Garcia and Secretary, Department of Social Services (Social services second review)

[2020] AATA 2949

Garcia and Secretary, Department of Social Services (Social services second review) [2020] AATA 2949 (17 August 2020)

Division:GENERAL DIVISION

File Number(s):      2019/2577

Re:Lourdes Garcia

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Chris Puplick AM, Senior Member

Date:17 August 2020

Place:Sydney

The Tribunal affirms the decision under review.

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

Chris Puplick AM, Senior Member

CATCHWORDS

SOCIAL SECURITY – widow allowance – transfer to age pension – applicant owner of investment properties – cancellation of payment – debt to the Commonwealth – whether overpayment should be recovered – no administrative error – debt recoverable – no special circumstances – decision under review affirmed

LEGISLATION

Social Security Act 1991 (Cth) ss 43, 55, 408BA, 1064, 1121, 1223, 1236, 1237A, 1237AAD

CASES

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov v Centrelink [2003] FCAFC 133
In the Marriage of Phillippe [1997] 4 Fam LR 153
Jess v Scott and Others (1986) 70 ALR 185
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Secretary, Department of Social Security v Hales (1998) 82 FCR 154

Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569

REASONS FOR DECISION

Chris Puplick AM, Senior Member

17 August 2020

1. This is an appeal by Ms Lourdes Garcia (the Applicant) against a decision by the Secretary, Department of Social Services (the Respondent) to cancel certain social security payments and recover a debt which resulted from them being overpaid under the provisions of the Social Security Act 1991 (Cth) (the Act).

2. The facts in this matter are straightforward:

   (a)On 14 May 2014, Ms Lourdes Garcia was granted a widow allowance effective from 7 May 2014 and on 17 April 2015 this was transferred to payment of the age pension.

   (b)At the date of her application for the widow allowance, the Applicant was the owner of some six investment properties located in New South Wales and Queensland.

   (c)Each of these properties was subject to a mortgage from one or other bank, several of the mortgages being inter-linked over more than one property.

   (d)The Applicant did not declare in her application for the widow allowance, or in response to any further notifications from Centrelink that she was the owner of these properties because she believed, erroneously, that a property, if subject to a mortgage “belonged” to the bank and not to her.

   (e)The value of the properties as at 7 May 2014 was some $1,431,550.07 when the asset limit for a single householder (the level at which the widow allowance ceased to be paid) was $196,750.

   (f)The value of the properties as at 17 April 2015 was some $1,754,914.20 when the asset limit for a single householder (the level at which the age pension ceased to be paid) was $775,500.

   (g)The existence of the Applicant’s ownership of five of the six properties did not come under active notice by Centrelink until 5 December 2016.

   (h)On 25 October 2018 Centrelink cancelled the Applicant’s age pension from the period of 7 May 2014 to 12 July 2017 because during this period an incorrect calculation of her widow allowance and age pension had been made due to a failure to consider her asset position as a result of her non-disclosure of the property ownership.

   (i)This decision was confirmed by an Authorised Review Officer of the Department (ARO) on 25 February 2019. That decision was challenged by the Applicant but affirmed by a decision of the Social Services and Child Support Division of this Tribunal (AAT1) on 2 April 2019.

   (j)On 10 May 2019 the Applicant appealed to this Tribunal for a second review of that AAT1 decision and the matter was heard (by telephone due to Covid19 restrictions) on 7 August 2020.

   (k)The consequence of the cancellation decision (para (h) above) was that it was determined that in the period 7 May 2014 to 12 July 2017 the Applicant had been overpaid a total of $64,721.54.

   (l)After this determination had been made, Centrelink became aware of the fact that the Applicant owned a sixth property, details of which had not at any stage been declared to it.

   (m)Centrelink seeks recovery of the overpayment and maintains that there are no reasons why the debt should not be recovered in full.

   Discussion

3. It is not in dispute that the Applicant was a widow at the time of her application for widow allowance, nor that she was of the requisite age at the time of her transfer onto the age pension (sections 408BA and 43 of the Act).

