Editors --- "Newstart allowance: meaning of 'unemployed'" [2006] SocSecRpr 36; (2006) 8(3) Social Security Reporter, Article 13

• SECRETARY TO THE DEWR and JOSS
• Background
• The legislation
• The evidence before the Tribunal
• The Tribunal’s decision
• Formal decision

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Newstart allowance: meaning of 'unemployed'

SECRETARY TO THE DEWR and JOSS

Decided: 10th July 2006 by Graham J.

Background

Joss made a claim for and was paid newstart allowance. On 30 May 2001 Centrelink decided that Joss had been overpaid newstart allowance in the period 24 July 1997 to 27 January 1998. Centrelink found that, on the basis of certain activities Joss had undertaken during this period, he could not be said to have been ‘unemployed’, and therefore was not qualified for newstart allowance at that time. Note that Joss was not required to look for work during this period on the basis of his physical disabilities.

Joss appealed this decision to the SSAT, who found in his favour. The Secretary to the DEWR appealed to the AAT, although only in relation to the adjusted period of mid-September 1997 to 22 January 1998. The AAT heard evidence as to the nature of Joss’s activities during this period, and affirmed the SSAT’s decision on the basis that Joss was ‘unemployed’ during this period.

The Secretary to the DEWR appealed to the Federal Court. The primary issue in this case was the meaning of the word ‘unemployed’ in s.593(1)(a) of the Social Security Act 1991 (‘the Act’). The Secretary’s Notice of Appeal to the Court set out three questions of law to the Court:

(a) Did the Tribunal misdirect itself in law when construing the meaning of ‘unemployed’ in s.593 of the Act?

(b) Was it open on the evidence accepted by the Tribunal for it to find that the Respondent was ‘unemployed’ for the purposes of s. 593 of the Act at relevant times?

(c) Did the Tribunal comply with its obligation to give reasons as required by s. 43 of the Administrative Appeals Tribunal Act 1975?

The legislation

Section 593 of the Act provides the general qualification criteria for newstart allowance. Between 1 September 1997 and 15 December 1997, that section relevantly provided:

593 (1) Subject to sections 594 and 598, a person is qualified for newstart allowance in respect of a period if:

(a) the person satisfies the Secretary that throughout the period the person is unemployed; and

(b) throughout the period, or for each period within the period, the person either:

i. satisfies the activity test; or

ii. is not required to satisfy the activity test; and...

This section was amended on 15 December so that s.593(1) was expressed to be ‘Subject to sections 596, 596A, 597 and 598’ instead of ‘Subject to sections 594 and 598’. However, none of the sections to which s.593(1) was subject had any application to the facts of this case.

The Court also made reference to s.595(1) of the Act. That section allows the Secretary to treat a person as being unemployed throughout a period in circumstances where the person has undertaken paid work during the period, if the Secretary is of the opinion that the work should be disregarded taking into account:

i) the nature of the work; and

ii) the duration of the work; and

iii) any other matters in relation to the work that the Secretary considers relevant.

However, the Court noted that at no stage during this appeals process had the Secretary considered the exercise of this power.

The evidence before the Tribunal

Joss gave evidence that he usually worked as a captain. During the period in question he travelled interstate to help select a boat for purchase by an acquaintance, Steenbuck, who was the manager of a small charter boat company. Steenbuck sought to purchase a boat to be used for commercial purposes. Joss assisted in selecting a boat and performed substantial work to organise repairs and other tasks on the boat that was eventually purchased - the ‘Zane Grey’. He gave evidence that, except for some 26 days during the period when he was recuperating from a medical operation, he worked on the Zane Grey ‘every day’.

Joss gave further evidence that he received money for expenses incurred in his work, but that he did not receive wages during this period. He stated that he believed that he was performing this work on the understanding that he had entered into a contract with Steenbuck, and not on the basis that he was ‘employed’ by Steenbuck. He believed that ‘somewhere down the line’ he would receive 50 per cent of the takings in the boat’s commercial ventures.

Steenbuck told the Tribunal that he employed Joss towards the end of 1996. His employment became, in Steenbuck’s words, a ‘major job’ in 1997 when they purchased the boat and the boat was damaged, requiring repairs. Steenbuck also gave evidence that he paid Joss a petrol allowance and that Joss had received wages during the period by way of weekly cash payments. There was, however, no documentary evidence before the Tribunal to indicate that Joss received wages during the period, and Steenbuck’s records only showed that wages were paid to Joss after 22 January 1998.

Steenbuck denied that he had ever intended that he and Joss would undertake any joint ventures in relation to the Zane Grey, or that Joss had an interest in the boat or its commercial activities.

