LINDSAY ROBERT CHARLISH and and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2013] AATA 434
[2013] AATA 434
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/4913
Re
LINDSAY ROBERT CHARLISH
APPLICANT
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
RESPONDENT
File Number
2012/4932
Re
ALISON ESTELLE CHARLISH
APPLICANT
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
RESPONDENT
DECISION
Tribunal Mr P Wulf, Member
Date 26 June 2013 Place Brisbane
The Tribunal sets aside the decisions under review and substitutes them; finding that the applicants are not homeowners and should be paid rent assistance. The matters are remitted to the respondent for recalculation of pensions and allowances to be paid to the applicants.
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Mr P Wulf, Member
CATCHWORDS
SOCIAL SECURITY – Pensions, benefits and allowances – Rent assistance – Retirement village residents – Whether “ingoing sum” paid by applicants to owner of retirement village prior to occupation under a Licence Agreement forms an ownership of property – Whether “yearly sum” is rent or should be treated as rent for purposes of the Act – 12 month periodic licence – Decisions under review set aside and substituted
LEGISLATION
Social Security Act 1991 (Cth) ss 11, 12, 12C, 13, 55, 1064, 1146 to 1151
CASES
Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 263 ALR 411
Bushell v Repatriation Commission (1992) 175 CLR 408
Department of Social Security v Knight (1996) 44 ALD 283
Re Secretary, Department of Social Security and Cowan [1997] AATA 987
Re Secretary, Department of Social Security and Knight [1996] ATAA 101
Re Secretary, Department of Social Security and Montgomery [1996] AATA 749
Secretary, Department of Social Security v Montgomery (1996) 44 ALD 291
Shi v Migration Agents Registration Authority (2008) 235 CLR 286REASONS FOR DECISION
Mr P Wulf, Member
INTRODUCTION
On 20 October 2011, Mr Lindsay Robert Charlish and Mrs Alison Estelle Charlish, the applicants,[1] executed a Residence Agreement (“the agreement”) that allowed them to reside in a unit at Sundale Garden Village (“retirement village”).[2] On 19 April 2012, the respondent decided that it would pay the applicants the age pension at a rate that did not contain a component for rent assistance as it considered them to be homeowners. The applicants sought review of the decisions and, on 22 June 2012 and 13 July 2012, a review officer and an authorised review officer, respectively, affirmed the original decisions. There is no dispute that the applicants qualify for and receive aged pension as a couple.[3]
[1] Exhibit 1, T-Document 1/1-3. On 1 November 2012, the applicants son, Mr Rob Charlish indicated by email that he had been requested by his parents to be their representative in regards to all matters including the hearing on 9 April 2013 and other contact with the respondent.
[2] Exhibit 1, T-Document 7/82-104.
[3] Exhibit 3, para 3.
The applicants appealed to the Social Security Appeals Tribunal, which affirmed the decisions under review on 21 September 2012.[4] Mr and Mrs Charlish now seek review of those decisions by this Tribunal.
[4] Exhibit 1, T-Document 2/4-15.
For the reasons that follow, the Tribunal sets aside the decisions under review and in substitution determines that the applicants do qualify for rent assistance under the Social Security Act 1991 (Cth) (“the Act”) as they are not the owners of the unit.
LEGISLATION
The rate of a person’s aged pension is determined by s 55 of the Act, which states that if the person is not permanently blind, Pension Rate Calculator A contained within s 1064 of the Act should be used.
When assessing whether a person is a homeowner, which is a critical aspect of this case, s 11(4)(b) of the Act is relevant insofar as it defines that a person who is a member of a couple is a homeowner if:
(i) the person, or the person’s partner, has a right or interest in one residence that is:
(A) the person’s principal home; or
(B) the partner’s principal home; or
(C) the principal home of both of them; and
(ii) the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home.
Section 12 of the Act sets out the definitions of a retirement village, which is where the applicants reside. Section 12 states:
(1) In this Act:
actual value has the meaning given by subsection (5).
retirement village has the meaning given by subsections (3) and (4).
retirement village resident has the meaning given by subsection (5).
