Federal Court of Australia

Lee v Secretary, Department of Social Services [2022] FCA 217

ORDERS

THE COURT ORDERS THAT:

1.    The decision of the Administrative Appeals Tribunal in file number 2021/2701 dated 7 October 2021 is affirmed.

2.    By 4.00 pm AEST on 18 March 2022, the parties shall file and serve any written submissions (limited to three pages) which they wish to make on the subject of the appropriate costs order which should be made.

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

REASONS FOR JUDGMENT

DOWNES J:

1    By notice of appeal from a tribunal filed on 1 November 2021, the applicant appealed from a decision of the Administrative Appeals Tribunal (AAT) in file number 2021/2701 dated 7 October 2021.

2    For the reasons that follow, the decision of the AAT will be affirmed.

Background

3    On 12 February 2018, the applicant ceased employment with Superior Wood Pty Ltd.

4    On 22 May 2018, the applicant commenced to receive the Newstart Allowance.

5    The applicant claimed that he was unfairly dismissed by Superior Wood Pty Ltd and applied to the Fair Work Commission for remedy.

6    On 22 July 2019, the Fair Work Commission made orders that:

A.     Superior Wood Pty Ltd is to pay Mr Jeremy Lee compensation in the amount of $24,117.08 less tax according to law, and 9.5% superannuation contribution into Mr Lee's nominated superannuation fund as an appropriate amount for remuneration lost. These amounts are to be paid to Mr Lee within 14 days of the date of this order.

B.     This order comes into effect on 22 July 2019.

(emphasis added)

7    A payment slip dated 1 August 2019 was subsequently produced and confirmed payment of a total gross amount as $24,117.08 and a net amount after tax of $16,399.62. In its terms, and under the heading “Description” on the payment slip, the payment was described as “Employment Termination Payment”.

8    In consequence of the payment, on 7 August 2021, the applicant was forwarded a notice of suspension of the payment of the Newstart Allowance which relevantly stated:

A decision has been made to stop your Newstart Allowance from 1 August 2019 until 29 January 2020 because your income is too high. This is because we are taking into account money you have received for a redundancy payment and/or unused leave entitlements (for example, annual leave and long service leave). This is called an Income Maintenance Period.

9    On 12 August 2019, the applicant requested an internal review of this decision.

10    On 20 September 2019, an Authorised Review Officer reviewed and affirmed the decision of 7 August 2021 (the ARO decision).

11    On 11 January 2021, the applicant applied for review of the ARO decision in the Social Services & Child Support Division of the AAT.

12    On 24 March 2021, the Social Services & Child Support Division of the AAT affirmed the ARO decision.

13    On 30 April 2021, the applicant lodged an application for review of the decision of the Social Services & Child Support Division of the AAT.

14    On 7 October 2021, the AAT affirmed the decision of the Social Services & Child Support Division of the AAT.

15    On 1 November 2021, the applicant filed his notice of appeal from the decision of the AAT of 7 October 2021.

Source of jurisdiction to bring appeal

16    Appeals to the Federal Court from decisions of the AAT are brought pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).

17    Section 44 relevantly provides:

44    Appeals to Federal Court of Australia from decisions of the Tribunal

Appeal on question of law

(1)     A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding.

...

Federal Court may make findings of fact

(7)    If a party to a proceeding before the Tribunal appeals to the Federal Court of Australia under subsection (1), the Court may make findings of fact if:

(a)     the findings of fact are not inconsistent with findings of fact made by the Tribunal (other than findings made by the Tribunal as the result of an error of law); and

(b)     it appears to the Court that it is convenient for the Court to make the findings of fact, having regard to:

(i)    the extent (if any) to which it is necessary for facts to be found; and

(ii)    the means by which those facts might be established; and

(iii)    the expeditious and efficient resolution of the whole of the matter to which the proceeding before the Tribunal relates; and

(iv)    the relative expense to the parties of the Court, rather than the Tribunal, making the findings of fact; and

(v)    the relative delay to the parties of the Court, rather than the Tribunal, making the findings of fact; and

(vi)    whether any of the parties considers that it is appropriate for the Court, rather than the Tribunal, to make the findings of fact; and

(vii)    such other matters (if any) as the Court considers relevant.

