Maher and Department of Family and Community Services

[2001] AATA 1041

DECISION AND REASONS FOR DECISION [2001] AATA 1041

ADMINISTRATIVE APPEALS TRIBUNAL      )

)     Nos         N2001/1058 and 
  )              N2001/1059

GENERAL ADMINISTRATIVE DIVISION          )          

Re      john and bernice maher  

Applicant

And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        

Respondent

DECISION

Tribunal       Senior Member M D Allen

Date6 December 2001

PlaceSydney

ADMINISTRATIVE APPEALS TRIBUNAL  )         No   N2001/1058

)  
GENERAL ADMINISTRATIVE DIVISION     )

Re:   JOHN MICHAEL MAHER
  Applicant

And: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal              Senior Member M D Allen

Date  6 December 2001

Place                   Sydney

DecisionFOR the reasons given orally at the conclusion of the hearing in this matter, the decision under review is AFFIRMED.

(Sgd)  M.D. ALLEN

.............................

Senior Member

ADMINISTRATIVE APPEALS TRIBUNAL  )         No   N2001/1059
  )  
GENERAL ADMINISTRATIVE DIVISION     )

Re:       BERNICE MAHER

Applicant

And:     SECRETARY, DEPARTMENT
  OF FAMILY AND COMMUNITY
  SERVICES
  Respondent

DECISION

Tribunal              Senior Member M D Allen

Date  6 December 2001

Place                   Sydney

DecisionFOR the reasons given orally at the conclusion of the hearing in this matter, the decision under review is SET ASIDE and the Tribunal substitutes in lieu thereof its decision, namely THAT the Applicant, BERNICE MAHER is entitled to Age Pension as and from 22 August 2000.

(Sgd)  M.D. ALLEN

.............................

Senior Member
CATCHWORDS

Social Security – Assets Test. Family home owned by Proprietary company of which Applicants were sole shareholders. Applicants had made a loan to company to discharge mortgage. Loan an asset in the hands of the Applicants. Hardship provisions. Whether special circumstances existed. Inability of male Applicant to receive benefit when female Applicant granted benefit under hardship provisions.

Social Security Act 1991 – s11, s1118, s1122, s1129, s1131

Repatriation Commission v Harrison and Anor 78 FCR 442
Repatriation Commission v Hall 15 ALD 84
Secretary Department of Social Security v Ellis 24 AAR 535
United Mexican States v Cabal [2001] HCA 60

REASONS FOR DECISION

Senior Member M D Allen

1. At the conclusion of the hearing of the above matter the terms of the decision intended to be made and the reasons therefor were stated orally. After service upon the Applicant of a copy of the decision that was in fact made, the Applicant pursuant to Sub-section 43(2A) of the Administrative Appeals Tribunal Act 1975 requested the Tribunal to furnish to the Applicant a statement in writing of the reasons of the Tribunal for its decision.

1. The oral reasons for decision have been transcribed by Auscript, the Commonwealth Reporting Service.  Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

1. The said transcript is annexed hereunto and furnished to the Respondent and to the Applicant as it is the reasons for the Tribunal's decision.

I certify that this and the preceding page are a true copy of the decision and reasons for decision herein of:

Senior Member M D Allen

Signed:         
          ..................................................................................……………………………….

Associate

Date of Hearing  6 December 2001
Date of Decision  6 December 2001

Solicitor for Applicant                  Ms Sandra Clark, Welfare Rights Centre
Advocate for Respondent          Ms Angela Smith, Department of Family and
  Community Services

DRAFT DECISION  

ADMINISTRATIVE APPEALS TRIBUNAL

Matter No Nos 1058 and 1059 of 2001
By MR M.D. ALLEN, Senior Member
MAHER and DFCS
SYDNEY, THURSDAY 6 DECEMBER 2001

SENIOR MEMBER: In this matter, pursuant to an application made on 20 July 2001, the applicant seeks review of a decision by the Social Securities Appeals Tribunal on 12 June 2001 affirming prior rejection of their claims for, in the case of Mr Maher, Newstart Mature Age Allowance and in the case of Mrs Maher an Aged Pension and affirming a decision of recover amounts of benefits and pensions overpaid. The facts of the matter have been agreed between the parties and are set out in paragraphs 22 to 30 inclusive of the decision of the Social Security Appeals Tribunal. That decision is document T2 in the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975.

Briefly stated, it would appear that, upon Mr Maher being retrenched in his position as a Flight Engineer, on the advice their accounts Mr and Mrs Maher entered into the business of property development.  To that end a company, Plan Blue Pty Ltd, was incorporated as a proprietary company.  They then borrowed moneys from Australian Guarantee Corporation, the borrowings being secured by a mortgage over their then residential property at Portview Place.  A residential building was constructed at 2 Merchison Street, Sylvania.  This, it would appear, was the only activity ever engaged in by Plan Blue Pty Ltd.  Unfortunately, when it came time to sell the property, because of a slump in housing prices in the Sydney area, any offer to purchase would have involved the construction and consequent sale being at a loss to Plan Blue Pty Ltd.

