Theo v Secretary, Department of Families, Community Services and Indigenous Affairs

Federal Court of Australia (Full Court)|2007-05-23|Before: Feldman P, Spender J, Greenwood J, Gyles JJ

INTRODUCTION 1 Since February 2002 the appellant has been in dispute with the respondent about his entitlement to an age pension. The history is set out in the reasons of the Administrative Appeals Tribunal (the Tribunal) the subject of the present appeal: Theo v Secretary, Department of Family and Community Services [2006] AATA 1086. Only the most recent part of that history need be recorded. 2 On 12 July 2004 the appellant applied for the age pension. The application was rejected and the rejection was confirmed on review by the Social Security Appeals Tribunal (SSAT). The Tribunal dismissed the appellant's application for review of the SSAT's decision. The appellant's appeal to the Federal Court was upheld by Spender J, who set aside the orders made by the Tribunal and remitted the matter to it for reconsideration: Theo v Secretary, Department of Family and Community Services (2006) 42 AAR 503. On 1 December 2006 the Tribunal, constituted by Greenwood J, confirmed the decision under review. The appeal is from that decision.

THE PENSION APPLICATION 3 The appellant completed a document headed "Claim for Age Pension". He filled in the "Personal details" section. Possibly because he says he is separated from his wife, he completed the "Partner details" section "N/A". He completed the "Payment details" section. As to "Tax details" he wrote "Already known to you". He endorsed the section relating to his partner "N/A". To the "Accommodation" part, which requested details of the class of dwelling in which he lived, he responded "Long Grass". The section "Other questions" was marked "N/A". 4 The appellant also completed a document headed "Income and Assets 3". He filled in the sections dealing with income and assets generally. He marked the parts dealing with real estate and compensation entitlements "N/A".

THE OBLIGATION TO PROVIDE INFORMATION 5 Section 36 of the Social Security (Administration) Act 1999 (Cth) (the Administration Act) requires the respondent to determine a claim for a social security payment by either granting or rejecting it. Section 37(1) requires the respondent to grant the claim if satisfied that the claimant is qualified and the social security payment is payable. 6 Division 6 of Part 3 of the Administration Act deals with the obligation of a person to provide information for the purposes of the Act. Section 63, which is in Div 6, empowers the respondent, by written notice, to require a person receiving or claiming a social security payment to provide information: s 63(2)(d). In the event of non‑compliance, the payment the person is receiving or has claimed is not payable: s 63(4)(d). However the requirement of the notice must be reasonable: s 63(4)(c).

THE REQUEST FOR INFORMATION 7 By letter dated 16 July 2004, a few days after the appellant's application for the pension, Centrelink requested him to provide certain information in order that his claim could be assessed. The letter was in part as follows: "You must complete the enclosed forms. Private Trust module, Separation details form, Accommodation details form, and Real Estate details form. If you are no longer involved in the Solon Theo Family Trust, you must provide the original stamped amended trust deed showing you have relinquished control of the trust." 8 The appellant filled in the home address part of the "Separation details" form "N/A". As to his name, date of birth, address where currently living and telephone number, he stated "Your records have such information". As to the date of separation, whether it was then permanent or indefinite, temporary or uncertain, he said "Do not remember". As to the circumstances that led to the separation he wrote "No answer". As to the address where he and his partner were living before the separation, he answered "Your records have such information". The "Real estate details" were marked "N/A", as was the Private Trust module. 9 On 16 August 2004 Centrelink advised the appellant that his claim had been rejected because he had not provided enough information for an assessment of his claim to be made. The letter made particular reference to his failure to provide information about his involvement in the Solon Theo Family Trust (the Trust).

