Edward D'Couto and Secretary, Department of Social Services

[2013] AATA 843

[2013] AATA 843

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2012/3988
Re	Edward D'Couto
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	G. D. Friedman, Senior Member
Date	3 October 2013
Date of written reasons	28 November 2013
Place	Melbourne

For reasons given orally at the hearing, the Tribunal affirms the decision under review.

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

G. D. Friedman, Senior Member

Social Security – Newstart Allowance Allowance – Whether properties are realisable assets – Whether Applicant Qualified Under Hardship Provisions – Whether Special Circumstances Exist – Sole Administrative Error – Decision Under Review Affirmed

Social Security Act 1991 ss 11 (1)-(2), 611, 612, 1121 (1)-(2), 1237AAD

Social Security (Administration) Act 1999 s 13

REASONS FOR DECISION

G. D. Friedman, Senior Member

28 November 2013

ORAL DECISION

EDITED EXTRACT OF TRANSCRIPT PROCEEDINGS

12.40 PM, THURSDAY, 3 OCTOBER 2013

1. The matter before me is a decision of the Social Security Appeals Tribunal, dated 16 January 2012.  The tribunal affirmed the decision of Centrelink to cancel payments of newstart allowance and to refuse a claim for payment under the hardship provisions.  It also set aside the decision of the authorised review officer (ARO), to raise and recover a newstart allowance debt of $20,454, from the period 1 July 2009 to 10 May 2011, and substituted the new decision, that recovery of the debt incurred in the period 4 November 2010 to 10 May 2011 be waived.

2. I need to determine the value of Mr D’Couto’s assets, combined with Mrs D’Couto’s assets, and then take half, to see whether that exceeded the allowable assets limit at the time of the newstart allowance claim.  I then have to consider whether Mr D’Couto satisfied the hardship provisions for the assets test, to enable him to be granted newstart allowance.  And then I need to determine, if I find that there was an overpayment, whether the amount was $20,454 for the period 1 July 2009 to 10 May 2011 was a recoverable debt; and, if so, whether the debt, or part of the debt, should be waived or written off in full or in part.

3. There is no dispute that Mr D’Couto was a member of a couple with his wife, Mrs D’Couto, in the period 1 July 2009 to 10 May 2011, and that he was a homeowner.  I’m satisfied that on 8 March 2005 Mr and Mrs D’Couto were registered as the joint proprietors of Unit 4/180-182 Dorset Road, Croydon.  On 8 August 2005 they were registered as the joint proprietors of 10 Achilles Court, Lilydale. Mr D’Couto does not agree with that, but on the balance of probabilities, having viewed the official transfer of land documents, I find that on 8 August 2005 they were registered as joint proprietors of Achilles Court, Lilydale.

4. I also find that on 18 August 2005 Mr and Mrs D’Couto were registered as joint proprietors of 65 Kingsburgh Lane, Lilydale.  On 22 April 2007 they were registered as joint proprietors of Kent Street, Moe.  And on 5 November 2008 they were registered as joint proprietors of 10 Brinbrook Street, Tarneit.

5. When Mr D’Couto lodged his claim for newstart allowance on 19 May 2009 he listed three properties: Dorset Road, Kingsburgh Lane, and Achilles Court. The Achilles Court property being his home address and principal residence with his wife.  On the same day he also lodged a document identifying real estate details in which he was required to answer the question ‘how many properties in Australia and/or outside Australia do you and/or your partner own or have an interest in?’   Mr D’Couto listed three properties in response, Kingsburgh Lane, Dorset Road, and Kent Street. 

6. In evidence today, Mr D’Couto said that he understood that the Brinbrook Street property was just a block of land.  He seems to be saying he did not realise that he had to include that as a property.  I do not accept that argument.  The question asked of him: “How many properties do you own or have an interest in?”  A block of land is an interest in property D’Couto should have included in the list of assets to be taken into account when determining his eligibility for newstart allowance.

7. On the same day, Mr D’Couto lodged documents outlining his statements regarding the loans that he had taken out, to secure the properties, with Westpac.  There was a mortgage over Achilles Court, Kingsburgh Lane, and Kent Street.  There was a further one over Achilles Court, Kingsburgh Lane, and Kent Street.  And there was a further one over Brinbrook Street and Dorset Road.  Further, on that day, Mr D’Couto provided council valuation notices, and he said Achilles Court was worth $300,000, Kingsburgh Lane $225,000, Dorset Road $270,000, and Kent Street $75,000.

