Donnan and Secretary, Department of Veterans’ Affairs (Veterans' entitlements)
[2017] AATA 296
•8 March 2017
Donnan and Secretary, Department of Veterans’ Affairs (Veterans' entitlements) [2017] AATA 296 (8 March 2017)
Division:GENERAL DIVISION
File Number(s): 2016/2748
Re:Betty Donnan
APPLICANT
Secretary, Department of Veterans’ AffairsAnd
RESPONDENT
DECISION
Tribunal:Mr Conrad Ermert, Member
Date:8 March 2017
Place:Melbourne
The Tribunal sets aside the decision under review and substitutes a decision that the balance of the monies owing from the sale of the two properties is not to be included in the assessment of assets conducted under the Aged Care Act 1997.
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Mr Conrad Ermert, Member
CATCHWORDS
AGED CARE - assessment of assets for Aged Care - sale of properties - release of obligation to repay loans - deprived assets - disposal of assets - contracts for sale - contracts abandoned – disposition of assets included in asset calculations for period of five years after date of disposition - decision set aside
LEGISLATION
Aged Care Act 1997; s 44-22(4)(a)
Veterans' Entitlements Act 1986; ss 5J(2B), 52E, 52JA
CASES
Summers v The Commonwealth (1918) CLR 144
DTR Nominees v Mona Homes (1978) 138 CLR 423
CGM Investments Pty Ltd v Chelliah (2003) 196 ALR 548
REASONS FOR DECISION
Mr Conrad Ermert, Member
INTRODUCTION
Mr Donnan, the husband of Mrs Betty Donnan, the Applicant, passed away in 1997. In 1999 Mrs Donnan decided that she wanted to gift a block of land to her son, Colin, and her share in the farm to her son, Adrian. Mrs Donnan’s solicitor advised her that gifting the properties would cause her to lose some of her pension supplement payments. He advised Mrs Donnan to make the property transactions as a sale, with Mrs Donnan foregoing the annual loan repayments until the loans were eventually finalised. This arrangement was put in place and enacted until 2003 after which the annual releases from the loan ceased.
On 11 May 2015 Mrs Sheryl Radford, the daughter of Mrs Betty Donnan, the Applicant, lodged with the Department of Veterans Affairs, the Respondent, a Permanent Residential Aged Care – Request for Combined Assets and Income Assessment for the purpose of determining the fees payable by Mrs Donnan in an aged care facility.
As investigations indicated that the money owing to Mrs Donnan would not be repaid, the money was treated as a gift or disposal of her assets. On 18 May 2015 the Respondent determined that the value of Mrs Donnan’s assets for aged care purposes included the sum of $147,000 still owed to her on the contracts for the sale of land to her sons (the original decision). Mrs Radford sought a review of the assessment. On 22 April 2016 a Service Pension Review Officer affirmed the decision.
This matter is an application to review the decision of the Service Pension Review Officer.
HEARING
Mr Arthur Graham, an authorised representative of AMP Financial Planning Pty Ltd, represented Mrs Donnan at the hearing. Mr Ken Rudge, of the Department of Veterans’ Affairs, represented the Respondent.
I had before me the documents provided by the Respondent in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (the T-Documents). For Mrs Donnan I took into evidence as Exhibit A1 a bundle of documents comprising:
·letter from Mr Arthur Graham to the Tribunal, dated 6 October 2016;
·letter from Colin Donnan, dated 17 September 2016;
·statement by Adrian Donnan, undated;
·photograph and typed transcript of a letter by Mrs Sheryl Radford, dated 17 September 2016; and
·letter from Mr Richard J. Dwyer, legal practitioner, to Mrs Donnan dated 23 December 1998.
For the Respondent I took in as evidence:
·Exhibit R1 – a bundle of documents numbered 1 to 50 with a covering letter dated 4 August 2016; and
·Exhibit R2 – figures relation to Sale of Properties, Releases of Obligation and Deprived Asset/Gift dated 4 August 2016.
In addition I have for consideration the Respondent’s Statement of Facts and Contentions dated 1 February 2017.
LEGISLATION
The relevant legislation is contained in the Veterans’ Entitlements Act 1986 (the VE Act) and the Aged Care Act 1997 (the Aged Care Act).
Section 44-22(4)(a) of the Aged Care Act provides that the value of a person’s assets, if that person is receiving an income support supplement, includes the amount that would be included in the value of a person’s assets if Subdivisions B and BB of Division 11 of the VE Act applied for the purposes of the Aged Care Act. Subdivisions B and BB respectively include s52E and s52JA, which I outline below.
