Korossietis and Secretary, Department of Health (Social services)
[2022] AATA 1730
•17 June 2022
Korossietis and Secretary, Department of Health (Social services) [2022] AATA 1730 (17 June 2022)
Division:GENERAL DIVISION
File Number: 2021/2571
Re:Joanna Korossietis
APPLICANT
AndSecretary, Department of Health
RESPONDENT
DECISION
Tribunal:Mr A. Maryniak QC, Member
Date:17 June 2022
Place:Melbourne
The Tribunal affirms the decision under review.
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Mr A. Maryniak QC, Member
Catchwords
SOCIAL SECURITY – aged care – financial hardship – where loan was granted for benefit of niece – whether forgiven loan considered unrealisable asset – whether forgiven loan constitutes a gift – whether Applicant eligible for financial hardship assistance – decision affirmed
Legislation
Aged Care Act 1997 (Cth)
Social Security Act 1991 (Cth)
Subsidy Principles 2014 (Cth)
Fees and Payments Principles 2014 (No.2) (Cth)Cases
Downes and Secretary, Department of Family and Community Services [2002] AATA 737
Greenhill and Secretary, Department of Family and Community Services [2006] AATA 176
Kojcic and Secretary, Department Social Security [2016] AATA 200
Tattam and Secretary, Department of Health (Social Services) [2021] AATA 625REASONS FOR DECISION
Mr A. Maryniak QC, Member
17 June 2022
At the outset, the Tribunal appreciates that the Applicant is in a difficult predicament. She is 99 years old, has dementia and lives in an aged care facility. She has an existing debt to that aged care facility which is increasing as she is unable to meet the total cost of her care. It is a credit to that aged care facility that it has not taken steps to remove her.
The Applicant seeks review of the Respondent’s decision of 20 January 2021 affirming a decision to refuse the Applicant’s claim for financial hardship assistance.
On 8 February 2016, the Applicant loaned her niece Alexandra Plevritis $530,000. The loan agreement at 0.5% interest until 5 February 2050 noted, in handwriting, that the loan was to be repaid at $220.18 per month. Such payments were made without default. The loan agreement included the standard term that, in the event of default, the Applicant could ‘declare the principal and interest due at that time to be immediately due and payable’.
On 10 March 2020, State Trustees (‘ST’) (having been appointed the Applicant’s administrators on 29 January 2019), by Deed of Agreement with Ms Plevritis, increased the repayments to $349.66 per month. The recitals to this deed reveal an interesting tension between ST and Ms Plevritis which appears to have been resolved by the Deed and, in any event, has not been raised before the Tribunal.
By that deed, Ms Plevritis also paid ST $37,600, thereby reducing the ‘outstanding principal debt and interest’. The terms of the loan were further altered by this deed, which is essentially a settlement deed, in that the remaining principal debt and interest could become immediately due and payable, inter alia, upon the death of either the Applicant or Ms Plevritis. The Applicant also had the right to demand further repayment(s) should further funds be required to fund the Applicant’s accommodation, personal or care needs.
Additionally, Ms Plevritis charged her Southbank property with the due payment of all monies owing to the Applicant by reason of that deed and permitted a caveat on the property. As a consequence of the 10 March 2020 deed, there were increased obligations upon and exposures for Ms Plevritis.
By deed of agreement on 30 October 2021, ST noted that the 10 March 2020 deed was entered ‘to resolve an allegation that [Ms Plevritis] acted in breach of her fiduciary duties by entering into a loan agreement’ dated 8 February 2016 as referred to above. It also noted that Ms Plevritis ‘has complied with the terms of the deed of settlement and has to date made loan repayments to [the Applicant] totalling $46,893.61.’
Hence, prior to the 30 October 2021 agreement, Ms Plevritis had not only continuing repayment obligations but also significant exposure and obligations to make further payments in the event that such were demanded, as required by the Applicant to fund her accommodation, personal and care needs.
On 20 January 2021, the Respondent affirmed the decision to refuse the Applicant’s hardship application (‘Decision’) because the unpaid loan of $530,000 was ‘considered to be a financial asset for social security and aged care purposes. Legally, a loan ceases to exist at the time it is repaid, or when the debtor is formally released from the loan. A debtor is released from a loan contract…where the loan is forgiven’.[1]
[1] Respondent’s review outcome letter dated 20 January 2021, pages 2-3.