8. In May 2009, after lodging the claim, Mr D’Couto was sent information notices, and those notices stated, “You must tell us within 14 days about events or changes in circumstances affecting your payment.”  And it listed the combined assets.  A further notice was sent in June 2009, and further notices were sent in the period June 2009 to May 2011.

9. Documents that had been submitted by Centrelink indicate that mortgage balances for the various accounts show that the various loan accounts in the amounts of $146,167.32, $224,001.23, $476,693.57, $94,968.64, $318,947.19 and $146,167.62.

10. At the request of Centrelink, the Australian Valuation Office provided valuations as follows: Kingsburgh Lane, $750,000; Achilles Court, $420,000; Brinbrook Street, $350,000; and Dorset Road, $300.000.  And on 24 May 2011 Centrelink made a decision to cancel Mr D’Couto’s newstart allowance from 12 October 2009, because the value of his assets and his wife’s assets were above the allowable limit.  And that’s a decision to cancel his newstart allowance.

11. Mrs D’Couto then said that she and Mr D’Couto had moved from Achilles Court to Kingsburgh Lane, which was now their principal residence, as from April 2011.  And on 30 May 2011 a newstart allowance debt was raised in the amount of $17,237.25. 

12. In June 2011 Mr D’Couto lodged a claim for consideration under the hardship provisions that was rejected on the basis that the properties were not unrealisable.  There were further council valuation notices provided by Mr D’Couto in connection with his application to the Social Security Appeals Tribunal, and further valuations were provided in November 2011 by the Australian Valuation Office.

13. In December 2011 the Australian Valuation Office carried out inspections and further valuations were made.  The AVO valued Kent Street at $82,500; Achilles Court at $360,000; Dorset Road at $320,000; Kingsburgh Lane at $670,000, and Brinbrook Street at $340,000.  As a result of those new valuations, the ARO varied the debt decision, and increased the debt to $20,454 for the period 1 July 2009 to 10 May 2011.  That is a decision that was ultimately reviewed by the Social Security Appeals Tribunal.

14. The relevant legislation is the Social Security Act 1991 (the Act) and the Social Security Administration Act 1999 (the Administration Act). The date of claim is set out in section 13 of the Administration Act, and the qualification for newstart allowance is to be determined at 28 May 2009. That is the date I find for the eligibility for newstart allowance. The newstart allowance qualification, set out in section 611 of the Act, as of the relevant time: that refers to assets. Section 612 (2) refers to a person being a member of a couple, and if a person receives a social security benefit, the assets are taken to be 50 per cent of the sum. So that means that I have to look at 50 per cent of the overall assets. And “assets” under section 11 (1) of the Act means property or money. Section 11 (2) says in reference to a particular asset: if the asset is owned by the person jointly, or in common, a reference to the value of the other person’s interest in the asset.

15. As at 28 May 2009, the asset limit for a partnered homeowner, which in this case applied to Mr D’Couto, was $121,750. Therefore, if the value of Mr D’Couto’s assets exceeded that figure, as at 28 May 2009, he was not qualified to receive newstart allowance under section 611 of the Act.

16. In connection with the valuation of the assets at relevant times, I have before me the detailed valuations by the Australian Valuation Office.  I heard evidence from Mr Ian Flynn, a Senior Valuer with the AVO, who explained the basis of his valuation of the two properties that he inspected at the relevant times.  Mr D’Couto challenged the value of those two valuations, on the basis that it didn’t reflect the actual value at the time.  Also, in one of the properties there was a bungalow which, ultimately, was not part of the sale, and Mr D’Couto also questioned other sales in the area, and, as far as Kingsburgh Lane is concerned, the extent to which the house was built, the proportion of the house that was built. 

17. I’ve taken into account Mr D’Couto’s comments on the valuation.  My finding is that, on the balance of probabilities, Mr Flynn’s valuations are to be preferred, because he is a person who is objective, who has had 35 years’ experience in the industry.  He’s a senior valuer, and I’m satisfied, having read his reports, that the factors he took into account were relevant.  Even though Mr D’Couto did not agree with the valuations, I find that the valuations were appropriate, taking into account all relevant factors at the time. The Tribunal accepts those valuations.

18. Section 1118 (b) of the Act says that:

    If the person is a member of a couple--the value of any right or interest of the person in one residence that is the principal home of the person, of the person's partner or of both of them that is a right or interest that gives the person or the person's partner reasonable security of tenure in the home

19. And that’s explained in the Guide to Social Security, which, basically, means that if there an encumbrance – and this is spelt out in section 1121 of the Act:

    Effect of charge or encumbrance on value of assets

    (1)   If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person's assets for the purposes of this Act (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.

