Egberts; Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and
[2007] AATA 2102
•21 December 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 2102
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2006/1310
GENERAL ADMINISTRATIVE DIVISION )
ReSECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Applicant
AndCINDY EGBERTS
Respondent
DECISION
TribunalMr Julian Block, Deputy President
Date21 December 2007
PlaceSydney
DecisionsIn respect of the main issue, as defined in these reasons, the decision of the Social Security Appeals Tribunal dated 21 August 2006 is set aside and the decision of the Applicant’s delegate dated 27 March 2006 is affirmed. In respect of the Special Disability Trust issue, as defined in these reasons, the Trust, as defined in these reasons, is categorised with effect from 20 September 2006 as a Special Disability Trust within Part 3.18A of the Social Security Act1991.
...................[sgd]...........................
Mr Julian Block
Deputy President
CATCHWORDS
SOCIAL SECURITY – disability support pension – reduction of rate of disability support pension – debt owing by the Respondent – testamentary trust established for the benefit of a disabled person – whether assets and income of testamentary trust should be wholly attributed to the respondent – SSAT erred in finding that the Trust constituted a life interest –discretionary trust – Respondent is attributable stakeholder – attribution percentage 100 percent – no special circumstances to warrant waiver of debt – effect of special disability trust provisions – waiver of requirements for trusts established before 20 September 2006 – decision under review affirmed – trust categorised as a special disability trust with effect from 20 September 2006
RELEVANT ACT/S
Social Security Act1991: Parts 3.18, 3.18A; ss 11A, 1118, 1207P, 1207V, 1207X, 1208E, 1209L, 1209N, 1237AAD
CITATIONS
Gartsidev Inland Revenue Commissioners [1968] AC 553
Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639
OTHER AUTHORITY
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000
REASONS FOR DECISION
21 December 2007
Mr Julian Block, Deputy President
PART A - preliminary introduction and background
1. The nature of the decision which is under review in this matter (and referred to in these reasons as “the main issue”) , is clearly set out in clauses 1 and 2 of the document entitled “Outline of Applicant’s Submissions” dated 7 November 2007 (“OAS”) reading as follows:
1.On 31 August 2006 the Social Security Appeals Tribunal allowed an appeal by the respondent against the applicant’s decision to reduce the rate of the respondent’s Disability Support Pension due to the attribution of assets and income under Part 3.18 of the Social Security Act 1991 (Cth) and to raise and recover a debt of $1,850.98 arising from overpayment during the period 14 October 2004 to 28 June 2006 [T2].
2.The applicant now applies for a review of that decision by the AAT. The respondent also contends that the resulting debt, if any, should be waived pursuant to section 1237AAD of the Social Security Act.
2. There is a secondary issue between the parties in respect of the application of Part 3.18A of the Social Security Act 1991 (“the Act”) and which is dealt with separately in Part H of these reasons. Part H applies to the Special Disability Trust Issue (the SDT issue”), as defined hereafter, whereas all other parts of these reasons up to Part G deal with the main issue. Part I contains the findings of the Tribunal in respect of both issues.
3. The Tribunal had before it the T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act1975; it also accepted the tender of the following exhibits:
Exhibit R1:A document entitled “TIMELINE – EVENTS RELATING TO CINDY EGBERTS’ FINANCIAL MANAGEMENT” and which deals in chronological order with certain relevant events; there was evidence before the Tribunal that this Exhibit requires correction in one respect and that is that probate in the estate of the late Mrs Greta Zoomer was granted on 21 February 2002 and not 21 December 2002;
Exhibit R2:A witness statement dated 7 June 2007 by Caroline Egberts; and
Exhibit R3:A witness statement dated 7 June 2007 by Wilhelmina Milligan.
4. The Applicant was represented by Mr James Hmelnitsky of counsel instructed by Ms Lauri Gazi of the Australian Government Solicitor and the Respondent was represented by Ms Kay Sant of counsel instructed by Mr Stuart Sutherland of Logical Legal Solicitors.
5. It is convenient by way of commencement to set out the content of the OAS under the head of “Background”, clauses 3 to 13 as follows:
BACKGROUND
3.There appears to be very little factual dispute between the parties.
4.The respondent has a severe intellectual disability and receives a Disability Support Pension. Prior to her death in late 2001, the respondent’s mother, Mrs. Zoomer, cared for the respondent in her home at 4 Halifax Court, St Clair in New South Wales.
5.On 15 July 1996 Mrs. Zoomer made a will in which she settled a testamentary trust for the benefit of the respondent. The respondent’s sisters were appointed executors and trustees of the will. The relevant parts of the will were in the following terms:
“AND I GIVE DEVISE AND BEQUETH the whole of my Estate both real and personal to my Trustees UPON TRUST to
(i)pay my funeral and testamentary expenses and debts and any taxes payable in respect of this my Estate
(ii)to be guardians of my daughter Cindy Egberts (“CINDY”).
I GIVE DEVISE AND BEQUETH the rest and residue of my Estate both real and personal wheresoever situate to my TRUSTEES to hold on trust for the benefit of my daughter CINDY during her lifetime with POWER to deal with the assets of the estate at their absolute discretion both as to capital and income for the absolute benefit of CINDY.”
6.The will then sets out specific powers of the trustees and further directs the trustees to, among other things, “regard the best interest of CINDY as their paramount consideration”.
7.Upon Cindy’s death, the assets of the estate are intended to pass first to any spouse or children of Cindy and, if she has no spouse or children, to various other family members.
