Lal and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2011] AATA 807
•15 November 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 807
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2011/2358
GENERAL ADMINISTRATIVE DIVISION ) Re SAM KUAR LAL Applicant
And
SECRETARY, DEPT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr R G Kenny, Senior Member Date15 November 2011
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ..............................................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Benefits and entitlements – Age pension – Asset valuation – Disposal of assets for no consideration in money or money’s worth – Value of assets disposed of included as assets of applicant – Decision under review affirmed
Social Security Act 1991 (Cth) ss 43, 44, 1064, 1123, 1124, 1126AA
REASONS FOR DECISION
15 November 2011 Mr R G Kenny, Senior Member BACKGROUND
1. On 23 December 2010, Sam Kuar Lal[1] lodged a claim with Centrelink for age pension which is payable under the Social Security Act 1991 (Cth) (the Act). On 24 December 2010, her claim was rejected on the basis that the value of her assets exceeded the allowable asset value limit. On 1 March 2011, an authorised review officer varied that decision on the basis that Mrs Lal’s assets did not exceed that allowable limit, and determined that she could be paid the age pension at a rate reduced in accordance with the value of her assets. On 27 April 2011, the Social Security Appeals Tribunal (SSAT) set aside that decision and remitted the matter to Centrelink to recalculate Mrs Lal’s age pension on the basis that her assets were to include certain assets, valued at $721,225.11, which had been disposed of by her.
[1] Mrs Lal is also identified in documents as Mrs Sam Kuar.
LEGISLATION AND ISSUES
2. The qualification criteria for the age pension are set out in s 43 of the Act and it is common ground that Mrs Lal meets those requirements. The rate of age pension is determined in accordance with the rate calculator in s 1064 of the Act. The rate is subject to both an income and an assets test and the payable rate is whichever is the lesser calculation on those tests. It is not disputed that Mrs Lal was a single non-homeowner when she claimed the age pension. At the time of the claim for age pension, once the value of a single non-homeowner’s assets exceeded $313 250, the amount of age pension was reduced until the asset value reached $790 750. At that point, the rate of age pension was nil. Under s 44 of the Act, once a person’s rate is nil, age pension is not payable to the person.
3. The Act provides for assets which have been disposed of to be included in the value of the person’s assets. In that regard, ss 1123, 1124 and 1126AA of the Act read:
1123 Disposal of assets
(1) For the purposes 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.
…
1124 Amount of disposal or disposition
If a person disposes of assets, the amount of the disposal or disposition is:
(a) if the person receives no consideration for the destruction, disposal or diminution—an amount equal to:
(i) the value of the assets that are destroyed; or
(ii) the value of the assets that are disposed of; or
(iii) the amount of the diminution in the value of the assets whose value is diminished; or
(b) …
1126AA Disposal of assets in income year—individuals
Disposals to which section applies
(1) This section applies to a disposal (the relevant disposal) on or after 1 July 2002 of an asset by a person who is not a member of a couple at the time of the relevant disposal.
Increase in value of assets
(2) If the amount of the relevant disposal, or the sum of that amount and the amounts (if any) of other disposals of assets previously made by the person during the income year in which the relevant disposal took place, exceeds $10,000, then, for the purposes of this Act, the lesser of the following amounts is to be included in the value of the person’s assets for the period of 5 years starting on the day on which the relevant disposal took place:
(a) the amount of the relevant disposal;
(b) the amount by which the sum of the amount of the relevant disposal and the amounts (if any) of other disposals of assets previously made by the person during the income year in which the relevant disposal took place, exceeds $10,000.
