FEDERAL COURT OF AUSTRALIA

Kang v Secretary, Department of Social Services [2017] FCA 895

ORDERS

THE COURT ORDERS THAT:

1.    The application be allowed and the decision of the Administrative Appeals Tribunal be set aside.

2.    The matter be remitted to the Administrative Appeals Tribunal for determination in accordance with law.

3.    By no later than 4pm on 18 August 2017, each party is to file and serve:

(a)    Written submissions in support of the costs order sought by that party, limited to 4 pages in length; and

(b)    If that party seeks a lump sum costs order, a Costs Summary affidavit in accordance with the Federal Court Costs Practice Note.

4.    By no later than 4pm on 1 September 2017, each party may file and serve:

(a)    Submissions (if any) in reply, limited to 3 pages in length; and

(b)    An affidavit (if any) responding to the other party’s Costs Summary affidavit.

5.    Unless the Court otherwise orders, costs to be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MCKERRACHER J:

INTRODUCTION

1    The applicant, sadly, has a severe mental disability. The applicant has been denied compensation because of benefits he receives or may receive from a family Trust. That decision will be reversed but, for reasons explained below, it is not open to me, on this occasion, to substitute the decision with one of my own. Regrettably, the applicant will be required to return to the Administrative Appeals Tribunal for a third occasion (through no fault of the applicant) to seek a determination.

2    Appropriately, the respondent conceded a deficiency in part of the Tribunal’s reasoning where, with respect, the Tribunal failed to fully address and apply the relevant principles which are pertinent to the exercise of discretion by the decision maker as to the impact, if any, from the existence of the Trust of which an applicant is a beneficiary.

BACKGROUND

3    From about 19 April 1985, the applicant received a disability support pension under the Social Security Act 1991 (Cth). On 4 December 2014, the respondent’s delegate determined to cancel the pension. The delegate also determined that the applicant had been overpaid a total of $163,426.44 (the debt) by way of the pension between 4 January 2007 and 2 December 2014.

4    The delegate’s decision was based on a finding that the pension was not payable to the applicant during the period in question because the value of his assets exceeded the requisite threshold under the Act. That decision turned on the conclusion that the assets of a discretionary trust, established by the applicant’s father, known as the Kang Family Trust, should be attributed to the applicant personally pursuant to s 1207X of the Act.

5    The applicant sought an internal review of the delegate’s decision on the basis that the applicant was not the sole beneficiary of the Trust and should not be attributed with the whole of the assets of the Trust. The Authorised Review Officer (ARO), an independent officer of the Department of Human Services, queried the decision on the basis that the Trust Deed and financials of the Trust suggested that the applicant was not the controller of the Trust. That description applied to the applicant’s brother as sole director of the corporate trustee, Vameze Pty Ltd. But ultimately the delegate’s decision was affirmed.

6    The applicant then lodged an application for a review of the decision at the Social Security Appeals Tribunal (SSAT). Shortly after, the SSAT merged with the Tribunal and became Tribunal’s Social Services and Child Support Division. Under the transitional provisions, the review application lodged with the SSAT was deemed to be an application for Tribunal first review. Following a hearing, the Tribunal affirmed the decision to cancel the applicant’s pension (the first review decision).

7    Following the first review decision, the applicant filed an application with the Tribunal’s General Division. On 21 October 2016, the Tribunal dismissed the application and affirmed the decision to cancel the applicant’s pension and attribute 100% of the value of the Trust assets to him (the second decision). However, the Tribunal remitted the decision pertaining to the quantum of the debt for recalculation.

8    The applicant now appeals to this Court from the second decision under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).

STATUTORY FRAMEWORK

9    Part 3.18 of the Act creates a process whereby the assets and income of a private trust or private company may be treated as being attributed to an individual for the purposes of the Act. Pursuant to s 1208E, the value of an individual’s assets includes the value of assets owned by a trust to the extent that an ‘asset attribution percentage’ is applicable.

1208E    Attribution of assets

(1)    For the purposes of this Act, if:

(a)    an individual is an attributable stakeholder of a company or trust at a particular time on or after 1 January 2002; and

(b)    at that time, the company or trust owns a particular asset (whether alone or jointly or in common with another entity or entities); and

(c)    if, at that time, that asset had been owned by the individual instead of by the company or trust, the value of the asset would not be required to be disregarded by any express provision of this Act; and

(d)    at that time, the asset is not an excluded asset (see subsection (2));

there is to be included in the value of the individual’s assets an amount equal to the individual’s asset attribution percentage of the value of the asset referred to in paragraph (b).

Note:    For attribution of the assets of a special disability trust, see section 1209Y.

Excluded assets

(2)    The Secretary may, by writing, determine that, for the purposes of the application of subsection (1) to a specified individual and a particular company or trust, a specified asset is an excluded asset.

(3)    A determination under subsection (2) has effect accordingly.

(4)    In making a determination under subsection (2), the Secretary must comply with any relevant decision-making principles.

