CATCHWORDS ADMINISTRATIVE LAW - social security - assets test — disposal of assets — whether 'consideration' received - expectation of free accommodation - whether enforceable agreement necessary. WORDS AND PHRASES - 'consideration'. Social Security Act 1947 s.6AC, sub-secs.(10) and (11) GEORGINA FRENDO v SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY No. VG 177 of 1987 Woodward J. Melbourne 2 December 1987 - oe = 3 DEC 1987 TiN d IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 177 of 1987 GENERAL DIVISION ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: GEORGINA FRENDO Applicant and SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY Respondent MINUTES OF ORDER COURT: Woodward J. DATE: 2 December 1987 PLACE: Melbourne THE COURT ORDERS THAT: The appeal be dismissed. (NOTE: Settlement and entry of orders is dealt with by 0.36 of the Federal Court Rules). IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 177 of 1987 ee ee ee GENERAL DIVISION ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL BETWEEN: GEORGINA FRENDO Applicant and SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY Respondent COURT: Woodward J. DATE: 2 December 1987 PLACE: Melbourne REASONS FOR JUDGMENT This is an appeal on a question of law from a decision of the Administrative Appeals Tribunal. The Tribunal affirmed a decision, made on behalf of the respondent, that in calculating the amount of the applicant's invalid pension, a gift of $30,000 each to her son and daughter should be taken into account as "property disposed of" by the applicant, which should be included in the value of the property of the applicant for purposes of applying an assets test. The facts, and the relevant provisions of the Social Security Act 1947 ("the Act"), are set out in detail in the Tribunal's decision. The point of law argued before this Court is a short one and a summary of facts and directly relevant legislation will suffice. The applicant and her family are Maltese and adhere to traditional Maltese views about the respective obligations of parents and children. The applicant and her husband, although relatively young (the applicant is 42), are both in poor health. They have a son, Ray, aged 22 and a daughter, Jane, aged 17. In 1985 Ray, although only 19, was married. In the course of family discussion it was decided to sell the family home in St. Albans, which the applicant and her husband owned. There were a number of reasons for this, the chief one being that the applicant and her husband could not look after it without the help of their children. It seems that the son wanted his own home and the daughter was thinking of going to Malta to live with grandparents. This she did early in 1986. In the course of discussion about the sale, it was agreed that the parents would use money from the sale to help secure the future of their children and, in return, the son would welcome his parents into the house he would build with the assistance of their gift. In the event, the house was sold in August 1985. In December 1985 the applicant gave Ray $30,000 and the following month she paid another $30,000 into a bank account for Jane which is administered by Ray as trustee. So far as Ray 1s concerned, the applicant's motives for the gift seem to have included, (a) a wish to help him secure his future, and (b) a desire to compensate him for his willingness to provide a home for his parents and to assist them in their poor state of health. The evidence made it clear that Ray would have done what he could for his parents without any reward, but the $30,000 would no doubt make it easier for him to provide accommodation. In the case of Jane, the applicant's reasons for her gift seem to have been (a) a desire to treat her children equally, (b) the need to provide for a future dowry - a matter of obligation and pride among Maltese, and (c) a wish to provide some support for her daughter in the short term. Counsel for the applicant argued that the gift to Ray was for the benefit of the applicant and her husband, and the gift to Jane was inextricably bound up, by ties of obligation and fairness, with the gift to Ray. The questions of law which the Court is called on to determine arise from sub-secs.(10) and (11) of s.6AC of the Act. Sub-sec.(10), so far as it is relevant, provides, "For the purposes of this section, a person shall be taken to have disposed of property of the person if the person engages in a course of conduct ...... that diminishes, directly or indirectly, the value of the property of the person where ~ (a) the person receives no consideration, or inadequate consideration, in money or money's worth; or (b) ..... and the amount of that disposition of property shall be taken to be an amount equal to the amount of the diminution in the value of that Property reduced by the consideration (if any) received by the person in respect of that disposition." Sub-sec.(11) 18 in the same terms, except that it refers to income rather than property. It will be sufficient to deal with sub-sec.(10) as representing both sub-sections. The finding of the Tribunal was that the applicant had received no consideration in money's worth for either of the gifts to her children. It held that the word 'consideration' is a technical legal term with an established meaning, and there is no reason to think it should have any other meaning in the present context. Thus there must be a legally enforceable agreement for a future benefit before it can be said that the promise of such a benefit amounts to 'consideration' within the meaning of the Act. The Tribunal found that, in making the family arrangements by which the applicant and her husband would in due course live with their son in his home, "there was never any intention between the parties to enter into legal relations". That finding was not challenged in this appeal. Counsel for the appellant argued that it was not necessary to have a legally enforceable agreement in order to show that 'consideration' had been received. He submitted that the word 'consideration' should not be given any technical legal meaning in the present context, but should be treated as having one of the ordinary meanings attributed to it by the Shorter Oxford Dictionary, namely - "sae 4. The taking into account of anything as a reason or motive; a fact or circumstance taken, or to be taken, into account. 