(3)…
SUBMISSIONS
4. Bob Hamilton, for the respondent, submitted that, in 2009, Mrs Lal and her daughter, Reena Lal, were owners in joint tenancy of a house at Bracken Street, Moorooka (Bracken Street) and that Mrs Lal was the sole owner of her home at Vassey Street, Moorooka (Vassey Street). He noted that in 2009 Mrs Lal gifted her interest in Bracken Street to her granddaughter, Shanel Chandra. He noted that, in 2009, she also gifted to Ms Chandra a sum of $196,225.11, from the proceeds of the sale of Vassey Street. Mr Hamilton submitted that these were dispositions in accordance with ss 1123 and 1126AA of the Act. He also submitted that Mrs Lal gifted a cash amount of $250,000 to Ms Chandra and other family members and that these payments were also dispositions under those provisions. He submitted that those dispositions were made for no consideration and that, in accordance with s 1124 of the Act, the value of them should be included in her overall asset valuation for the purposes calculating her age pension under the Act. He submitted that the total value of those dispositions was $721,225.11 comprising:
·Interest in Bracken Street property: $275,000;
·Portion of proceeds of sale of Vassey Street property: $196,225.11; and
·Cash: $250,000.
5. Mr Hamilton submitted that, in 2008, Centrelink had raised an overpayment in the amount of $31,313.15 against Mrs Lal in relation to overpayments of age pension from 2003 to 2007. He submitted that Mrs Lal has not repaid those monies and that, on 24 July 2008, judgement was entered against her in relation to that debt in the Magistrates Court of Queensland. Mr Hamilton referred to a sequestration order which was made against Mrs Lal’s estate on 1 June 2011 in the Federal Magistrates Court at Brisbane and which recorded the date of bankruptcy as 30 September 2010. He submitted that there were occasions, especially after the sale of Vassey Street, when Mrs Lal had sufficient funds available to her to make the debt payment to Centrelink but that she had chosen to dispose of those funds to Ms Chandra, without consideration, to avoid doing so.
6. The advocacy advice service, Welfare Rights Centre Inc, did not represent Mrs Lal. However, Patrick Cranitch, a solicitor with that service, provided a written submission in her support, but only in relation to Bracken Street. He submitted that Mrs Lal became part owner of Bracken Street to assist Reena Lal to purchase the property in 1994. He noted that Reena Lal was in poor health at the time and that the lending institution required greater security than she was able to provide on her own. Mr Cranitch submitted that the property was purchased solely for Reena Lal, that Mrs Lal made no repayments on the loan and that she made no other contribution to the purchase of the property. He noted that Mrs Lal and Reena Lal transferred the property to Ms Chandra on 30 June 2009 in return for “natural love and affection”. At that time it was valued at $550,000 with Mrs Lal’s share being $275,000. Mr Cranitch submitted that Mrs Lal held her share of the property on trust for Reena Lal and, accordingly, it was not her asset and, therefore, not a gift by her to Ms Chandra.
7. Mrs Lal was assisted at the hearing by her daughter, Reena Lal, who advised that Mrs Lal would not give evidence because she had a hearing difficulty and did not speak or understand English. Reena Lal was aware of the details relating to Mrs Lal’s application and gave evidence on her mother’s behalf. Mrs Lal gave her approval to this mode of proceeding. Reena Lal submitted that the transfer of Bracken Street and of monies to Ms Chandra had been in accordance with a direction in the will of her father, Mrs Lal’s husband. She further submitted that the transfers were in recognition of the substantial financial contributions made by Ms Chandra over the years to the repayment of the mortgage on Bracken Street and to renovations at Vassey Street. Reena Lal confirmed that Bracken Street had been valued at $550,000 and that Vassey Street was sold on 20 April 2009 for $480,000. She submitted that the transfers did not fall within the relevant provisions of the Act and should be disregarded in assessing Mrs Lal’s age pension.
EVIDENCE
8. It is not disputed that Reena Lal and Mrs Lal became the joint owners of Bracken Street in 1994. Reena Lal’s evidence was that Mrs Lal’s name was included in the title and mortgage as additional security for the loan only because this was required by her bank due to Reena Lal being in ill health and in receipt of a Centrelink pension. Reena Lal said that the house was fully paid for by 2008 and that, since 1994, repayments were not made by Mrs Lal but by herself, other members of her family including her brothers but, mainly, by Ms Chandra. Her evidence was that, because of Ms Chandra’s role in discharging the debt on Bracken Street, the house was transferred into her name on 30 June 2009 when it was valued at $550,000.
