JUDGMENT No. 6F&/ B77. CATCHWORDS Social Security - General Matters and Statutory Pensions - Rate of pension - "Income" - of "protected person" under Public Trustee Act 1958 (Vic.) - payments received by Public Trustee within defined meaning of "income" for purposes of Part III and Part VII of the Social Security Act 1947. Social Security Act 1947 - ss. 112, 114, 124, 125 Repatriation Act 1920 Public Trustee Act 1958 (Victoria) - ss. 49, 50, S4H, 54I, Sa, 57 Pisak v. Hegedus £1383] 2 V.R. 386 ROBERT GEORGE FLANNERY v. SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY No. VG7 of 1987 Sweeney, Keely and Jenkinson JJ. Melbourne 7 December, 1987 IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY ) No. VG? of 1987 GENERAL DIVISION ) ON APPEAL from the Administrative Appeals Tribunal BETWEEN: ROBERT GEORGE FLANNERY Applicant AND: SECRETARY TO THE DEPARTMENT. OF SOCIAL SECURITY Respondent MINUTE OF ORDER JUDGES MAKING ORDER: Sweeney, Keely and Jenkinson JJ. WHERE MADE: Melbourne DATE OF ORDER: 7 December, 1387 THE COURT ORDERS THAT: l. The appeal be allowed. 2. The decision in writing dated 24 December 1986 of Administrative Appeals Tribunal be varied uo the by substituting for the word and figures Z September 1984" in paragraph l(a) thereof the word and figures November 1985" and by substituting for the "13 word "pension" in paragraph 1(b) and in paragraph 2 thereof the word "benefit". 3. The respondent's costs of the appeal be paid by applicant. Note: Settlement and entry of orders is dealt with in Order of the Federal Court Rules. the IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 7 of 1987 ) ) GENERAL DIVISION ON APPEAL from the Administrative Appeals Tribunal BETWEEN ROBERT GEORGE FLANNERY Applicant AND: SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY Respondent CORAM : Sweeney, Keely and Jenkinson JJ. PLACE : Melbourne DATE : 7 December, 1987 REASONS FOR JUDGMENT Sweeney, J. I agree with the orders proposed by Jenkinson, J. and with his reasons for judgment. I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Sweeney Dated: 7 December, 1987 = — => ee ey cee Associate IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 7 of 1987 ) ) GENERAL DIVISION ON APPEAL from the Administrative Appeals Tribunal BETWEEN ROBERT GEORGE FLANNERY Applicant AND=>: SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY Respondent CORAM : SWEENEY, KEELY and JENKINSON JJ. PLACE : MELBOURNE DATE : 7 DECEMBER, 1987 REASONS FOR JUDGMENT KEELY J.: I have had the advantage of reading the reasons for judgment prepared by Jenkinson J. I agree with them and with the orders proposed by him. I certify that this page is a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Keely Associate: \ Date: 7 December, 1987 IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DISTRICT REGISTRY » No. VG7 of 1987 GENERAL DIVISION ON APPEAL from the Administrative Appeals Tribunai BETWEEN: ROBERT GEORGE FLANNERY Applicant AND: SECRETARY TO THE DEPARTMENT. OF SOCIAL SECURITY Respondent CORAM: Sweeney, Keely and Jenkinson JJ. DATE: 7 December, 193987 REASONS FOR JUDGMENT JENKINSON J. Appeal from a décision of the Administrative Appeals Tribunal. The applicant and Shirley Jean Flannery lived in the same house in the State of Victoria during the period with which this appeal 1s concerned, from 23 November 1382 unt:1 18 November 1985. On the former date the applicant made a claim for a special benefit, for payment of which provision 1s made in Division 6 of Part VII of the Social Security Act 1947, which included at relevant times these provisions: 2. "124. (1) Subject to sub-section (2), the Director-General may, in his discretion, grant a special benefit under this Division to a person - (a) who is not in receipt of a pension under Part III or IV, .... (b) who 1s not a person to whom an unemployment benefit or a sickness benefit 15 payable; and (c) with respect ta whom the Director-General is satisfied that, by reason of age, physical or mental disability or domestic circumstances, or for any other reason, that person 18 unable to earn a sufficient livelihood for himself and his dependants (if any). 