May and Secretary, Department of Health
[2016] AATA 881
•8 November 2016
May and Secretary, Department of Health [2016] AATA 881 (8 November)
Division
GENERAL DIVISION
File Number
2015/0442
Re
Robert May
APPLICANT
And
Secretary, Department of Health
RESPONDENT
DECISION
Tribunal Deputy President K Bean
Date 8 November 2016 Place Adelaide The decision under review is varied, so as to provide that as at 18 December 2014, Mr May’s assets included a one-third share of the property at Paralowie (net of the mortgage on the property), which was not required to be disregarded pursuant to subs 44-26A(6) of the Aged Care Act 1997.
.............. [Sgd] .................................................
Deputy President K Bean
CATCHWORDS
HEALTH – Aged care – Residential care recipient – Fees and charges payable to approved aged care service provider – Assessment of value of applicant’s assets – Where applicant’s interest in a property as a joint tenant treated as an assessable asset – Where applicant did not make any financial contributions in respect of the property – Consideration of family arrangement/agreement – Intention that applicant would have legal and beneficial interest in property – Decision under review varied.
LEGISLATION
Aged Care Act 1997, subss 44-26A(6) and (9), s 44-26C and Chapter 3A
Subsidy Principles 2014, subs 47(2)
REASONS FOR DECISION
Deputy President K Bean
8 November 2016
The applicant, Mr May, is currently 85 years old. Before entering residential care in February 2015, he lived with his daughter, Mrs Mesalic, and her husband in a property at Paralowie (the property). On 17 December 2014, Mr May lodged with Centrelink a Request for a Combined Assets and Income Assessment. In response to that request, a determination was made on 18 December 2014.[1]
[1] Exhibit 1, T12/170.
As Mr May was listed as one of four joint tenants of the property, the delegate who made that determination decided that the value of Mr May’s interest in the property should be included in his assets for the purpose of the assessment.
Mrs Mesalic, acting under power of attorney, subsequently requested a review of that determination.
On 20 January 2015, the original decision was affirmed by an Authorised Review Officer (ARO),[2] and on 2 February 2015, Mrs Mesalic lodged an application for review with the Tribunal.
[2] Exhibit 1, T2/3.
STATUTORY FRAMEWORK
Although it is not expressly stated in the original determination or the ARO’s decision, I have inferred that both decision-makers were exercising the power conferred by s 44-26C of the Aged Care Act 1997 (the Act), which requires the relevant Department[3] to determine the value of a person’s assets for the purposes of that Act at a particular point in time when requested to do so. It relevantly provides:
[3] At that time, the responsible Department was the Department of Human Services. However, it is currently the Department of Health.
Determination of value of person’s assets
Making determinations
(1)The Secretary must determine the value, at the time specified in the determination, of a person’s assets in accordance with section 44-26A, if the person:
(a) applies in the approved form for the determination; and
(b) gives the Secretary sufficient information to make the determination.
The time specified must be at or before the determination is made.
Note 1: Determinations are reviewable under Part 6.1.
Note 2:An application can be made under this section for the purposes of section 52J-5: see subsection 52J-5(3).
...
When the determination is in force
(3)The determination is in force for the period specified in, or worked out under, the determination.
Chapter 3A of the Act relates to fees and charges that may be payable by a residential care recipient. Subject to a means test assessment, the Commonwealth may partially subsidise those fees, and the amount of the subsidy is dealt with in Chapter 3, by reference to what are known as “Subsidy Principles”.
For the purpose of calculating the value of the person’s assets at a particular time, subs 47(2) of the Subsidy Principles 2014 provides in effect that the provisions of the Social Security Act 1991 which exclude a person’s principal home from the calculation of the value of their assets, do not apply for the purposes of the Act. However, subs 44-26A(6) of the Act provides that the value of the person’s home is to be disregarded if, at the time of assessment, it was occupied by the partner, dependent child, or carer of the person who had occupied the home for the past two years (or in the case of a close relation, for the past five years) and who was eligible to receive an income support payment. Although Mrs Mesalic and her husband resided in the property, I understand they were not receiving (and, I infer, may not have been eligible to receive) social security benefits. Therefore, Mr May’s interest in the property was treated as an assessable asset. Relevantly, subs 44-26A(9) of the Act provides:
A reference to the value of the assets of a person is, in relation to an asset owned by the person jointly or in common with one or more other people, a reference to the value of the person’s interest in the asset.
DECISION-MAKING HISTORY
The ARO ultimately determined that Mr May’s assets totalled $122,647, comprised of $28,647 in financial assets, $4,000 in household contents, and the value of his interest in the property, being $90,000.[4] The result of the relevant calculations was that Mr May’s fees would be partially subsidised by the Commonwealth, although he would still be required to make contributions to accommodation costs of $34.79 per day, on top of a “basic daily fee”.
[4] Exhibit 1, T2/4. The property was apparently valued at $360,000. However, this did not take into account the mortgage on the property.