…
(3) Premises constitute a retirement village for the purposes of this Act if:
(a) the premises are residential premises; and
(b) accommodation in the premises is primarily intended for persons who are at least 55 years old; and
(c) the premises consist of:
(i) one or more of the following kinds of accommodation:
(A) self‑care units;
(B) serviced units;
(C) hostel units; and
(ii) communal facilities for use by occupants of the units referred to in subparagraph (i).
(3A) For the purposes of paragraph (3)(b), if accommodation in premises is primarily intended for persons who are a certain age that is more than 55 years, the accommodation in those premises is taken to be primarily intended for persons who are at least 55 years old.
(4) Residential premises are also to be taken to constitute a retirement village for the purposes of this Act if the Secretary is satisfied that the residential premises have similar functions to those referred to in subsection (3).
(5) A person is a retirement village resident if the person’s principal home is in a retirement village.
Section 12C of the Act defines a retirement village as a “special residence” and a person who resides in a retirement village as a “special resident”.
As to an “entry contribution” when living within a retirement village, relevantly s 1147 of the Act defines that as being:
(1) A special resident’s entry contribution is:
…
(b) if the resident is a member of a couple, shares the resident’s principal home with the resident’s partner and is not a member of an illness separated couple—an amount equal to 50% of the resident’s individual residence contribution and of the partner’s individual residence contribution; or
…
(1C) For the purposes of this Division, the individual residence contribution is:
(a) for a retirement village resident—the total amount paid, or agreed to be paid, for the resident’s current right to live in the retirement village; and
…
(2) An amount that is rent for the purposes of this Act is to be disregarded in applying subsections (1), (1A) and (1B).
When assessing what is the definition of rent, s 13(2) of the Act is important insofar as it defines rent to be:
(a) the amounts are payable by the person:
(i) as a condition of occupancy of premises, or of a part of premises, occupied by the person as the person’s principal home; or
…
(ii) for services provided in a retirement village that is the person’s principal home; or
…
(iv) for lodging in premises that are the person’s principal home; … and
(b) either:
(i) the amounts are payable every 3 months or more frequently; or
(ii) the amounts are payable at regular intervals (greater than 3 months) and the Secretary is satisfied that the amounts should be treated as rent for the purposes of this Act (emphasis added).
BACKGROUND AND CONSIDERATION
From the outset, the Tribunal must stress that the Public Information Document (“PID”)[5] is less than perfect and there are many inconsistencies and problems with it. To highlight the special circumstances of this case, the Tribunal feels it is necessary to provide examples of where the PID has likely caused the matter to proceed to litigation. For example, it would appear on the face that the applicants had a choice of numerous options that would allow them to reside in the retirement village. The options included:[6]
(1)Freehold accommodation tenure;
(2)Leasehold accommodation tenure;
(3)Licence accommodation tenure; and
(4)Other forms of accommodation tenure.
[5] Exhibit 3.
[6] Exhibit 3, cl 3.6, p. 20 of 37.
When considering the above, one of the major issues with the PID is exposed in that there was really only one option available, that being that any potential resident could only have a licence over a property and, based on this, a resident could never gain freehold. The PID then goes on to say at cl 4.4 that while there are freehold and leasehold accommodation units, the only ones available under a licence are Units 1, 3, 9, 14, 15, 23, 26, 28, 42, 45, 49, 55, 61, 62, 81, 87 and 93.[7] This demonstrates how the parties could be confused by the contents of the PID.
[7] Exhibit 3, cl 4.4, pp. 26-27 of 37.
On 20 October 2011, the applicants executed the agreement that allowed them to reside in a unit at the retirement village. Prior to that time, the applicants had lived in their own property in Murgon. There had been some discussion within the family as to where and by what means the applicants would live in future retirement. At the time of signing the agreement, they had not sold their Murgon property (it was listed for sale in August 2011); however, they were able to sell the property in March 2012 for $205,000.00.