10    Subsection 1207X(2) of the Act provides:

…

Trust

(2)    For the purposes of this Part, if:

(a)    a trust is a controlled private trust in relation to an individual; and

(b)    the trust is not a concessional primary production trust in relation to the individual (see section 1208U);

then:

(c)    the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and

(d)    if the individual is an attributable stakeholder of the trust—the individual’s asset attribution percentage in relation to the trust is:

(i)    100%; or

(ii)    if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage; and

(e)    if the individual is an attributable stakeholder of the trust—the individual’s income attribution percentage in relation to the trust is:

(i)    100%; or

(ii)    if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage.

…

(5)    In making a determination under this section, the Secretary must comply with any relevant decision-making principles.

11    It is common ground between the parties that the Trust is a ‘controlled private trust’ as defined in subs 1207V(1) of the Act and there has been no suggestion that the Trust is a ‘concessional primary production trust’ as defined in s 1208U of the Act.

12    Having satisfied para (a) and para (b) of subs 1207X(2) of the Act, the provision gives the decision maker discretion to:

(a)    determine whether the individual is not an attributable stakeholder of the trust; and

(b)    determine whether, in the event that the individual is an attributable stakeholder, whether the individual's asset attribution percentage in relation to the trust will be either 100% or a lower percentage.

13    There are no express criteria under the Act setting out when a person who is an attributable stakeholder should be determined to be otherwise, or when a person’s asset attribution percentage should be determined to be lower than 100%. However, subs 1207X(5) of the Act provides that in making a determination under s 1207X, the respondent ‘must comply with any relevant decision-making principles’. It is also common ground between the parties that the relevant decision-making principles are the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 (Cth) (the Attribution Principles).

14    Part 2 of the Attribution Principles governs the exercise of discretion in determining that an individual is not an attributable stakeholder. Section 5 of the Attribution Principles states the following purpose:

[Part 2] sets out decision-making principles with which the Secretary must comply in making a determination, under paragraph 1207X (1) (a) or (2) (c) of the Act, that an individual is not an attributable stakeholder of a company or trust.

15    Sections 6 to 13 of the Attribution Principles set out various matters which the respondent (and the Tribunal on review) must consider in the exercise of that discretion. Amongst other things, the decision maker must consider:

(a)    The ‘relationship between the individual and the company or trust having regard to … the reason why, but for a determination, the individual would be an attributable stakeholder … and … the circumstances mentioned in this Part’: subs 6(2).

(b)    ‘[W]hether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust’: subs 7(2)(c).

(c)    ‘[W]hether the individual has received a benefit from a distribution made by the company or trust’: subs 9(1).

(d)    ‘[W]hether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust’: subs 10(1).

(e)    ‘[W]hether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 9 or 10) from the assets or income, or both, of the company or trust’: subs 11(1). ‘Benefit’ for the purposes of this section is ‘not limited to a benefit to which the individual has a legal or equitable entitlement’ and ‘includes benefits received or derived in the form of property or services’: subs 11(2).

16    Part 3 of the Attribution Principles governs the exercise of the discretion in determining whether an attributable stakeholder’s asset attribution percentage in relation to a trust should be a percentage lower than 100%: s 14 of the Attributable Principles. Part 3 sets out various matters which the respondent must consider in the exercise of that discretion, which include the same considerations referred to in Pt 2, as discussed above: ss 16-22 of the Attribution Principles.

IN THE TRIBUNAL

17    The applicant sought a review of the first review decision in the general division of the Tribunal on the following grounds:

(1)    The applicant’s father is not the appointor of the Trust.

(2)    The applicant is not the controller of the Trust.

(3)    The applicant is a non-controller and assets of the Trust cannot be attributed to him.

18    The issues which arose before the Tribunal were:

(1)    whether the applicant was an attributable stakeholder of the Trust and, if so, whether his asset attribution percentage should be less than 100%; and

(2)    whether the applicant has a recoverable debt arising from the overpayment of the pension.

19    The Tribunal commenced by providing an overview of the purpose of the Act. It was noted that the fundamental basis of Social Security law is to provide benefits for qualified persons who do not have other means of income support, observing that there is no automatic entitlement to social security benefits under the Act. To receive a benefit a person must be eligible for the particular claimed benefit by not exceeding the threshold of assets or income. If a person has an income or assets that exceed this threshold, Parliament expects the person to draw on his or her own financial resources.

20    The Tribunal noted that the Trust was established in 1987 by the applicant’s father and that the Trust Deed provides that eligible beneficiaries meant any children, grandchildren and great grandchildren of the father, and the spouse of any of his children. The Trust Deed specifically excludes the father or his legal representatives, the settlor or any trustee or former trustee from being an eligible beneficiary. The Trust Deed provides that the powers to remove the trustee and to appoint a new trustee or trustees resides with the father during his lifetime and upon his death those powers of removal and appointment vest in his legal personal representatives.

21    The Tribunal considered s 1207C of the Act which provides that in determining whether a trust is a designated private trust, or whether a trust is a controlled private trust in relation to an individual, a relative of the individual is an ‘associate’ of the individual.

22    In concluding that no exclusions apply under s 1207P of the Act, the Tribunal determined that the Trust is a ‘designated private trust’. This is not disputed by the applicant.

