Hughes and Secretary, Department of Health (Social services) - [2017] AATA 2590

Hughes and Secretary, Department of Health (Social services) [2017] AATA 2590 (13 December 2017)
Division:GENERAL DIVISION
File Number: 2017/4154
Re:Mr Robert Hughes
APPLICANT

AndSecretary, Department of Health
RESPONDENT

DECISION
Tribunal:Senior Member D Davies
Date:13 December 2017
Place:Brisbane

The Tribunal finds the application for review is unsuccessful and the decision under review is affirmed.
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Senior Member D Davies
CATCHWORDS
AGED CARE ASSESSMENT – entitlement to assistance – whether refundable accommodation deposit is an asset – whether a loan can be used to reduce the value of the assessable asset – decision affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975
Aged Care Act 1997
Social Security Act 1991
Schedule of Fees and Charges for Residential and Home Care from 20 March 2017
Subsidy Principles 2014
Property Law Act 1974 (Qld)
CASES
Re Fawthrop and Repatriation Commission [1993] AATA 359
REASONS FOR DECISION
Senior Member D Davies
13 December 2017
BACKGROUND

This is an Application by Robert John Hughes (the “Applicant”) for review of a decision made by an Authorised Review Officer (“ARO”) of the Department of Human Services (the “Department”) on 28 June 2017,[1] to affirm a departmental decision made on 1 June 2017[2] to assess the Applicant’s assets for residential aged care purposes at $699,877.00 (or $511,964.20 for aged care purposes) as of 10 April 2017, which included the Refundable Accommodation Deposit (“RAD”) of $250,000.00 as an asset without any reduction in respect of a loan in that amount.
[1] Exhibit 1, T Documents, T17, p 176.
[2] Exhibit 1, T Documents, T18, p 187.
The issue for consideration by the Tribunal is whether in the assessment of the value of the Applicant’s assets, the RAD of $250,000.00 is included as an asset without any reduction by the amount of a loan in the same amount in respect of the RAD.
Both parties have consented to this Application being determined without a hearing in accordance with Section 34J of the Administrative Appeals Tribunal Act 1975 (AAT Act).
The evidence before the Tribunal is contained in the documents submitted by the parties which I have marked as Exhibits:
·Exhibit 1 –      Tribunal Documents
·Exhibit 2 –      The Respondent’s Statement of Facts Issues and Contentions
·Exhibit 3 –      Letter from the Applicant’s attorney Ms Jill Naumann to the Tribunal dated 2 November 2017
·Exhibit 4 –      Email from Ms Naumann to the Tribunal dated 15 November 2017 with attachments A to E being receipts in relation to the RAD.
Having regard to the material in these Exhibits and the consents of the parties, in accordance with Section 34J of the AAT Act, I consider that the issues for determination can be adequately determined in the absence of the parties without holding a hearing.
FACTS
Since 11 January 1996, the Applicant has been in receipt of an age pension.[3]
[3] Exhibit 1, T Documents, T10, p136.
On 15 December 2016, the Applicant moved into a serviced apartment at Tabeel Lutheran Home which is separate to the Residential Aged Care Facility.[4] The Applicant paid rent at this facility.[5] The Applicant paid a RAD of $350,000.00 for this unfunded place at Tabeel Lutheran Home.[6]
[4]           Exhibit 1, T Documents, T7, p60.
[5]           Exhibit 2, Attachment A.
[6]           Exhibit 1, T Documents, T8, p67.
The Applicant’s son Murray Robert Hughes and daughter-in-law Deborah Joy Hughes provided the funds for the accommodation deposit.[7]
[7] Exhibit 1, T Documents, T15 and 16, pp174-175; Exhibit 4 Attachments A, B, C and D.
On 10 April 2017, the Applicant moved into the Residential Aged Care Facility. Upon being made aware that the Applicant had entered into a funded place at Tabeel Lutheran Home on 24 April 2017, the Department wrote to the Applicant inviting the completion of the Permanent Residential Aged Care Request for a Combined Assets & Income Assessment Form (RCAA).[8]
[8] Exhibit 1, T Documents, T13, p172.
The notice informed the Applicant that without an assessment of his income and assets, the maximum amount of fees and payments could be charged for his accommodation.
On 10 April 2017, the Applicant completed the RCAA form[9] requesting an asset assessment in respect of admission into aged care. The following relevant information was provided in the form:
·The Applicant was admitted to the Tabeel Lutheran Home on 10 April 2017.[10]
·At the time of the claim, the Applicant was in receipt of age pension.[11]
·A refundable accommodation deposit of $250,000.00 was paid to the Tabeel Lutheran Home on behalf of the Applicant by Mr and Mrs Hughes.[12]