In order to move into the unit at the retirement village, the applicants had numerous options, including to make a one-off payment of $279,000 (rather than the option they subsequently chose),[8] which would have required the applicants to find an additional $74,000 had they already sold their home. From the evidence, the applicants’ family contemplated this option and believed they would have struggled to obtain the additional monies (even when they had the proceeds of the sale of the family home) unless they took out a loan of some form. The applicants’ submission is that they made an initial entry contribution in the form of a year’s rent in the amount of $13,950.00. The evidence was that the family was able to scrap together that amount to allow the applicants to move into the unit. In contrast, the respondent submits that the entry contribution was for the total licence value of the unit of $279,000 and this is the amount that the respondent values the asset. It is, however, patently clear on the evidence that the applicants did not make an initial ingoing contribution as they did not have the financial capacity to do so and this is the reason for selecting the pay as you go option.
[8] Exhibit 1, T-Document 7/82-104, esp. p. 103; Exhibit 3, cl. 3.4, p. 20 of 37.
The applicants entered into an agreement which, on its reading, appears to indicate they would reside in unit 54 and would make an ingoing contribution of $279,000.[9] On this basis alone, it is understandable without a detailed evaluation of the agreement how the respondent came to the determination that the applicants should not be paid rent assistance as they were a home owner. However, within cl 3.4 of the PID and sch 1 of the agreement, the applicants have agreed to one of five options, this being the pay as you go option which would require them to pay $13,950 annually, and this was the only initial contribution.[10] It would appear from the statements of Mr Charlish, for his parents, that this amount was calculated on the basis of residing in the property for 20 years and this amount would then result in the total amount required to be paid ($279,000). When considering the units that were available under a licence as identified in the PID, the term of the licence was either life or earlier termination.[11]
[9] Exhibit 1, T-Document 7/82-104, esp. p. 103; Exhibit 3, cl. 3.4, p. 20 of 37.
[10] Exhibit 1, T-Document 7/82-104, esp. p. 103; Exhibit 3, cl. 3.4, p. 20 of 37.
[11]Exhibit 3, cl. 4.4 p. 26 of 37.
Of concern, the signed PID does not state whether the applicants have freehold tenure, leasehold tenure, a licence or other as none of the boxes are marked.[12] This could be considered an error by those completing the document. However, the Tribunal notes that the amount of $13,950 is payable each year on the anniversary of the date of the Residence Agreement until the Residence Agreement is terminated,[13] and this is the option identified in the agreement.[14] More importantly, cl 4.3 of the agreement states:[15]
This right is granted to you under this agreement, is personal to you and is by way of licence only. No other right is given to you under any lease or by way of any other estate or interest in the unit.
In the Tribunal’s view, this would suggest that the actual agreement is a licence to reside rather than giving the applicants any form of freehold title of the property and reasonable security. The rationale behind this determination is that there is no set period for the payment each year. For example, if the applicants actually owned the property after the 20 year period, there should be no requirement to continue to make an on-going contribution except for the purposes of maintenance (it is noted that the applicants must continue to pay a general service fee of $284.46 per 28 days); however on the reading of the PID, they would need to continue to pay. Moreover, if the agreement is terminated, the applicants are not refunded or provided any form of compensation as an exit entitlement for the period they have resided in the property.[16] Further, cl 19 of the agreement allows the applicants to terminate the agreement on one (1) month’s written notice, whereas the retirement village may terminate the agreement on fourteen (14) days’ notice based on intentional and reckless behaviour and two months’ notice in other circumstances. On this basis, one must consider that the applicants are not homeowners, as only having a licence, being able to be removed from the retirement village on as little as fourteen days’ notice and not being able to be paid out following the termination of their agreement, does not, in the Tribunal’s opinion, give them reasonable security of tenure as required under s 11(4) of the Act.
[12] Exhibit 1, T-Document 7/82-104; Exhibit 3, cl 3.6, p. 20 of 37.
[13] Exhibit 1, T-Document 7/82-104, esp. p. 103; Exhibit 3, cl 3.4, p. 20 of 37.
[14] Exhibit 1, T-Document 7/82-104, esp. p. 103.
[15] Exhibit 1, T-Document 7/82-104, esp. p. 86 cl 4.3.
[16] Exhibit 1, T-Document 8/106.
