Editors --- "Age pension: non-compliance with notices requiring provision of information" [2006] SocSecRpr 11; (2006) 8(1) Social Security Reporter, Article 11

• THEO and SECRETARY TO THE DFaCS
• Background
• The legislation
• The findings and decision of the AAT
• The decision of French J.
• The decision of the Full Court
• Formal decision

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Age pension: non-compliance with notices requiring provision of information

THEO and SECRETARY TO THE DFaCS

(Full Federal Court of Australia)

Decided: 23rd November 2005 by Kiefel, Jacobsen and Greenwood JJ

Background

Theo was granted age pension on 9 July 1998. His wife received the blind pension. From 8 September1978 Theo was the trustee of a family trust known as the Solon Theo Family Trust (‘the Trust’). His wife and four children were its beneficiaries. Theo made a statutory declaration which bore the date 14 December 2001 in which he said that he had resolved to transfer his capacity as trustee to his son.

The Social Security Act 1991 (the Act) was amended with effect from 1 January 2002 by the introduction of a new Pt 3.18 dealing with the treatment of private trusts and companies for the purposes of the income and assets tests relating to pension payments.

Notices requiring information about the Trust were sent to Theo on 25 February 2002 and 7 March 2002 and to his wife on 5 February 2002. On 12 June 2002 a delegate of the Secretary cancelled Theo’s age pension based on his failure to provide information to it about the cessation of his association with the Trust. On 30 May 2003 the cancellation was overturned by a decision of the AAT and arrears of pension of $11,374 were paid for the period 27 March 2002 to 1 July 2003. The AAT decision was based upon the invalidity of the notices. The failure to comply with them therefore did not give rise to the power to cancel Theo’s pension.

Further notices were issued to Theo requiring information about the relinquishment of his involvement with the Trust. He was found not to have complied with those requirements and his pension was again cancelled on 10 September 2003. He lodged fresh applications for the age pension in October 2003 and April 2004 which were rejected. Theo pursued review of these decisions through the SSAT and the AAT. He was unsuccessful in relation to each of those matters and his challenge to the calculation of the arrears paid pursuant to the first AAT decision.

Theo unsuccessfully appealed against the decision of the AAT that affirmed the arrears calculation, cancellation decision and rejection decisions in relation to his age pension.

The legislation

Section 36(1) of the Social Security (Administration) Act 1999 (the Administration Act) obliges the Secretary to determine a claim for a social security payment by either granting or rejecting it. Section 37(1) requires the Secretary to grant the claim if the claimant is qualified and the social security payment is payable.

Section 63 of the Administration Act permits the Secretary to require a claimant for a social security payment to provide information to the Secretary by written notice specifying the time for the provision of the information. In the event that the claimant fails to comply with the requirement in the notice, the payment that the person is receiving or has claimed is not payable.

Section 196 of the Administration Act appears in Part 5 ‘Information management’, Division 1 ‘Information gathering’. Section 192 in that Part provides a general power in the Secretary to obtain information or have documents produced and applies where there is a question as to whether a person is qualified to make a claim for the payment or whether they are entitled to receive payment. Section 196 requires the notice to be in writing and given in a certain manner, specifying the information to be given and the period within which it is to be given. The notice must specify that it is given under the section.

One of the consequences of a failure to comply with s.196 is the commission of an offence, for which s.197 of the Administration Act provides a penalty of a term of imprisonment. Section 81(1) provides that if a person is given a notice ‘embodying a requirement under Division 1 of Part 5’ and they do not comply, the Secretary may determine that the payment is to be cancelled or suspended.

The findings and decision of the AAT

The AAT found that on 8 August 2003 the Secretary had requested Theo to provide further information in relation to his involvement in the Trust. It found that the Secretary had requested a copy of the amendment to the Trust Deed, a properly completed Private Trust Module (PT Module) and the income tax return for the trust in 2001/2002 as well as its balance sheet and a profit and loss statement.

It found that on 20 August 2003 Theo had responded by putting a line through every operative page of the PT Module writing ‘N/A’ and returning the PT module. The AAT was satisfied that the documents requested were in Theo’s possession or under his control. Although he said he no longer had any involvement with the Trust, the AAT was not satisfied that that was the case after hearing him give evidence.

The AAT held that the letter of 8 August 2003 was a written notice under s.196 of the Administration Act which was validly given. The AAT held that Theo had not provided the information requested by the Secretary but simply indicated that he did not believe the request for information concerned him. The AAT found that Theo had failed to comply with a validly given notice. The Secretary therefore had a discretion to cancel the Age Pension and the decision to exercise that discretion was the correct and preferable decision in the circumstances. The AAT affirmed the decision.