Subsection 5J(2B) of the VE Act provides that an asset is a deprived asset if the person has disposed of the asset.
Section 52E of the VE Act provides relevantly:
Disposal of assets
For the purposes of this Act, a person disposes of assets of the person if the person engages in a course of conduct that diminishes, directly or indirectly, the value of the person’s assets and:
(a)The person receives no consideration in money or money’s worth for the diminution in the value of the person’s assets; or
(b)The person receives inadequate consideration in money or money’s worth for the diminution of the value of the person’s assets; or …
Section 52JA of the VE Act provides relevantly:
Disposition of assets in tax year – individuals
Dispositions to which section applies
(1)This section applies to a disposition (the relevant disposition) on or after 1 July 2002 of an asset by a person who is not a member of a couple at the time of the relevant disposition.
Increase in value of assets
(2)If the amount of the relevant disposition, or the sum of that amount and the amounts (if any) of other dispositions of assets previously made by the person during the tax year in which the relevant disposition took place, exceeds $10,000, then, for the purposes of this Act, the lesser of the following amounts is to be included in the value of the person’s assets for the period of 5 years starting on the day on which the relevant disposition took place:
(a) the amount of the relevant disposition;
(b)the amount by which the sum of the amount of the relevant disposition and the amounts (if any) of other dispositions of assets previously made by the person during the tax year in which the relevant disposition took place, exceeds $10,000.
…
TRIBUNAL CONSIDERATIONS
Amount under Consideration
Referring to Exhibit R2, Mr Rudge submitted that the asset amount of $137,000 arrived at in the original decision was incorrect. He contended that errors as detailed in Exhibit 2 had been made in calculating the outstanding amount of the debt and the correct figure is $134,500. Mr Graham agreed with the contention and the revised figure of $134,500.
I am satisfied with the agreement of the parties and find that the correct figure for consideration of the main issue is $134,500.
Has Mrs Donnan disposed of an Asset (section 52E of the VE Act)?
There is no dispute regarding Mrs Donnan’s intention to gift the properties to her sons. The relevant evidence is:
·In his letter of 6 October 2016, Mr Graham stated “In concluding I believe it was a gift all along and family thought the solicitor’s idea was purely a mechanism to protect the $120 F/N supplement. There was no follow through by him with Mrs Donnan to make this happen”. At the hearing Mr Graham reiterated that the transfer of the properties to the sons was “always going to be a gift”.
·In her letter of 17 September 2016 Mrs Radford stated “I was told by Mum that a Solicitor had organised so that she could gift the land to the boys Adrian & Colin”.
·In his letter Adrian wrote “She had the land gifted in 1998 or 1999 … Mum had no concerns when the property was sold and did not want any monies be paid to her”. Based on information provided by Mr Rudge and Mr Graham at the hearing, I find that the date of this sale was in 2002.
·In his letter dated 17 September 2016 Colin wrote “ … we left Hopetoun in 2002, so Mum was left on her own and not coping real well at this stage. We sold the farm in 2013, I had discussions about it with Mum and she had no problem with selling the farm and at no stage did she ask for any of the money from the sale”. Based on this information and that provided by Mr Rudge and Mr Graham at the hearing, I find that Colin began leasing his property out in 2002 and sold it in 2013.
The arrangement for the disposal of the properties is described in the advice given by Mr Dwyer to Mrs Donnan in his letter dated 23 December 1998:
“As I have advised your supplement would be lost if you simply gave the lands to Adrian and Colin, because there would be a deemed income of 5% on the whole of the value of the land for five years from the date of the gift.
However, if the lands are sold to them, you can release each of them from the obligation to pay $5,000.00 on the first day of each Pension year – as well as selling the lands to them for $5,000.00 each less than what you think fair market value is to be now.”
Mrs Donnan acted on the advice to the extent that she contracted to sell the properties to her sons and up to the year 2003 she released the sons from the obligation to pay yearly sums of money.
From all the evidence and the concessions of Mr Graham I accept that, by following Mr Dwyer’s advice, Mrs Donnan engaged in a course of conduct that diminished the value of her assets and that she received no consideration in money or money’s worth for the diminution in the value of her assets.
I am satisfied that Mrs Donnan disposed of assets to her sons in the terms of section 52E of the VE Act and I find accordingly.
Is the Disposition more than Five Years Old (Section 52JA of the VE Act)?
As Mrs Donnan has disposed of the property to her sons under s52E of the VE Act, I must now turn my mind to the matters raised by s52JA of the VE Act. Under that section, a disposition is to be included in the value of a person’s assets for a period of five years starting on the date the disposition was made.