125. The rate of a special benefit payable to any person shall be such rate as the Director-General, in his discretion, from time to time determines, but not exceeding the rate of the unemployment benefit or the sickness benefit which could be paid to that person if he were qualified to receive it." The applicant satisfied at relevant times the criteria specified un sub-section 124(1). He was unable to earn a livelihood because Mes. Flannery's physical disabilities during the relevant pericd required that she be constantly attended and the applicant provided that attendance in discharge of a moral obligation which the respondent and the Administrative Appeals Tribunal recognised. The applicant and Mrs. Flannery had cohabited as though man and wife since 1956. What is in question is the rate of special benefit payable. The rate of special benefit is to be determined in exercise of a discretion, but not exceeding the rate of the unemployment benerit or the sickness benefit which could have been paid to the applicant if he had been qualified to receive it. At relevant times s.l112 of the Social Security Act 1947 prescribed the rate of each of those latter two benefits, varying each in accordance with several circumstances. Sub-section 114(1) made provision for the reduction of the rate per week of each benefit payable to a person whose income should exceed 320 per week, the amount of the reduction being proportioned to the amount of that income. It was provided by sub-section 114(3) that for the purposes of the application of sub-section 114(1, in relation ts a married person that income should anclude the income of the person s spouse, except in circumstances which dco not obtain ain this case. The expressions "married person" and "Spouse" were 30 defined as to comprehend the applicant and Mrs. Flanner7 respectively. What 15 1n question is whether certain amounts are income of Mrs. Flannery, within the meaning of that word in sub-section 114(3). At relevant times the word "income" was defined to mean in Part VII in relation to a person, unless the contrary intention should appear, "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 whatsoever, within or outside Australia, and includes any periodical payment or benefit by way of gift or allowance. . ane At all material times the definition made express provision toa exclude from the meaning of the word "income" a pension payable under the Repatriation Act 1920. Mrs. Flannery was eligible for a fortnightly pension payable under the Repatriation Act 1920 by 4. reason of her being the widow of a member of the Forces. The fortnightly pension was paid, not to Mrs. Flannery personally, but to the Public Trustee for the State of Vactoria. At relevant times Mrs. Flannery owned a Fund of about $50,000. Being at all material times an infirm person and therefore a protected person, within the respective meanings of those expressions inthe Public Trustee Act 1958 (Vic.), Mrs. Flannery had no power of control over her property, the "general care protection and management" of which was committed by that Act to the Public Trustee. That was why her pension was paid to the Public Trustee, and why the fund was under his control. Section 54H of the Public Trustee Act 1958 provided at relevant times: "(1) Until a protected person has ceased to he a protected person such person shall be deemed uncapable of dealing with or transferring or alienating or charging his moneys or property or any part thereof or of becoming liable under any contract without the order of the court or the written consent of the Public Trustee or his committee ias the case may be, except aS to moneys or property which have been paid or delivered toa patient by the Public Trustee in the exercise of the discretion vested in him by section fifty-four A of this Act. 12) For the purpose of this section and section 54I, the acceptance of payment of the whole or any part of a debt shall be deemed to be a dealing with property." Section 54I at relevant times provided: "Except as in the last preceding section provided every dealing transfer alienation or charge by any protected person shall be void and of no effect, and the moneys or property the subject of such dealing transfer 5. alienation or charge shall be recoverable by the Public Trustee or his committee on application to a judge of the court in chambers 1m a summary way, and such judge shall have jurisdiction to make such order in the matter and as to costs as in his discretion he deems just: Provided that nothing in this or the last preceding section shall render invalid void or of no effect any dealing transfer alienation or charge by any such protected person made for adequate consideration with to or in favour of any other person who proves that he has acted in good faith and was unaware that such person was a protected person." Mrs. Flannery was not shown to have been at any relevant time a "patient" within the meaning of that word in the Public Trustee ct 1358. It was the submission of Mr. Bell of counsel for the applicant that the income which derived from the investment of the fund by the Public Trustee was not within the meaning of the word "income" in sub-section 114(3) of the Social Security Act 1947. This submission had been advanced to, but rejected by the Administrative Appeals