·The Applicant estimated a net market value of $2,000.00 for his personal effects and household contents.[13]
·The Applicant owned a property at 17 Mulgowrie Road, Laidley and the property was valued at $350,000.00.[14]
·At the time of admission into care, the Applicant did not have a carer eligible for income support payment, residing with him for the previous years.[15] The Applicant also did not have a close relation residing with him who was eligible for income support payment, for the previous five years.[16]
·The Applicant stated that he owed a debt to MR and DJ Hughes (his son and daughter-in-law) in the amount of $250,000.00 for the payment of the RAD.[17]
[9]           Exhibit 1, T Documents, T12, p142.
[10]          Exhibit 1, T Documents, T12, p144.
[11]          Exhibit 1, T Documents, T12, p142.
[12]          Exhibit 1, T Documents, T12, p143.
[13]          Exhibit 1, T Documents, T12, p145.
[14]          Exhibit 1, T Documents, T12, p147-148.
[15]          Exhibit 1, T Documents, T12, p150.
[16]          Exhibit 1, T Documents, T12, p150.
[17]          Exhibit 1, T Documents, T12, p162.
The accommodation bond reduced from $350,000.00 to $250,000.00 for the funded place. The Applicant has advised that Tabeel Lutheran Home refunded $100,000.00 directly to the Applicant’s son who had paid the initial accommodation deposit.[18]
[18] Exhibit 4, Attachment E.
On 6 May 2017 Debra and Murray Hughes made statutory declarations declaring that they jointly paid the sum of $250,000.00 to Tabeel Lutheran Home as a deposit on behalf of the Applicant.[19] They declared that the amount is a loan to the Applicant, repayable in full upon the sale of the house at Laidley.
[19] Exhibit 1, T Documents, T15, p174; T16, p175.
The RCAA form and Mr and Mrs Hughes’ statutory declarations were received by the Department and were assessed on 1 June 2017.[20] A determination was made that the Applicant’s total net assets were valued at $511,964.20 including the RAD paid on his behalf by Mr and Mrs Hughes.[21]
[20] Exhibit 1, T Documents, T18, p187.
[21] Exhibit 2, Attachments B and C.
The Applicant was notified on this decision on 7 June 2017 and advised that his assets for aged care purposes were valued at $511,964.20.[22] The asset value included the $250,000.00 RAD paid on behalf of the Applicant by his son and daughter-in-law and a reduced value of his principal home which was capped at $162,087.20.
[22] Exhibit 2, Attachment D.
On 23 June 2017, the Applicant, by his daughter Jill-Maree Naumann who is also his attorney pursuant to Enduring Power of Attorney,[23] sought review of the decision to assess his assets including the $250,000.00 loan for the RAD.[24] Ms Naumann stated that the Applicant’s son and daughter-in-law Murray and Deborah Hughes had loaned the Applicant the money for the accommodation bond and that upon the sale of the Applicant’s principal home at Laidley that the money would be repaid to them.
[23] Exhibit 1, T Documents, T4, p35.
[24] Exhibit 1, T Documents, T18, p186.
On 28 June 2017 an ARO affirmed the decision, finding that the refundable deposit of $250,000.00 for the RAD is an assessable asset and a debt “of $250,000.00 is not recognised and will not reduce the value of [the Applicant’s] assessable assets”.[25] The ARO noted:
“A loan is only recognised when it is secured by an assessable asset. While it is acknowledged that the client’s family loaned him $250,000.00 this debt was not secured by the house therefore it is not recognised. The house and the RAD are assessable assets.”[26]
[25] Exhibit 1, T Documents, T17, p177.
[26] Exhibit 1, T Documents, T17, p180.
On 12 July 2017 the Applicant applied to the Tribunal for review of the ARO decision. The Applicant gave the following reasons for the Application for Review:
“The RAD of $250,000.00 was paid by my son Murray Hughes and his wife Deborah Hughes. This money was not a gift but was a loan which I will repay upon the sale of my house at 17 Mulgowie Road, Laidley. The money was never in my possession or bank account and therefore if the RAD is included as an asset the loan should be included as a liability as the money was never mine”.[27]
[27] Exhibit 1, T Documents, T1, p3.
LEGISLATIVE PROVISIONS
The legislation relevant to this decision is contained in the:
·Aged Care Act 1997 (the "Aged Care Act”);
·Social Security Act 1991 (the “Social Security Act”);
·Schedule of Fees and Charges for Residential and Home Care from 20 March 2017 (“Fees and Payments Principles”) (Exhibit 2, Attachment E); and
·Subsidy Principles 2014 (made under the Act) (the “Subsidy Principles”).
The maximum cost payable for residential aged care is regulated by the Australian Government. Additionally, there are subsidies available for the costs associated with residential aged care, which are amongst other factors, determined by an assessment of an individual’s income and assets.