The Tribunal also had before it evidence from proceedings instituted by Joss against Steenbuck in the Industrial Relations Commission of NSW (IRCNSW) on 23 November 1999. The summons sought an order that a contract entered into between Joss and Steenbuck, or the company operated by Steenbuck, was ‘unfair, harsh or unconscionable’.

The summons stated that the contract in question was made around December 1996, and that it was Joss’s belief that he would be entitled to 50% of either the company operated by Steenbuck or the Zane Grey itself on the basis of ‘work, time, effort, management, care and consideration in relation to personal exertion to be foregone for the period December, 1996 to the period ending January, 1999’. Joss’s affidavit, which was filed in the IRCNSW proceedings, included assertions that Joss worked on the boat seven days a week for a minimum of 10 hours per day after picking up the vessel in September 1997, except during periods of illness.

The evidence before the Tribunal was that the IRCNSW proceedings were settled before going to hearing. Joss received a lump sum of $75,000 by way of settlement.

The Tribunal’s decision

The Tribunal found that there was a ‘possibility’ that Joss was self-employed if his expectation was that he would receive 50 % of the enterprise connected with the boat. On the other hand Steenbuck gave conflicting evidence about Joss’s position and told the Tribunal that he employed Joss from 1997 and paid him wages, even though there was no documentary proof of this.

The Tribunal then stated that it was not clear whether Joss was employed or self-employed. The Tribunal decided, however, that there was insufficient evidence before it to conclude that Joss was ‘not unemployed’:

... although the circumstances of arrangement with Mr Steenbuck are not clear to me, after careful consideration of the evidence before me, on balance, I am not satisfied that Mr Joss was not ‘unemployed’. (Reasons, para. 32)

The Federal Court’s discussion

The Court discussed the three member AAT decision of McKenna and Director-General of Social Service (1981) 3 ALD 219 and concluded:

Undoubtedly a person will be unemployed when they are without work or employment and that situation is both temporary and ‘involuntary’. (Reasons, para. 15)

The Court closely analysed the case-law dealing with the more specific question of whether a person who is self-employed may be considered to be ‘unemployed’. In relation to self-employment, the Court cited the Tribunal’s decision in the case, Te Velde and Director-General of Social Services (1981) 3 ALN 111. In that case Senior Member Hall reasoned that a self-employed person may be considered ‘employed’ even when engaged in full-time activities that do not earn that person a sufficient livelihood.

The Court also considered the case of Weekes and Director-General of Social Services (1981) 3 ALN 141, in which the Tribunal reasoned that a person who was seeking to establish a business and who was not in receipt of any net income could not be regarded as ‘unemployed’.

The Court then looked at the evidence before the Tribunal in this case. The Court found that this evidence only gave the Tribunal two choices - to decide whether Joss was an employee or was in self-employment. A finding that Joss was ‘unemployed’ during the relevant period was not open to the Tribunal on the evidence before it. It is apparent that the Tribunal accepted that: Joss was involved in the selection and purchase of the Zane Grey; Joss went to the boat every day over a lengthy period, including the relevant period; and Joss worked on the boat or in the office on board the boat sourcing equipment. The Court commented:

Plainly, Mr Joss was not, during the relevant period, without work or employment in a situation that was temporary and involuntary. If he was not an employee, he was undoubtedly carrying on business or engaging in work with a view of profit. He was undertaking work on the ship with intensity.... He was applying himself with great vigour to the job in hand. (Reasons, para. 55)

The Court concluded that after applying the law in relation to what constitutes a person being ‘unemployed’ within the meaning of s.593(1) to the findings of fact made by the Tribunal, the only issue could have been whether Mr Joss was an employee of Steenbuck or his company, or a partner or joint venturer of Steenbuck and/or his company throughout the period (Reasons, para. 54). As an employed person, Joss could, in the exercise of the Secretary’s discretion under s.595, be treatedas an unemployed person, but that would only be because he was not ‘unemployed’ in fact. However, this was not the course undertaken by the Tribunal in this case.

Formal decision

The Court answered the questions of law in this matter as follows:

(a) The Tribunal misdirected itself in law when construing the meaning of ‘unemployed’ in s.593 of the Act.

(b) It was not open on the evidence accepted by the Tribunal for it to find that Joss was ‘unemployed’ for the purposes of s.593 of the Act at the relevant times.

(c) However, the Tribunal complied with its obligation to give reasons as required by s.43 of the Administrative Appeals Tribunal Act 1975. Its reasons, while leaving a number of factual issues ‘hanging’, were not so deficient that it was impossible to ascertain whether there was an error in the decision-making process. (Reasons, para. 60)

The Court allowed the Secretary to the DEWR’s appeal, and set aside the Tribunal’s decision. The case was remitted to the Tribunal to be heard and decided again without the hearing of further evidence.

[D.A.]