THE TRUST 10 The Trust was created by deed made 8 September 1978. The appellant was the trustee. The Trust is a discretionary trust, the beneficiaries being the appellant's wife, Athina, and four children, Andrew, Tania, Paul and Alexander. Clause 3 of the deed is as follows: "The said Solon Theo may at any time by writing under his hand and seal alter the settlement herein made to confer upon the Trustee further or additional powers, to vary or cancel any of the Trustee's powers, to exclude any beneficiary or contingent beneficiary, to add to or enlarge the class of beneficiaries, to vary the Trusts upon which the Trust Fund is held by the Trustee, to revoke power to direct as to the vesting in possession of income or corpus of the Trust Fund and otherwise to vary the trusts powers and provisos relating thereto and the rights powers and duties of the Trustee and to transfer or assign to any other person or corporation the power given to the Trustee by this Deed to direct as to the vesting in possession of the Trust Fund in the class of beneficiaries referred to but no alteration made pursuant to this clause shall operate or be deemed to confer on the Settlor or his estate or Solon Theo or his estate any beneficial interest in the Trust Fund." Clause 8 confers on the trustee power to retire as trustee and appoint a replacement, and the continuing power to remove any trustee, appoint another or reappoint himself. 11 On 14 December 2001 the appellant made a statutory declaration by which he "resolved to transfer [his] capacity as trustee" to his son Paul effective from that date "and without retaining any formal roles, pecuniary interests or control on the functioning" of the trust. 12 On 5 February 2002 Centrelink wrote to the appellant's wife drawing her attention to changes to the rules relating to the assessment of income and assets for private trusts and small private companies effective from 1 January 2002. After advising that Centrelink records indicated that Mrs Theo may have an involvement in the Trust, the letter went on: "It is important that you read the enclosed Information Booklet which contains information about the changes and what you need to do. You must complete the Private Trust or Private Company forms or tell us why you think you are not involved in a trust or company. We are asking you to provide detailed information about your and/or your partner's private trust or private company." 13 On 18 February 2002 the appellant responded to Centrelink's letter to Mrs Theo by stating that he was the trustee of the Trust, that the trustee was not a Private Trust or a Private Company, and that the changes to the rules referred to in the letter did not concern him or his wife. 14 In May and June 2002 the appellant executed various documents in which he declared that he was no longer involved in the Trust, that he was not a trustee of any trusts, and that he and his wife were not in a position to exert any control over the Trust.

MEANS TEST TREATMENT OF PRIVATE TRUSTS 15 The changes in the rules to which Centrelink's letter of 5 February 2002 drew attention are found in Part 3.18 of the Social Security Act 1991 (Cth) - "Means test treatment of private companies and private trusts". The Part consists of ss 1207 to 1209K. Section 1207 contains a helpful simplified outline of the Part: · "This Part sets up a system for the attribution to individuals of the assets and income of private companies and private trusts (sections 1207Y and 1208E). · Attribution starts on 1 January 2002. · For an asset or income to be attributed to an individual: (a) the company must be a designated private company or the trust must be a designated private trust (sections 1207N and 1207P); and (b) the company must be a controlled private company in relation to the individual or the trust must be a controlled private trust in relation to the individual (sections 1207Q and 1207V); and (c) the individual must be an attributable stakeholder of the company or trust (section 1207X). · A company or trust will be a controlled private trust or a controlled private company if the individual passes a control test or a source test. … · The asset deprivation rules and the income deprivation rules are modified if attribution happens." 16 It is not necessary to set out the details of the complicated scheme in Part 3.18. It is sufficient to record the following matters in relation to the possible application of the attribution provisions to the appellant. First, the Trust is a designated private trust within s 1207P because it is not a "fixed trust" as defined, or a complying superannuation fund, and there is no evidence that it is an "excluded trust" as defined. 17 Second, the Trust is a controlled private trust in relation to the appellant because the appellant passes the control test on a number of the grounds specified in s 1207V(2), only one of which need be satisfied. As appears from the Tribunal's reasons at [21], [23] to [27] and [29] to [35], and from what is said at [22] to [25] below, it is unclear whether the appellant has in truth ceased to be trustee of the Trust. Either he is the trustee, or if he is no longer the trustee an "associate" of his, namely his son Paul, is: ground (a). The word "associate" is defined so as to include a person's spouse and children. Further, either the appellant or Paul is able to vary the trust deed, so that ground (c) is also satisfied. 18 Third, the appellant is an attributable stakeholder of the Trust for the purposes of s 1207X because the Trust is a controlled private trust in relation to him. Under that section the consequence is that his asset attribution percentage and his income attribution percentage in relation to the Trust is 100% or such lower percentage as is determined by the respondent. 19 Fourth, s 1207Y(1) operates to include in the appellant's ordinary income additional income derived by the Trust. That occurs if the following conditions are satisfied: (a) during a particular derivation period of the trust, it derives an amount that is ordinary income; (b) the appellant is an attributable stakeholder of the trust throughout the attribution period that relates to the derivation period of the trust; (c) the attribution period begins on or after 1 January 2002; and (d) if that amount had been derived by the appellant instead of by the trust, it would have formed part of his ordinary income. When these conditions are satisfied: "then, in addition to any other ordinary income of the individual, the individual is taken to receive, during that attribution period, ordinary income at an annual rate equal to the individual's income attribution percentage of the amount worked out using the formula: Amount referred to in paragraph (a) x365 Number of days in the derivation period