A person entering permanent aged care who seeks to receive government assistance must apply for a Residential Care Assets Assessment (RCAA). RCAA are made by the Department of Human Services on behalf of the Department of Health. The value of a person’s assets upon entering into the residential aged care is determined in accordance with provisions in the Aged Care Act.
The RCAA determines the level of government assistance available which then effects the amount of residential care subsidy payable to an approved provider. The amount of the means tested care fee that a resident is required to pay is dependent on an income and asset assessment which is conducted by the Secretary in accordance with Sections 44-21, 44-23 and 52C-3 of the Aged Care Act. The value of a person’s assets upon entering into residential aged care is determined under Section 44-26A of the Aged Care Act and under the Subsidy Principles. Subsection 44-26A(5) of the Aged Care Act relevantly states:
“If a person has paid a refundable deposit, the value of the person’s assets is taken to include the amount of the refundable deposit balance”.
Subsection 47(1) of the Subsidy Principles provides that for the purposes of Section 44-26A of the Aged Care Act, the value of a person’s assets is the value worked out in accordance with Division 1 of Part 3.12 of the Social Security Act.
Subsection 47(2)(a) of the Subsidy Principles provides that certain sections of the Social Security Act do not apply, including Section 1118(1)(v) which states:
“(1)In calculating the value of a person’s assets for the purposes of this Act (other than sections 198F to 198MA (inclusive) Division 1B of Part 3.10 Division 2D and Sections 133 and 1135A) disregard the following:
(v) the amount of any refundable deposit balance in respect of a refundable deposit paid by the person.”
Accordingly, the refundable deposit balance in respect of a refundable deposit paid by a person is to be included in calculating the value of the person’s assets.
In this matter, it is not in contention that the RAD is to be included in the assessment of a person’s assets under the Aged Care Act. What is in contention is that the Applicant’s assets including the RAD, should be reduced by the value of the loan provided to the Applicant to pay the RAD.
Section 1121 of the Social Security Act provides for the effect of a charge or encumbrance on the value of assets. It relevantly provides:
“(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 persons assets for the purposes of this Act, … is to be reduced by the value of the charge or encumbrance”.
However, Subsection 47(2)A of the Subsidy Principles provides:
“Also, Subsection 1121(1) of the Social Security Act, does not apply for the purposes of working out the value of the persons assets to a charge or encumbrance over the amount of any refundable deposit balance in respect of a refundable deposit paid by a person”.
This provision was inserted into the Subsidy Principles in October 2016. The explanatory statement to the Subsidy Amendment (Flexible Care Subsidy and Other Measures) Principles 2016 states:
“The amendments related to the first purpose confirm the position that the full value of a refundable accommodation deposit is included as an asset for aged care means testing purposes and is not reduced by any charge or encumbrance over the refundable accommodation deposit”.
The effect of this is that a charge or encumbrance over the amount of any refundable deposit balance does not reduce the value of the person’s assets by the value of that charge or encumbrance.
CONSIDERATION
As I have mentioned, the evidence is that the Applicant’s son, Murray Robert Hughes and daughter-in-law Deborah Joy Hughes paid the $250,000.00 RAD on behalf of the Applicant. The receipt from the accommodation provider which is Attachment A to Exhibit 4 records a payment of $290,000.00 “received from MR and DJ Hughes on behalf of R Hughes”.
Exhibit 4 Attachments B, C and D are Commonwealth Bank Netbank receipts for payments each of $20,000.00 to Tabeel authorised by Deborah Hughes being “Hughes RJ Deposit”.
Mr and Mrs Hughes have each made Statutory Declarations dated 6 May 2017[28] which state that they have jointly:
“… paid the sum of $250,000.00 to Tabeel Lutheran Aged Care Home.
This amount was paid as a deposit on behalf of Robert John Hughes for a permanent aged care room.
[28] Exhibit 1, T Documents, T15, p174; T16, p175.
This amount is a loan to Robert John Hughes and is repayable in full upon the sale of his residence at 17 Mulgowie Road, Laidley”.