8.Probate of the will was granted on 21 December 2002.
9.After her mother’s death, the respondent lived in the house at St Clair until October 2004 before moving to a group home operated by the Department of Ageing, Disability and Home Care.
10.The St Clair house has been rented out since 15 October 2004 at a rental of approximately $250 per week. The tenant is one of the respondent’s brothers. In addition to the rental income, the trust also derives a small amount of interest income.
11.The evidence suggests that all income of the trust is being accumulated against the possibility that the trustees will be required to undertake renovations to the St Clair house or to meet increased costs for the respondent’s medical treatment or other therapies in the future.
12.The respondent’s current needs appear to be met by her pension and by her own money, namely a deposit account previously held jointly with her mother: see paragraphs 11 and 12 of the SSAT’s decision at T2.5.
13.On 27 March 2006, an authorised review officer at Centrelink determined to reduce Ms Egbert’s rate of Disability Support Pension on the basis that the assets and income of the testamentary trust should be wholly attributed to the respondent pursuant to Part 3.18 of the Social Security Act 1991: T24.118. The respondent then applied for a review of the ARO’s decision by the SSAT.
6. The extract from the OAS referred to in paragraph 5 above in these reasons, is not materially dissimilar from the content, under the head of “Facts”, contained in the Applicant’s Statement of Facts and Contentions dated 13 February 2007 (“Applicant’s SoFaC”). The Respondent in her Statement of Facts and Contentions dated 5 November 2007 (“Respondent’s SoFaC”) expressly acknowledged the correctness of clauses 1 to 10 of the Applicant’s SoFaC. It is clear (as set out in clause 3 of the OAS) that there is little, if any, dispute of facts between the parties. (It should be noted that clause 8 of the OAS should be treated as altered to reflect the correct date on which probate was granted in the estate of the late Mrs Greta Zoomer, who is referred to in these reasons as “the Respondent’s mother”.)
7. The home at 4 Halifax Court, St Clair is referred to in these reasons as “the Home” and the testamentary trust established by the Respondent’s mother under her will is referred to as “the Trust”. The Respondent’s mother had 10 children including the Respondent; she appointed as trustees of the Trust, three of her daughters, Caroline Egberts (referred to as “Caroline”), Wilhelmina Milligan (referred to as “Wilhelmina”) and Linda Egberts (the three trustees are collectively referred to in these reasons as “the Trustees”).
PART B - the evidence before the tribunal
8. Of the Trustees, only Caroline and Wilhelmina gave evidence. In each case, their respective evidence was, in the main, confined to confirmation of their own witness statement, Exhibit R2 in the case of Caroline, and Exhibit R3 in the case of Wilhelmina. Cross-examination in each case was brief.
9. Exhibit R2 exclusive of its annexures reads as follows:
I, Caroline Egberts, of … in the State of New South Wales, state that:
1.I am guardian and trustee for my sister Cindy Egberts ("Cindy"), Cindy is 44 years old and suffers an intellectual disability. Cindy lived with my mother until her death.
2.My mother Greta Zoomer prepared a will in 1996, which established a Trust for Cindy with strict instructions that the needs of Cindy be made from the Trust. Two of my sisters, Wilhemina, Llnda and myself were appointed Trustees and Guardians. The Trust was to ensure that the needs of Cindy were met during her lifetime. The Trust provided a life interest in the family home for Cindy. Our mother left strict instructions that the needs of Cindy were to be met by the Trust where necessary. Upon Cindy's death the estate was to be shared among surviving brother and sisters.
3.My mother died in 2001 and her estate consisted of the family home at 4 Halifax Court, St Clair, a joint bank account of about $50,000 with Cindy and other bank accounts (the amount for each account is set out in the Will). We sought and were given authority from the Office of the Protective Commissioner to release the $50,000 from the National Bank. My sister Wilhelmina was appointed Financial Manager over Cindy's funds. These funds are not considered as part of the Estate but rather Cindy's own money. The Trust accounts and Cindy's accounts are separate. The family home is at St Clair and is valued at approximately $275,000. There are 3 bedrooms. Currently my brother, Herbert is renting the property for $250 per week. The property requires substantial repairs and any repairs to the property. As the Trust monies are for Cindy welfare there are no immediate plans to do any renovations.
4.However , Cindy currently lives in a group home run by the NSW Department of Home and Community Care. She has no security of tenure. She could be asked to leave at any time or we as guardians and trustees may need to remove her from the home if she is at risk in any way from another resident or staff member or if she is unhappy and depressed. We would have no choice but to return her to the family home in which she has a life interest. Trust funds would have to be used to renovate and secure appropriate staff and support services.
5.Cindy's Disability Support Pension provides for her basic living costs including rent in residing in the group home and any additional expenses are met by the Trust. All income from the Trust that was created by my late mother for the benefit of Cindy has been accumulating in Trust.
6.The cash component of Cindy's entitlement under the Will has paid to Cindy's bank account in the amount of approximately $50,000. The accounts/bank statements have been provided for the Tribunal hearing.
7.Until approximately 18 months prior to her death my mother was the primary carer of Cindy. At this time my mother became incapacitated. She suffered "Lewy Bodies" which is a cross between Althzeimer's and Parkinson's diseases. My mother did not want to go to a nursing home and did not want to leave Cindy. Cindy had become her reason for living.
