Khadem and Secretary to the Department of Family and Community Se Rvices

[2003] AATA 596

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 596

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2002/1396

GENERAL ADMINISTRATIVE  DIVISION

Re:         PARI KHADEM

Applicant

And:       SECRETARY TO THE
  DEPARTMENT OF FAMILY AND

COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       M.J. Carstairs, Member

Date:             26 June 2003

Place:            Melbourne

Decision:The Tribunal affirms the decision under review.

(sgd) M.J. Carstairs

Member

SOCIAL SECURITY ‑ widow allowance ‑ disposal of proceeds of sale of property ‑ financial hardship provisions ‑ whether severe financial hardship

Social Security Act 1991 ss11(12), 11(13), 1118, 1131(1), 1132(4)

Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225

Repatriation Commission v Hall (1988) 15 ALD 84

Re Twelftree and Repatriation Commission (1986) 10 ALD 34

Re Cooper and Repatriation Commission (AAT 11584, 24 January 1997)

Re Brian Lawlor Automotives Pty Ltd and Collector of Customs (New South Wales)

(1978) 1 ALD 167

REASONS FOR DECISION

26 June 2003  M.J.Carstairs, Member

1.      This is an application by Pari Khadem (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 29 November 2002.  The SSAT affirmed a decision of an authorised review officer (ARO) of Centrelink dated 21 October 2002.  The ARO had affirmed the decision of a Centrelink delegate of the Secretary to the Department of Family and Community Services (the respondent) dated 17 September 2002 to refuse a claim for payment of widow allowance under the hardship provisions.   

2.      At the hearing of this matter Ms S. Dhanapala, a Community Lawyer with the Central Highlands Community Legal Centre, represented the applicant, and Ms E. King, a Centrelink advocate, represented the respondent.  An interpreter assisted the applicant in the Farsi (Persian) language.

3. The evidence before the Tribunal comprised oral evidence and the documents lodged under s37 of the Administrative Appeals Tribunal Act1975 (T1-T14), together with six exhibits (Exhibits A1-A6) tendered by the applicant. The applicant at the resumed hearing withdrew exhibit A4.

BACKGROUND

4.      The applicant was born on 6 October 1943 and migrated to Australia in 1981 with her husband and three children.  She and her husband were the joint owners of a property in Rosanna, a suburb of Melbourne, and another property in Ballarat North.  On 16 May 2001 the applicant’s husband died, leaving his real and personal property to the applicant.  She applied for widow allowance and was paid from 31 August 2001.

5.      The applicant sold the Rosanna property and on 6 February 2002 gave the proceeds of the sale ($291,287) to two of her children.  On 11 February 2002 Centrelink cancelled the widow allowance on the grounds that her assets exceeded the allowable limit.   On 20 March 2002 the applicant sought review by the SSAT, which affirmed the decision on 15 April 2002.  On 21 May 2002 the applicant sought review by the Tribunal, which affirmed the decision on 27 August 2002.  On 3 September 2002 the applicant lodged a claim for widow allowance under the hardship provisions, which was refused on 17 September 2002.  On 21 October 2002 an ARO affirmed the decision. 

6.      On 25 October 2002 the applicant lodged an appeal with the SSAT, which affirmed the decision.  On 19 December 2002 she sought review by the Tribunal of the SSAT decision.

EVIDENCE

7.      The applicant told the Tribunal that she sold the property at Rosanna because her late husband wished her to do so in the event of his death, so that the children would benefit financially, according to Iranian culture.  She stated that she was receiving widow allowance before selling the property and that, had Centrelink told her that her widow allowance would be cancelled, she would have made another arrangement with the proceeds of the sale of the house.

8.      The applicant said that she attended Centrelink on 14 January 2001 to advise of her change of address, as she moved to Ballarat two months before settlement was due on the Rosanna house.  She said that she told the Centrelink officer who attended upon her that the settlement was due on 6 February 2001 and was told that she should come in when the sale was finalised.  She said that she was not told she should not deal with the proceeds of the sale and she was not provided with an interpreter.  When the Rosanna property settled, on her instructions, the cheques were made payable to her children. She said that she lives alone on the Ballarat property, and although she has no mortgage, she has had to rely on loans from relatives and friends, and donations from charitable organisations, to survive.