9. As proof of the basis of Mrs Lal’s involvement in the purchase of Bracken Street, Reena Lal referred to two hand-written notes, dated 17 June 1994, one of which was signed by her and both of which were signed by Mrs Lal. These were received by Centrelink on 8 December 2010. They declare that Mrs Lal did not own any share in Bracken Street. Reena Lal denied that these notes had been written recently to support Mrs Lal’s claim for age pension and said that she had found them in a file shortly before she forwarded them to Centrelink.
10. Reena Lal said that her father died in 2002 and that Vassey Street was their family home. She referred to her father’s will, saying that it was in accordance with his wishes that the proceeds of the sale of Vassey Street were paid to Ms Chandra. She said this was in recognition of financial contributions made by Ms Chandra toward renovations of Vassey Street. Reena Lal said that the monies paid to Ms Chandra were not paid by Mrs Lal but by the solicitor involved in the transfer of title to Ms Chandra. She said that after the sale of Vassey Street Mrs Lal also repaid money to her son and grandson, who contributed to the upkeep on Vassey Street.
11. Reena Lal agreed that she assisted her mother to complete Centrelink documentation including Income and Assets forms. One of these, dated 10 June 2010, declared negative responses to the questions:
In the last 5 years have you (and/or your partner) given away, sold for less than their market value, or surrendered a right to, any cash, assets, property or income?
In the last 12 months have you (or your partner) received a lump sum payment that you have not already advised on this form?
12. Those responses were also included on an Income and Assets form which was undated, signed by Mrs Lal and received by Centrelink on 22 December 2010. Reena Lal agreed that transactions were made and monies received in the time‑frames identified in those questions but was unable to explain the negative responses.
13. Reena Lal agreed that, from 2009 to 2011, Mrs Lal had made several trips abroad from Australia to Fiji, France, the United Kingdom, Canada, the United States of America and Malaysia. A copy of Mrs Lal’s passport was in evidence and this confirms that frequency of overseas travel by Mrs Lal. Reena Lal said that, for trips taken after the sale of Vassey Street, Mrs Lal had made payment herself and that, for earlier trips, Ms Chandra had made payment and allowed Mrs Lal to use a credit card while away from Australia. Reena Lal denied that Mrs Lal had a joint bank account with Ms Chandra and said that Mrs Lal had only one bank account which was with the Commonwealth Bank of Australia.
14. Commonwealth Bank statements for an account in Mrs Lal’s name show account balances of $31.36 (December 2006); $100.99 (June 2010); $100.00 (March 2010). A statement from the Commonwealth Bank advised that the following separate accounts were identified in the names of Mrs Lal and Ms Chandra:
Title Date opened Balance Mrs Sam Kuar[2] 10 May 2002 $100.93 Ms Chandra and Mrs Lal 22 April 2009 $1,000.76 Mrs Lal 18 May 2009 $16.60 [2] This is the alternative name of Mrs Lal.
15. Mrs Lal’s son, Hari Lal, provided a letter, dated 28 February 2011. He referred to Reena Lal’s sickness when Bracken Street was purchased in 1994 and the need for Mrs Lal to be guarantor of her loan. He described Mrs Lal as being uneducated and considered that she would not have understood the nature of her role in the purchase of Bracken Street.
16. Centrelink documentation confirmed that a debt of $31,313.15 was raised against Mrs Lal in relation to overpayments of age pension from 2003 to 2007. Also in evidence were the judgements, noted above in Mr Hamilton’s submission, from the Magistrates Court and Federal Magistrates Court. They confirm that judgement was entered against Mrs Lal for her Centrelink debt and her status as a bankrupt. The Income and Assets Forms in evidence include the denial by Mrs Lal of transfers of assets and the receipt of a lump sum from the sale of Vassey Street.
17. A copy of a document which purported to be the Last Will and Testament of Mrs Lal’s late husband was in evidence. It was supplied to Centrelink on 8 December 2010. It is undated. It appoints Ms Chandra as the sole executor of the will. It states that Mr Lal gave, devised and bequeathed a life interest to Mrs Lal in his house at Vassey Street and continued:
I give devise and bequeath the proceeds of the sale of my house to my granddaughter Shanel Chandra as repayment of a debt I owed to her paternal grandfather.