8.My eldest sister Diane came to live at home during the week to care for mum and Cindy with the support of home care services that I arranged. The rest of the family would look after them on weekends on a roster basis. Just before her death mum broke her hip. She developed an infection in hospital which was the subsequent reason for her death.
9.Following mum's passing, my sister, Linda arranged for Cindy to live at Aunty Dein for a number of months. My Aunty had a different way of treating Cindy. She can be rather authoritarian. Cindy could only watch TV at limited times. My aunty's grandkids would harass Cindy. My Aunty herself was frail and not taking care of herself that well. Meals in particularly were often out of a can or take away. I would visit Cindy when I could and it was almost impossible to return her to my Aunty as she would cry and indicate that she wanted to go home with me. Cindy was definitely not happy living with our Aunty.
10.We had a family meeting (Cindy was obviously included) with a case worker from the Department of Community Services. Those in attendance all agreed that it would be better for Cindy if she returned to the family home. We also agreed that it would be best to put Cindy's name on the list for a group home. A few months after mum's death we organised for Cindy to go home. We used trust funds to pay for staff and support services to make this possible. Cindy needed help showering, dressing and having breakfast in the morning.
11.The Thorndale bus would pick her up and take her to her work (supported employment). Cindy was working at the Thorndale workshop at Werrington 5 days a week 8am to 3.3Opm. In the afternoon, the workers would bathe her, cook her dinner and get her ready for bed. My brother Herbert would ensure that she went to bed at an appropriate time and be there to ensure she was ok during the night.
12.Carers cost approximately $30 per hour during the week and $40-60 on the weekend. If a carer was sick our sister Diane would have to get a taxi over as she cannot drive and Cindy can't be left unsupervised. Logistically and financially we didn't think we could sustain that model of how Cindy was being cared for too long. So when a group home vacancy at Greystanes became available we took it. There are 4 women in the group home and rotating staff. The staff are there 24hrs a day to support the women that live in the home.
13.Cindy can be very cheeky and can turn her room upside down. Some of her bad behaviour relates to when she cannot listen to the television or if she wants listen to CDs or she is being harassed by one of the other residents of the home. I have been advised by staff that if her behaviour deteriorates that they will ask her to leave. It is the policy of the home that if she continues with her bad behaviour they can move her on from the home.
14.In this situation we have no other option but to return Cindy home. This will involve engaging paid carers. As mentioned these fees are expensive and would have to be paid for out of Cindy's money and from the Estate/Trust.
15.As mentioned Cindy has her own funds. The pension is paid into the Group Home account and the staff will take money out for shampoo and other personal items that Cindy may need. I attach and Mark "A" Cindy's Expenditure Account Book.
16.If the home purchases like furniture, clothes or a walking machine they seek approval from us before purchasing any of those items. Sometimes this Cindy's bank account has been topped up from the estate/trust to fund larger purchases.
17.My sister usually takes Cindy to her home for the weekend every second weekend. Cindy loves to have a break from the group home and stay with Dianne. Cindy loves baths. The group home doesn't have one but Dianne does. Wilhelmina provides Dianne with monies for Cindy expenses during the weekend such as food, spending money for outings and utilities. Cindy can take two baths a day.
18.Cindy does not speak and her non verbal communication is also limited. Intellectually she is similar to a two year old. She can say "No. She cannot say, "Yes". Both Wilhemina and I have had surgery to remove our thyroid. There is a family history of thyroid problems. Cindy needs to be tested regularly for thyroid problems. Her dental procedures are through the Dental Hospital at Westmead. There is a family history of "Graves disease". Cindy has no health insurance and is reliant on her health care card for medical treatment. She has speech therapy program and communication plan which is also helping staff of the group home to be able to communicate with Cindy. I know there was an initial payment of $2,000 for this but expenses will be ongoing.
18.Cindy has been losing weight while at the home. I believe that she is not very happy there at the moment. The home has 5 to 6 staff and there are staffing problems and I believe that the staffing issues are affecting Cindy. I anticipate that Cindy may need to go back to the family home at St Clair. She cannot live again with Aunty Dein as she has two impaired hips and needs to be cared for herself.
19.There is one other Trustee apart from Wilhemina and myself and that is my other sister, Linda. Linda has not been involved with the Trust since Cindy moved out of our Aunty Dein's. Linda arranged for Cindy to stay with our Aunty but Cindy was never really happy staying there. The Trust allows for any two Trustees to sign for the Trust monies.
20.Cindy will have future expenses that will need to be provided from the joint account. These include her speech therapy, educational/vocational activities.
21.I attach and Mark "B" a folder of documents relating to the administration of the Trust.
[Signed]
10. Exhibit R3, exclusive of its annexures reads as follows:
I, Wilhelmina MiIIigan of … in the State of New South .Wales, state that:
1.I am a Trustee, Guardian and Financial Manager for my sister Cindy Egberts. Cindy lived with my mother at the family home at mum's house at 4 Halifax Court, St Clair. My mother passed away In 2001 and her estate including a life interest in the family home to be held in trust for my sister Cindy. Caroline, Linda and I were appointed trustees/guardians of the estate/Trust.
2.My mother cared for Cindy until she began to suffer dementia. That's when all the family chipped in to care for mum and Cindy. My sister Dianne with the help of Homecare services cared for them during the week. On weekends most of my brothers and sisters were part of a roster to care for them both on weekends. My mother felt bad that she needed this help but appreciated not being sent off to a nursing home.