(8)     For the purposes of making findings of fact under subsection (7), the Federal Court of Australia may:

(a)     have regard to the evidence given in the proceeding before the Tribunal; and

(b)     receive further evidence.

...

The decision below

18    The reasons of the decision dated 7 October 2021 defined the issue before it as being “whether the payment received by the Applicant was a termination payment so as to be captured by sections 1068 – G7AG to 1068 – G7AR of the Social Security Act 1991 (Cth) (“the Act”), and therefore give rise to an Income Maintenance Period.”

19    The applicant did not assert any error in relation to the identification of this issue by the AAT. Indeed, the applicant’s submissions appear to be directed at this issue.

20    The reasons below then set out certain sections of the Social Security Act as being relevant to that identified issue at [4] – [7] as follows:

Section 643 of the Act provides that the rate of new start allowance is calculated using Benefit Rate Calculator B at the end of section 1068 of the Act. Module G of Benefit Rate Calculator B sets out that an income tested [sic] affects the rate of new start allowance.

Sections 1068 – G7AG to 1068 – G7AR provide for an Income Maintenance Period to apply when a person receives a termination payment.

Section 1068 – G7AH of the Act provides:

Certain termination payments taken to be ordinary income

1068 – G7AH If:

   (a)    a person’s employment has been terminated; and

(b)    the person receives a termination payment (whether as a lump sum payment, as a payment that is one of a series of regular payments or otherwise);

the person is taken to have received ordinary income for a period (the income maintenance period) equal to the period to which the payment relates.    

Section 1068 – G7AQ of the Act includes the following definition of “termination payment”:

“termination payment” includes:

   (a)    a redundancy payment; and

(b)    a leave payment relating to a person’s employment that has been terminated; and

(c)     any other payment that is connected with the termination of a person’s employment.

21    The applicant did not assert any error in relation to this statement of the relevant legislation. Indeed, the applicant set out the statutory definition of “termination payment” in his submissions and emphasised the words in (c) of that definition, namely “any other payment that is connected with the termination of a person’s employment”.

22    The reasons below state the critical findings at [17]–[18] as follows:

The payment at the heart of this application would clearly not have been made but for the Applicant's prior employment. The Fair Work Commission ordered the payment "as an appropriate amount for remuneration lost". Moreover, the former employer clearly made the payment as an "Employment Termination Payment". The payment clearly fell within sub paragraph (c) of section 1068 – G7AQ, as it fell within the description "any other payment that is connected with the termination of a person's employment".

The decision by the Respondent, the ARO and AAT 1 were clearly correct. The submissions by the Applicant to the contrary are ill-founded in fact, and misconceived in law.

The Notice of appeal

23    The notice of appeal identified two questions of law, which were:

1.     The Applicant asserts that his compensation payment was for the breach of his right to employment. It was not Income because it was not paid for accrued entitlements or due for work performed or in lieu thereof. It was Capital.

2.     The Social Security (Administration) Act 1999 claims in s.1068 G7AH(c) that a Termination Payment [is] any payment that's connected with the termination of a person's employment.

(emphasis original)

24    The notice of appeal also identified findings of fact that this Court is asked to make, which were:

1.     The Applicant’s compensation payment – for Unfair Dismissal (the breach of his right to employment) – must be recognised as Capital not Income.

2.     The Dept of Social Security has mischaracterized a compensation payment for the breach of the right to employment as a termination payment.

3.     The Dept of Social Security has wrongly asserted a Capital payment is Income and has then denied Social Security payment on that basis.

4.     The suspension period was based on a false assertion by the Dept of Social Security.

(emphasis original)

25    The applicant did not seek to adduce any additional evidence other than that which was before the AAT.

26    The grounds relied on were set out in the notice of appeal as follows:

1.     On 1 May 2019 the Work Commission ruled in [2019] FWCFB 2946 that the Applicant was Unfairly Dismissed: …Mr Lee’s dismissal was unjust… Mr Lee was unfairly dismissed.