4. The question to be determined is whether or not the decision of the AAT1 (confirming the decision of the ARO) should be affirmed.

5. This matter can be determined by answering a number of very simple questions.

6. Prior to answering those questions certain facts need to be established. The Respondent has obtained from the Applicant’s banks details of the mortgages secured against the various properties and the degree to which they can be reduced, by repayment from the Applicant, at prescribed periods of time. The formula is set out in the case of both the St George and Westpac loans at paragraphs (29), (38) and (43) of its Statement of Facts, and Contentions. Centrelink has also conducted desk-top valuations of each of the properties at a variety of relevant dates.[1] The Tribunal sees no reasons not to accept these calculations based on the material before it. Application of these calculations results in the following:

   [1] Section 37 Supplementary Tribunal Documents (T Docs) pages [1075]-[1144].

Property	Value $ 7 May 2014	Value less mortgage $ 7 May 2014	Value $ 17 April 2015	Value less mortgage $ 17 April 2015
Waitara	385,000	349,754	485,000	424,336
Goulburn (1)	300,000	138,614	325,000	170,715
Goulburn (2)	300,000	138,614	325,000	170,715
Oakhurst	380,000	163,148	430,000	269,461
Marayong	480,000	473,482	540,000	536,228
Forrest Lake, Qld	390,000	167,935	400,000	183,457

1. All figures rounded.

   CONSIDERATION

2. Question 1: Was the Applicant eligible to be paid widow allowance on 7 May 2014?

3. Answer: No.

4. On 7 May 2014 the Applicant was the owner of six properties as per the table.[2] Each of the properties was encumbered by a mortgage. Section 1121(1) of the Act provides, that for the purposes of calculating social security entitlements, the value of any asset in the hands of the owner(s) should be discounted by any encumbrances thereupon. Hence, at 7 May 2014 the value of the properties in the hands of the Applicant was in the order of $1,431,547.[3] At that time the maximum asset value allowed for an applicant for widow allowance was $196,750.[4] This rendered her ineligible for the payment of widow allowance.

   [2] The Applicant also had a principal place of residence (in Marayong) which is excluded from calculation of assets for social security payment purposes (section 1118).

   [3] The difference from $1,431,550.07 comes from rounding in the table figures.

   [4] Calculations are made under section 55 of the Act using the calculator in section 1064.

5. Question 2: Was the Applicant entitled to be paid the age pension on 17 April 2015?

6. Answer: No.

7. On 7 May 2014 the Applicant was the owner of six properties as per the table. Each of the properties was encumbered with a mortgage. Section 1121(1) of the Act provides, that for the purposes of calculating social security entitlements, the value of any asset in the hands of the owner(s) should be discounted by any encumbrances thereupon. Hence, at 17 April 2015, the value of the properties in the hands of the Applicant was in the order of $1,754,912.[5] At that time the maximum asset value allowed for an applicant for widow allowance was $775,500. This rendered her ineligible for the payment of the age pension.

   [5] The difference from $1,754,914.20 comes from rounding in the table figures.

8. Question 3: Has there been an overpayment of widow allowance and age pension between 7 May 2014 and 12 July 2017? If so, what is the amount in question.

9. Answer: Yes. The amount in question is $64,721.54.

10. The Tribunal is not in a position to make an independent calculation of the full extent of the overpayment but accepts the figures set out in the Department calculations provided in the Tribunal Documents at pages 805 to 809.

11. Question 4: Should the overpayment be recovered, or should it be waived or cancelled?

12. Answer: It should be recovered in full.

13. Section 1223 of the Act establishes that overpayments are debts to the Commonwealth and are legally recoverable unless it can be shown that the debt has arisen as a result of an administrative error on the part of the Department (section 1237A), the debt is effectively irrecoverable (section 1236) or there are “special circumstances” why it should be waived or cancelled (section 1237AAD).