    (2) Subsection (1) does not apply to a charge or encumbrance over an asset of a person to the extent that:

    (a) the charge or encumbrance is a collateral security; or

    (b) the charge or encumbrance was given for the benefit of a person other than the person or the person's partner.

20. And there is a formula that is used to determine the amount that an encumbrance can be deducted from the value of the property.  And given that most of the mortgages were secured over the principal residence and other residences, then the formula has to be used to determine what, if any, were the deductions that can be made from the encumbrances.  So that if there is an exempt asset and an assessable asset, the amount of the outstanding charge or encumbrance is shared between the assets in proportion to the assets’ values.

21. Having said that I accept the Australian Valuation Office valuation of the properties as at 1 July 2009, I find that the net value of the properties was as follows:

    ·Brinbrook Street, mortgage $449,004 multiplied by its value of $300,000, divided by its value, $300,000, and the value of Dorset Road, $300,000, ($600,000) equals $224,502.  Net value of Brinbrook Street, less the offset, was $75,498 as at 28 May 2009. 

    ·Kent Street, mortgage balance $548,541, multiplied by its value of $77,500, divided by its value, and that of Achilles Court, and Kingsburgh Lane, ($747,500) equals $56,872.  Net value, less the offset ($56,872), was $20,628 as at 28 May 2009.

    ·Kingsburgh Lane, mortgage balance, $548,541, multiplied by its value of $310,000, divided by its value and that of Kent Street, and Achilles Court ($1,700,477) equals $227,488.  Net value, less the offset ($227,488) was $82,510 as at 28 May 2009.

    ·Dorset Road, mortgage balance $318,811, multiplied by its value of $300,000, divided by its value and that of Brinbrook Street ($600,000) equals $224,502. Net value, less the offset ($224,502) was $75,498 as at 28 May 2009.

    ·Achilles Court cannot be taken into account, because that was the principal residence at the time.

22. Therefore, I find that at 28 May 2009, the total net value of Brinbrook Street, Dorset Road, Kent Street, and Kingsburgh Lane was $254,134. In reference to subsection 612(2) of the Act, the value of the applicant’s assets at 28 May 2009 was $130,780 comprising 50% of the total of the real estate assets ($254,134), financial investments ($2,424) and other assets ($5,002) of the applicant and Mrs D’Couto.

23. As at 28 May 2009 the asset value limit was $121,750 for a partnered homeowner, as the applicants assets were above that limit, he was not qualified to receive newstart allowance at 28 May 2009

24. I have taken into account the balances of the Westpac mortgages, and I find that the net values of Brinbrook Street, Dorset Road, Kent Street, and Achilles Court at 24 May 2011 were $100,391, $94,485, $23,626, and $103,095 respectively.  Consequently, at 24 May 2011, the net value of Brinbrook Street at $100,391, Dorset Road at $94,485, Kent Street at $23,626, and Achilles Court: $103,095 was $321,597.  Taking into account Mr D’Couto’s share, she was not in receipt of Social Security benefit as at 24 May 2001.  The asset value at that date was $258,000 for apartment homeowners.  Therefore, Mr D’Couto’s total assets were $321,597.  And as that exceeded the asset value, I find the decision to cancel the newstart allowance was correct.

25. Now, the next issue is whether the hardship provisions apply. On 15 June 2011, Mr D’Couto lodged a claim for consideration under hardship. Under section 1131 of the Act, a person can be paid a benefit if they have an unrealisable asset. Section 11 of the Act defines an unrealisable asset as an asset which cannot sell or realise or use as a security for borrowing.

26. Mr D’Couto told me that he didn’t want to sell the properties at the time.  He said they weren’t worth anything when you looked at the mortgages that were still on the properties.  And he said the tenants were not paying their rent, and he had great financial difficulty at that time.  However, he agreed that at a later point he did sell three of the properties, and he said that with the tenants not paying rent, and with the council rates, etc, he was forced into a position where he had to sell, even though he didn’t do very well out of the sale.

27. I find that because Mr D’Couto actually did sell the properties, they were realisable. I find that when he made his claim, on 15 June 2011, under the hardship provision, although he might not have done very well, he was capable of selling the properties. There is no reason why the properties could not have been sold. Therefore, I find that they were not unrealisable assets for the purpose of the Act. Therefore, I find that he was not eligible, under the hardship provisions of the Act, to be paid newstart allowance.