23    The Tribunal then turned to consider the ‘control test’ under s 1207V of the Act, which is relevant in determining whether a Trust is a ‘controlled private trust’. The respondent contended that the applicant passes the control test because his associate, the applicant’s brother, administers the Trust in his role as the director of Vameze Pty Ltd. The Tribunal observed that the first review decision disputed the appointment of the applicant’s brother to the Trust and had taken the view that the applicant’s father remained the appointor. Although the Tribunal considered that this conclusion was consistent with the Trust Deed, the respondent, in submissions before the hearing, accepted that the applicant’s brother administered the Trust. Ultimately, however, the Tribunal considered that nothing turned on this point because both are relatives of the applicant and therefore ‘associates’ in terms of s 1207C of the Act.

24    The Tribunal noted the following contentions by Counsel for the applicant:

(a)    The applicant did not ‘control’ the Trust because he was not capable of exercising control.

(b)    The applicant is not an attributable stakeholder but is instead a ‘beneficiary’ of the Trust.

(c)    The applicant’s brother is also a beneficiary, because he had lived for many years, rent-free, in a house which is owned by the Trust.

(d)    The applicant was completely dependent on his carers. He was not aware of the Trust and cannot therefore be said to be in ‘control’.

25    The Tribunal noted that in cross-examination, the applicant’s brother explained that he and his mother live with the applicant in a house owned by the applicant. The applicant’s mother is his full-time carer but his brother said that he also assists with his care. The applicant’s brother also informed the Tribunal that he holds an enduring power of attorney in respect of the applicant and that he is compelled to act in the best interests of the applicant. During cross-examination, the applicant’s brother was directed to [27] of the first review decision, which stated:

[The applicant’s brother] wrote in a letter to Department [sic] on 27 November 2012:

“Mr Chong Soo Kang’s disabled son’s name is Hoil kang [sic]. He is one of the beneficiaries of the trust. The remaining beneficiaries of the trust are Mr Kang’s other children only. The properties held by the trust are used for recreational purposes for his disabled son. However there is an unwritten understanding that if these properties are sold the proceeds are to be used to the benefit of his disabled son.”

26    The applicant’s brother agreed that he did say that at the time. The Tribunal also directed the applicant’s brother to [26] of the first review decision which referred to information that the applicant’s father had given to the Department and was repeated in sworn evidence:

[The applicant’s father] previously advised the Department and the tribunal that his sole purpose in establishing the [Trust] was to make sure that his son [the applicant], who has an intellectual disability, would be provided for after he, [the applicant’s father], was no longer around. [The applicant’s father] said that [the applicant] who is now 45 years hold has an intellectual age of four or five years old. [The applicant’s father] said he wanted to avoid disputes over his will that might jeopardise [the applicant’s] welfare in the future.

27    The applicant’s brother also agreed that this was an accurate representation of what his father had told the SSAT hearing in 2014, but said that evidence was given in the context of his father’s aged pension claim. The applicant’s brother said that the Trust does not undertake any business other than holding land and that the funds of the Trust are used for the maintenance of property only.

28    The Tribunal considered that in some of the arguments put forward by the applicant, there appeared to be a misunderstanding of how the relevant provisions of the Act are applied in relation to individuals who are attributable stakeholders in trusts. The Tribunal noted (at [49]) that:

[t]he Act makes explicit provisions which must be applied and which may differ from how trust law operates in other contexts. The purpose of these provisions is to effectively “lift the veil” on trusts which benefit individuals so that the individual’s access to that financial support is taken into account in terms of the income and assets test.

29    The Tribunal considered that the applicant passed the control test under s 1207V(2) and that that in order to satisfy this statutory control test, whether the applicant himself exercises personal control is not relevant. The Tribunal held (at [51]) that the Trust was set up for the applicant, noting that the applicant’s brother, his ‘associate’, not only administers the Trust, but also has an enduring power of attorney in respect of the applicant and provides care for him. The applicant’s brother is also responsible for ‘the applicant’s financial affairs and one of the reasons the Trust’s funds are not distributed to the applicant is that, owing to his intellectual disability, he does not have any concept of money’. Furthermore (at [57]) the Tribunal determined ‘that other persons, the applicant’s mother and one of his brothers, receive a material benefit by living in a house owned by the Trust is incidental to this fact’.

30    The Tribunal concluded (at [56]-[58]):

56.    Unfortunately for the arguments of the Applicant’s representative, the construction of section 1207X(2) is clear. If a trust is a controlled private trust in relation to an individual and not a concessional primary production trust, then ipso facto, that individual’s asset attribution percentage in relation the trust is 100 per cent, unless the Secretary determines otherwise.

57.    I find that [the Trust] was set up for the Applicant. That is clear from the sworn evidence of the person who established it, [the applicant’s father], to the SSAT. That other persons, the Applicant’s mother and one of his brothers, receive a material benefit by living in a house owned by the Trust is incidental to this fact. I have no doubt from what he said in his submissions and in evidence that [the applicant’s brother] acts in the best interests of his brother and would not do anything which affected him which was not in those best interests.

58.    It follows, because of the operation of section 1207X of the Act, that the Applicant’s asset and income attribution percentage is 100 per cent, because the [respondent] has not made a determination otherwise.

…

59.    Applying the Principles, there does not seem to me to be any circumstance affecting [the applicant’s] relationship with [the Trust] which would lead, or should have led, to the [respondent] making a determination under the Principles (Principle 16) to set a percentage of attribution less than 100 per cent.