18. On 22 June 2010, the Australian Valuation Office (AVO) completed a report on the valuations on Bracken Street and Vassey Street. It included an historical title search for each property. The first of these identified Mrs Lal and Reena Lal as joint tenants of Bracken Street until it was transferred to Ms Chandra on 30 June 2009. The second identified Mrs Lal as the surviving joint tenant as from 22 April 2005 and a transfer to new owners on 14 May 2009. Transfer documents were also included. They describe the consideration for Bracken Street as being “natural love and affection” and for Vassey Street to be $480,000. The AVO valued Bracken Street and Vassey Street at $550,000 and $480,000, respectively.
19. A copy of the letter, dated 19 May 2009, to Mrs Lal from John Healy & Co, solicitors, was in evidence. It is not disputed that the reference in that document to “Kuar” is to Mrs Lal. It advised Mrs Lal of the completion of the sale of Vassey Street and that the cheques on settlement were paid as follows:
1 Westpac cr a/c Kuar $19,547.73 2 ReMax Annerley $3,695.00 3 Brisbane City Council $512.60 4 S. Kuar $200,000.00 5 Shanel Chandra $196,225.11 6 John Healy and Co $299.00 total $420,279.44
20. Mrs Lal described a range of renovations that were carried out at Vassey Street and provided copies of what purported to be receipts for materials used and work undertaken in that regard.
CONSIDERATION
21. I have concerns with the evidence in this matter. Reena Lal was extremely vague in giving evidence in relation to many of the material issues raised in the application. In particular, this was in relation to the role that Ms Chandra played in providing financial assistance to Mrs Lal and Reena Lal in respect of mortgage repayments on Bracken Street, her contribution to the costs associated with the renovations at Vassey Street, the extent to which she assisted Mrs Lal in her rather extensive overseas travel, Mrs Lal’s banking arrangements and the manner in which payments were alleged to have been made to family members.
22. Clearly, Ms Chandra was pivotal to Mrs Lal’s case. She was not called as a witness and no explanation was given for her absence. Moreover, no statement was provided by Ms Chandra to assist in the clarification of the issues in which she was directly involved. I draw an adverse inference from the failure to call upon Ms Chandra to clarify these matters.
23. Reena Lal advised the SSAT that money was paid to Mrs Lal’s grandson and her son Hari in the amounts of $60,000 and $50,000, respectively. Reena Lal ascertained from Mrs Lal in the hearing that she paid these sums in cash. However, she also said that she had not paid the total amounts and would continue to make payments as she was able to do so. There were no relevant bank statements in evidence to indicate Mrs Lal holding such sums of money or of making any cash transfers. Hari Lal, in his letter, dated 28 February 2011, made no reference to having received any payment from Mrs Lal.
24. In her evidence, Reena Lal reluctantly agreed that the responses in the Income and Assets forms which were signed by Mrs Lal did not correctly advise Centrelink of transactions made and monies received in the time-frames identified in those questions. Her evidence was that she had assisted Mrs Lal to complete the documents but she was unable to explain why incorrect and misleading responses were included.
25. The letter from the solicitor who acted in relation to the sale of Vassey Street set out the manner in which the settlement monies were distributed by way of cheques. One of these in the sum of $19,547.43 was a credit to Mrs Lal’s Westpac account and would appear to be in discharge of a mortgage. However, an amount of $200,000 was paid by cheque to Mrs Lal. The few statements from the Commonwealth Bank that were provided in evidence do not include any reference to such an amount. I have noted that Reena Lal’s evidence was that Mrs Lal had only a single account with the Commonwealth Bank although, as noted above, the Commonwealth Bank advised that Mrs Lal was recorded as holding three separate accounts.[3]
[3] See paragraph 14 above.