This is a hearing de novo and the Tribunal has considered all the documentary evidence comprising exhibits R1, R2 and A1 together with the written and oral submissions of the parties. The Tribunal notes that no submissions were made regarding any impact of the Applicant’s asserted impaired judgement from 20 August 2015 or dementia from about 25 October 2018.
Despite the respectable argument put by Counsel for the Applicant, the Tribunal does not accept that an estoppel is created, regardless of the way ST may have read or purported to rely upon select words from that Decision. The Tribunal is not persuaded that the Decision or any evidence before it is sufficient to create any estoppel which would prevent the Respondent from arguing, and the Tribunal considering and determining, whether the forgiving of the loan by the 30 October 2021 agreement constituted a gift and/or was a relevant asset. This is particularly so where other words in the Decision discuss the position regarding gifts.
The Applicant submits that the 30 October 2021 deed which forgave the loan does not constitute a gift under the relevant statutory provisions to be considered. The Applicant also submits that the loan, prior to being forgiven, constituted an unrealisable asset. The Respondent submits the contrary.
The relevant statutory provisions are contained within the Aged Care Act 1997 (Cth) (‘Aged Care Act’), the Social Security Act 1991 (Cth) (‘Social Security Act’), the Subsidy Principles 2014 (Cth) (‘Subsidy Principles’) and the Fees and Payments Principles 2014 (No. 2) (Cth) (‘Fees and Payments Principles’). The Tribunal is assisted by the identification of such provisions as referred to in the Statement of Facts and Contentions of the Respondent, as referred to below.
The question before the Tribunal is whether the Applicant is entitled to financial hardship assistance for aged care purposes pursuant to the Aged Care Act.
By section 44-31 of the Aged Care Act:
(1)The Secretary may, in accordance with the Subsidy Principles, determine that the care recipient is eligible for a hardship supplement if the Secretary is satisfied that paying a daily amount of resident fees of more than the amount specified in the determination would cause the care recipient financial hardship.
(2)In deciding whether to make a determination under this section, and in determining the specified amount, the Secretary must have regard to the matters (if any) specified in the Subsidy Principles. The specified amount may be nil.
…
Section 44-24 of the Aged Care Act sets out how to determine a care recipient’s total assessable income and by section 44-26A of that Act:
(1) Subject to this section, the value of a person’s assets for the purposes of section 44-22 is to be worked out in accordance with the Subsidy Principles.
…
By Section 52K-1 of the Aged Care Act:
(1)The Secretary may, in accordance with the Fees and Payments Principles, determine that a person must not be charged an accommodation payment or accommodation contribution more than the amount specified in the determination because payment of more than that amount would cause the person financial hardship.
(2)In deciding whether to make a determination under this section, and in determining the specified amount, the Secretary must have regard to the matters (if any) specified in the Fees and Payments Principles. The specified amount may be nil.
…
By section 44-26A(4)(b) of the Aged Care Act:
The value of a person’s assets is taken to include the amount that the Secretary determines to be the amount…that would be included in the value of the person’s assets if Division 2 of Part 3.12…of the Social Security Act…applied for the purposes of this Act.
A determination of the value of a person’s assets is required in accordance with the Subsidy Principles. Various provisions of Division 1 of Part 3.12 of the Social Security Act do not apply.
By s 38 of the Fees and Payments Principles:
(1)For section 52K-1 of the [Aged Care] Act, this section sets out matters which the Secretary must have regard in deciding whether to make a financial hardship determination in relation to a person.
(2)The Secretary must not make a financial hardship determination in relation to a person if:
(a)the person’s means have not been assessed in accordance with the Act; or
(b)the value of the person’s assets (worked out under section 44-26A of the Act and section 47 of the Subsidy Principles 2014) is more than 1.5 times the sum of the annual amount of the following (worked out under the Social Security Act):
(i)the basic age pension amount;
(ii)the pension supplement amount;
(iii)the clean energy supplement; or
(c)the person has gifted:
(i)more than $10,000 in the previous 12 months; or
(ii)more than $30,000 in the previous 5 years.
(3)In determining the value of a person’s assets for paragraph (2)(b), unrealisable assets are not to be included.
Sections 11(12) and (13) of the Social Security Act defines ‘unrealisable asset’ as follows:
(12) An asset of a person is an unreasonable asset if:
(a)the person cannot sell or realise the asset; and
(b)the person cannot use the asset as a security for borrowing.