20 The appellant's grounds of appeal are described at [27] to [36]. They do not attack the Tribunal's finding that the respondent's request for information was reasonable for the purposes of s 63(4)(c) of the Administration Act. Nor do his extensive written submissions or his several affidavits referred to therein do so. Nor did he do so in his oral submissions. The existence of Part 3.18 came to light in the course of discussion as to the basis upon which the reasonableness of a request is to be determined. Had reasonableness been a ground of appeal, the question would have been whether, having regard to the existence of Part 3.18, the request for information about the Trust was reasonable. We agree with the Tribunal's conclusion that it was reasonable. In this connection we refer to the mischief that clearly lies behind Part 3.18 of the Social Security Act.

THE TRIBUNAL'S DECISION 21 The Tribunal had before it evidence that on 9 October 2003 the appellant, as trustee of the Trust, became registered as owner of land at Tiaro and other land at Cooloola. The Tribunal said: "Accordingly, by 9 October 2003, dealing instruments were being lodged with the Queensland Land Registry … which recorded a proposed acquisition of two blocks of land by Mr Theo in his capacity as trustee of the Solon Theo Family Trust. By 7 November 2003, Mr Theo had executed before a Justice of the Peace two documents in relation to the blocks of land at Tiaro and Cooloola which were prepared, signed and lodged expressly in response to two requisitions … seeking an accurate statement of the correct details of the transferee for each block of land. Searches reveal that as at 19 June 2006 Mr Solon Theo was recorded as the owner of the two blocks of land as trustee. Both at the date that Mr Theo lodged his application for a social security payment, 12 July 2004, and the date he received a request from the Respondent for information in relation to his claim for an age pension, 16 July 2004, Mr Theo was registered as the owner in his capacity as trustee of the Solon Theo Family Trust of two blocks of land. On 21 July 2004, when Mr Theo returned to Centrelink module PT (Private Trust) and module R (Real estate details) endorsed in each case with a line through the document and the letters 'N/A', Mr Theo was recorded as the owner of the Tiaro and Cooloola land in his capacity as trustee of the Solon Theo Family Trust." 22 The Tribunal then rejected the appellant's contention that in taking transfers of the two properties he was simply providing "administrative assistance" in the affairs of the Trust. As to this the Tribunal said, amongst other things: "even if the correct characterisation of the completion and execution of the documents and Mr Theo's participation in the acquisition of each block of land is merely a facet of 'administrative assistance' in the affairs of the trust, the Respondent is entitled to receive and Mr Theo is obliged to provide information relevant to his application for an age pension and, in particular, information concerning whether Mr Theo is either the legal or beneficial owner of any land or other assets and whether any title to land recorded in the name of Mr Theo is held upon any trust. A notice to provide such information must be reasonable in its requirements and lawfully made. It is not accurate to describe the information sought by the Respondent as either irrelevant or 'not applicable' to Mr Theo." 23 The Tribunal then referred to the appellant's letter to Centrelink of 18 February 2002 in which he asserted his continuing role as trustee, and said that: "The apparent inconsistency between the position adopted in the letter … and other material [asserting his retirement as trustee] is something that could have been clarified by the provision of further information. The apparent inconsistency reflected in the letter … seems to be consistent with the execution of documents in October and November 2003 which in turn is inconsistent with other declarations. These matters highlight the importance of obtaining from Mr Theo the information sought by the Respondent and the reasonableness of the requirements of the notice." 24 The Tribunal then referred to s 63(4) of the Administration Act and concluded by saying: "The information sought by the Respondent on 16 July 2004 encompassed information current either at 16 July 2004 or, more particularly, current at the date of completion of the various modules on 21 July 2004 by Mr Theo concerning Mr Theo's separation details from Mrs Athina Theo, his accommodation details, information in relation to any real estate interest and information in relation to any role or interest in a private trust. … I find that the request was reasonably made. I find that Mr Theo refused to provide information in relation to real estate interests he then held and I find that Mr Theo refused to provide information in relation to the Solon Theo Family Trust. Documents existed at that time which suggested that Mr Theo had a continuing role in relation to the trust and that he was the registered owner of two blocks of land. Mr Theo was obliged by force of the notice to provide information in relation to those two matters to the Respondent. No explanation was given of the character of the administrative assistance provided to the trust, the precise nature of the assistance, the apparent inconsistency between earlier documents and Mr Theo's apparent position as a continuing trustee of the trust. Nor was any explanation given of the important matter that Mr Theo was at that date (and apparently remains) the registered owner of two blocks of land in a trustee capacity." (emphasis in original) 25 The Tribunal concluded that the respondent was obliged, by reason of the appellant's failure to provide the requested information, to reject his claim (s 36(1)), and the Tribunal, standing in the respondent's shoes, could not be satisfied that the social security payment was payable.

