfall in the till were amounts that were received to Ms Richards [sic] own use or benefit. That is so I consider because the definition of gross ordinary income in s 1072 of the Act incorporates the s 8 definition of income relevantly an amount earned, derived or received by a person for the persons [sic] own use or benefit. Thus s 1072 looks at income earned, derived or received for the use or benefit of the person in issue. It is in my view not to the point that s 1072 goes on to speak of "without any reduction". To treat the amounts of shortfall in this way simply recognises the reality that those sums were not received by Ms Richards for her own use or benefit. There was at best a nominal receipt but given that Ms Richards used those sums to satisfy her contractual obligation to make good shortfalls it could not be said that in any real sense she earned, derived or received those sums or that she had the use or benefit of them.

28 The AAT said that the one case where she was able to recover the amount that was not originally paid to her, that being the sum of $1,300, should be treated as income at the time of the receipt.

29 At [27] the AAT said:

In my view the proper analysis of that transaction was that at the time of the shortfall Ms Richards incurred a liability to her employer which reduced her entitlement to receive income by the amount of the shortfall. Given that she did not have the capacity or the income to meet that obligation her employer, in effect, loaned that sum to her and obliged her to repay it in weekly instalments.

The questions of law

30 The questions of law said to have been raised on the appeal were:

1.1 The proper construction and operation of ss 8(1), 8(2) and 1072 of the Social Security Act 1991 (the SS Act);

1.2 Whether the extended definition of ‘ordinary income’ in section 1072 of the SS Act is of no relevance if the facts do not first satisfy the definition of ‘income’ in section 8(1) of the SS Act;

1.3 Whether, on the facts as found by the Tribunal, the Respondent’s ordinary income included the sums subsequently repaid by her to the hotel in respect of TAB till shortages within the meaning of section 8(1) and 1072 of the SS Act;

1.4 Whether, on the facts as found by the Tribunal, the Respondent earned, derived or received for her own use or benefit the sums subsequently repaid by her to the hotel in respect of TAB till shortages within the meaning of section 8(1) and 8(2) of the SS Act;

1.5 The proper construction and operation within the legislative scheme of the phrase "without any reduction" in section 1072 of the SS Act;

1.6 The proper construction and operation of the phrase "own use or benefit" in section 8(1) of the SS Act.

The primary judge’s decision

31 In her reasons for judgment the primary judge considered that the sums representing the TAB till shortfalls did not represent income earned, derived or received by Ms Richards for her own use or benefit. In concluding that the TAB till shortfall deductions did not represent income earned, derived or received by Ms Richards for her own use or benefit her Honour relied upon the following reasons which may be summarised:

1. The repayment of the shortfalls was a fundamental term of Ms Richards’ contract of employment. Her income was determined by reference to three factors namely the number of hours worked in a week, an hourly rate and any till shortfalls.

2. The phrase "own use and benefit" in the definition of income in the Act necessarily implied rights of ownership of the relevant income amounts by the person receiving them.

3. The phrase "own use and benefit" did not contemplate money which although received was repayable to the employer under the employment contract against income earned.

4. The proposition that the shortfall deductions were in some fashion the price that Ms Richards had to pay for having the employment and the entitlement to remaining income would not be sufficient to support a conclusion that the moneys so deducted were for Ms Richards own use and benefit.

5. The obligation undertaken by Ms Richards in this case could be contrasted with payments made by a person as a result of arrangements, otherwise within his or her control, such as outgoings on residential properties which constitute an expense in generating rental income of those properties.

6. A construction of the phrase "own use and benefit" which would catch moneys required to be repaid to the employer is at odds with the purpose of the Act in maintaining a basic level of income for those unable to receive sufficient income.

Grounds of appeal

32 The grounds of appeal were stated as follows:

1. The learned primary judge erred in finding that

1.1. it was open to the Administrative Appeals Tribunal (the Tribunal) to find that the Respondent did not "earn, derive or receive" the part of her wages that was used to repay her employer for shortfalls in the TAB till "for [her] own use or benefit" within the definition of "income" in s 8(1) of the Social Security Act 1991 (the Act), so that the part of the Respondent’s wages used for that purpose should not be characterised as "income" for the purposes of the Act;

1.2 because the Respondent was required to repay shortfalls in the TAB till to her employer, the part of the Respondent’s wages that was used by the Respondent for that purpose could not be said to have been "earned, derived or received" by the Respondent "for [her] own use or benefit" and should therefore not be characterised as "income" for the purposes of the Act.

2. The learned primary judge should have found:

2.1 on the facts as found by the Tribunal, including the facts that the Respondent:

(a) was paid wages by her employer;

(b) was obliged to repay all shortfalls in the TAB till; and

(c) used part of her wages to repay those shortages;

it was not open to the Tribunal to conclude that the Respondent’s income for the purposes of the Act did not include the amounts used by the Respondent to repay to her employer the shortfalls in the TAB till;

2.2 the Respondent having "earned, derived or received" the full amount of her income from her employer and used part of the amount received to repay to her employer the shortfalls in the TAB till, the Respondent’s "income" for the purposes of the Act included any part of the amount "earned, derived or received" by the Respondent that was used for that purpose.

A question of law

33 The question on which this appeal turns is whether the amount of Ms Richards’ wages calculated before deductions for till shortfalls represented, in the words of the Act, "an income amount earned, derived or received" by her for her "own use or benefit". This question necessarily involves the construction of the statutory terms. In Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 at 287 the Full Court set out five general propositions relating to the meaning, construction and operation of statutes and the circumstances in which they raised questions of law or fact. Omitting reference to authorities, the propositions were as follows:

1. The question whether a word or phrase in a statute is to be given its ordinary meaning or some technical or other meaning is a question of law.