Tribunal. The fund to which I have referred was held by a bank to the credit of Mrs. Flannery when she became a protected person and un July 1983 the Public Trustee received payment of these moneys from the bank, pursuant to the provisions of the Public Trustee Act 1958. The Public Trustee invested the moneys as part of a4 fund called the Common Fund kept in the books of the Public Trustee. The Public Trustee Act 1958 imposed on the Public Trustee a duty to "undertake the general care protection and 6. management of the estates of all protected persons in Victoria (s.49(1) of the Public Trustee Act 1958), and the more particular duty "subject to this Act to take possession and care of recover collect preserve and administer the property and estates of all protected persons in Victoria and generaliy to manage their affairs and to exercise all rights statutory or otherwise which such persons might themselves exercise if they were of full capacity" (s.49(2) of the Public Trustee Act 1958). By s.50 of that Act the Public Trustee was given power, "subject to this Act un the name and on behalf of a protected person", inter alia to collect receive and recover income of and moneys due or which may become due to the estate of any such a protected person, to invest any moneys in any security in which trustees may by law invest, to pay debts, to bring and defend legal proceedings in the name of any such a protected person, and generally todo allacts and exercise all powers with respect to the estate as effectually and in the same manner as the protected person might have done if he or she were not under a legal disability. By sub-section 50:1) the Public Trustee is empowered in his discretion to invest any moneys in his hands either - "(a) on the separate account of the estate trust property or person to which or whom the moneys belong; or (b) (1f the moneys are not directed to be invested im some other specified manner and investment in the Common Fund 15 not specifically prohibited by the terms of the trust governing the said moneys) as part of a fund to be called the 'Common Fund' to be established and kept 1n the books of the Public Trustee." Both the fund of which the Public Trustee took possession Mrs. received each fortnight on her behalf were invested by him in Common Fund as they were received. The following provisions Flannery became a protected person and the pension 7. the Public Trustee Act 1354 should be noticed: o ll s.56(7), "Investments made from moneys forming part of the Common Fund shall not be made on account of or belong to any particular estate trust property or person, but the Public Trustee shall cause to be kept in the books of che Public Trustee an account showing at all times the current amount at credit in the Common Fund on account of each estate trust property or person." (8), (9): "(7) The Public Trustee may in his discretion at any time withdraw from the Common Fund any amount at credit in the Common Fund on the account of any estate trust property or person and may invest such amount on the _ separate account of that estate trust property or person. 18) Amounts so withdrawn trom the Common Fund shall as from the date of such withdrawal cease to have any claim for anterest ofr otherwise from the Common Fund. (9) No capital appreciation or depreciation in the value of any investments made from the Common Fund shall be deemed or taken to increase or diminish the amount at credit in the Common Fund on the account of any estate trust property or person, and on the withdrawal from the Common Fund of any amount invested therein the estate trust property or person in question shall be entitled to he credited with the actual amount which was 50 invested without regard to any such appreciation or depreciation." when he the of S.57(1), (2), (3): "(1l) Interest received from the investment of the moneys forming part of the Common Fund shall be paid into an account to be called the 'Interest Suspense Account' and shall be allocated therefrom as hereinafter provided. (2) On each amount at credit in the Common Fund interest at the appropriate rate fixed from time to time by the Public Trustee shall at such times and intervals as the Public Trustee determines be allocated and paid out of the Interest Suspense Account to the credit of the estate trust property or person entitled for the time being to the interest on the said amount; and the Public Trustee may fix different rates of interest according to the source and nature of the different amounts invested in the Common Fund, the periods for which they are so invested and such other factors as the Public Trustee considers relevant. (3) No estate trust property or person shall be entitled in respect of any amount at