Mr Maher then found some alternate employment outside Australia.  During that time tenants were put into both the property at 2 Merchison Street, Sylvania and the residential property at 3 Portview Place, Burraneer.  It would appear that, whilst overseas, there was a fire, if I understand Mrs Maher's evidence, at the residential property.  The result of that being that the decision was made to sell that property and the proceeds of sale paid out mortgages, both over the residential property at 3 Portview Place and also the property held in the name of Plan Blue Pty Ltd at 2 Merchison Street, Sylvania.  The amounts advanced to pay out the moneys owing by Plan Blue Pty Ltd stand in the books of that company as an unsecured loan to Mr and Mrs Maher.

It is this unsecured loan which has occasioned difficulties that both

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applicants now have to contend with. Although there's argument by the applicants concerning the house property at 2 Merchison Street, Sylvania, in which they now reside and whether they could be regarded as owners, as that term is defined in subsection 4 of section 10 of the Social Security Act 1991. The asset which prevents payment of benefits or pensions to the Mahers is in fact the unsecured loan by them to Plan Blue Pty Ltd which, as stated previously, continues to be recorded in the books of the company and in the profit and loss statements of the said company.

Section 1122 of the Social Security Act is quite clear and unequivocal, it states:

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.  It does not include any amount payable by way of interest under the loan.

There seems to have been two cases, namely Lecture v the Department of Social Security (1995) 88 SSR, unreported AAT decision number 10416, where a loan to a company and the status of the applicants, as a home owner, was considered. That case also relied on an earlier decision in Robertson v Repatriation Commission 34 Administrative Law Decisions 615. I also, at the outset, have difficulty with both of those cases, in as much as the law is quite clear, as pointed out by Tamblin J in Repatriation Commission v Harrison and another 78 FCR 442, where his Honour held that the Tribunal made a significant material error of law by treating shareholder directors and the corporate entity as being indistinguishable for the purpose of calculating the value of the shareholders' assets.

At page 447 his Honour discusses lifting the corporate file and says inter alia: "It seems to me, however, that the importance of the statement cannot be minimised in this way. The substance of para 13 is that the decision-maker has treated the shareholder directors and the corporate entity as being indistinguishable for the purpose of calculating the value of the shareholders' asset, this is contrary to settled principal. His Honour referred to the well known case of Salamon v Salamon and Co Limited (1897) AC 22". I notice his Honour also referred to Ford's Principles of Corporations Law at paragraph 4350. It seems to me that on that basis there is simply no warrant to enter into an investigation as to between the Mahers and the separate corporate entity, Plan Blue Pty Ltd.

The situation therefore is that, in the hands of the Mahers, it is an asset, being the loan to the company which, if I understand, the current financial statement of the said company is in the sum of $574,589, which would be sufficient to put the Mahers in excess of

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the asset's test. I was referred to section 1118 of the Social Security Act (1991) regarding the disregarding of assets. However, that section has no application to the present circumstances as the asset in contention is the loan. As an alternative submission the hardship provisions of the Social Security Act were referred to. Subsection 1 of section 1131 is headed: Access to financial hardship rules benefits. Paragraph C, thereof, states a failure that a payment under the financial hardship rules is available if the person's partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support.

If I were to find that pursuant to subsection 1 of section 1129, that Mrs Maher was entitled to the Age Pension, then it seems to me that section prevents a consideration of whether any pension should be paid, or should I say benefit or pension paid to Mr Maher. Subsection 1 of section 1129 reads into (a) that:

If (a) either:  (i) a social security pension is not payable to a person because of the application of an assets test; or (ii) the person's social security pension rate is determined by the application of an assets test and either …(c) the person or the person's partner has an unrealisable asset.   

As to what is an unrealisable asset, reference is made to subsections 12 and 13 of section 11 of the Social Security Act. Subsection 13 of section 11 reads:

For the purposes of the application of this Act to a social security pension … an asset of the 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.       

In the circumstances of this particular case I understand it to be recognised by the respondent and, indeed, I find that in the circumstances it would be unreasonable to expect Mrs Maher to use the asset as a security for borrowing. Neither Mr or Mrs have any income coming in and it would be difficult to see how they could use a loan standing to a proprietary company as an asset upon which they could themselves seek a loan.  The circumstances of Mrs Maher are very restricted, currently neither her husband or her are in receipt of any income whatsoever.  They are living, as I understand it, off credit card borrowings and the charity of friends.

It can be said that they could realise the asset.  This would mean the winding up of Plan Blue Pty Ltd and the only asset of that company is the home in which both Mr and Mrs Maher are residing.  It is now, indeed, and has been for some years their family home.  That would

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mean the selling, in effect, of their family home, they would then have to find new premises, just what they would realise on the sale is difficult to ascertain.  The property has been valued by the Australian Valuation Office but, I believe I can say, sitting here, as the Tribunal, in Sydney that a current boom in Sydney house prices now seems to have peaked and the current financial pages of the Sydney Morning Herald indicate that house prices are, if anything, dropping. 