3.After my mother passed away Cindy was taken to live at my Aunty Dein's place by my sister Linda. Cindy stayed there for a couple of months but she wasn't very happy there. Aunty was not very tolerant of Cindy's behaviour and Cindy became very withdrawn. My sister Caroline and I would take Cindy to medical appointments as well as visit.
4.We had a family meeting and it was decided that Cindy would come home to our family home which mum had left for her to live in. A caseworker from the Department of Community Services helped us to arrange services to make this possible. She also put Cindy's name on a list for a group home because we didn't know whether we could manage to help Cindy live at home in the long term.
5.When Cindy returned home she had assistance from some homecare agencies, one of those was "Rainbow". They would arrive early in the morning and come back at 3.30pm to assist her having a bath and getting dressed both in morning and in the evening. Cindy is about 40 to 50 kilograms and it is difficult to get Cindy in and out of the bath as she gets very stubborn and won't get out of the bath.
6.When homecare staff called in sick or just failed to turn up our sister Dianne had to travel from Merrylands in a taxi so that Cindy was not left alone. In the end it wasn't working for Cindy to be staying at home - it was expensive and staff were unreliable and often changing. Caroline works full-time and I have a daughter that I care for. We both live two and a half hours away on the south coast. A group home vacancy came up and it was seen as a good choice for Cindy.
7.A speech therapist comes to the group home and has developed a program to help Cindy better communicate with staff. This is paid for from Cindy's account. Cindy has lost weight and has an under active thyroid. She has a slight hearing problem and has had surgery on this in the past. On our father's side there is a history of ''bowel cancer". Cindy is having medical tests to determine why she is losing weight. It appears that Cindy has a normal life expectancy.
8.Cindy would attend "Thorndale" to do some work but the Commonwealth Rehabilitation Service became concerned that Cindy capacity to work had recently gone down to O. Cindy had also withdrawn from work and was sitting alone all day. Caroline and I had meetings with Thorndale and since then a more appropriate program has been set up for Cindy and others with similar needs. She attends the new program three days a week at a cost of $50 per day. This is likely to increase particularly if Thorndale cannot arrange funding for the program.
9.The family home is about 25 years old and my mother "scrimped and saved" to buy the house after our rented home burnt down so that Cindy would have somewhere to live and maybe a bit of money to cover what the pension didn't. The house needs urgent renovating and the bathroom would need alterations so Cindy could have a bath. Cindy has a problem getting in and out of baths. The house is getting old. Bathroom would need to be renovated to meet Cindy's needs Hebert resides at the house and pays $250 per week in rent.
10.If the house was to be rented to someone other than Herbert than renovations and maintenance would need to made to the house. He is willing to put up with it the way it is. The house is valued at approximately $250, 000 - $275,000. The Valuer’s General valuation for the land is about $150,000. I attach and Mark "C" a copy of the VG's certificate.
11.When my mother passed away there was $50,000 in a joint bank account and there remains about $35, 000. We had to purchase furniture including a bed. wardrobe, sheets, TV, DVD player when Cindy moved into the group home. The account that Cindy has is topped up from the Trust as her money gets low. However, Cindy's DSP provides sufficient money for us to not have to top up her account very often. But as her medical expenses increase I anticipate this would change and more funds would need to be transferred.
12.If Cindy remains in the group home the Trust money can be spent on Cindy rather than renovating the family home. We expect that Cindy due to her behaviour problems may have to leave the home soon. The monies would then have to be paid on carer's and medical expenses of Cindy and as mentioned renovating her home.
13.Cindy has no control or access to the Trust Caroline and I administer Cindy's own funds and the Trust as we see fit to look after the needs of Cindy
[Signed]
11. Each of the witnesses confirmed that, save only for amounts of $2,000, $3,000, $2,000 and $2,000 (totalling in all $9,000) utilised for the Respondent’s benefit in late 2002 and early 2003 (“the relevant period”), no amounts in respect of the Trust and whether of income or of capital, have been utilised for the Respondent’s benefit.
12. Caroline said that clauses 5 and 16 of her witness statement (Exhibit R2) required amendment in that the Respondent’s additional expenses were met from her own term deposit and that the bank account was topped up from her term deposit and not from the Trust. Wilhelmina said in her evidence that a similar amendment was required in respect of clause 11 of her witness statement (Exhibit R3).
13. The witnesses’ evidence established that the main asset of the Trust is the Home, and being the home in which the Respondent lived with her late mother prior to her move into the group home operated by the Department of Ageing, Disability and Home Care. The Home is currently occupied by one of the Respondent’s brothers, Herbert Egberts (“Herbert”), under a lease; Herbert as tenant in respect of the Home pays rental of $250 per week. The rent was fixed some years ago when the Home was first leased to Herbert as the fair market rental at that time, and it has not thereafter been the subject of any rent review.
14. When asked whether the current rental return (net of expenses) referable to the Home is not low in relation to its current value, and whether a better return might not be obtained by selling the Home and reinvesting the proceeds, Caroline said that there are reasons why this is not feasible. In the first place, the Respondent can be difficult and aggressive, and it is not certain that she will always be able to reside in the group home. It is possible that she may have to return to the Home and to be looked after in such event by paid carers, more particularly because none of her nine siblings is able to undertake the responsibility. Further, the Home was the Respondent’s home and she would feel comfortable in it. Moreover, the Home is now in a condition which is run down, and the bathroom and kitchen, in particular, are in need of renovation.
15. The current value of the Home is not altogether clear. During the course of her evidence, Caroline referred to an amount of $250,000, but there are references in the written evidence to a higher amount.