There were no authorities provided during the course of the hearing and the Tribunal has therefore undertaken its own research to investigate relevant precedence. The relevant cases include Re Secretary, Department of Social Security and Cowan (Cowan);[17] Secretary, Department of Social Security v Knight (Knight);[18] and Secretary, Department of Social Security v Montgomery (Montgomery),[19] all of which were heard by the Tribunal in 1996 and 1997. These decisions provide conflicting answers. The second matter was upheld by the Federal Court in Department of Social Security v Knight,[20] while the third matter was successfully appealed to the Federal Court in Secretary, Department of Social Security v Montgomery.[21]
[17] [1997] AATA 987.
[18] [1996] AATA 101.
[19] [1996] AATA 749.
[20] (1996) 44 ALD 283.
[21] (1996) 44 ALD 291.
Both Cowan and Montgomery involved the same retirement village, with Miss Cowan and Mrs Montgomery being neighbours. The licence agreements signed by each of the parties and the ingoing amounts payable by each of them were identical; this being that the total amounts for the properties were paid up front with amounts then being deducted from the initial amount for each year they lived in the retirement village. The yearly amount deducted in Montgomery was $4,700 and the yearly amount in Cowan was $4,500, but nothing turned on that difference. However, the requirement to pay an ingoing contribution is very different in the present matter.
In Montgomery the applicant and her husband commenced to reside in a unit in a retirement village. They occupied this unit pursuant to a Licence Agreement which they entered into with the Australian Pensioners' League, the owner of the Retirement Village. Under the terms of the Licence the Australian Pensioners' League granted to the respondent and her husband an “exclusive licence … to occupy and use” the unit. The Licence was to endure for “the Term” which was not defined by the Licence and, by implication, continued until determination of the Licence.
In the matter of Cowan, in support of the Secretary’s contention that the yearly amount of $4,500 should not be treated as rent payable, the Secretary, at [8], referred the Tribunal to cl 9 in the Licence Agreement, which stated:
The rights conferred by this Licence on the Resident shall rest in contract only and shall be personal to the Resident and shall not create nor confer upon the Resident any lease or tenancy of any nature whatsoever or any estate or interest whatsoever in or to the Unit and the rights of the Resident under this Licence shall be those of a licensee only subject always to the conditions set out in this Licence and shall not comprise nor include any further or other rights as regards occupation of the Unit.
In the appeal before the Federal Court in Montgomery,[22] Nicholson J noted that in his opinion there was no provision in the licence agreement for annual deductions of the yearly sum. Nicholson J stated at 296:
Until that point in time no yearly sum is required to be deducted. Indeed, the whole of the ingoing sum being held by the league, it has an entitlement to deal with it as it sees fit, subject to its obligation upon determination to make payment to the resident in accordance with the formula under [the licence agreement].
[22] (1996) 44 ALD 291.
Nicholson J further stated, at 296-297:
Proceeding on that basis, the question is whether such annual deductions properly fall within the word “payable”. In my opinion they could not. The reason is that the ingoing sum has already been paid by the resident to the league. When the annual deduction is made it is the league dealing with its own funds. The act of payment is compete. Nothing passes from the resident to the league to constitute a payment and no obligation arises making any such amount “payable” even if annually deducted.
The consequence of the resident having discharged the obligation of paying the incoming sum is that there is no further payment required other than for operating costs and other charges to satisfy the condition necessary for occupancy. There can be no default in “payment” of a sum in the nature of $4700 that could give rise to a right in the league to recover that sum or terminate the licence. Rather, what occurs is that the resident is entitled to a repayment on termination of the licence which gives rise to right in the resident to recover the sum (less amounts calculated using the formula). It is the resident to whom the sum is “payable”.
In the appeal before the Federal Court in Department of Social Security v Knight,[23] Tamberlin J dismissed an appeal from the decision of a Tribunal affirming the decision of the SSAT that rent assistance was payable to Mrs Knight relating to the grant of a licence to occupy a unit in a retirement village. In that case the total entry contribution payable to secure residence in the village was $30,000. Of this, $15,000 was paid by or on behalf of Mrs Knight. The balance of the entry contribution was agreed to be paid off by regular monthly instalments over 10 years. Initially this was $154.00 for each four week period up to February 1995 after which it reduced to approximately $127.00 per payment.
[23] (1996) 44 ALD 283.