I am satisfied that Mr and Mrs Hughes did loan the $250,000.00 to the Applicant to pay the RAD for his aged care accommodation. I am also satisfied by the statement in the Applicant’s Application for Review to this Tribunal which he signed, that the RAD of $250,000.00 was a loan and that he intended to repay it upon the sale of his house at Laidley.[29]
[29] Exhibit 1, T Documents, T1, p3.
The issue which this raises is whether the statement by the Applicant that he would repay the loan for the RAD upon the sale of his house constitutes a “charge” or “encumbrance” and over what property it could be a charge or encumbrance.
Neither “charge” nor “encumbrance” is defined in the Social Security Act. In Re Fawthrop and Repatriation Commission [1993] AATA 359, the Tribunal considered the meaning of “charge” and “encumbrance”. In an equivalent context in the Veteran’s Entitlement Act 1986 the Tribunal said:
“23. … we should briefly consider the meaning of the terms “charge” “encumbrance” and “security”. Taking first the word “charge”, we note that an ordinary meaning of it is the liability to pay money but that it may also denote a particular liability to pay money when performance is secured by the creditor’s right to receive payment from a specific fund or out of the proceeds of the realisation of specific property…
24.The word “encumbrance” may also have a wider and a narrower meaning in general language as is apparent from the case of Wallace v Love (1922) 31 CLR 156 (at 164) when it was said:
“The word “encumbrance”, in its ordinary connotation, means that a person or a state is burdened with debts, obligations or responsibilities. True the word is in law especially used to indicate a burden on property, a claim, lien or liability attached to property. …”
…
27.Given the context in which the word “security” is used in section 52C and particularly in the juxtaposition of the words “charge” and “encumbrance”, we have concluded that the word “security” must be understood to connote a debt or claim the payment of which is in some way secured. For the same reasons, the word “charge” must also be given its narrower meaning to denote a liability, the performance of which is secured and the word “encumbrance” to mean a claim, lien or burden attached to a property”.
In considering whether the loan for the RAD is a charge or encumbrance over the Applicant’s principal home, Section 11 of the Property Law Act 1974 (Qld) provides that:
“No interest in land can be created or disposed of except in writing, signed by the person creating….the same”.
Having regard to the meaning to be given to the words “charge” or “encumbrance” I do not consider that the statement by the Applicant in Section 3 of his Application for Review to this Tribunal[30] that the money for the RAD played by his son and daughter-in-law “was a loan which I will repay upon the sale of my house” is sufficient to constitute a charge or encumbrance over his house property nor does it meet the requirements of the Property Law Act to create a security interest over his house.
[30] Exhibit 1, T Documents, T1, p3.
Accordingly, for the purposes of Section 1121(1) of the Social Security Act I do not consider that the loan for the payment of the RAD constitutes a charge or encumbrance over the Applicant’s principal home so that the value of that asset is to be reduced by the value of the loan.
The next question to be considered is whether the loan is a charge or encumbrance over the amount of the refundable deposit balance in respect of the RAD. Whilst I do not consider that the loan is a “charge” or “encumbrance” even if it is, the effect of subsection 47(2)A of the Subsidy Principles is quite clear, that Section 1121(1) of the Social Security Act does not apply for the purposes of working out the value of the person’s assets to a charge or encumbrance over the amount of any refundable deposit balance.
Accordingly, in the present case, I find that for the purpose of calculating the value of the Applicant’s assets there is no reduction of the value of those assets by the value of the loan of $250,000.00 which was used to pay the RAD on behalf of the Applicant.
CONCLUSION
The application for review is unsuccessful and the decision under review is affirmed.

I certify that the preceding 41 (forty-one) paragraphs are a true copy of the reasons for the decision herein of
Senior Member D Davies
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Associate
Dated: 13 December 2017

Date of hearing on the papers: 24 November 2017

Advocate for the Applicant: Ms Jill-Maree Naumann

Solicitors for the Respondent: Ms Michelle Brazier
Department of Human Services

Date of hearing on the papers:	24 November 2017
Advocate for the Applicant:	Ms Jill-Maree Naumann
Solicitors for the Respondent:	Ms Michelle Brazier Department of Human Services