9.      The applicant explained that her children have family and other commitments and are unable to assist financially on a continuing basis.  She said that she has been unable to find employment apart from two weeks at a restaurant.  She has ongoing back problems.  She stated that she has no money for heating and other essential expenses, and has been unable to afford to leave the house.  She said that she would have cultural difficulties with having someone board with her.  Although the house has three bedrooms, she said that she needs to keep bedrooms vacant for her son and daughter to visit.  The applicant ruled out selling her house, which is her sole asset and was purchased for $120,000 about six years ago, because she said that she would not be able to obtain a loan for a smaller residence.

10.     Documents provided to the Tribunal show that at 11 April 2003 the applicant’s bank balance was $63. A letter dated 28 February 2003 from the Commonwealth Bank (Exhibit A1) stated that the applicant’s personal loan application did not meet the bank’s requirements.  The applicant confirmed that her financial situation has not changed because she has received no income for more than twelve months. 

11.     In oral evidence the applicant’s daughter Elham Jamhali said that she and her husband received a lesser amount than the other two siblings as her father had given them money on an earlier occasion.  She said that had they known the consequences for her mother they would have agreed to make some provision for her from the Rosanna house.  She said that her husband is working  (she could not recall his salary) but they are unable to assist her mother as the money is tied up in their house on which there is a mortgage.  They purchased a four‑bedroom house for $230,000 in December 2001.  Prior to that they lived in the house in Ballarat where her mother now resides.

12.     In a letter dated 20 May 2003 (Exhibit A6), the applicant’s daughter Mojgan Khadem stated that she received the sum of $253,287.06, and used it as follows:

(a)$97000 to her brother Erfan Khadem;

(b)$97,000 retained by her; and

(c)$59,000 was repayment to Mojgan for expenses incurred on her mother's behalf, including $8000 for funeral costs, $15,000 for an overseas trip with her mother, $6000 to solicitors and removalists and $30,000 on repairs to the Rosanna house prior to its sale.

13.     Ms Khadem stated that she had put all her share of the money into the purchase of a property in Adelaide.

14.     In an affidavit sworn on 9 April 2003 (Exhibit A3) the applicant’s son, Erfan Khadem, stated that he is unemployed and used his share of the proceeds from the sale of the Rosanna house to purchase a property.  There is a mortgage of $130,000 on this property, repayable at $800 per month.  He said that he is unable to assist his mother.

CONSIDERATION OF THE ISSUES

15. Section 1131(1) of the Social Security 1991 (the Act) provides for the payment of a benefit to a person whose assets would otherwise preclude payment:

1131(1)    If:

(a)a social security benefit is not payable to a person because of the application of an assets test; and

(b)the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(c)the person's partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(d)either:

(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or

(ii)the Secretary decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and

(e)       the person, or the person's partner, has an unrealisable asset; and

(f)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(g)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person.

16.     Ms Dhanapala submitted that the applicant's disposal of the proceeds of the sale of the Rosanna property to her children should be disregarded.  She said that the only reason the applicant disposed of the proceeds of the sale as she did was to carry out her husband’s wishes, in accordance with Iranian cultural tradition.  Ms Dhanapala submitted that the applicant’s decision to dispose of the Rosanna property was reasonable at the time, but that the applicant did not know of the consequences of her actions at the date of the disposal. 

17.     Ms Dhanapala referred the Tribunal to Re Twelftree and Repatriation Commission (1986) 10 ALD 34, at 43, which sets out the matters to be considered in the exercise of the discretion to decide whether the hardship provisions should be applied:

…

The following circumstances (which do not purport to be exhaustive) will in our view be relevant to a consideration of whether it is reasonable to exercise that discretion:

(1)   Has the disposal of property deprived the grantor of income and thereby left him in circumstances of financial hardship?