There is also the factor that the property, being owned by the company, would be subject to a Capital Gains Tax on any sale, thus reducing the funds in the hands of Mr and Mrs Maher.  It would also seem too that family homes have been treated with particular sensitivity in approaching hardship cases.  It was stated by the Tribunal in Secretary Department of Social Security v Elsa, an unreported AAT decision number 10470, that the Tribunal would not order that Mr Elsa put his family home on the market in order to receive Job Search Allowance, this principle is well established in Social Security law.  To my knowledge that decision was never appealed by the respondent.

As to whether one can be expected to sell the family home, again, is a reasonably broad test. In particular, I would refer to Repatriation Commission v Hall 15 ALD 84. Just reading from the head-note, the Full Court of the Federal Court there said:

In determining, for the purposes of the assets test, whether a person could reasonably be expected to sell or realise a property, it was not appropriate to confine consideration to the personal financial circumstances of the pensioner or claimant for a pension.  All matters which bear upon the reasonableness of a decision to sell or realise a property should be taken into account.  These include personal and social factors as well as financial and economic factors and the public or community interest as well as the interests of the claimant.     

In addition, the Court said at 15 ALD page 86:

It was, in our opinion, open to the Tribunal to find " severe financial hardship" on the evidence before it.  We do not read this expression as requiring proof of destitution.

Mrs Maher gave evidence in this matter, as she said:

Moving home would affect me, it is our family home.

Her health is not good.  The strain which has been imposed upon her and her husband by the current proceedings has been great. 

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Indeed, she has moved to the South Coast to get away from this matter.  I take from that that there has been a separation in the family.  She is on anti-depressants because of their financial circumstances, they are in debt.  Neither her husband or herself have ever been in debt before their married lives, she found the circumstances quite destroying.  Indeed, part of the problem, of course, is that the Mahers, like any other people, were not legally trained, have not made the distinction between themselves and the proprietary company, which owns the family home.

Indeed, it must be said that, particularly at the time they realised the dwelling at 3 Portview Place, they received particularly bad advice. In all of those circumstances, therefore, it seems to me that this is a case where it is proper to apply section 1129 of the Social Security Act and determine that an Aged Pension should be paid to Mrs Maher. There was some debate about the date of that and it was said that special circumstances must apply before the benefit can be backdated. The term "special circumstances" has received considerable interpretation in the Social Security laws. In particular, I would refer to the decision of Carr J in Secretary Department of Social Security v Ellis 24 AAR 535, particularly at page 539.

In that case his Honour quoted from the well-known case of Beadle and Director General of Social Security 7 ALD 670, where a Full Court of a Federal Court said: "… special circumstances must include events which would render the 6 months unfair or inappropriate … It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase 'special circumstances', although lacking precision, is sufficiently understood in our view not to require judicial gloss".

There was a gloss put on it properly by Kiefel J in Groth v Secretary Department of Social Security 40 ALD 541 at 545, where she said:

For present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others to take it out of the usual or ordinary case. 

Similar comments were made, in a totally different context, by the High Court in United Mexican States v Cabal [2001] HCA 60, where at paragraph 61, speaking of extradition cases, the Court said, first:

"The circumstances of the individual case are special in the sense that they are different from the circumstances that the person is facing extradition would ordinarily endure when regard is had to

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the nature and extent of the extradition of charges.  This means that the circumstances relied on must be different in kind from the disadvantages that all extradition defendants have to endure.  To constitute ' special circumstances',  the matters relied on need to be extraordinary and not factors applicable to all defendants facing extradition."

One can put in there the words "Social Security" where extradition occurs. 

In this matter it seems to me that Mrs Maher has been one-half of a marital partnership which has been under severe financial constraints for a considerable period of time.  That has been brought about, more by inadvertence, it seems, and bad advice than any deliberate action on the part of Mr and Mrs Maher, although it must be said that, in some of their dealings with the Department of Social Security, they were less than frank.

It seems remarkable to me that they did not disclose the fact that they were directors of the company, that is a factor that they must have known.  Some of the difficulties they now find themselves now in would have no doubt been alleviated if they had made a full and proper disclosure.  That being so, however, given all of the circumstances to which I have referred I do think the circumstances, affecting particularly Mrs Maher, in effect upon her health and the strain on the marital relationship, makes the circumstances special and it seems to me that the pension should be backdated to 22 August 2000, so that the order of the Tribunal will be that: the decision in the case of Mr Maher is affirmed and in the case of Mrs Maher the decision under review is set aside when the Tribunal substitutes its decision that she is entitled to the payment of Aged Pension, as and from 22 August 2000.

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