28. As far as the debt is concerned, the value of his assets was $384,328 as of 28 May 2009 and $407,890 at 1 July 2011.  The value of his assets was above the limit for newstart allowance.  Therefore, he was not eligible to receive newstart allowance in the period 1 July 2009 to 10 May 2011, and I find, after looking at the calculations and figures provided by Centrelink, that in the period from 1 July 2009 to 10 May 2011 Mr D’Couto received newstart allowance at the value of $20,454 that he was not entitled to receive.  I find that this constitutes a debt to the Commonwealth, in that amount.  Therefore, I find that he is liable to pay $20,454 for overpayment. 

29. Should the debt, or any part of the debt, be waived?

30. The Social Security Appeals Tribunal waived part of the debt, about $6,000 of the debt.  It appeared to me – and this was part of my initial questioning of Mr D’Couto – that it based its decision on the fact that Mr D’Couto and Mrs D’Couto did not divulge ownership of the Tarneit property at the time he lodged an application for newstart allowance in 2009, and he conceded that he did not do that. 

31. And so, it seemed to me that that was the basis of the decision of the Social Security Appeals Tribunal.  When I questioned Mr D’Couto on it, he said that he conceded that it therefore was not a sole administrative error by Centrelink, and therefore section 1237A could not apply for the debt to be waived. 

32. However, at the hearing, Mr Noonan, on behalf of the respondent, stated that an examination of the documents showed that on 4 November 2010, Centrelink became aware, when it asked for details of mortgage documents, that, in fact, a mortgage was held over the property at Tarneit.  And on that basis, it might be said that once Centrelink became aware of the existence of the Tarneit property, to continue to claim that the debt was partly due to Mr D’Couto not divulging the property might be seen to have been wrong: that, in fact, Centrelink should have known about the property from 4 November 2010.

33. Taking all relevant matters into consideration, I find that on 4 November 2010, when Centrelink became aware of the mortgage over the Tarneit property, Centrelink should have known that the Tarneit property was in fact owned by Mr and Mrs D’Couto.  Consequently, I find that the part of the debt that began from that date, on 4 November 2010, arose from sole administrative error by Centrelink, and therefore I find that it is appropriate for me to waive the part of the debt that started on 4 November 2010 until the end of the period.  Therefore, I find that the debt should be waived in part, and that the new debt would be $14,742.62.

34. In terms of other relevant provisions, section 1236 of the Act provides for a debt to be written off. I find that there is no basis for the debt to be written off. Mr D’Couto is now receiving newstart allowance, and there is provision for him to repay the debt.

35. The remaining section of the Act to consider as regards a waiver is section 1237AAD, which says that I can waive the debt if there are special circumstances. There is no definition of special circumstances in the Act. But in decisions of the court and this Tribunal there needs to be something unusual, uncommon, or exceptional about the circumstances, other than financial hardship alone. Mr D’Couto has told me that he is suffering financial hardship, that he is separated from his wife at the moment, living in a different house; that he is a debtor for debts that she owes to run her business; and that the sale of three of the properties has resulted in further debts. I accept that he is in financial difficulty. He also told me that he has had knee operations, and he has not been able to work for several years. He has a sore shoulder. He lost his job as a glazier as a result of not being able to work.

36. Although I find that there are health issues that he faces as well as financial difficulties – I find that those are not markedly different from other people in a similar situation. I also find that whilst he is in difficult circumstances regarding his health, his marriage and finances, I find that they do not constitute special circumstances for the purposes of section 1237AAD of the Act. I do not waive any more of the debt amount in this case.

37. Because of my decision I find that the decision of the Social Security Appeals Tribunal was the correct or preferable decision.  And I affirm that decision.  Mr D’Couto, that means that the original debt of $20,454 has been reduced by the same amount as the Social Security Appeals Tribunal reduced the debt, that is, $14,742.62.  And although you still have a debt, you have got at least the same amount reduced from the debt as you had with the Social Security Appeals Tribunal.  I wish you well in the future.

    END OF EXTRACT [1:10pm]

    CONCLUSION

1. The Tribunal affirms the decision under review.

I certify that the preceding 38 (thirty -eight) paragraphs are a true copy of the reasons for the decision of G. D. Friedman, Senior Member

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

Associate

Dated 28 November 2013

Date of hearing

3 October 2013

Applicant

Advocate for the Respondent

In person

Tim Noonan

Solicitors for the Respondent

Program Litigation and Review Branch, Department of Human Services