16. In addition to the Home, the Trust has about $80,000 in the form of term and other deposits and in respect of which some income is derived.
17. The Respondent herself has three bank accounts and including a term deposit in an amount of about $35,000 arising from the fact that she and her late mother were, in respect of that term deposit, joint tenants. Her accounts are managed by the Trustees and in particular by Wilhelmina.
18. The Trust is, and always has been, conducted on the basis that apart from the aggregate amount of $9,000 utilised for the Respondent’s benefit during the relevant period, it receives rental and other income and pays its own expenses, and then accumulates the balance remaining. In particular, it pays expenses referrable to the Home, and in addition, income tax in respect of the income which is accumulated, notwithstanding the fact that the rate of tax in respect of income accumulated by the trustees of a discretionary trust is high.
19. The cross-examination of each of the two witnesses was brief and their evidence can and should be accepted. In particular, it must be accepted that the decision of the Trustees to accumulate income was made on the basis that it was, and is, in the best interests of the Respondent that this policy be followed. In particular, no person other than the Respondent can, or does, receive any benefit of any kind from the Trust. Indeed, the terms of the Trust are such that no person, other than the Respondent, can benefit from the Trust. The Trust was set up by the Respondent’s mother for the sole benefit of her disabled daughter, the Respondent (to the exclusion of her other nine children), on the basis that the Trustees have wide powers on a discretionary basis to utilise capital and income for her, the Respondent’s, benefit.
PART C - the nature of the trust and the ssat decision
20. At the very core of this decision (in respect of the main issue and leaving aside for the time being the SDT issue) is the manner in which the Trust should be characterised. The Social Security Appeals Tribunal (“SSAT”), in its decision dated 21 August 2006, found that it should be characterised in relation to the Respondent as a life interest; in making that finding, the SSAT erred.
21. A life interest is, of its very nature, one in respect of which the beneficiary or life tenant, is entitled, during his or her lifetime, to the income derived. The Trust is, by contrast, no more or less than a discretionary trust, and in respect of which and during her lifetime, the Respondent is the only possible discretionary object. As such, and in relation to the Trust, she does not have any proprietary rights; her rights consist of a right to be considered in relation to any possible distribution and the right to compel due administration. I refer to and agree with the contentions by the Applicant in clauses 26 and 27 of the OAS reading as follows:
26.There is no definition of “life interest” in the Act. However, at law the expression “life interest” or “life estate” has been used to describe either a legal or equitable interest in property, often created under a will, which continues for the life of the owner: see for example Ex parte Middleton (1983) 1 Qd R 170. There is no doubt that the respondent in this case did not have a “life interest” in the St Clair property in any legal sense, since the legal title to the St Clair property is owned by the trustees. The only question is whether such beneficial interest as the respondent has under the trust could be termed a “life interest” in any asset.
27.The critical consideration in determining the nature of the respondent’s interest under the trust is the wording of the instrument which created the trust, namely the will. Here, the respondent’s interest both in the capital and the income of the trust is described as being in the discretion of the trustees. It is true that her interest as a beneficiary of the trust subsists only so long as she lives, however that does not lead to the conclusion that she has a “life interest” in the assets of the trust. Instead, her interest as a discretionary beneficiary extends only to ensure that the assets and income of the trust are properly administered according to the terms of the trust: see Heydon and Leeming, Jacobs’ Law of Trusts in Australia, 7th Edition, LexisNexis Butterworths 2006 at paragraphs 109 and 2315. The respondent has no interest in the property of the trust, even though she may be the only potential beneficiary: Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 especially at 655D per Meagher JA.
22. One of the leading cases in this area is that of Gartside v Inland Revenue Commissioners [1968] AC 553 which is expressly referred to in ISPT, cited in clause 27 of OAS and quoted in paragraph 5 above.
23. Having come to the erroneous conclusion that the Respondent enjoyed a life interest in the assets of the Trust, the SSAT determined that the value of her life interest in the Trust should not be used to calculate her disability support pension (“DSP”) entitlement.
24. The SSAT then considered Part 3.18 of the Act. The SSAT concluded at paragraph 49 of its decision that the Trust was a “designated private trust” within s 1207P of the Act and, pursuant to clause 53, that the Respondent met the control test because the Trustees, being her sisters, were associated with her.
25. It is convenient at this juncture to draw on OAS as to other aspects of the SSAT decision; I include clauses 18 to 22 as follows:
18.The SSAT then considered whether and to what extent the assets of the trust should be attributed to the respondent. At paragraph 57 the tribunal referred to section 1208E(1)(c) which provides, in effect, that an asset is not to be attributed to an individual where its value would otherwise be required to be disregarded. The SSAT appears to have considered that because the respondent’s interest in the trust were to be disregarded (by reason of the fact that it was a “life interest”), then the assets of the trust would also be exempt if owned by the respondent.
19.The SSAT therefore concluded that the assets of the trust should not be attributed to the respondent at all: paragraph 58.
20.The tribunal then considered whether the income of the trust should be attributed to the respondent. After setting out the relevant criteria from the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 the tribunal concluded that the appropriate attribution percentage was 0%: paragraph 65.
21.A significant consideration in reaching this conclusion appears to have been the fact that the respondent had no “control” over the trust and that the prospect of any future benefit was “unknown”: paragraph 62.
