Basile and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 186

Administrative Appeals Tribunal

DECISION AND WRITTEN REASONS FOR ORAL DECISION [2008] AATA 186

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/4696

GENERAL ADMINISTRATIVE DIVISION		)
Re		CARMELA BASILE

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal   Senior Member, Mrs Josephine Kelly

Date of decision                6 February 2008

Date of written reasons    5 March 2008

Place  Sydney

Decision   The reviewable decision is affirmed. 

....................[sgd]..........................

Senior Member, Mrs Josephine Kelly

CATCHWORDS

SOCIAL SECURITY – disability support pension – assets – principal residence sold – new property purchased – loan agreement with daughter and son-in-law – caveat on new property - whether loan charge or encumbrance – whether caveat charge or encumbrance – whether assets reduced by value of charge or encumbrance – applicants’ daughter and son-in-law had no equitable interest in new property - reviewable decision affirmed

Administrative Appeals Tribunal Act 1975 s 43
Social Security Act 1991 ss 11, 1118, 1121, 1129, 1130

Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529
Repatriation Commission v Tsourounakis (2007) 158 FCR 214

WRITTEN REASONS FOR ORAL DECISION

5 March 2008  Senior Member, Mrs Josephine Kelly     

1. At the conclusion of the hearing of this matter in Sydney, the terms of the decision made and a summary of the reasons for that decision were stated orally. The Applicant requested the Tribunal to furnish a statement in writing of the reasons for its decision pursuant to sub-section 43(2A) of the Administrative Appeals Tribunal Act 1975.

FACTS

2.       Mrs Basile, who was receiving a disability support pension, lived in a property at Guildford where she felt unsafe.  Her daughter and son-in-law, Mr and Mrs Bruno, leant her funds to purchase another property at Girraween.  Mrs Basile moved to the Girraween property on 24 May 2007.  She had put the Guildford property on the market on 23 April 2007 and settlement occurred in September 2007.  

3.      On 28 May 2007 Mrs Basile advised Centrelink that she had moved to the Girraween property. On 1 June 2007 Centrelink decided to suspend her disability support pension because the Guildford property was assessable as an asset for the purpose of determining her pension entitlement and, consequently, the value of her assets exceeded the relevant asset limit.

4.      Mrs Basile lodged a claim for consideration under the severe financial hardship provisions of the Social Security Act 1991 ("the Act"). On 8 June 2007 Centrelink advised her that her disability support pension had been cancelled because of the value of her assets.

5. On 18 June 2007 Centrelink decided to pay Mrs Basile $162.07 per fortnight under the access to financial hardship provisions of the Act (s 1129 of the Act). For that purpose, Centrelink accepted that the Guildford property was an unrealisable asset during the period June to September 2007 (s 11 of the Act). The notional income from the unrealisable asset is taken into account for the purpose calculating the adjusted annual rate of ordinary income (s 1130). Mrs Basile’s pension returned to the maximum rate after settlement of the sale of the Guildford property. She still has a debt to Mr and Mrs Bruno of approximately $17,000.

6.      On 20 June 2007 Centrelink advised Mrs Bruno that there was a risk of the gifting rules being applied when Mrs Basile paid back the proceeds of the sale of the Guildford property.  On 25 June 2007, at the suggestion of a Centrelink officer, Mr and Mrs Bruno entered into a loan agreement which provided that Mrs Basile would repay and fully discharge the loan on the sale of the Guildford property.    They also lodged a caveat on the title of Guildford reflecting the loan.

7.      Thereafter, Mrs Basile requested a review of the decision to reduce her pension. The authorised review officer affirmed the decision and then Mrs Basile sought review of the Social Security Appeals Tribunal which affirmed the decision.

ISSUES

8.      The issues in this case are:

1.  Whether the loan to Mrs Basile was an encumbrance or a charge on the Guildford property, and

2.  Whether a caveat Mr and Mrs Bruno placed on the Guildford property was an encumbrance.     

THE LAW

9. In summary, s 1118(1) of the Act provides that the value of a person's interest in the principal home can be disregarded for the purpose of the assets test. I accept that as of 24 May 2007 the Girraween property was Mrs Basile's principal home. It follows that the Guildford property was relevantly an asset.

10. Section 1121(1) of the Act allows the values of a person's assets to be reduced by the value of a charge or encumbrance on the property.

MRS BRUNO’S SUBMISSIONS

11.     There were two aspects to Mrs Bruno's submissions.  First, she argued that the caveat was evidence that she and her husband had an equitable interest in the Guildford property, or it was an encumbrance of itself.  She raised this argument because she had been told by a Centrelink officer that that was the effect of the encumbrance.  Her principal argument was that the loan she and her husband made to Mrs Basile gave rise to an equitable interest in the Guildford property, and was thus a charge of encumbrance on the property. I note that the loan agreement dated 25 June 2007 stated that the loan repayment date was "On sale of" the Guildford property. 

CONSIDERATION

12.     In my opinion, a caveat is not an encumbrance or charge on the land.  It is a notice to the Registrar-General not to register any dealings without notice to the caveator (Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 at 537.)

13.     In my opinion, the equitable interest which arose in this case was that Mr and Mrs Bruno were the beneficial owners of the Girraween property for which they provided the funds for purchase.  Such an equitable interest would be relevantly a charge or encumbrance on that property if it were an assessable asset (Repatriation Commission v Tsourounakis (2007) 158 FCR 214 at 240). However, I do not consider that the loan was a charge or encumbrance on the Guildford property.

14.     For the above reasons, I must affirm the decision under review. 

OBSERVATIONS

15.     I make the following observations because of the discussion at the hearing.  It seems that if Mrs Basile had not told Centrelink that she had moved until after the Guildford property had been sold, she would have continued to receive her full pension.  Because she acted honestly and in accordance with her obligation to notify Centrelink, her pension was reduced.    

16.     It is true that neither she nor Mr and Mrs Bruno consulted Centrelink before the loan arrangement and the purchase was made, however, I understand that none of them would have imagined that a short term arrangement entered into for the laudable purpose of improving Mrs Basile's welfare could have the unfortunate consequence of reducing her pension at a time her costs were temporarily increased.  She had to pay insurance on both properties, and incurred legal and real estate agency costs and other costs of moving.

17.     Further, I do not know whether Centrelink would have provided accurate and useful advice if she had asked, given the unhelpful advice that was given later which caused unnecessary costs to be incurred.  I do not list all the instances of conversations with various Centrelink officers which seem to have only compounded the anxiety and distress suffered by Mrs Basile and Mr and Mrs Bruno. 

18.     Although it is no comfort to Mrs Basile or Mr and Mrs Bruno, I emphasised at the hearing and I emphasise in these reasons for decision that what happened to Mrs Basile was most unfortunate.   Given the current complexity of the social security legislation, is it not possible for some provisions to be enacted to permit such a short term arrangement without requiring expensive legal arrangements such as mortgages over properties, to ensure that the temporary holding of an asset in circumstances such as arose in this case, is not taken into account for the purpose of assessment of a pension? 

DECISION

19.     The reviewable decision is affirmed.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member,
Mrs Josephine Kelly.

Signed: Steven Mulipola
Associate

Date of hearing:  6 February 2008

Date of oral decision:  6 February 2008

Date of written reasons:                 5 March 2008

Representative for Applicant:       Mrs Jo Bruno

Solicitor for Respondent:               Centrelink Legal Services