GROUNDS OF APPEAL 26 There are six grounds of appeal.

Estoppel 27 The appellant claims that the age pension was paid to him from 1 January 2002 to 1 July 2003 "while the alleged deficiencies were in existence". He also says that after cancellation of his pension, the respondent reinstated it and continued to pay it during the period 1 July to 9 September 2003. These facts are said to estop the respondent from relying on s 63 of the Act. 28 Even if, which may be doubted, the appellant could establish the elements for an estoppel (as to which see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387), an estoppel is not available against the operation of s 63(4) of the Administration Act, which obliges the respondent to refuse an application for a pension when an applicant does not provide relevant information. Conduct by the respondent such as that alleged cannot prevent the respondent from carrying out the duty imposed by statute. 29 In Attorney‑General (NSW) v Quin (1990) 170 CLR 1 at 17 Mason CJ said: "The executive cannot by representation or promise disable itself from, or hinder itself in, performing a statutory duty or exercising a statutory discretion to be performed or exercised in the public interest, by binding itself not to perform the duty or exercise the discretion in a particular way in advance of the actual performance of the duty or exercise of the power …." The Chief Justice then quoted with approval the observations of Gummow J in Minister for Immigration v Kurtovic (1990) 92 ALR 93 at 111: "in a case of a discretion, there is a duty under the statute to exercise a free and unhindered discretion and an estoppel cannot be raised (any more than a contract might be relied upon) to prevent or hinder the exercise of the discretion; the point is that the legislature intends the discretion to be exercised on the basis of a proper understanding of what is required by the statute, and that the repository of the discretion is not to be held to a decision which mistakes or forecloses that understanding." Mason CJ continued at 170 CLR 1 at 18: "No doubt the principle gains some of its force from the circumstance that the discretion has a legislative foundation and it is not readily to be supposed that the legislature intended that a proper exercise of the discretion in the public interest was to be frustrated, hindered or circumvented by executive action." See also Spencer Bower G, Estoppel by Representation (4th ed, Feldman P, Hochberg D and Leech T (eds), LexisNexis UK, 2004) at VII 9.3 and Wilken S and Villiers T, The Law of Waiver, Variation and Estoppel (2nd ed, Wilken S (ed), OUP, 2002) at [9.123] to [9.126]. 30 These principles have been applied in two of the appellant's own cases: Theo v Secretary, Department of Family and Community Services (2006) 42 AAR 503 at [39] per Spender J and Theo v Secretary, Department of Family and Community Services [2005] FCA 880 at [52] per French J. We agree with French J's observation that "there was no estoppel which would overcome the statutory powers which supported the cancellation of his pension and the limitation on eligibility under s 63(4) which prevented such a payment being made".