26. The solicitor’s disbursement summary identifies cheque payments totalling $420,279.44. This would seem to omit a reference to some $50,000. Reena Lal was unable to provide any explanation as to the distribution of that sum. Reena Lal contended that her mother was not responsible for the transfer of $196,225.11 by the solicitor to Ms Chandra. She contended that this was done by the solicitor and was done in accordance with the terms of her father’s will. I do not accept that contention. Clearly, the distribution to Ms Chandra could only have been in accordance with instructions given to the solicitor by the vendor of the property. This was Mrs Lal. A more fundamental difficulty is presented by Reena Lal’s contention. The Vassey Street home was held in joint tenancy by Mrs Lal and her husband. As such, Mr Lal’s interest would devolve automatically to Mrs Lal on his death. The AVO search on the property confirmed that she was the sole owner at the time of sale in 2009. It was not open to Mr Lal to bequeath a life interest to Mrs Lal or for the proceeds of sale to be distributed to anybody because, on his death, Mrs Lal became the sole owner of Vassey Street. The will was not referred to by Reena Lal at the SSAT hearing. Mr Hamilton questioned the validity of the will and I share that concern. It was not produced to Centrelink until 8 December 2010. I note that it bears no date.
27. Further, in relation to the will, I note that the reason expressed therein for making provision for Ms Chandra was that Mr Lal had a debt to her paternal grandfather. That was not the basis on which Reena Lal gave her evidence or made her submissions at the hearing. Rather, the reason given was that Ms Chandra was compensated for the substantial financial contributions she made to the acquisition and maintenance of Bracken Street and Vassey Street.
28. Receipts provided by Mrs Lal for renovation work supposedly done at Vassey Street were in evidence. Some of the entries contained therein are illegible and none of them provide guidance as to the nature of the expenditure, the premises to which the expenditure relates or who met the expenditure.
29. As with the will, I have concerns about the provenance of the two hand-written notes, dated 17 June 1994, tendered by Reena Lal. They purport to declare that Mrs Lal had no right to any interest in Bracken Street. Again, these were not produced or referred to at the SSAT hearing and were only provided to Centrelink on 8 December 2010.
30. In all of this, I am able to place little, if any, reliance on the evidence of Reena Lal in this matter. I am satisfied that Mrs Lal transferred her half share in Bracken Street, valued at $275,000, to Ms Chandra. I have noted the submission by Mr Cranitch concerning the reliance on the device of the trust to explain Mrs Lal’s involvement in Bracken Street. However, the evidence is so unsatisfactory that I am unable to conclude that a trust was established. I am satisfied that Mrs Lal instructed the solicitor from John Healy and Co to make a payment of $196,225.11 to Ms Chandra. I do not accept that those transfers to Ms Chandra were made because of her financial contributions to Bracken Street or Vassey Street. That being so, the reasons for the transfers are unexplained on the evidence before me. After the sale of Vassey Street, a payment by cheque for $200,000 was made to Mrs Lal. There are no bank records to indicate the movement of those monies. Certainly, there are no records to support payments of $60,000 and $50,000 to Mrs Lal’s grandson or son. Indeed, Hari Lal made no reference to his payment in his letter and, in any event, there was conflicting evidence on whether the sum had been paid to him. The amount of $200,000 has not been accounted for and neither has the additional $50,000 which appears to have been omitted from the solicitor’s distribution of sale receipts. In the absence of any evidence to the contrary, I am satisfied that Mrs Lal also received that additional amount and that she had a sum of $250,000 available for her use in mid-2009.
31. I am satisfied that the amounts of $275,000, $196,225.11 and $250,000 were disposed of by Mrs Lal for no or inadequate consideration in money or money’s worth and that, accordingly, the dispositions fall within s 1123 of the Act. In accordance with s 1124 of the Act, they total $721,225.11. Under s 1123AA, the amount by which such a disposition exceeds $10,000 is to be included, for a period of five years, as assets of Mrs Lal for the purpose of calculating her age pension.
DECISION
32.The Tribunal affirms the decision under review.
I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member
Signed: ...............................................................................
Research AssociateDate/s of Hearing 24 October 2011
Date of Decision 15 November 2011
The applicant was represented by her daughter
Solicitor for the Respondent Bob Hamilton, departmental advocate
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