60.    While the Applicant himself is impaired by his disability from exercising ‘control’, the Applicant’s associate who does administer and control the trust does so for the Applicant’s benefit.

61.    While [the applicant] has not made a contribution himself to the Trust (see Principle 17) it was set up for him.

62.    While the Applicant has not received a financial distribution under Principle 18, he has plainly received a valuable benefit under this Principle by the provision of a Trust-owned residence for him at the Philip Street property, for the whole of the Debt Period.

63.    Under Principle 19, it is reasonably foreseeable that the Applicant may receive a future benefit from the corpus of the Trust or any future income it makes.

64.    Under Principle 20, [the applicant] received during the Debt Period, and continues to receive, a benefit by the provision of his accommodation, noting the construction of this Principle extends the concept of “benefit” to include property, services and other things to which the individual may or may not have a legal or equitable entitlement.

65.    Principle 21 is not applicable to [the applicant] because he is not an attributable stakeholder of any other company or trust to the knowledge of the Tribunal.

66.    Therefore, I find that the Respondent applied the Principles set out in the legislative instrument correctly.

67.    I am in no doubt on the papers before me, especially the evidence to the SSAT in 2014, that [the applicant] is an attributable stakeholder of [the Trust], and that the attribution should be 100 per cent. I so find.

(emphasis added)

31    The Tribunal then went on to make findings that a debt is due and payable to the Commonwealth, however, remitted the amount of the debt due and payable to the respondent for recalculation for the part of the Debt Period between 13 October 2013 and 2 December 2014.

GROUNDS OF APPEAL

32    Broadly, the issues canvassed in the applicant’s notice of appeal are:

(1)    whether the Tribunal failed to carry out a merits review;

(2)    whether the Tribunal made legal errors including whether it failed to make required determinations and took into account irrelevant considerations; and

(3)    whether this Court should make an order setting aside the respondent’s decision and re-instating the applicant’s pension.

Failure to carry out a merits review

33    By grounds 1 and 2 of the applicant’s notice of appeal, the applicant submits that the Tribunal did not undertake a merits review as required by s 43(1) of the AAT Act.

34    The applicant notes [25] of the Tribunal’s reasons, where it states:

the tribunal must put itself in the shoes of the original decision maker and consider whether the original decision made was correct in law and, where the legislation provides for a discretionary power, that any discretion was exercised in a preferable (i. e. correct, equitable and just) manner.

35    The applicant submits that the decision of the Tribunal was vitiated because the Tribunal asked itself the wrong question or misdirected itself as to the nature of its powers and function, embarking on a de facto appeal or in a manner analogous to a form of strict appeal. Consequently, the applicant submits that the Tribunal failed, or constructively failed, to exercise its jurisdictional function as a merits review body. Rather, the applicant submits, the Tribunal made a number of conclusionary statements that were unsupported by facts.

Failure to make determinations and irrelevant considerations

36    By Ground 3(a), (f) and (j), the applicant submits that the Tribunal failed to properly consider and make a determination in accordance with the Attribution Principles. In so far as the Tribunal did consider the Attribution Principles and did make a determination, the applicant argues that the Tribunal failed to provide reasons for its determination.

37    The applicant acknowledges that because of the provisions of the Act, the applicant, although severely disabled, has passed the control test and therefore the Trust is a controlled private trust. The applicant further acknowledges s 1207X(2)(a) of the Act provides that if a trust is a controlled private trust in relation to an individual, then pursuant to subs 1207X(2)(c) and (d) the individual is:

(a)    an attributable stakeholder of the Trust unless the respondent otherwise determines; and

(b)    if an attributable stakeholder, the individual's asset attribution percentage in relation to the Trust is 100% or any lower percentage determined by the respondent.

38    The applicant submits that in making those determinations the Tribunal failed to make a determination in accordance with subs 1207X(5) of the Act which requires the decision maker to comply with any relevant decision making principles, namely, the Attribution Principles. Rather, the applicant argues, the Tribunal proceeded on the assumption that there was no requirement to make a determination or determinations under subs 1207X(2) of the Act or the Attribution Principles and if no such determination was made then, the ‘default’ or ‘deeming’ provision applied regardless of the actual circumstances of the individual. The applicant notes [56], [58] and [59] where the Tribunal stated:

56.    Unfortunately for the arguments of the Applicant’s representative, the construction of section 1207X(2) is clear. If a trust is a controlled private trust in relation to an individual and not a concessional primary production trust, then ipso facto, that individual’s asset attribution percentage in relation the trust is 100 per cent, unless the [respondent] determines otherwise.

…

58.    It follows, because of the operation of section 1207X of the Act, that the Applicant’s asset and income attribution percentage is 100 per cent, because the [respondent] has not made a determination otherwise.

…

59.    Applying the Principles, there does not seem to me to be any circumstance affecting [the applicant’s] relationship with [the Trust] which would lead, or should have led, to the [respondent] making a determination under the Principles (Principle 16) to set a percentage of attribution less than 100 per cent.