2.     On 22 July 2019, the Commission ordered [2019] FWC 5095 the employer to pay $24,117 in compensation.

3.     The compensation payment was for Unfair Dismissal. The Applicant was being compensated for the breach of his right to employment.

4.     The compensation money was not paid for dismissal but for unfair dismissal – hence it was not a termination payment.

5.     The compensation was not due for employment entitlements or work performed, but was ordered to be paid for legal remedy – hence it was not a termination payment.

6.     The department of Social Security and the Commonwealth falsely assert that money paid for Unfair Dismissal (legal remedy) is a termination payment and therefore income.

(emphasis original)

Submissions by the parties

27    In substance, the primary contention of the applicant is that the AAT erred in finding that the payment from Superior Wood Pty Ltd was a termination payment, and therefore income, for the purposes of the Social Security Act.

28    In summary, the applicant submitted that:

(a)    certain termination payments can be taken to be ordinary income if (a) employment was terminated (b) termination payment was received (c) the person is taken to have received ordinary income for a period;

(b)    a termination payment is defined as (a) a redundancy payment (b) leave payment relating to a person’s employment (c) any other payment that’s connected with the termination of the person’s employment (emphasis in submissions);

(c)    his payment was not employment income as it was a legal remedy due to the unfair termination of his employment, thereby being “an example of how section (c) is false”;

(d)    the vague and misleading s 1068 – G7AQ(c) provides that a termination payment includes any other payment that is connected with the termination of a person’s employment (emphasis in submissions);

(e)    “Centrelink (and the Social Security Act) are falsely asserting that income is determined by who pays it, and that ANY payment CONNECTED WITH the termination of a person’s employment is income”;

(f)    income is “defined by WHY the payment was made not by WHO made it”;

(g)    as the payment was payment for unfair dismissal it was not income as “Income is money earned from employment”. That his employer was ordered to provide compensation does not mean that the payment can be classed as income “because it was clearly money awarded” for the breach of the applicant’s legal rights;

(h)    “s1068-G7AQ(a) & (b) rule out my payment being classed as Income so the Act adds the contradictory s1068-G7AQ(c) to try and grab any payment made to an employee ... my compensation payment is a clear example of error in the Act”;

(i)    the compensation payment was ordered by the Commission for the breach of the applicant’s right to employment. It was a payment in lieu of reinstatement;

(j)    “[the Commission’s ruling] was achieved against the Commonwealth that wrote the Privacy Act 1998 and it’s [sic] Employee Records Exemption. So if the Commonwealth is then allowed to claim a large portion of my compensation payment, it would be profiting from losing a Human Rights case, and profiting at the expense of the party whose rights were breached. That is obviously unjust and immoral”; and

(k)    “[b]oth Centrelink and the ATO have wrongly asserted that my payment was Income, and have deceptively claimed a large proportion of my compensation.”

29    On this basis, the applicant sought orders that he should not have been denied the Newstart Allowance and that the respondent should pay him the money owed for the period 1 August 2019 – 29 January 2020 when that allowance was wrongly suspended.

30    The respondent submitted that the applicant's complaint fails to expose any error of law in the decision of the AAT and seeks to engage in an impermissible merits review. It submitted that the determination of whether the payment was a termination payment, and therefore whether an income maintenance period was enlivened, was a question of fact about which the AAT made a finding which was open on the evidence before it and was made for the cogent reasons identified in the reasons for decision of the AAT.

31    In relation to the applicant’s claim that the payment was “capital”, the respondent submitted that the applicant had not demonstrated the justification or relevance of this. In any event, the respondent’s submissions cited the definition of “income amount” found in s 8 of the Social Security Act and noted that it includes amounts whether capital in nature or not. Accordingly, the respondent submitted there was no error, whether in fact or law, apparent from the claim that the payment was “capital”.