2. The ordinary meaning of a word or its non-legal technical meaning is a question of fact.

3. The meaning of a technical legal term is a question of law.

4. The effect or construction of a term whose meaning or interpretation is established is a question of law.

5. The question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law.

34 In Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 at 396, the High Court observed that the distinction between meaning and construction (referred to in propositions 2 and 4) was artificial if not illusory. The distinction was one which had been made by Isaacs J in Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60 at 78. The High Court in Agfa-Gevaert [1996] HCA 36; 186 CLR 389 said (at 397):

If the notions of meaning and construction are interdependent, as we think they are, then it is difficult to see how meaning is a question of fact while construction is a question of law without insisting on some qualification concerning construction that is currently absent from the law.

The Court did not resolve the issue but its observations suggest that the meaning of a statutory word or term is to be treated as a question of law whether it be characterised as the "ordinary" or "non legal technical" meaning of the word or term or the construction given to it.

35 The question raised by the present appeal does not depend upon the perhaps illusory distinction between meaning and construction. It is whether, on the facts as found, Ms Richards had earned, derived or received income for her own use or benefit within the meaning of the Act. That, according to the fifth of the Pozzolanic propositions, is a question of law.

Income amount earned, derived or received

36 The Court was referred to a number of authorities applying the income-based means test for social security benefits under the Social Security Act 1947 (the 1947 Act) and the 1991 Act. The definition of "income" in the 1947 Act did not contain the reference to "gross income" which appears in the 1991 Act. It was construed by the Full Court of the Federal Court in Haldane-Stevenson v Director-General of Social Security [1985] HCA 41; (1985) 7 ALD 467 as referring to net income. In calculating "net income" however expenditure not associated with deriving it was not to be taken into account. So too, in Marsh v Secretary, Department of Social Security (1986) 12 FCR 100, discretionary expenditure out of a training allowance was not taken to reduce the "income" to be assessed for the purpose of unemployment benefit even though the expenditure was related to training.

37 In Secretary, Department of Social Security v Garvey (1989) 19 ALD 348, the Full Court held that loss from one source of income could not be set off against the yield from another source of income. It said (at 351):

In defining "income" the Act was concerned with what amount was available to a pensioner to meet commitments and outgoings after the pensioner had drawn together the net returns of various sources of income. It was not concerned with what amount was left in the pensioner’s hands after that income had been received and had been applied to various commitments and outgoings ...

See also Kear v Secretary, Department of Society Security [1998] FCA 1087. In that case Heerey J struck out as disclosing no reasonable cause of action an appeal from an AAT decision which held receipts from a rental property to be income in the hands of a pensioner notwithstanding expenditure out of the receipts to meet mortgage and rate payments in relation to the property and to discharge an obligation in relation to another property. That conclusion held good under both the 1947 and 1991 Acts.

38 None of the cases cited to the Court were of any real assistance in the determination of the question on this appeal. The 1947 Act cases say that expenditures unrelated to the gaining of the relevant income are not to be taken into account in determining net income. A fortiori expenditures of that character have no part to play in determining "gross income" under the 1991 Act.

39 The purpose of the benefits provided under the 1991 Act, like those provided under the 1947 Act, is to "maintain a basic level of income for those who [are] unable to receive sufficient income to provide for themselves": Garvey 19 ALD 352. The Act is a remedial provision and calls for no narrow or pedantic construction: Rose v Secretary, Department of Social Security (1990) 21 FCR 241 at 244.

40 In the present case the question is what was the gross ordinary income earned, derived or received by Ms Richards for her own use or benefit. The answer is to be found in the terms of her employment contract. Although the AAT drew a distinction between the terms of the certified agreement and the oral term regarding the payment of shortfalls, the oral term was also part of the contractual arrangement under which Ms Richards was employed. Both the certified agreement and the oral term were announced to Ms Richards after she started work and she accepted them as the basis upon which she was employed. Their overall effect was that (questions of legality aside) she agreed to receive wage rates set out in the certified agreement less any shortfall in the till takings.

41 The shortfall payment was integrally related to the work Ms Richards was employed to perform. It was for the benefit of her employer. It was not the price to Ms Richards of a benefit provided to her. For example, an amount deducted by an employer for meals and accommodation or as repayments off a debt owed by the employee to the employer would each ordinarily be "an income amount earned, derived or received by the [employee] for the [employee’s] use or benefit" within the definition of "income" in s 8 of the Act. In such a case the deduction would simply provide a means for the employee to pay for benefits for which he or she would otherwise have had to pay out of his or her income or other moneys at his or her disposal.

42 No point is made of the fact that some of the shortfall was recovered over a number of weeks at a rate agreed between Ms Richards and her employer. The AAT treated that as "in effect" a loan of the shortfall amount from the employer to be paid in weekly instalments.

43 Given the beneficial intention of the legislation, the construction of the term "ordinary income" does not require the dissection of elements of the remuneration arrangement between employer and employee so that contingent variations in the income are not to be taken into account simply because on one view they might be characterised as deductions. The gross income earned, derived or received by Ms Richards during the relevant period was the amount of the wages specified in the certified agreement less the shortfall. The amount later paid back to her by her employer after recovery of proceeds of the theft by a third party would, of course, be income to be declared for the purpose of the parenting payment at the relevant time.

44 In our opinion her Honour was correct and the appeal should be dismissed with costs.

I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices French, Moore & Lindgren.

Associate:
Dated: 3 June 2008

Counsel for the Appellant:	Mr P Hanks QC with Ms E Ford
Counsel for the Appellant:	Australian Government Solicitor
Counsel for the Respondent:	Mr RW Gotterson QC with Mr CD Coulson
Solicitor for the Respondent:	Welfare Rights Centre

Date of Hearing:	12 May 2008
Date of Judgment:	3 June 2008