22.The SSAT therefore concluded that the matter should be remitted to Centrelink to be redetermined on the basis that the assets of the trust should be disregarded pursuant to section 1118 of the Social Security Act and that the income of the trust be attributed at the rate of 0%.
PART D - the legislation in general
26. The Applicant contends, correctly, that the SSAT erred both in its consideration of s 1118 of the Act and also in its application of Part 3.18 of the Act. The Applicant further contends, again correctly, that, leaving aside the life interest aspect referred to previously in these reasons, s 1118 does not prevent the assets of the Trust from being attributed to the Respondent in accordance with Part 3.18 of the Act, but excluding in respect of the Home, for the period during which she lived in it and in addition the period of two years which followed.
27. Section 1118 of the Act provides that the value of certain assets of an individual are to be disregarded for the purpose of calculating the value of a person’s assets. Part 3.18 of the Act operates differently so as to attribute to individuals, in certain circumstances, assets owned by companies and trusts. Section 1118 operates so as to restrict the operation of the attribution provisions, but only to the extent that the asset to be attributed would be disregarded in accordance with s 1118 of the Act.
28. The SSAT appears to have treated the Respondent as having a life interest in the estate, that is, the Trust (see paragraph 32), or the individual assets (see paragraph 44). In either case, that treatment was erroneous. The Respondent did not, as set out previously in these reasons, have a life interest in anything at all.
29. Part 3.18 applies, subject to two issues, to attribute the assets of the Trust to the Respondent. The two issues are:
(a)The effect of s 1208E(1)(c); and
(b)The extent to which, on a discretionary basis, the income and assets of the Trust should be attributed.
30. Section 1208E(1) of the Act provides:
…
(1)For the purposes of this Act, if:
(a)an individual is an attributable stakeholder of a company or trust at a particular time on or after 1 January 2002; and
(b)at that time, the company or trust owns a particular asset (whether alone or jointly or in common with another entity or entities); and
(c)if, at that time, that asset had been owned by the individual instead of by the company or trust, the value of the asset would not be required to be disregarded by any express provision of this Act; and
(d)at that time, the asset is not an excluded asset (see subsection (2));
there is to be included in the value of the individual’s assets an amount equal to the individual’s asset attribution percentage of the value of the asset referred to in paragraph (b).
…
31. The clear intention of that section is to attribute the assets of controlled private trusts, except when the relevant assets would have been exempt if owned by an individual. It is also clear that, for the reasons given by the SSAT, the Trust is a designated private trust under s 1207P of the Act and a controlled private trust under s 1207V of the Act. It is not necessary to set out those sections of the Act in full. As regards control, the Trustees and the Respondent are associates, both because they are relatives and also because the Trust is one in respect of which the Respondent can benefit. It is clear also that the Respondent is an attributable stakeholder as referred to in s 1207X of the Act; so for that matter are the Trustees attributable stakeholders.
32. Section 1208E(1)(c) is a provision which requires careful analysis. Leaving aside the double negative in the concluding portion, it poses a hypothetical question. It requires the decision-maker to determine whether the value of an asset which is owned, in this case by the Trust, would be exempt if the same asset were owned by the relevant individual, and in this case, of course, the Respondent. The relevant asset in this case is, in addition to the bank deposits to which I have referred, the Home. If those assets were owned by the Respondent, they would not be exempt. The Home in particular would not be exempt, excepting only to the extent that it had been her principal home, and as to which the definition in s 11A (formerly s 11(7)) of the Act refers.
33. Put another way, the hypothetical question requires consideration of how the Act would apply if the individual owned the asset. In answering that question, it cannot be correct to assume that the individual owned something different from that which was owned by the Trust. In this case, the SSAT assumed the ownership of a life interest, but a life interest is not the same as the freehold and, in any event, the Respondent did not, as has been demonstrated, have a life interest.
34. The SSAT concluded that s 1208E(1)(c) had the effect that the assets of the Trust should not be attributed to the Respondent. It was in error in this regard, and this would be so even if the Respondent did have a life interest (and as has been demonstrated, she did not).
PART E - the attribution percentage
35. The term “Principles” refers to the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000. Section 1207X(5) of the Act requires, on a mandatory basis, that the Principles be considered.
36. It is correct to say that the Respondent has no personal control over the assets or income of the Trust. Her disability prevents her from doing so, and this indeed is the reason why the Trust was established by the Respondent’s mother for the benefit of one only of her ten children.
37. There is no reason to doubt that the Trustees are fulfilling their fiduciary duties. The fact that they are accumulating income rather than distributing it results, so the SSAT found in part, because the Respondent receives a DSP.
38. Clause 23 and 24 of the Respondent’s SoFaC reads as follows:
23.Ms Egberts should not be considered an attributable stakeholder taking into account all those factors. Most of them do not favour treating her as an attributable stakeholder. There can be no doubt that she has not made a contribution to the Trust and has absolutely no capacity to exercise any control over it. As found by the SSAT, she is entirely reliant on the Trustees operating the Trust in accordance with the expressed intentions of her deceased mother. But, even assuming they do so, that does not mean she would derive any benefit from the Trust. For example, at the moment and since March 2003, she has derived no benefit from the Trust.
24.As Ms Egberts has no control, she can derive no benefit unless the Trustees determine, in their absolute discretion, that it is in her best interests that she do so. The respondent has received some past benefit from the Trust. The Tribunal must take into account the value of that past benefit, which is $9,000 and therefore minor. It should also take into account that she has not received any benefit for several years and is unlikely to do so in the foreseeable future.