Contractual arrangement with Commonwealth 31 The applicant contends that the Tribunal's decision breaches the contractual arrangement between him and the Commonwealth "as per the Australian Constitution and the Income Tax Assessment Act 1936". There is no substance in this contention, which was correctly rejected by French J in Theo v Secretary, Department of Family and Community Services [2005] FCA 880 at [52]. His Honour said: "Mr Theo argued for some form of contractual entitlement of a constitutional character deriving from his contributions as a taxpayer. The provisions of the Income Tax Assessment Act do not affect the construction or operation of the provisions of the [Social Security Act] or the Administration Act." 32 The Tribunal made much the same point in the present case: "Mr Theo contends that since he has been a taxpayer over time, consistent with the requirements of the Income Tax Assessment Act1936 (Cth), he enjoys a social contract which entitles him to be paid an age pension. … There is no substance in the notion that Mr Theo's historical status as a taxpaying citizen of Australia gives rise to a social contract between Mr Theo and the Commonwealth which entitles him to any class of social security payment, independently of a valid claim for such a payment properly established in accordance with the provisions of the social security law." (emphasis in original)

Disregard of Constitution and Income Tax legislation 33 The appellant contends that the Constitution and the Income Tax legislation in its various forms since 1936 should have been taken into account by the Tribunal, and that they take precedence over the Administration Act upon which the Tribunal relied. This contention is disposed of by what we have said about the preceding ground. We agree with the Tribunal when it said: "the construction and interpretation of the provisions of the Social Security Act 1991 (Cth) and the Administration Act are not informed by any aspect of the history of the enactment of the Income Tax Assessment Act 1936 (Cth) or the continuing operation or construction to be given to the provisions of that Act or the Income Tax Assessment Act1997 (Cth)."

Disregard of Spender J's decision 34 In Theo v Secretary, Department of Family and Community Services (2006) 42 AAR 503 Spender J held that the Tribunal's power under s 42B(1) of the Administrative Appeals Tribunal Act 1975 (Cth) cannot be exercised unless the Tribunal considers the merits of the application on the basis of the material before it and finds that the application is futile because it cannot succeed. Section 42B(1) empowers the Tribunal to dismiss an application if satisfied it is frivolous or vexatious. Spender J found that the Tribunal had failed to have regard to certain of the material before it. That case has no resemblance to the present case, and does not assist the appellant.

Rubber stamping Centrelink decisions 35 The appellant contends that the Tribunal's decision contains a number of errors "which dilute its veracity". It adopted "a system which leaves a lot to be desired", and has done nothing other than rubber stamping previous Centrelink decisions. In support of this claim we were referred to [8] and [9] of the Tribunal's reasons. In [8] it does no more than record the respondent's contentions. In [9] it simply records the appellant's contentions. Even though no findings or conclusions are to be found in these paragraphs, it is clear that the appellant disputes the correctness of the Tribunal's later rejection of his submissions and acceptance of the respondent's submissions. In this ground of appeal the appellant has not identified any question of law for the purposes of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). See Condell v Commissioner of Taxation [2007] FCAFC 44 at [13] per Gyles J.

Contradictory reasons 36 The final ground of appeal is that the Tribunal's decision contains "contradicting reasons" to justify the cancellation of the appellant's age pension. These reasons were not identified, and accordingly this ground fails.

CONCLUSION 37 The appeal is dismissed with costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kiefel, Sundberg and Gyles.

Solicitor for the Respondent: Australian Government Solicitor

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