39    Consequently, the applicant says, although the Tribunal stated that the applicant was an attributable stakeholder, no finding was made, no reasons were given and the statement was made in the context of whether or not the attribution percentage should be less than 100%. Therefore, the applicant submits, the Tribunal failed to determine whether the applicant was an attributable stakeholder.

40    By grounds 3(b) and (i) the applicant submits that the Tribunal also erred by failing to determine whether the applicant could reasonably be expected to exercise effective control of the Trust. The applicant notes that although the Tribunal correctly found at [65] that the applicant does not control the Trust, the Tribunal was diverted from considering the issue of ‘effective control’ by its finding that the applicant’s brother controls and administers the Trust for the benefit of the applicant. The applicant argues that for him to be in effective control, the applicant would require the ability to exercise control in a conscious and deliberate manner. The applicant submits that it was necessary to decide as a matter of law whether the Attribution Principles used the phrase ‘effective control’ in any other sense than that which is used in ordinary speech. Assuming the common understanding of the words applies, the applicant submits that had to be determined and the Tribunal then had to decide whether the applicant had effective control of the Trust.

41    By grounds 3(e) and (i) the applicant submits that in coming to its decision, the Tribunal relied on a finding that the Trust was set up and was for the applicant's benefit. The applicant submits that this was an irrelevant consideration as ‘control’ is the relevant criterion in the Act and the Attribution Principles. The applicant argues that the purpose of the Trust was irrelevant to the determination of whether or not the applicant was an attributable stakeholder and to any determination of the applicant’s asset attribution percentage. In addition, the applicant submits that the Tribunal’s conclusion on that point is tantamount to holding that the Trust is a sham. However, the applicant argues that the Trust is not a sham; in addition to its express terms, the uncontradicted evidence was that Trust is an ordinary discretionary trust and has operated as such for many years.

42    The applicant also argues that the Tribunal failed to consider the terms of the Trust. The applicant, although not named in the Trust Deed, is one of the Eligible Beneficiaries as defined in cl 1(b)(i) of the Trust Deed. The applicant argues that as the Trust is a discretionary trust, the use of the word or expression ‘beneficiary’ is a misnomer. Rather, the applicant is an object of a power. The applicant has no legal or equitable interest in the trust fund but only a mere expectancy or hope of consideration by the Trustee. Accordingly, as well as having no control, the applicant argues that he has no beneficial interest in the assets of the Trust and, even if he were capable of doing so, has no right to call for the assets.

43    By ground 3(d), the applicant argues that the Tribunal also failed to consider or take into account the relevant guidelines and that the failure to do so is an error of law.

44    The applicant cites Guide to Social Security Law 4.12.3.10 - Discretionary Trusts which states that if assets have been transferred to a discretionary trust before 7.30 pm on 9 May 2000, attribution among the attributable stakeholders of the trust should be determined according to the degree of control capable of being exercised in the trust by the stakeholder(s). If contributions are made after that time the determination of attribution among attributable stakeholders should be made with regard to the source of the assets of the trust. (The applicant considers that ‘source’ was not relevant in this case because all assets had been transferred to the Trust prior to 9 May 2000.) Guide to Social Security Law 4.12.1.20 - Determining a Controlled Private Trust states as follows:

The control test, in conjunction with the associate rule, is used to determine the level of control a stakeholder exercises in relation to a designated private trust. Although a trustee often undertakes the day to day management of a trust, effective control of a trust generally rests with the person/s who can dismiss and appoint a trustee, or veto a trustee's decision, or exercise control over the trustee in another manner, or change the trust deed …

45    This Guide also sets out ‘factors to consider when establishing who has control over a private trust when determining the attribution percentages of stakeholder/s’. The applicant argues that none of those factors apply or could apply to the applicant as they all relate to actual or ‘effective’ control. On this point, the applicant also relies on the definition of ‘control’ in s 1207A of the Act.

46    Guide to Social Security Law 4.12.2.10 - Attribution Percentages states that attribution of the assets should be determined according to the individual/s or members of a couple who control the structure. The Guide states that when making a decision as to the percentage of attribution to a stakeholder the delegate must refer to the Attribution Principles. The Guide provides that when there are multiple stakeholders the assets and income should be attributed to the stakeholders in the percentage determined by the level of control exhibited by the individuals.

47    Despite this requirement, and notwithstanding that the applicant is severely disabled, the applicant submits that the respondent incorrectly attributed 100% of the assets of the Trust to the applicant. Furthermore, notwithstanding that the Tribunal found that the applicant did not control the Trust, the Tribunal, at [67], affirmed this attribution.

48    By grounds 3(g) and (h) and 5, the applicant repeats his arguments put forward in his notice of appeal, namely:

(a)    The fact that the applicant allegedly received a benefit by living in a house owned by the Trust was irrelevant. This was particularly so in light of another eligible beneficiary under the Trust had already being living in same house for nine years after it was purchased and prior to the applicant moving into the house. It was also irrelevant, in any event, because if the house had been personally owned by the applicant it would not have been taken into account when considering the applicant’s eligibility for a pension.

(b)    The statement in paragraph [63] of the Tribunal’s reasons that it was reasonably foreseeable that the applicant may receive a future benefit from the corpus of the Trust or any future income it makes was a conclusion without any supporting reasons. There was also no evidence to support this statement. The Tribunal did not consider or make reference to s 19(3)(b) of the Principles.