39. While it is true that, at the current time, the Trustees are able to accumulate rather than distribute income, circumstances may alter in the future. That this is a possibility was referred to in the evidence before the Tribunal. There is absolutely no reason to suppose that the Trustees will not, if the need arises, utilise income or assets for the Respondent’s benefit. The current policy of accumulation is, in accordance with the evidence before the Tribunal, designed to benefit the Respondent and indeed, (as set out previously) the terms of the Trust are such that no other person can benefit from the Trust.
40. In respect of the Principles, it is correct to say that it is necessary to have regard to the degree of control exercised by the Respondent. But this is one element only. All of the other elements point towards a 100 percent attribution. The terms of the Trust are such that only the Respondent can benefit. There is nothing in the evidence which can, or does, defeat this design. Moreover, that there is a lack of control on the part of the Respondent arises, apart from any other considerations, from the fact that the Trust is a discretionary trust. The Respondent would be in exactly the same position if, as the only discretionary object of the Trust, she were not handicapped.
41. The Respondent has made no contribution to the Trust; see sections 17 and 26 of the Principles. The Tribunal agrees with the Applicant’s contention that this is “a neutral factor”.
42. As to past benefits, it is true that the Respondent has so far received minimal benefits from the Trust, but this is so because she has been receiving the DSP.
43. As to future benefits, the Tribunal has no reason to doubt that distributions will be made, and whether of income or of capital, if required. As at present, the policy of accumulation is, in the meantime, so the Trustees consider, of benefit to her. Notwithstanding the doubt expressed in the Respondent’s SoFaC as to the fact that there ever will be distributions, it is clear enough that if the need arises the Trustees will make distributions.
44. It is necessary to consider whether the Respondent has benefited from the assets and income of the Trust. She did receive minimal monetary benefits, and as set out previously, and for a period she lived in the home. But again, as set out previously, she is the only possible beneficiary of the Trust.
45. Ms Sant contended that regard should be had to the fact that while the Respondent is undoubtedly an attributable stakeholder, the Trustees are also attributable stakeholders. This is so, but the Trustees do not have any beneficial entitlement in the Trust and so that under the Principles, it would be proper to determine their attribution percentage as nil.
46. By the same token, the Respondent, as an attributable stakeholder, must be assessed at 100 percent. This is so because she is the only possible beneficiary. The legislation in question starts from the prima facie position that the attribution percentage is 100 percent, to be reduced where there are specific disabling factors. The disabling factors relate to the question of who will benefit and not who controls. Put in other words, it can be seen as contended by the Applicant that it is only where the attributable stakeholder will not, as a matter of substance, benefit from the Trust that the attribution percentage should be reduced. This is not the case in this matter. The Trust exists solely to benefit the Respondent. In the absence of a breach of trust, both the assets and income of the Trust have been, and will continue to be, administered solely for her benefit.
47. It follows that the attribution percentage to be applied in respect of the Respondent is 100 percent.
PART F - the debt
48. The Respondent seeks the waiver pursuant to s 1237AAD of the Act of a debt amounting to $1,850.98.
49. The Tribunal agrees with the Applicant’s contention that there are no special circumstances warranting waiver of the debt in whole or in part. The Respondent contends, in this context, that the debt arises because of the existence of the Trust and the lack of control on the part of the Respondent. The Tribunal agrees, in this context, with clause 50 of the OAS reading as follows:
50.The focus of the respondent’s submission in this respect is that the debt only arises because of the existence of the trust over which the respondent has no control. However the entitlement to the pension depends upon a means test which must be satisfied before the pension can be paid. In other words, it was always necessary for the respondent in this case – or those responsible for her financial affairs – to correctly ascertain her asset and income position as required by the Social Security Act. The debt does not arise in this case for capricious or surprising reasons. It arises because the respondent has the benefit of a trust which the Social Security Act requires to be taken into account in working out her entitlement.
50. The parties did not, when furnishing submissions as to the SDT issue, deal with the effect, if any, of a decision on that issue in favour of the Respondent on the debt. The Tribunal, itself, is not aware of the internal workings which gave rise to the debt and is thus unable to come to a view as to whether its decision, in relation to that issue, does in fact have a bearing on the debt. Insofar as this decision requires the repayment of the debt it is made subject to any appropriate reduction arising from this decision in relation to the SDT issue; the Tribunal remits the matter to the Respondent who should take this aspect into account to the extent necessary or appropriate.
PART G - conclusion as to the main issue
51. Ms Sant cited (at some length) parts of the second reading speeches which preceded the introduction of Part 3.18 of the Act. The Tribunal does not consider that this material is relevant. It also does not consider it necessary to refer to a number of decisions mostly by this Tribunal, which were cited to it.
PART H - Part 3.18A of the Act – the SDT Issue
52. The Tribunal was advised during the hearing of this matter that the Act has been amended with effect from 20 September 2006, by the inclusion of a new Part 3.18A entitled "Private financial provision for certain people with disabilities”. It was accepted that it was conceivable that the Trust might be capable of classification (with effect from 20 September 2006) as a Special Disability Trust (“SDT”); however, the parties were not, at that time, in a position to deal with this aspect of the matter and it was determined, by agreement, that the parties would be allowed time within which to consider the application of Part 3.18A and to furnish submissions in writing, in the case of the Applicant by the end of the first week in December 2007, and in the case of the Respondent by way of reply within one week thereafter. Written submissions were duly received, in the case of the Applicant dated 11 December 2007 and referred to as “SAS”, and in the case of the Respondent dated 14 December 2007 and referred to as “RAS”. This issue is referred to in these reasons as the “SDT issue.”
