CATCHWORDS
ADMINISTRATIVE LAW - appeal from the Veterans' Appeal Division of the Administrative Appeals Tribunal - proper construction of s46AB and s46AD of the Veterans' Entitlement Act 1986 (Cth) - whether distributions paid in respect of investment product prior to the purchase by the pensioner can be taken into account in the calculation of the ordinary income of that pensioner for the purpose of s46AD - "holders of the product" referred to in the definition of "distributions" in s46AD are the generic class of all holders of the relevant investment product.
Veterans' Entitlements Act 1986 (Cth) ss 5H, 42, 45ZK, 46AA(2), 46AB, 46AC, 46AD, 56D, 57(2), 57B, 57D, 57E and 175(2)
Re Gemmell and Secretary, Department of Social Security (1995) 38 ALD 707
No SG 60 of 1995
REPATRIATION COMMISSION v DAVID RALPH BOARDMAN and JOAN MARIE BOARDMAN
Branson J
Adelaide
1 March 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No SG 60 of 1995
)
GENERAL DIVISION )
ON APPEAL from the Veterans' Appeals Division of the Administrative Appeals Tribunal constituted by Mr B H Burns (Deputy President), Mr B C Lock and Dr J Y Hancock (Members)
BETWEEN:
REPATRIATION COMMISSION
Applicant
- and -
DAVID RALPH BOARDMAN and JOAN MARIE BOARDMAN
Respondents
MINUTES OF ORDER
CORAM: Branson J
PLACE: Adelaide
DATE: 1 March 1996
THE COURT ORDERS THAT:
1. The appeal is allowed and the decision of the Administrative Appeals Tribunal of 11 August 1995 is set aside.
2. The decision of the Repatriation Commission of 14 December 1993 is affirmed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No SG 60 of 1995
)
GENERAL DIVISION )
ON APPEAL from the Veterans' Appeals Division of the Administrative Appeals Tribunal constituted by Mr B H Burns (Deputy President), Mr B C Lock and Dr J Y Hancock (Members)
BETWEEN:
REPATRIATION COMMISSION
Applicant
- and -
DAVID RALPH BOARDMAN and JOAN MARIE BOARDMAN
Respondents
REASONS FOR JUDGMENT
CORAM: Branson J
PLACE: Adelaide
DATE: 1 March 1996
This is an appeal from the Veterans' Appeals Division of the Administrative Appeals Tribunal ("the Tribunal"). The issues involved in the appeal are the proper construction of ss46AB and 46AD of the Veterans' Entitlements Act 1986 (Cth) ("the Act").
FACTUAL BACKGROUND
The respondents, Mr and Mrs Boardman, are each in receipt of service pensions payable under Part III of the Act. They have at all times complied with the requirements of the Repatriation Commission ("the Commission") to provide information concerning other income and assets acquired by them to allow the Commission to determine the appropriate levels of their respective pensions.
The respondents jointly purchased 400 Commonwealth Bank ordinary shares on 28 August 1991. They reinvested dividends paid on the shares and consequently received 13 further shares on 13 April 1992, 15 further shares on 30 October 1992, 12 further shares on 30 April 1993 and 11 further shares on 27 October 1993.
On or about 10 September 1993 the respondents received a standard form letter on the letter head of the Minister for Finance, the Hon Ralph Willis M.P., and apparently signed by him. The letter invited shareholders of the Commonwealth Bank to take part in "another opportunity for you and the Australian public to take part in an offer of shares in the Commonwealth Bank". In November 1993 the respondents jointly purchased 370 shares at a price of $9.35 per share from the offer referred to in the Minister's letter. On 29 April 1994 they gained a further 26 shares as a consequence of dividend reinvestment.
On 14 December 1993 the Commission, apparently being satisfied by reason of the respondents' ownership of Commonwealth Bank shares that the rate at which the service pensions were being paid to the respondents was more than the rate provided for by the Act, determined that such rate should be reduced to a rate specified in the determination (see s56D of the Act). Section 57(2) of the Act authorises a pensioner who is dissatisfied with a decision of the Commission reducing the rate of a service pension to request the Commission to review the decision. The respondents requested such a review. The Commission reviewed the decision and on 28 January 1994 affirmed it (see s57B of the Act). The written record of the Commissions' decision on review was provided to the respondents (see ss57D and 57E of the Act).