(c)    The fact that the debt allegedly owed by the applicant could allegedly be repaid by the legal representative of the applicant or the Trust was legally incorrect and not a relevant consideration as those persons were different legal persons or entities to the applicant and had no legal (or non-legal) obligation and (insofar as the Trust is concerned) no power to pay the debt.

Whether the matter should be remitted to the Tribunal

49    Section 44(4) of the AAT Act empowers the Court to make any such order as it thinks appropriate by reason of its decision. In McKenzie v Repatriation Commission (2014) 142 ALD 332 Murphy J stated (at [78]):

… It is well-established that where only one result consistent with the court's decision is possible, the court may make a decision as substitution for that under review, thereby relieving both the Tribunal and the parties of the burden of a further hearing.

50    The applicant submits that the Tribunal has already made the necessary findings of fact, the crucial finding being that the applicant does not control the Trust. Consequently, at most, the applicant submits, all that is now required is to make the finding that the applicant does not have ‘effective control’ of the Trust.

51    In the applicant’s submissions, the applicant informally sought leave to amend its notice of appeal to add further grounds of appeal in support of this contention. Namely:

(1)    the decision by the Tribunal to not set aside the decision of the respondent to cancel the applicant's pension after the Tribunal found that applicant did not control the Trust was so unreasonable that no decision maker could have come to it;

(2)    the decision by the Tribunal to not set aside the decision of the respondent to affirm the 100% attribution of the assets to the applicant was so unreasonable that no decision maker could have come to it; and

(3)    the Tribunal failed to ask itself the right question or misdirected itself on the interpretation of the law.

52    The applicant argues that if the matter were remitted to the Tribunal, the only possible outcome is that the original cancellation of the applicant's pension will be set aside. Therefore, there is no good reason for remitting the matter to the Tribunal for what will be, in effect, the third hearing in the Tribunal. The applicant also argues that it should not be remitted due to the ‘unfortunate’ procedural history of the matter.

53    The applicant submits that these proceedings have been affected by the same flawed reasoning in that the decision makers have failed to consider the relevant criteria in order for there to be an attribution of assets: no-one considered the requirement to first ascertain whether the applicant was an attributable stakeholder, rather the decision makers went straight to the determination of the attribution percentage. The applicant submits that if the attributable stakeholder point had been considered and decided correctly it would not have been necessary to consider attribution of the assets. If the respondent had properly carried out its decision-making functions and had complied with the Attribution Principles as required by the Act, the two Tribunal reviews and this appeal would have been unnecessary.

RESPONDENT’S SUBMISSIONS

54    The respondent conceded that the Tribunal’s decision is affected by error of law and should be set aside. However, the respondent opposes:

(1)    the making of any findings of fact by this Court under subs 44(7) of the AAT Act; and

(2)    the making of any orders by this Court to the effect that the applicant’s pension should be re-instated.

55    The respondent submits that the appropriate relief would be orders that the Tribunal’s decision be set aside and the case be remitted to the Tribunal.

56    The respondent cites the Court’s Consent Orders Involving a Federal Tribunal Practice Note (GPN-TRIB) which applies where ‘the parties propose that an order be made with their consent, the effect of which is to set aside or vary an order of the Tribunal’. This Practice Note requires the parties to justify the making of the order on the basis that a decision of the Tribunal may only be set aside under s 44(1) of the AAT Act where the Court is satisfied that the Tribunal has erred in law.

57    The respondent consents to an order setting aside the Tribunal decision for two reasons. First, the respondent concedes that the Tribunal failed to properly consider or take into account mandatory relevant considerations, namely the requirements of Pt 2 of the Attribution Principles. The respondent accepts that on a fair reading of the Tribunal’s statement of reasons it is open to conclude that the Tribunal failed to properly consider the Attribution Principles. Therefore, the Tribunal’s discretion under s 1207X of the Act miscarried.

58    Secondly, the respondent concedes that the Tribunal failed to give a statement of reasons that complies with subs 43(2B) of the AAT Act. The respondent also accepts that on a fair reading of the Tribunal’s statement of reasons it is open to conclude that it has not sufficiently exposed its reasoning process (particularly in relation to the application of Pt 2 of the Attribution Principles). This also amounts to an error of law.

59    For those reasons, the respondent concedes that the applicant's appeal should succeed to the extent of an order setting aside the Tribunal's decision.

60    However, the respondent submits that the additional arguments or questions of law advanced by the applicant either do not properly arise in this appeal or the arguments take the matter no further than the errors conceded by the respondent.

61    As to grounds 1 and 2, the respondent accepts that the Tribunal’s task was to carry out a merits review. Whilst the respondent does not concede that the Tribunal ‘embarked on a de facto appeal or in a manner analogous to a form of strict appeal’ as alleged by the applicant, the respondent does concede that the review miscarried because the Tribunal failed to take into account mandatory relevant considerations.

62    As to ground 3(a), (f) and (j), the respondent concedes that the Tribunal failed to properly consider the Attribution Principles and failed to give adequate reasons for its decision.