credit in the Common Fund to any further or other interest than the interest allocated and paid as provided in the last preceding sub-section." The evidence was that the allocation out of the Interest Suspense Account to the credit of each estate trust property or person entitled for the time being to the interest on each amount at credit in the Common Fund was made twice a year. All interest s0 allocated was immediately re-invested in the Common Fund. The allocation, pursuant to sub-section 57(2), of what the sub-section itself calls "interest" on the amount at credit in the Common Fund on account of Mrs. Flannery constitutes in my opinion a derivation by her of profits, and for her own benefit, 3. in the sense contemplated by the definition of "income" for the purposes of Part VII of the Social Security Act 1947. Mr. Bell denied that the accretion to the amount to Mrs. Flannery's credit in the Public Trustee s accounts which each such an allocation effected was within the defined meaning of the word "income" in Part VII, because in his submission the accretion conferred on Mrs. Flannery no entitlement to any money or chose in action. By reason of the provisions of the Public Trustee Act 1958 her status as a protected person deprived her of all power to deal with any accretion to her property, so that 1t could not be said in respect of such an accretion that anything had been earned, derived or recelved by her for her own use or benefit, according to the submission. But the provisions of the Public Trustee Act 19532 present no impediment to the passing of property to a protected person except the impediment which the protected person 53 incapacity herself to deal with moneys and other property raises. Upon allocation of interest pursuant to sub-section 5712) to the credit of the protected person, that amount of interest becomes her property, 1m my opinion. She could not herself accept payment of that amount while she remained a protected person (5.54H); and if - as the evidence showed was the case - the interest 1s added immediately after the allocation prescribed by sub-section 57(2) to the amount at credit in the Common Fund on account of the protected person, 1t will thereupon merge in that Fund (5.56\3)). But the indebtedness, evidenced in the books of the Public Trustee, in that amount of interest to the protected person 1s at the moment of allocation her property, in my opinion. The Public Trustee holds no interest in her property, not even the bare legal estate of a trustee. His custody of her property 1s the custody Lo. = of a bailiff or a statutory agent. (See Pisak v. Hegedus £1382] 2 V.R. 386 at 388-389.) When investment of her money 15 made as part of the Common Fund the nature of her proprietary right may be transmuted (s.56(3)), but 1t 1s unnecessary for present purposes to determine in what way. At the moment of allocation of interest, pursuant to sub-section 57(2), there was in my opinion a derivation of profits by the protected person for her own benefit, which brings the amount of interest allocated within the defined meaning of income for the purposes of Part VII of the S3o0cial Security Act 19547. It was derived for her own benefit notwithstanding her legal incapacity to deal with 1t personally, in my opinion. Because the Administrative Appeals Tribunal had been informed by the representatives of the parties that the exclusion of pension payable under the Repatriation Act 1320 from the defined meaning of the word "income" in Part VII of the Social Security Act 1947 had ceased as from 20 September 1984, paragraph 1 of the Tribunal's decision was expressed thus: "The decision under review is set aside and the matter is remitted tc the Secretary to the Department of Social Security for reconsideration in accordance with a direction that: - (a) special benefit be paid to the applicant pursuant to Division 6 of Part VII of the Social Security Act 1947 for the period from 23 November 1983 to 20 September 1984 inclusive; and (b) the rate of the pension be calculated in accordance with the reasons stated by the Tribunal for this decision." ll. The parties are now in agreement that that exclusion subsisted throughout the period with which the Tribunal was concerned, namely from 23 November 1983 until 18 November 1585. The pension paid to Mrs. Flannery under the Repatriation Act 1320 being excluded from the "income" which 14 attributed, for the purposes of Part VII of the Social Security Act 1947, to the applicant, his entitlement to special benefit will subsist throughout the period with which the Tribunal was concerned. It will accordingly be necessary to allow the appeal and to order that paragraph l(a) of the decision in writing of the Tribunal be varied