53. The effect of Part 3.18A is to modify the rules in respect of individuals with disabilities who have the benefit of a SDT. The question to be decided is as to whether the Trust is an SDT within Part 3.18A of the Act.
54. Section 1209L of the Act reads as follows:
1209L.A trust is a special disability trust if the following requirements of this Division are complied with:
(a)the beneficiary requirements (see section 1209M);
(b)the trust purpose requirements (see section 1209N);
(c)the trust deed requirements (see section 1209P);
(d)the trustee requirements (see section 1209Q);
(e)the trust property requirements (see section 1209R);
(f)the reporting requirements (see section 1209S);
(g)the audit requirements (see section 1209T).
Note:The Secretary may waive one or more requirements in certain circumstances (see section 1209U).
55. The Applicant noted (correctly) that for a trust to fall within Part 3.18A, it must satisfy all of the requirements of section 1209L, but subject to the proviso that the Applicant has the power to waive any one or more of them.
56. The Applicant contends that the Trust does not meet the requirements of section 1209N of the Act which reads as follows:
1209NTrust purpose requirements
Sole purpose–care and accommodation for principal beneficiary
1209N(1)Subject to this section, the sole purpose of the trust during the lifetime of the principal beneficiary, as provided by the trust deed for the trust, must be to meet reasonable care and accommodation needs of the beneficiary.
Note:The provision of care and accommodation for the principal beneficiary is also dealt with at section 1209R.
1209N(2)The trust may have purposes, ancillary to the purpose mentioned in subsection (1), that are necessary or desirable to facilitate the achievement of that purpose.
Reasonable care and accommodation needs
1209N(3)If guidelines are made under subsection (4), for the purposes of this section the reasonable care and accommodation needs of a principal beneficiary of a special disability trust must be decided in accordance with the guidelines.
1209N(4)The Secretary may, by legislative instrument, make guidelines for deciding what are, and what are not, reasonable care and accommodation needs for principal beneficiaries of special disability trusts.
57. The Applicant’s contentions in this context are neatly encompassed in clauses 13 and 14 of SAS reading as follows:
13.Whilst as a matter of practice it may be that the trustees have generally administered the trust to that end in the past, the will does not satisfy the statutory requirement in section 1209N. The trust is for the respondent’s benefit generally and the trust deed is not limited in the way expressly required by subsection 1209N(1). The trustees are entitled to distribute income or corpus to the respondent for purposes unconnected with her care and accommodation needs.
14.Accordingly, the applicant submits that the trust is not a special disability trust within the meaning of Part 3.18A.
58. The Applicant, in addition, drew the Tribunal’s attention to paragraph 4.14.3.60 of the Guide to Social Security Law. That paragraph reading relevantly as follows:
…
If a trust was established before 20 September 2006 it may not be possible to alter the trust deed to comply with the clauses of the model trust deed that comes into effect from 20 September 2006.
Where a trust deed cannot be altered and the trustee provides a statutory declaration that they will comply with the special disability trust requirements. That is:
·the trust is protective,
·the severely disabled person is the principal beneficiary,
·the trust will only be used to meet the care and accommodation needs of the severely disabled person, and
·the trust will comply with the investment rules as set out for a special disability trust.
A waiver can be given in the above circumstances. However, the waiver can only apply for the period that the trustee continuously complies with the agreed conditions in the statutory declaration.
…
59. In RAS the Respondent dealt at some length and comprehensively with the provisions of Part 3.18A of the Act in order to demonstrate that, with the exception only of s 1209N, all of the requirements of s 1209L are satisfied, and contended that a waiver in respect of the provisions of that s 1209N would be appropriate.
60. It is the Tribunal’s view that the Trust is indeed couched in terms which do not constitute strict compliance with the provisions of s 1209N of the Act. However the evidence before the Tribunal is that the Trust is in fact an SDT, that it has always been administered as such and, moreover, that there is no reason to suppose that it will be administered by the Trustees in any manner which does not comply with s 1209N of the Act. The Trustees have, on the evidence before the Tribunal, been careful and conservative (influenced by the fact that the Respondent receives a DSP) and there is no basis for a suggestion that they might act otherwise.
61. I do not consider that there is any need for the execution of statutory declarations in the manner suggested by the Applicant in the SAS. The Tribunal has the power standing in the shoes of the Applicant to grant the necessary waiver and considers that this is, quintessentially, a case in which it should do so.
PART I - Findings
62. In respect of the main issue the decision of the SSAT dated 21 August 2006 is set aside and the decision of the Applicant’s delegate is affirmed. (It follows that the debt referred to in Part F must, but subject to clause 50, be repaid.) In respect of the SDT issue, the Trust is categorised with effect from 20 September 2006 as an SDT.
63. This matter is remitted to the Applicant for assessment in accordance with these reasons.
I certify that the 63 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Julian Block
Signed: .....[sgd]......................................................................
AssociateDate of Hearing: 8 November 2007
Date of Decision: 21 December 2007
Solicitor for the Applicant: Ms Lauri Gazi, AGS
Counsel for the Applicant: Mr James Hmelnitsky of counsel
Solicitor for the Respondent: Mr S Sutherland, Logical Legal Solicitors
Counsel for the Respondent: Ms Kay Sant of counsel
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