On 4 February 1994 Mr Boardman, on behalf of the respondents, applied to the Tribunal, pursuant to s175(2) of the Act, for a review of the decision affirmed by the Commission on 28 January 1994.
The Tribunal conducted a review in this matter and on 11 August 1995 set aside the decision of 14 December 1993 and remitted the matter back to the Commission. This is an appeal against that decision of the Tribunal.
LEGISLATIVE FRAMEWORK
Service pensions are dealt with in Part III of the Act. Division 7 of Part III contains provisions for the calculation of the rate of service pensions. As Mr Boardman is a veteran with a dependent child, s42 of the Act directs that the respondents' rate of pension is to be worked out by reference to the Rate Calculator at the end of s42 of the Act. That Rate Calculator provides by Module E for "ordinary income" to be taken into account in calculating a rate of pension. Section 5H of the Act contains definitions relevant to the income test, including a definition of "ordinary income". Nothing turns on those definitions in this case.
Part IIIB of the Act contains provisions applicable to service pensions and income support supplement. Section 45ZK of the Act has the effect of providing, amongst other things, that, for the purpose of income tests, a person's ordinary income includes amounts that are taken to be ordinary income of the person under Division 2 of Part IIIB. Division 2 of Part IIIB of the Act includes in Subdivision AA provisions dealing with managed investments and listed securities. The Subdivision applies to investments in the form of listed securities if the investments were acquired after 18 August 1992 (s46AA(2)). It is agreed in this case that the Commonwealth Bank shares held by the respondents are listed securities within the meaning of Part IIIB of the Act, and that some of the Commonwealth Bank shares held by them were acquired after 18 August 1992. These shares will hereafter be described as "the relevant Commonwealth Bank shares."
Section 46AB of the Act, which appears in Subdivision AA of Division 2 of Part IIIB of the Act, provides as follows:-
"If:
(a) a person has an investment; and
(b) this Subdivision applies to the investment; and
(c) based on its performance over the preceding 12 months, the investment product to which that investment belongs has shown a return;
the person's ordinary income on a yearly basis is taken to be increased by:
value of investment x annualised rate of return on investment product
where:
"value of investment" is the value of the person's investment;
"annualised rate of return on investment product" is the annualised rate of return on the investment product based on its performance over 12 months."
Section 5J(1) of the Act contains the following definition of investment product:-
""investment product", in relation to a managed investment or listed security, means all the investments or securities that are:
(a) in or with the same body corporate or in the same trust fund;
and
(b) subject to substantially the same terms and conditions as that managed investment or that listed security."
Section 46AD of the Act allows for the calculation of returns on investment products. So far as is here relevant it provides:-
"An investment product:
(a)shows a return for a 12 month period if:
(i) . . . .
(ii)the formula below gives a positive number; ...
. . . . . . .
closing value + distributions - opening value
where
"closing value" is the value of the product at the end of the period;
"distributions" is the sum of:
(a) the amount of the distributions (however described) made to the holders of the product during the period; and
(b) the value of bonus issues (however described) of the product made to holders of the product during the period; and
(c) the value of any other rights given to holders of the product during the period because they hold investments in the investment product;
"opening value" is:
(a) if the product has been available for the whole of the period - the value of the product at the beginning of the period;
or
(b) if the product became available during the period - the value of the product when it became available."
DECISION OF THE TRIBUNAL
It was
contended on behalf of the respondents that the Commonwealth Bank shares
purchased by them in November 1993 were not the same investment product as the
Commonwealth Bank shares initially offered to the public. The Tribunal rejected this contention. In my view it was right to do so. The issue
was not reargued before me.
The principal contest before me was as to the validity of the construction which the Tribunal adopted of s46AD of the Act, the relevant portion of which is set out above. As to s46AD the Tribunal stated as follows:-
"We are of the opinion that the phrases "if the product has been available" and "if the product became available" are open to more than one meaning. In particular what meaning is to be given to the word "available"? In our opinion it has two possible meanings:
(a) "available" to the world at large in an extremely general sense, i.e. to any investor;
or
(b) "available" to the investment product holder in question, who is being assessed for pension purposes, for their own personal use to deal and dispose of, as they so choose.