It is common ground that the properties were subject to the contracts of sale dated 22 March 1999 contained in Exhibit R1. It is not in dispute that Mrs Donnan enacted a number of Releases of Obligation for yearly loan repayments up to and including 2 July 2003. The Releases were not of the full amount required of the contracts rendering the sons in breach of the contracts. However the contracts were still in place as at 2 July 2003 and the disposition had not been completed. It is not in dispute that there was no further action taken by the contract parties beyond 2 July 2003. To assist in determining the effect of a lack of action on the currency of a contract Mr Rudge helpfully referred me to the following court decisions:
·Summers v The Commonwealth (1918) 25 CLR 144 (Summers);
·DTR Nominees Pty Ltd v Mona Homes Pty Ltd & Anor (1978) 138 CLR 423 (DTR Nominees); and
·CGM Investments Pty Ltd v Chelliah (2003) 196 ALR 548 (CGM Investments).
In Summers Isaacs J said at 151-152:
Whatever the terms of a contract may be, it is possible for the parties so to conduct themselves as mutually to abandon or abrogate it.
…
There must be some point of time at which delay or neglect amounts to refusal … In truth, the projects seem to have been to a great extent, if not altogether, abandoned by all the parties concerned.” In my opinion, that is the legal position here. Informally, but effectively, the parties have so acted in relation to each other as to abandon or abrogate the contract.
In DTR Nominees Stephen, Mason & Jacobs JJ said at 434:
… the contract in the present case was still on foot on and after 25th July 1974. Neither party had effectively rescinded. But there can be no doubt that by 5th December 1974, when these proceedings were commenced, neither party, whatever may have been their reasons, regarded the contract as being still on foot. Neither party intended that the contract should be further performed. In these circumstances the parties must be regarded as having so conducted themselves as to abandon or abrogate the contract. The position is similar to that with which Isaacs J. dealt in Summers …
In CGM Investments Finkelstein J held at 552-555:
17. Whenever parties make a contract it is possible that they have conducted themselves in such a way that it can be said by implication that they have agreed to rescind their bargain …
18. In my view, the authorities to which I have referred establish not only that an agreement can be abandoned by conduct, but also that the question whether an agreement has been abandoned does not require one to examine whether the parties actually had the intention of abandoning the agreement; only whether their conduct, when objectively viewed, manifests that intention. This conclusion accords with the objectivist theory of contract which is now irrevocably entrenched in our law …
22. In my opinion to show that a contract has been abandoned by inactivity on both sides it is necessary to establish that the inactivity (which may sometimes amount to no more than silence on one side) produces the clear inference that one party does not wish to proceed with the contract and the other party consented to that situation.
As at 2 July 2003 the contracts were still on foot. The next contract requirement was for the sons to make loan repayments in July 2004. No payments were made. Mrs Donnan took no action to enforce those contract provisions. Nor did she release the sons from their obligations to make those payments. None of the contract parties took any action from 2003 onwards to proceed with the contract. In accordance with the findings in Summers and CGM Investment I am satisfied that, by their inaction, Mrs Donnan and her sons had abandoned their contracts by July 2004. I find that by July 2004 the contracts for sale were no longer on foot.
By her inaction I accept that Mrs Donnan accepted the contracts as no longer active. By doing so Mrs Donnan effectively disposed of the remaining value of the properties at that time. As such, I find that Mrs Donnan disposed of her properties by July 2004. As July 2004 is the date where disposition took place, it follows that, in accordance with s 52JA of the VE Act, the amount of the disposition was to be included in the value of Mrs Donnan’s assets until July 2009. As such, I find that the disposition of Mrs Donnan’s assets are to be disregarded in this case.
Conclusion
I have found that Mrs Donnan disposed of her assets to a value of $134,500. I have further found that this disposition occurred in July 2004. The effect of this finding is that the value of Mrs Donnan’s deprived assets are not to be taken into account in the assessment of her assets for Aged Care purposes.
DECISION
I set aside the decision under review and substitute the decision that the balance of the monies owing from the sale of the two properties is not to be included in the assessment of assets conducted under the Aged Care Act 1997.
I certify that the preceding 29 (twenty-nine) paragraphs are a true copy of the reasons for the decision herein of Mr Conrad Ermert, Member
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Associate
Dated: 8 March 2017
Date of Decision:
Date of Hearing:
8 March 2017
2 February 2017
Advocate for the Applicant: Mr Arthur Graham, Golconda Group Pty Ltd Solicitors for the Respondent: Mr Ken Rudge, Department of Veterans’ Affairs
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