1460. 5. Something given in payment; a reward, remuneration; a compensation 1607 ...." Thus, it was said, a promise to provide accommodation, or its actual provision, though not legally enforceable, could amount to consideration within the meaning of the Act. It would be something done by way of payment, reward or compensation for the gift. Counsel based this submission on the principle of statutory interpretation that words are to be given their plain and ordinary meaning unless it can be shown that the words are a 'term of art'. To adopt the language of Pollock B in Grenfell v Inland Revenue Commissioners (1876) 1 Ex D 242 at 248, if a statute contains language which is capable of being construed in a popular sense, then the statute "is mot to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning, of course, by the words "popular sense" that sense which people conversant with the subject matter with which the statute is dealing would attribute to it." The difficulty in applying this approach to the present case is that I doubt if 1t can be said that the word 'consideration' has a "popular sense" today, when used to mean a reward or compensation. In that sense it has an archaic ring to it, as in the example quoted 1n the Shorter Oxford Dictionary - "They hoped that I would give them some consideration to be carryed in a chaire to the toppe". In my view the immediate and natural effect of a reference in legislation to ''consideration' is to direct the mind of the reader towards the law of contract where, for hundreds of years, the word has had a special meaning. A closer examination of the context could lead to a different result, but when the word is used, as it is here, in the sense of a return or balancing factor for the diminishment of a person's assets, it is difficult to escape the conclusion that it is used in a technical, legal sense. I was referred, by consent, to the Second Reading Speech of the Minister who introduced the Social Security and Repatriation (Budget Measures and Assets Test) Bill 1984, which contained the immediately relevant legislation. The Minister said, "The Bill contains provisions to ensure that the income or assets test is not circumvente Yy pensioners depriving themselves o income or _ assets without receiving adequate value in return. Similar provisions apply in the current income test but, in the absence of an assets test, they have had limited effect. However, to allow for modest gifts, such as to relatives or charities, pensioners will be permitted to dispose of assets to the value of $2,000 if single or $4,000 combined for a Married couple, in each year without affecting pension entitlement. As announced by the Prime Minister in the House on 1 June 1984, any gifts or other forms of divestment which occurred on or after that date can affect pension once the test is introduced. These provisions will not, however, prevent pensioners selling or reducing their assets for legitimate reasons, such as_ buying consumer goods, maintaining or improving their homes, or financing holidays. Their purpose is to ensure that people cannot avoi the test, an thereby continue to receive a pension, b transferrin or iftin their assets to family or friends. Public subsidy of such arrangements is not a purpose of the pension system." (Underlining added.) Thus the Ministerial policy expressed in the words "without receiving adequate value in return" has_ been converted by the legislative draftsman into "... receives no consideration or inadequate consideration, 1n money or money's worth ..." There are sound reasons why the draftsman would choose this term well known to the law. In the first place it should make for greater certainty of interpretation. Secondly, it comprehends in a single word both a present benefit and the promise of a future benefit. Thirdly, it covers both an act and a forbearance. Finally it underlines the requirement that the "adequate value" received must be "in return" for the disposal of assets - the concept of a bargain is highlighted. There is, of course, authority for the common-sense proposition that, when a well-known legal term is used in a statute, it will be presumed (unless a contrary intention can be shown) that the term bears its normal legal meaning; see Attorney-General for NSW v Brewery Employees Union of NSW (1908) 6 CLR 469 at 531. Accordingly I take the view that, if a pensioner disposes of property, then to escape the effect of sub-sec.(10) of s.6AC of the Act, he or she must receive consideration, in the sense recognized by the law of contract of an act, forbearance or promise sufficient to establish the existence of a binding contract. In the present case it was conceded that there was, at most, a family understanding for the future provision of accommodation, which did not result in any immediate benefit or enforceable future right for the applicant. In these circumstances I find that the decision of the Administrative Appeals Tribunal on the point of law was correct and the appeal must be dismissed. I certify that the eight (8) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward Associate Dated: 2 December 1987 Counsel for the Applicant: Mr K. Bell Solicitor for the Applicant: Legal Aid Commission of Victoria Counsel for the Respondent: Mr R. Tracey Solicitor for the Respondent: Australian Government Solicitor