(2)   Was the sole purpose or dominant purpose of that disposal to produce that result?

(3)    Did the grantor know or should he have known that his action would produce that result?

(4)    If the grantor had not disposed of that property in that manner and for that consideration what would have been the effect on his pension rate?

(5)   Were there circumstances which made it reasonable for the grantor to do what he did?

18.     Ms Dhanapala stated that the applicant is an older, single, Iranian woman.  Under her culture, and for safety reasons, she is unable to consider renting out her house or taking in boarders as a means of supporting herself.  Ms Dhanapala said that the disposal of the proceeds of the sale had left the applicant in circumstances of severe financial hardship as she had no money, no savings and an inability to earn an income.

19.     Ms Dhanapala submitted that Centrelink should have explained the applicant’s rights to her; should have provided an interpreter; and should have urged her to make an appointment prior to receiving the proceeds of the sale, not after she had disposed of the money.  She said that Centrelink owed a duty of care in these circumstances.  Ms Dhanapala said that the applicant had been treated unfairly and had been forced to become a beggar.  She submitted that, as the applicant had attempted to obtain a loan from the bank and had been refused and has attempted to work and is prevented by ill‑health and the lack of jobs in the Ballarat area, she should be taken to be in financial hardship

20.     Ms Dhanapala submitted that the applicant’s circumstances should be considered in a global sense, taking into account her cultural circumstances.  In regard to the respondent's submission that, even if the Tribunal applied the financial hardship discretion, the rate of payment would be NIL as a result of the deeming of income on the disposed asset, as required by s1132 of the Act, she submitted that the Tribunal had a discretionary power to grant special benefit.

21.     Ms King submitted that, in applying the factors in Re Twelftree and the policy guidelines in the Guide to Social Security Law (the Guide), the proceeds of disposal of the Rosanna property should not be disregarded.  She said that the applicant had not enquired about the effect on her social security entitlements of disposing of the property, before selling the property and gifting the proceeds to her children.  She submitted that any hardship was a direct result of disposal of the asset.  The applicant would have been able to earn income from the capital amount if she had retained the proceeds of sale.  She submitted that the applicant could have assisted her children while retaining a portion of the proceeds for her own needs.  Instead, she relied on public funds for income while giving money to her children. Finally, she submitted that the applicant now owns a house that is fully paid‑off.

22.     In relation to the applicant’s cultural background, Ms King agreed that people of various backgrounds wish to assist their children financially and are not prevented by law from doing so.  However, she emphasised that any decision to gift the entire proceeds of the sale of a property needs to take into account the possible effect on social security entitlements and the ability of the person making the gift to provide for himself or herself financially.

23. Ms King submitted that the applicant does not have an unrealisable asset within the meaning of s11(12) and s11(13) of the Act. She said that the Ballarat property is an exempt asset under s1118 of the Act, and therefore under s1132(4) of the Act is not subject to an assets test for the purposes of applying the financial hardship provisions. Ms King acknowledged that the applicant’s financial position is difficult, but submitted that she is not in severe financial hardship under the Act.  Ms King stated that the applicant has an unencumbered house from which she could derive some income, or alternatively the applicant’s children are in a position to assist financially by using the assets to which the applicant has contributed as a means of generating income.

24.     Ms King submitted that, when the applicant was told on 12 February 2001 that her widow allowance would be cancelled, she could have asked her children to return the money, as this was only six days after the settlement date.  She further submitted that, even now, the children could use the equity in their respective properties to borrow money to assist their mother.

25.     In reaching its decision, the Tribunal takes into account the written material, oral evidence and the submissions made at the hearing.

26.     The Tribunal notes that in its decision of 27 August 2002 the Tribunal affirmed a decision of the SSAT that the sale of the Rosanna property took the applicant’s assets above the allowable limit for the entitlement to widow allowance.  At the hearing of that matter in 2002, no evidence was given that $59,000, of the total of $253,287.06 distributed to Mojgan Khadem, was for outlays on behalf of her mother.  Even if the $59,000 was not taken into account, the amount disposed of is above the assets limit for benefit payments.  However, the amount held as deprivation under s1125 of the Act may need to be recalculated taking into account this new evidence, along with the evidence of Elham Jamhali that she received part of her amount at an earlier time. 