(13) For the purpose of the application of this Act to a social security pension (other than a pension PP (single)), an asset of a person is also an unrealisable asset if:
(a)the person could not reasonably be expected to sell or realise the asset; and
(b)the person could not reasonably be expected to use the asset as a security for borrowing.
Division 1 of Part 3.12 of the Social Security Act contains general provisions relating to the asset test.
Relevantly, s 1122 of that Division states as follows:
If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.
Division 2 of Part 3.12 of the Social Security Act contains provisions relating to disposal of assets.
Section 1123(1) sets out relevant principles relating to disposal of assets and states:
For the purpose of this Act, a person disposes of assets of the person if:
(a)the person engages in a course of conduct that directly or indirectly:
(i)destroys all or some of the person’s assets; or
(ii)disposes of all or some of the person’s assets; or
(iii)diminishes the value of all or some of the person’s assets; and
(b)one of the following subparagraphs is satisfied:
(i)the person receives no consideration in money or money’s worth for the destruction, disposal or diminution;
(ii)the person receives inadequate consideration in money or money’s worth for the destruction, disposal or diminution;
(iii)the Secretary is satisfied that the person’s purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage.
Upon its terms it is unclear whether the loan, as modified on 10 March 2020, is unsecured (see clause 5). In any event, it is apparent that the Applicant retained rights to realise the loan by clauses 2 and 3 of the 10 March 2020 deed. The Tribunal finds that the loan was not an unrealisable asset, at least from 10 March 2020: see s 4 of the Fees and Payments Principles and ss 11(12) and (13) of the Social Security Act. The fact that Ms Plevritis would have to sell real property in order to repay the loan, if called upon, does not detract from the Tribunal’s finding in this regard. The Tribunal decision of Kojcic and Secretary, Department Social Security [2016] AATA 200 is distinguishable on its facts.
On 30 October 2021, the date the loan was forgiven, the balance owing to the Applicant was $483,106.39.
Pursuant to s 60 of the Subsidy Principles, a determination of eligibility for a hardship supplement must not be made if the value of the Applicant’s assets (per s 44-26A of the Aged Care Act and s 47 of the Subsidy Principles) is more than 1.5 times the sum of various amounts calculated under the Social Security Act. The Tribunal finds that the Applicant, prior to 30 October 2021, had assets (being monies lent after 27 October 1986) consistent with Part 3.12, s 1122 of the Social Security Act, exceeding an amount which would have permitted eligibility for hardship assistance.
The critical question remains whether the forgiving of the loan on 30 October 2021 was a gift. The Applicant’s Counsel quite properly did not press the argument that if the loan was a gift, it should be considered as such from inception, namely 8 February 2016. There is no substance to that argument.
However, the Applicant’s Counsel did put a thorough argument to the effect that within the terms of s 1123 of the Social Security Act, it could not be said that the Applicant had engaged in a course of conduct where she directly or indirectly disposed of all or some of her assets, receiving no consideration in money or money’s worth for such disposal. The Respondent submitted the contrary and sought to rely upon Downes and Secretary, Department of Family and Community Services [2002] AATA 737, Tattam and Secretary, Department of Health (Social Services) [2021] AATA 625 and Greenhill and Secretary, Department of Family and Community Services [2006] AATA 176, but all are distinguishable on their facts.
On balance, the Tribunal rejects the Applicant’s argument and finds that the better view is that a loan ‘forgiven’ on the facts in this matter constitutes a gift under the relevant Fees and Payments Principles and a disposal (and even perhaps a diminishing of value) of an asset pursuant to s 1123 of the Social Security Act.
In light of the terms of the 8 February 2016, 10 March 2020 and 30 October 2021 agreements, as discussed above, the Tribunal finds that the unpaid loan amount of $483,106.39 was an asset which was gifted, disentitling the Applicant to any financial hardship assistance pursuant to the Aged Care Act, on 10 September 2020 or subsequently.
By reason of the matters set out above, the Tribunal finds that the correct or preferable decision is to affirm the decision under review.
I certify that the preceding 33 (thirty-three) paragraphs are a true copy of the reasons for the decision herein of Mr A. Maryniak QC, Member
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Associate
Dated: 17 June 2022
Date of hearing: 31 May 2022 Counsel for the Applicant:
Solicitors for the Respondent:
Ms Susan Aufgang
State Trustees Limited
Advocate for the Respondent: Ms Peta Heffernan Solicitors for the Respondent: Australian Government Solicitor
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