63    As to ground 3(b) and (i), the respondent notes that s 7(2)(c) of the Attribution Principles provided that the Tribunal ‘must consider … whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust’. Again, the respondent concedes that the Tribunal failed to properly consider the Attribution Principles. However, the respondent submits that the question surrounding the proper interpretation of the phrase ‘effective control’, does not arise in this appeal because the Tribunal did not adopt any particular construction of the phrase ‘effective control’, but rather ‘failed to consider whether the applicant had ‘effective control’ of the Trust’.

64    As to ground 3(e) and (i), the respondent submits that the Tribunal was entitled to have regard to its finding that the Trust was set up for the benefit of the applicant. The question of whether the applicant derived any ‘benefit’ from the Trust was expressly made relevant by s 11 and s 20 of the Attribution Principles. The respondent also submits that it is not clear that the Tribunal failed to consider the relevant terms of the Trust deed itself. However, again, the respondent concedes that the Tribunal failed to properly consider the Attribution Principles.

65    As to ground 3(d), the respondent submits that it is not clear that the Guide to Security Law referred to by the applicant was itself a mandatory relevant consideration. The respondent argues that there is no evidence that the Guide was placed before Tribunal, nor is there any application to adduce the Guide into evidence before this Court. However, the respondent submits that it is unnecessary to resolve those matters because the applicant’s argument adds nothing to the respondent’s concession (as above) that the Tribunal failed to properly consider the Attribution Principles.

66    The respondent also opposes the applicant’s application to add additional grounds of appeal on the basis that the proposed grounds add nothing further to the arguments already advanced and take the matter no further than the respondent’s concession that the Tribunal’s decision is affected by error of law.

67    Finally, the respondent argues that the applicant’s appeal to this Court does not establish an entitlement to the relief that the applicant now seeks, nor that such relief would be appropriate. The respondent submits that the resolution of any question of law in the applicant’s appeal still leaves a broad discretion yet to be exercised by the Tribunal, namely:

(1)    whether to determine the applicant should not be an attributable stakeholder of the Trust; and

(2)    whether to otherwise determine that a lower percentage than 100% is to be the applicant’s asset attribution percentage.

68    The respondent notes that the exercise of discretion arising from subs 1207X(2) is to be guided by the considerations set out in the Attribution Principles, but no single consideration is itself determinative. That is, whatever facts have been found (or might yet be found), none of those is made determinative by the Act or by the Attribution Principles. In exercising its discretion, it is a matter for the Tribunal to accord such weight as it sees fit to those considerations.

69    The applicant’s pension was cancelled (and the resulting debt calculated) on the basis that the value of his assets was to include the value of the Trust’s assets in accordance with Pt 3.18 of the Act. The respondent submits that the correctness of that decision depends upon whether (and, if so, how) the discretion regarding the attribution of trust assets is to be exercised.

70    Contrary to the applicant’s contention that ‘the only possible outcome is that the original cancellation of the applicant’s benefit will be set aside’, the respondent submits that the outcome depends upon the exercise of the discretions vested in the Tribunal pursuant to subs 1207X(2) and therefore the case should be remitted to the Tribunal for re-hearing.

CONSIDERATION

71    An applicant who successfully identifies an error of law in the Tribunal’s decision will, subject to discretionary matters, be entitled to an order setting aside the decision remitting the case to the Tribunal to be heard again: s 44(5) of the AAT Act. Although the respondent has conceded that an error was made by the Tribunal, a decision of the Tribunal may only be set aside under s 44(1) of the AAT Act where the Court is also satisfied that the Tribunal has erred in law.

72    As was recognised by the Full Court in the decision of Minister of Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 (at 272), ‘the reasons of an administrative decision maker are meant to inform and are not be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed’. Further, there is no requirement that the Tribunal refer to every piece of evidence and every contention advanced before it, nor must its reasons ‘provide an unarguable logical progression to conclusion’: see Telstra Corporation Limited v Hunter [2016] FCA 318 (at [74]). Nevertheless, the Tribunal’s ‘statement of reasons must explain that actual path of reasoning in sufficient detail to enable a court to see whether the opinion does or does not involve any error of law’: Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480 (at [55]) and Comcare v Power [2015] FCA 1502 (at [99]).

73    In my view, and having regard to these principles, there has been a failure to take into account relevant considerations, namely, the Attribution Principles, when exercising its discretion pursuant to subs 1207X(2) of the Act.

74    That being so, there are only two issues remaining on the appeal.

75    The first issue is whether the applicant should be granted leave to add additional grounds of appeal. The applicant relied on the decision of Minister for Immigration Ethnic Affairs v Conyngham (1986) 11 FCR 528 in support of what the applicant submits is, in essence, only one new ground of appeal, namely whether the decision of the respondent was so unreasonable that no reasonable person could have made it. At the crux of this proposed ground was the Tribunal’s decision that the applicant did not have control of the Trust. The applicant submits that this decision should have been ‘the end of the matter’ in that once the Tribunal had reached that decision, there was only one possible outcome, and that was to set aside the first review decision.

76    As to that, while the amendment is opposed, the respondent accepts that if the amendment would be more likely to lead to the outcome for which the applicant contends, namely, that I should make the final decision now, then that would a powerful reason to allow the amendment. However, I do not consider the amendment should be allowed. It is a very late amendment which adds nothing to the applicant’s argument or the outcome. As will be indicated below, there can be no doubt that the applicant does not have the requisite control but, that may not in fact be the end of the matter due to the need to examine the question of the likelihood of future benefits.