The respondent clearly favours the first interpretation ... There is no doubt in our minds that to adopt this interpretation is to bring about a most unfair, unjust and absurd result. ...
On the other hand, if one is to adopt the second interpretation of "available" then the opening value is the value per share on the date that the investment product became available to the pensioner for his or her own personal use. ... In our opinion this interpretation leads to a fair and just result and is consistent with the intention of Parliament to assess all income, including capital gain on the investment product (to which the person's investment belongs) for the period in which the person actually held the investment in the product, whether it be for a 12 month period or a shorter length of time. As a matter of statutory interpretation, we prefer to adopt the second interpretation of "available" which clearly brings about the intent of Parliament without leading to an unjust or abused result."
In my view
if s46AD of the Act is read as a whole in its context of Subdivision AA of
Division 2 of Part IIIB of the
Act, the phrases "if the product has
been available for the whole of the period" and "if the product became available during the period" are
not ambiguous. Subdivision AA draws a
clear distinction between a person's "investment"
and the "investment product"
to which the investment belongs (see, for example, ss46AB and 46AC). Section 46AD provides a formula for the
calculation of returns on investment products not on investments.
It may be
noted that the process of reasoning used by the Tribunal to fix the "opening value" for the
purpose of s46AD of the Act as the value of the relevant Commonwealth Bank
shares at the time when the respondents acquired such shares, is not available
for the purpose of limiting "distributions"
to those made with respect to such shares after the date that the respondents
acquired them: the concept of the
product being "available"
forms no part of the definition of "distributions"
in s46AD. Nonetheless, the Tribunal held
that a distribution paid in respect of Commonwealth Bank shares before the
respondents purchased their relevant shares could not be taken into account for
the purpose of s46AD because the respondents were not holders of such shares at
the time that such distribution was made.
For the reasons already set out, I do not consider that the definition
of "distributions" can be
construed in this way. The "holders of the product"
referred to in the definition of "distributions"
in s46AD are, in my view, the generic class of all holders of the relevant
investment product: they are not the
particular pensioners
whose rates of pension are under review.
In my view, s46AD of the Act unambiguously deals with investment products generally and not with the investments of any particular pensioner. I accept the submission of Mr Hanks, counsel for the appellant, that an investment actually held by a pensioner is relevant to s46AD only for the purpose of identifying the relevant investment product so as to allow a calculation of the deemed increase or deemed reduction in the ordinary income of that pensioner pursuant to either s46AB or s46AC of the Act.
I should make it plain that I reject the submission of Mr Hemsley, counsel for the respondents, that the expression "the product" in s46AD is used in contradistinction to the expression "investment product" appearing in the same section. In my view, it is plain that the expression "the product" appearing in s46AD is a shorthand reference to the investment product referred to in the opening line of the section. Only on this basis can the section be given a sensible operation.
I note that Deputy President Forgie was required to consider provisions of the Social Security Act 1991 (Cth) which are virtually identical with the provisions contained in Subdivision AA of Division 2 of Part IIIB of the Act in Re Gemmell and Secretary, Department of Social Security (1995) 38 ALD 707. I respectfully agree with the approach adopted by the learned Deputy President to the interpretation of those provisions in that case.
In summary, I conclude that for the purpose of determining the amount by which the respondents' ordinary income on a yearly basis was to be taken to have increased by reason of their ownership of the relevant Commonwealth Bank shares (see s46AB of the Act), the calculation unambiguously required by s46AD of the Act to be undertaken is a calculation based upon the value of Commonwealth Bank shares at the beginning of the 12 month period and the amount of the distributions made to holders of Commonwealth Bank shares during that 12 month period. In such circumstances competing views as to the fairness of the provision need not be considered.
The appeal will be allowed and the decision of the Tribunal set aside. In substitution therefore it will be ordered that the decision of the Repatriation Commission of 14 December 1993 is affirmed. By agreement of the parties there will be no order as to costs.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Branson.
Associate:
Dated:
Counsel for the Applicant : Mr P J Hanks
Solicitors for the Applicant : Australian Government
Solicitor
Counsel for the Respondents : Mr G D Hemsley
Solicitors for the Respondents : Legal Services
Commission of S.A.
Hearing Date : 9 February 1996