The AAT considered the decision of 31 October 2003 by the Department to reject the fresh claim for age pension made by Theo on 6 October 2003. When the claim was lodged the Secretary had requested, by letter dated 10 October 2003, that Theo provide further information: a complete S Module and PT Module and proof of identity and a bank statement showing the balance as at 6 October 2003.

The letter stated that the authority for the request was ‘under social security law’ and that Theo would need to supply the documents or contact the Department within 14 days after the day on which the letter was given to him ‘to avoid possible rejection of your claim for age pension’. Theo provided proof of identity but did not provide the other documents requested.

The AAT held that the notice complied with s.196 of the Administration Act and was therefore a valid notice. It held that Theo’s failure to submit a completed Module PT form amounted to a failure to comply with a valid request for information and the payment he claimed was not payable pursuant to s.63(4). The decision to reject the claim for age pension of 31 October 2003was affirmed.

The AAT then considered the decision to reject Theo’s claim for age pension made on 8 April 2004. In response to that claim the Secretary, on 14 April 2004, requested that Theo provide further information. He was asked to provide the documents within 14 days after the date of receipt of the letter. A follow-up letter was sent on 16 April 2004. This letter expressly stated that it was a notice given under s.196 of the Administration Act. Theo did not provide any further information.

The AAT was satisfied that the written request was a valid request for information and that Theo had failed to comply with the request. It affirmed the Secretary’s decision to refuse the claim for the age pension.

The decision of French J.

On appeal to the Federal Court, French J considered the analysis by the AAT of the notices sent to Theo and indicated that while he had some reservations about the AAT’s reliance upon the s.196 notices as a basis for attracting the application of s.63(4) of the Administration Act there were no errors of construction of the relevant provisions of the Administration Act that would have affected the outcome of the case. The other arguments advanced by Theo were held to not disclose any error of law on the part of the AAT.

The decision of the Full Court

Theo argued that the requirements of a notice under s.63(4) of the Administration Act must be reasonable. He contended that they were not, because he was either unable to provide the information sought or he was not liable to provide it because he had resigned from the Trust before the new legislative provisions came into effect. The Court pointed out that the date of resignation from the Trust was a finding of fact, and that it was not permissible for the Court to involve itself in findings of fact. For the same reason the Court could not consider the correctness of the AAT’s finding that Theo had the information requested but did not provide it.

Theo also challenged French J’s reservation about the Tribunal’s reliance upon the notices under s.196 as a basis for attracting the application of s.63(4) of the Administration Act. He complained that his Honour determined the matter in the face of a reservation.

The Full Court stated that it found no difficulty with the procedure which was followed concerning the cancellation of the appellant’s pension. Section 196 of the Administration Act permitted information to be required in connexion with the question whether a cancellation should take place. Section 81 of the Administration Act had the effect that a pension may be cancelled if not complied with.

In regard to the determination of the applications for pension, the Court said:

We do not understand why notices under s196 were given. The relevant notices for the purposes of ss36 and 37 are those provided for in s63(2) of the Administration Act. The Tribunal correctly connectedss36 and 63 and spoke of them as the operative provisions. Its references to the notices under s196 were not connected with the decision to refuse. One may infer that the Tribunal took the first notices, those stated to be ‘under social security law’ as notices for which s63 provides. We agree. In our view it is not necessary that the notice state that it is one given under s63(2) for it to be a notice for the purposes of s63(4). There is no such requirement in the section. This may be contrasted with the provisions of s196, which contains an express requirement to that effect with respect to a notice issued pursuant to it. An important difference between the provisions is that a person failing to comply with s196 may be sentenced to a term of imprisonment. In those circumstances they need to be informed of the section being applied to them.

That leaves the question whether the provision of the s196 notice has any effect upon the operation of s63 when a notice is given under the latter section and not complied with. We cannot see that it has. It appears to us irrelevant to that question and an unnecessary step which had no purpose, given that there is no suggestion that the penalty referred to in s197 was to be sought. Indeed it seems to us that the Tribunal was at something of a loss to know how to deal with them. We do not however take the view that s196 was used by it to connect to s63(4) of the Administration Act. In this respect we respectfully differ from his Honour, but agree with the conclusion his Honour reached. (Reasons, paras. 24-25)

Formal decision

The appeal was dismissed with costs.

[C.E.]