Tamberlin J concluded, at 290:
In the circumstances of this matter, the direct legal nexus between the occupancy of the premises and the obligation to make contribution payments, coupled with the regular periodic nature of the payments, leads me to the conclusion that the payments both in form and substance are properly characterised as "rent" within the meaning of ss13(2) and 1064-D1 of the Act.
Tamberlin J also said, at 289-290:
The clear intention of the parties as evidenced by the licence agreement and the correspondence in evidence before the Tribunal, is that in substance the contribution payments were meant to be a condition of occupation of the premises. See Samuel v Salmon and Gluckstein Limited (1946) 1 Ch 8 at 12-13 applied in Nixon v Doney (1961) SR (NSW) 311 at 315. Further, the periodic contribution payments were to cease upon cessation of occupancy, with no resultant residual debt or financial obligation subsisting on the part of either party. Moreover, default in meeting the contribution payments would amount to breach of the licence agreement with the consequence that the licensor is entitled under cl 14 of the licence agreement, to terminate the licence and the occupancy under it.
The facts at issue in Knight provide the basis by which it may be distinguished from Cowan and Montgomery. Mrs Knight was obligated pursuant to the licence agreement to pay the in-going costs by instalments of certain amounts at certain periods. The obligation to make those payments and the periodicity of such payments lay at the foundation of Tamberlin’s J reasons and conclusion that the instalments should be considered as rent. Nicholson J, in Montgomery, considered Knight and noted that Mrs Knight had agreed to pay an “entry fee” of $30,000.00 and a weekly contribution of $38.60 per week. On this basis, he distinguished the facts before him where Mrs Montgomery had already paid the full ingoing amount of $69,000 and no further amount was payable (as rent).
In the present case there is similarity with Knight, although there does not appear to have been any sizeable initial contribution, more so an obligation that the applicants make periodic payments. The making of annual payments of $13,950 entails a strict obligation on the part of the applicants. There is a legal nexus between the applicants' occupancy of the premises and their obligation to make payments in the form of annual payments, which is clearly unlike Cowan and Montgomery.
The Tribunal, in normal circumstances would be bound by the decision of the Federal Court in Montgomery as it is a later decision and accordingly would affirm the decision under review. However, in the Tribunal’s opinion, the facts in Knight are more consistent with the present case and the reasoning which followed from those facts should be followed here.
CONCLUSION
After giving careful consideration of the evidence and, importantly, past Federal Court decisions, the Tribunal is satisfied that a liberal interpretation of the provisions of the Act allows payment to the applicants of rent assistance for the yearly payments prescribed under the terms of the licence agreement consistent with s 13(2)(b)(ii) of the Act. It has been noted that the respondent, based on its determination that the applicants should be considered to be home owners, was, at the same time, describing the term deposit that contains the proceeds of the sale of their original home at Murgon (which would have been the monies they used to pay the in-going contribution) as an asset, which has resulted in the applicants being impacted twice. In the circumstances, the Tribunal feels that the correct or preferable decision,[24] is that the applicants have not made an initial contribution of $279,000 and, moreover, are not home owners within the definition of s 11(4) of the Act, but are rather making an annual contribution of $13,950 which is in the form of a licence and, therefore, they should be paid rent assistance based on the decision of Knight.
[24] See Bushell v Repatriation Commission (1992) 175 CLR 408 at 425 per Brennan J; Shi v Migration Agents Registration Authority (2008) 235 CLR 286 at 298-299 per Kirby J, at 314 per Hayne and Heydon JJ and at 327 per Kiefel J and also cited in Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 263 ALR 411 at 421 per Downes and Jagot JJ.
DECISION
The Tribunal sets aside the decisions under review and substitutes them; finding that the applicants are not homeowners and should be paid rent assistance. The matters are remitted to the respondent for recalculation of pensions and allowances to be paid to the applicants.
I certify that the preceding 29 (twenty nine) paragraphs are a true copy of the reasons for the decision herein of Mr P Wulf, Member.
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Associate
Dated 26 June 2013
Date of hearing 9 April 2013 Advocate for the Applicant Mr Robert Charlish Solicitor for the Respondent Mr Robert Hamilton, Departmental Advocate
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