27. On the question of whether the disposal of the proceeds of sale should be disregarded under s1131(1)(d) of the Act, the Tribunal accepts that the applicant believes that Centrelink should have made her aware of the consequences of the disposal of the proceeds, and that she felt bound, by her cultural traditions, to carry out her husband's wishes. However, the Tribunal accepts the submission by Ms King that the applicant did not make adequate enquiries before the sale, and that any hardship suffered by her resulted directly from the disposal of the proceeds of that sale.

28. The Tribunal also agrees with Ms King that the applicant should have sought professional advice before finalising the sale. She had the option of retaining all the proceeds, or a sufficient proportion to meet her own needs, and also assist her children financially. The Tribunal notes that she retains an unencumbered property. The Tribunal does not disagree with the applicant’s evidence that her cultural background encouraged her to respect her husband’s wishes. However, the Tribunal accepts that the consequences of any decision to follow such a tradition cannot be ignored, for the purpose of entitlement to social security benefits. For these reasons, the Tribunal finds that the proceeds of sale of the Rosanna property should not be disregarded under s1131(1)(d) of the Act, when applying the assets test.

29. As the applicant is living in the principal place of residence, which is an asset exempt under s1118 and s1132(4) of the Act, the Tribunal finds that the applicant does not have an unrealisable asset. In Re Cooper and Repatriation Commission (AAT 11584, 24 January 1997) the Tribunal held the financial hardship provisions were not to be applied where a person does not have an unrealisable asset, as all parts of the section must be satisfied.

30.     On the question of severe financial hardship, the Tribunal notes that, although the term is not defined in the Act, in Repatriation Commission v Hall (1988) 15 ALD 84 the Federal Court of Australia held that the term does not require proof of destitution, but must be read in the context of the particular circumstances. In Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225 the Tribunal held that the term is a clear direction by the legislature that the section is only applicable when the requisite severity of financial hardship is present.

31. The Tribunal accepts the submission of Ms Dhanapala that the applicant is in difficult financial circumstances, has no income and little by way of savings. However, the Tribunal agrees with Ms King that, although the applicant may prefer to remain living alone in the Ballarat property and she would find difficulty in obtaining employment, she has the capacity to generate rental income from her unencumbered house. Further, she could reasonably expect to receive assistance from her children, who have derived benefit from the sale of the Rosanna property. For these reasons, and applying the factors set out in paragraph 1.1.S.120 of the Guide, the Tribunal finds that the applicant would not suffer severe financial hardship if s1131(1) of the Act did not apply to her.

32. Therefore, the Tribunal finds that the discretion under the financial hardship provisions of s1131(1) of the Act should not be exercised in the applicant’s favour to grant her a widow allowance.

33. In regard to the submission that the Tribunal could exercise a discretion under s43 of the Administrative Appeals Tribunal Act 1975 to grant special benefit, the Tribunal disagrees on two grounds.  Firstly, the decision made in regard to special benefit (exhibit A2) postdates the application to this Tribunal, and therefore the Tribunal has no jurisdiction in regard to that decision.  Secondly, the Tribunal has no general review powers, nor is it the repository of discretionary powers in a primary sense: Re Brian Lawlor Automotives Pty Ltd and Collector of Customs (New South Wales) (1978) 1 ALD 167.

DECISION

34.     The Tribunal affirms the decision under review.

I certify that the thirty four [34] preceding paragraphs are a true copy of the reasons for the decision of:

M.J.Carstairs, Member

(sgd)       Olympia Sarrinikolaou

Clerk

Date of hearing:  11 April and 27 May 2003
Date of decision:  26 June 2003
Advocate for applicant:                Ms S. Dhanapala
Solicitor for applicant:                  Central Highlands Community Legal Centre

Advocate for respondent:            Ms E. King, Centrelink