77    The second issue for debate is whether this Court should make the final decision or whether the matter should be remitted to the Tribunal. In Minister of Immigration and Ethnic Affairs v Gungor (1982) 4 ALD 575, Shepherd J (with Fisher J agreeing) rejected the proposition that subs 44(4) and subs 44(5) of the AAT Act when read together gave the Court ‘wide powers to make such order as it thinks fit’, stating (at 585) that:

…The only order which can be properly made is one the propriety of which is circumscribed by and necessary to reflect this court's view on the alleged or found error of law. To go further I would see as amounting to exceeding the jurisdiction of this court under this section. A power to make “such order as it thinks appropriate by reason of its decision” is much more restrictive than a power “to make such order as it sees fit” or a power “to make a decision in substitution for the decision” the subject of the appeal. Section 44(5) confirms, though it states that it does not purport to limit, this as an appropriate reading of the power in s 44(4) when it limits its statement of the express power of the court when setting aside a decision to the making of an order remitting the case to be heard again. Having set aside a decision, it has no express power to substitute what it sees as the correct decision unless such is the appropriate order by reason of its decision on the point of law in the context of the particular proceedings.

78    Furthermore, as was said by Mason J in Minister of Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 (at 40):

The limited role of a court reviewing the exercise of an administrative discretion must constantly be borne in mind. It is not the function of the court to substitute its own decision for that of the administrator by exercising a discretion which the legislature has vested in the administrator.

See also Selway v Minister for Infrastructure, Transport, Regional Development & Local Government [2011] FCA 43 (at [20]).

79    The applicant says that it is appropriate that I make the final decision because there is only one possible answer: the applicant should succeed and the Tribunal’s decision should be quashed.

80    Despite the complexity of the regulations, in the end the argument comes down to a fairly narrow point, that being whether there may still be a discretion yet to be exercised by the Tribunal.

81    First, the applicant says that there is no basis on which it could be said that he has control in any sense, practical or legal, as governed by the Attributable Principles. The respondent says there may be some residual discretion on that question because, as noted at [42] of the Tribunal’s reasons, all decisions of the applicant are made by his brother and mother on his behalf. The applicant’s brother also controls the Trust and has an enduring power of attorney in respect of the applicant. Therefore, the respondent submits that it might be said that when the applicant’s brother makes decisions about control of the Trust, as he is compelled to act in the best interests of the applicant, it is effectively the applicant making those decisions. I am not attracted to this argument, because, quite properly, the Attribution Principles are directed only to the circumstances surrounding the company or the trust in issue. To go further and look at the enduring power of attorney does not appear to me to be contemplated in the otherwise expansive principles. In my view, it can be said at this juncture that in every sense, including common sense, it is clear that the applicant does not have effective control of the Trust.

82    A greater difficulty for the applicant’s argument arises, however, in regards to the question of benefits that may arise from the Trust. Despite the Tribunal’s finding on control under s 10 and s 11 of the Attribution Principles, the decision maker must also consider the likelihood of future benefits from a trust: s 10 and s 19 of the Attributable Principles.

83    In the context of Pt 3, but not Pt 2, the Tribunal concluded (at [63]) that it was ‘reasonably foreseeable’ that the applicant would receive future benefits from the Trust. How this decision was reached is unexplained, although perhaps it was reached on the basis that the Trust was set up for the applicant’s benefit. However, as the applicant observes, there is no evidence of the applicant actually receiving any benefit from the Trust other than residing in a house which he shares with others and which has been excluded (in accordance with relevant principles) in the calculation of the applicant’s assets. Importantly, the applicant stated that the very reason that he has not received any benefits from the Trust is because in doing so he would risk exceeding the threshold under the Act, which would in turn make him ineligible for the pension. It should be noted that this perhaps may sound a little contrived and, reading between the lines in the Tribunal’s decision, the Tribunal may have taken the view that this was a trust for which the provisions under attack were directly written, namely, that the Trust having been established to effectively shield the assets of a pension holder from consideration. However, as discussed, how this decision was reached is unexplained.

84    As a result of the helpful exchanges of counsel, I consider that the question for this Court is a short one: is there really only one possible answer? If that is the position, then the respondent accepts that the matter should not be remitted to the Tribunal and this Court should make the decision. To my mind, I consider that there was only one possible answer in relation to control, given the applicant’s very severe mental disability. However, the position is more complex in relation to the ‘benefit’ the applicant derives or may derive from the Trust. In particular, I have difficulty in concluding that a range of answers might not be open in relation to the possibility of a future benefit from the Trust. In fact, I cannot see how it could be said that there was not a range of possibilities open on this point. For this reason, unfortunately the matter will have to go back to Tribunal for the third time.

CONCLUSION

85    Finally, the parties have asked that, regardless of my decision on whether I remit the matter to the Tribunal or substitute the decision with my own, the parties should have the opportunity to be heard on costs. Absent any other order, costs will be resolved on the papers following short written submissions.

Associate:

Dated:    4 August 2017