32    The respondent’s submissions set out s 8(1) of the Social Security Act, which provides “Income test definitions”. Section 8 defines the following relevant terms:

(a)    ‘income’, in relation to a person, means:

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

…

(b)    ‘income amount’ means

(a)     valuable consideration; or

(b)     personal earnings; or

(c)    moneys; or

(d)     profits;

(whether of a capital nature or not).

(c)    ‘ordinary income’ means:

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

Consideration

33    The first issue is whether the findings of fact sought in the notice of appeal should be made.

34    Pursuant to s 44(7) of the AAT Act, the Court may make a finding of fact which is inconsistent with a finding of fact made by the AAT only if, amongst other things, the finding of fact by the AAT was made as a result of an error of law.

35    The findings of fact in paragraphs 1 – 4 of the notice of appeal are, in effect, complaints about the respondent’s conduct which are premised on the applicant’s primary legal argument in this appeal that the payment which he received was not a termination payment, and was not income, and that accordingly, the respondent erred when it characterised the payment in this way with the result that it ought not to have suspended payment of the Newstart Allowance.

36    The first finding of fact which is sought is that the payment must be recognised as “capital” and not “income”.

37    However, the applicant’s submissions did not address how the payment to him could be characterised as “capital” and not “income”, having regard to the definition of s 8(1) of the Social Security Act or how, even if it was capital, this had the consequence that the payment was not connected to the termination of the applicant’s employment. No submission of this kind appears to have been made below either.

38    In any event, the payment received by the applicant fell within the definition of “income” within the meaning of s 8(1) because it was moneys, whether of a capital nature or not, which were received by the applicant for the applicant’s own use or benefit. That it was a payment made by way of compensation or legal remedy does not affect this conclusion.

39    For these reasons, the first finding of fact will not be made.

40    For the same reasons, the third finding of fact, being that the respondent has wrongly characterised a “capital” payment as “income”, will not be made.

41    Whether the second ‘finding of fact’ will be made, being that the respondent has mischaracterised the payment as a termination payment, is tied to the primary contention of the applicant and will be addressed below.

42    The fourth finding of fact which is sought is that the suspension period was based on a “false assertion” by the respondent. On the assumption that this is intended to describe no more than error by the respondent in acting on its mischaracterisation of the payment, then it is tied to the primary contention of the applicant and will be addressed below.

43    Importantly, having read the applicant’s submissions and listened to his oral submissions, the applicant does not appear to challenge the critical findings of facts as found by the AAT, being that:

(a)    the payment received by the applicant would not have been made but for the applicant’s prior employment;

(b)    the Fair Work Commission ordered the payment “as an appropriate amount for remuneration lost”;

(c)    the former employer made the payment as an “Employment Termination Payment”.

44    In other words, the applicant’s real complaint is that, notwithstanding these facts, the AAT was wrong to conclude that the payment “clearly” fell within sub paragraph (c) of the definition of termination payment contained in s 1068-G7AQ of the Social Security Act as it fell within the description “any other payment that is connected with the termination of a person's employment”.

45    The respondent submitted that the applicant’s complaint fails to expose any error of law in the decision of the AAT. This submission is understandable as the applicant’s notice of appeal and submissions did not identify any error of law with precision.

46    In Haritos v Federal Commissioner of Taxation (2015) 233 FCR 315; [2015] FCAFC 92 (Allsop CJ, Kenny, Besanko, Robertson and Mortimer JJ) at [62], the Full Court stated a number of conclusions concerning appeals in relation to s 44 of the AAT Act including that:

(1)    The subject matter of the Court’s jurisdiction under s 44 of the AAT Act is confined to a question or questions of law. The ambit of the appeal is confined to a question or questions of law.

(2)    The statement of the question of law with sufficient precision is a matter of great importance to the efficient and effective hearing and determination of appeals from the Tribunal.

47    At the hearing, the respondent conceded that it was arguable, at least, that whether the payment made to the applicant in relation to his unfair dismissal constituted a payment that fell within the scope of (c) of the definition of ‘termination payment’ contained in s 1068–G7AQ could be a question of law.