by substituting for the word and figures "20 September 1984" the word and figures "18 November 1985". By a slip reference 15 made in the decision to the rate of "pension", which will be amended to "benefit". On 16 January 1984 the applicant applied for a spouse carer's pension. It was a condition of qualification to receive such a pension that the person for whom care 15 provided be "an age pensioner or an invalid pensioner" or a person who "15 recelving a rehabilitation allowance under Part VIII". (3ocial Security Act 1947, s.33.) It was common ground that at no relevant time was Mrs. Flannery an age pensioner or qualified to receive an age pension and that she was not at any relevant time receiving a rehabilitation allowance. Concerning fulfilment of the other condition the Tribunal observed: "On 16 January 1984 the applicant had applied for a spouse carer's pension. His application had been rejected on the ground that his spouse was not 1n receipt of an age or invalid pension or receiving a rehabilitation allowance, a prerequisite for qualification for a Spouse Carer's pension. It 1S our view that, if Mrs Flannery had been granted an 12. invalid pension and had not ceased to be qualified to receive it, she continued to be an invalid pensioner throughout the period with which we are concerned even though her income at all times during that period may have been such that the amount of the pension payable to her was reduced to nil. That being so, we consider that the applicant was qualified to receive a spouse carer 5 pension." The Tribunal concluded, however, that spouse carer 5 pension was not payable to the applicant at any relevant time because the payments of pension under the Repatriation Act 1320 to the Public Trustee for Mrs. Flannery were, for the purposes of calculating the rate of spouse carer s pension payable to the applicant, to be included in the applicant's income. For the purposes of Part IIt of the Social Security Act 1947 pensions payable under the Repatriation Act 1920 were not excluded from "income", as they were for the purposes of Part VII. Spouse carer's pension fell within Part IIT. Mr. Bell, while admitting that a pension paid under the Repatriation Act 1920 to Mrs. Flannery would have formed part of the applicant's income for the purposes of calculating the rate of spouse carer's pension, submitted that the payments of pension under the Repatriation Act 1320 to the Public Trustee for her benefit did not fall within the defined meaning of the word "ancome". At relevant times the definition of that word for the purposes of Part III was in the same terms as the definition I have quoted of the same word for the purposes of Part VII, and Mr. Bell advanced the same submissions in support of his contention that payments of pension, as well as amounts allocated in respect of interest on the amount to Mrs. Flannery''s credit in the Common 13. Fund, which were received by the Public Trustee were not within the meaning of the word "1income" for the purposes of Part III. For the reasons already given in relation to the claim for special benefit, that contention should in my opinion he rejected. The pension payments and the interest credited did constitute income for the purposes of Part III, in my opinion. Ido not agree with the opinion expressed in the Tribunal's reasons for decision that Mrs. Flannery "ccntinued t= be an invalid pensioner", for the purposes of determining whether the applicant was qualified to receive a spouse carer 5 pension, after the amount of the invalid pension payable to her "was reduced to nil". At relevant times "pensioner" in Part III was defined to mean, unless the contrary intention appeared, "a person im receipt of a pension under this Part". I have found nothing in the Social Security Act 1947 to indicate a contrary intention. Accordingly I conclude that, because at no relevant time was Mrs. Flannery in receipt of anage or invalid pension, one of the conditions of qualification to receive a spouse carer's pension was not fulfilled in the applicant's case. Although the decision of the Tribunal 15 to be varied to the applicant s advantage, none of the disputed questions involved 14. in the appeal was decided against the respondent, who should have an order that the applicant pay his costs of the appeal. Counsel for the Applicant Solicitor for the Applicant Counsel for the Respondent Solicitor for the Respondent Dates of Hearing I certify that this and the thirteen preceding pages are a true copy of the Reasons for Judgment herein of The Honourable Mr. Justice Jenkinson./, Associate Dated: 7 December, 1987 Mr. K.A. Bell Legal Aid Commission or Victoria Mr. R.R.S. Tracey Australian Government Solicitor 22 and 23 June, 13857