14. There is no suggestion that there has been any administrative error on the part of the Department.[6] The debt is clearly recoverable given the circumstances of the Applicant whose debt is considerably less than the value of her assets.[7]

    [6] Section 1237A of the Act.

    [7] In this regard, although not relevant to the principal decision, the Respondent has calculated that the value of the Applicant’s assets as at 25 October 2018 was $2,176,343.58. Respondent’s Statement of Facts and Contentions at para [61].

15. As with so many key concepts in the Act, the term “special circumstances” is not given any precise definition. Without going into extensive detail, it can be said that the courts have identified a number of factors which go to establishing whether or not “special circumstances” exist. They must be:

    ·Something more than ordinary or usual[8]

    ·Markedly different from the usual run of cases – not necessarily unique but having a particular quality of unusualness[9]

    ·Somehow distinguishing from usual cases of an analogous nature[10]

    ·Attuned to the individual circumstances of each case[11]

    ·Not so rigidly applied as to risk harsh or unreasonable outcomes[12]

    ·Involving “facts peculiar to the particular case which set it apart from other cases”[13]

    ·Supportive of the overall integrity of the social security system and recognising the public interest in ensuring that public moneys are recovered where they can and should be.[14]

    [8] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; Jess v Scott and Others (1986) 70 ALR 185.

    [9] Re Beadle and Director General of Social Security (1984) 6 ALD 1 at [3].

    [10] Dranichnikov v Centrelink [2003] FCAFC 133.

    [11] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.

    [12] Secretary, Department of Social Security v Hales (1998) 82 FCR 154.

    [13] In the Marriage of Phillippe [1997] 4 Fam LR 153 per Kay J.

    [14] Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569; Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114, Secretary, Department of Social Security v Hales (1998) 82 FCR 154.

16. None of these “special circumstances” can be found in this instance. Furthermore, the Respondent points out that for special circumstances to exist, it must also be clear that an applicant did not “knowingly” make a false statement to the Department or fail to comply with provisions of the Act (section 1237AAD(a)).

17. Clearly, the Applicant failed to:

    (a)inform the Department of her property ownership/assets at the time of her original widow pension application;

    (b)disclose to the Department that she was in receipt of rental income from her properties when regular correspondence from the Department reminds social welfare recipients that they are obliged to disclosure such matters and changes of circumstances to the Department; and

    (c)challenge or query the statements received from the Department which showed her income and assets to be considerably less than they were.

18. The extent to which all or any of this was done “knowingly” by the Applicant, as distinct from being the result of her misunderstanding of her obligations, or her failure to act because of the pressures she claimed (in her evidence to the Tribunal) which resulted at the time of her widowhood, is not a matter which needs to be determined, given that “special circumstances” simply do not exist.

19. It was clear from her evidence to the Tribunal that the Applicant was more than a competent manager of her personal property portfolio. She told the Tribunal that she personally managed four of the six properties and that only two (Waitara and Forrest Lake) were managed by agents. She had a clear understanding of her responsibilities in terms of keeping the properties in good order and in terms of managing relations with tenants, repairs, rate payments and the like. It was also clear that she understood the details of the financial transactions involved in her various mortgages and in the inter-relationship of some of them across more than one property. She told the Tribunal that she had been in receipt of rental income of each of the properties from the time of their acquisition (ranging from 2001 to 2005) up until the present date – and hence at the time of her application for widow allowance – although there had been periods of non-occupancy in relation to each of them. She also told the Tribunal that she did not regard this rental income as “income” per se, because it went into the bank(s) to finance the mortgages, none of which is yet discharged.

20. There is thus no basis upon which the debt to the Commonwealth should be cancelled or waived, or that the Commonwealth should not take steps to secure its recovery/repayment.

    DECISION

21. The decision under review is affirmed.

I certify that the preceding 27 (twenty-seven) paragraphs are a true copy of the reasons for the decision herein of Chris Puplick AM, Senior Member

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

Associate

Dated: 17 August 2020

Date of hearing:	7 August 2020
Applicant:	In person
Solicitors for the Respondent:	Dr S Thompson, Services Australia