48    This was consistent with the Full Court decision of Federal Commissioner of Taxation v Trail Bros Steel & Plastics Pty Ltd (2010) 186 FCR 410; [2010] FCAFC 94 at [13] (Dowsett and Gordon JJ, Edmunds J agreeing) in which it was stated as a general proposition that, “what is “on a question of law” for the purposes of s 44 of the AAT Act [includes] whether facts found fall within a statute properly construed”.

49    However, as the Full Court observed in Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280 (Neaves, French and Cooper JJ) at 288:

This principle is qualified when a statute uses words according to their ordinary meaning and the question is whether the facts as found fall within those words. Where it is reasonably open to hold that they do, then the question whether they do or not is one of fact.

(citations omitted)

50    In Dring v Telstra Corporation Ltd (2021) 283 FCR 505; [2021] FCAFC 50 at [21], Flick J (with whom Rangiah and Wigney JJ agreed) cited the statement from Pozzolanic at 288 with approval and agreed with the proposition also stated in that case that where the line is to be drawn between a question of law and a question of fact is “not always easy of application”.

51    In the case before this Court, the relevant words in the Social Security Act are, “any other payment that is connected with the termination of a person’s employment”. The question before the AAT was whether the facts as found by it fell within those words.

52    On one view, the statute being considered below uses words according to their ordinary meaning and the question before the AAT was whether the facts as found fall within those words. If that view is correct, it was reasonably open for the AAT to hold that they do and therefore the question whether they did or not was one of fact. Applying that reasoning, this appeal is incompetent because the appeal is not on a question of law within the meaning of s 44 of the AAT Act.

53    However, the relevant words in the Social Security Act use the phrase “connected with”. As to that phrase, the Full Court in Pozzolanic stated, relevantly, at 288–289:

The words “connected with” are capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote. As Sheppard and Burchett JJ observed in Australian National Railways Commission v Collector of Customs (SA) at 378, the meaning of the word “connection” is wide and imprecise, one of its common meanings being “relation between things one of which is bound up with, or involved in, another”: Shorter Oxford English Dictionary. Although the words of the statute are construed according to their ordinary English meaning, that does not mean that their application to a set of facts is simply described as the matching of that set of facts with a factual description. There is necessarily a selection process involved. The range of relationships to which the words apply for the purpose of the Act depends upon a judgment about that purpose ... In the end this is not a process of fact finding. The facts are found. What is left is a value judgment about the range of the Act and that is a question of law.

54    Applying these statements of the Full Court, the AAT necessarily exercised a value judgment about whether there was a connection between the payment and the termination of the employment within the meaning of the statute. That it in fact did so is demonstrated by the use of the word “clearly” in the reasons.

55    For this reason, I am unable to accept the respondent’s submission that the appeal has not been brought on a question of law and is therefore incompetent.

56    Having said that, and for the following reasons, the applicant’s appeal fails. Further and for the same reasons, the findings of fact sought by the applicant in paragraphs 2 and 4 will not be made.

57    Despite the applicant’s submissions that subsection (c) of the definition of termination payment is “false”, “contradictory”, and an “error”, no error of law has been established by the applicant in relation to the AAT’s finding that the payment fell within subsection (c) of the definition of termination payment contained in s 1068-G7AQ.

58    Having regard to the findings of fact in the decision below, which are not challenged by the applicant, the payment was made to the applicant as a consequence of the termination of his employment. There is a direct and immediate relationship between the payment and the termination of the applicant’s employment in that, had the termination not occurred, the payment would not have been made.

59    The fact that the termination was found to constitute unfair dismissal, and the payment was made pursuant to an order of Fair Work Commission, does not detract from the connection between the payment and the termination of the applicant’s employment.

Conclusion

60    For these reasons, the decision of the AAT will be affirmed. I will also order that by 4.00 pm AEST on 18 March 2022, the parties shall file and serve any written submissions (limited to three pages) which they wish to make on the subject of the appropriate costs order which should be made.

Associate:

Dated:    11 March 2022