However, I note that on 10 September 2015, the Department[5] determined that Mr May would not be liable to pay an accommodation contribution for the period from 5 February 2015 (the date of Mr May’s entry into residential aged care) to 2 June 2015 (the day before the property was ultimately sold), on the basis that it would cause him financial hardship.[6] This was because the property was considered to be an “unrealisable asset” before it was sold on 3 June 2015, as Mr May would not have been able to “sell or borrow against his share” of the property while the other joint owners (Mr and Mrs Mesalic) continued to reside in it.[7]
[5] That is, the Department of Human Services. Specifically, the Chief Executive, Medicare.
[6] Section 52K-1 of the Act. See Exhibits 2 and 3.
[7] Secretary’s Statement of Facts and Contentions dated 15 September 2015, [28].
ISSUES
As I understand the position, Mrs Mesalic, who appeared on behalf of Mr May at the hearing, does not take issue with the values attributed by the ARO to Mr May’s financial assets and household contents. However, for reasons which I will outline in more detail below, she disputes that Mr May’s interest in the property should be taken into account for the purpose of calculating the value of his assets. If that value is excluded, it will have the effect of reducing the amount of the residential care fees (in particular, the accommodation contribution) payable by Mr May.
As to the relevant time, I note that the original determination was made on 18 December 2014 and related to the position as at that date. The ARO’s decision (which is the reviewable decision before me) also appears to have addressed the position as at that date, and by reference to the statutory framework, I consider I am also limited to assessing the position as at that date.
Before setting out the parties’ contentions, I will first outline the facts as they relate to the property.
THE PROPERTY
The Certificate of Title indicated at the relevant time that the registered proprietors of the property were Mr and Mrs Mesalic and Mr and Mrs May, as joint tenants.[8] Unfortunately, Mrs May passed away in February 2014. Mrs Mesalic explained in her oral evidence to the Tribunal that the Land Titles Office advised her it was not necessary to change the Certificate of Title.
[8] Exhibit 6.
It is not in dispute that Mr May did not make any capital contribution or mortgage repayments in respect of the property, or any contribution to maintenance expenses. These were made by Mrs Mesalic and her husband.[9]
[9] See Exhibits 4 and 7.
In her evidence, Mrs Mesalic explained that her parents’ names were put on the title for “security”—to ensure that they would not be left without a home to reside in if anything was to happen to Mr and Mrs Mesalic—and it was her understanding at that time that Centrelink would not have regard to the property in assessing their assets. She said that no one in the family, including her father, believes that he has an entitlement to one-third of the value of the property, as he has not contributed “his share”.[10]
[10] Indeed, Mr May subsequently confirmed this during his brief evidence at the resumed hearing on 2 September 2016.
As alluded to above, I note that the property was sold in early June 2015 for a net amount of approximately $333,000. In cross-examination, Mrs Mesalic said that she deposited $3,000 of that amount into Mr May’s bank account, and the balance was used by her and her husband to purchase another property.
CONTENTIONS
Secretary’s contentions
The Secretary contends that by the operation of property law, at the relevant time Mr May had an interest in the property because he was listed on the Certificate of Title as a joint tenant. When Mrs May passed away, her interest passed to the surviving joint tenants, each of whom then held a one-third interest. Mr Hay, who appeared on behalf of the Secretary at the hearing, submitted that this was the position irrespective of whether Mr May made any contributions to the property, and that the Tribunal should vary the decision of the ARO to reflect Mr May’s interest as being one-third of the value of the property, net of the mortgage.
Further, as the property was sold on or around 3 June 2015, the Secretary says that a new assessment will need to be made by the Department of the value of Mr May’s assets, including one-third of the proceeds of the sale that was received or deemed to have been received by him.
According to the Secretary’s Statement of Facts and Contentions, the matter was referred to a Complex Assessment Officer within the Department on 11 September 2015 for the purposes of a new assessment. However, at the resumed hearing on 2 September 2016, Mr Hay advised that the Department is awaiting the outcome of the Tribunal’s decision in this matter, before it makes a determination on the new assessment.
Mrs Mesalic’s contentions
As alluded to above, Mrs Mesalic contends that Mr May has not at any time been entitled to one-third of the value of the property because he did not make any contributions towards it, and because that was never the intention behind their arrangement. She says that if her father is to be regarded as having had an interest in the property, that should be “offset” against the payments towards the purchase price, mortgage, and maintenance that he ought to have made, which would effectively reduce his share to “nothing”.
Mrs Mesalic also contends that there has been a change in Centrelink’s position since the arrangement was entered into with her parents, as it was their understanding at that time that the property would not be included for the purposes of the assets test. I accept Ms Mesalic’s contention that this was the understanding of the family at the time, and that understanding appears to have been correct with respect to the assets test applicable to receipt of social security payments, such as the Age Pension. However, as I have indicated above, a person’s principal home does potentially form part of their assets when it comes to assessing their entitlements under the Aged Care Act.
Further submissions
I should also acknowledge that after the hearing on 21 March 2016, the Tribunal wrote to the parties identifying an additional issue which had not been canvassed, namely, that in certain circumstances, a legal interest in a property will not be regarded as part of a person’s assets for social security purposes, including where the person holds the legal ownership but not the beneficial or equitable ownership of the property. A telephone directions hearing was held on 7 June 2016, at which the parties were directed to provide further written submissions, and the matter was listed for a resumed hearing on 2 September 2016 at which this and some related issues were discussed.
CONSIDERATION
Although I accept what Mrs Mesalic says about the arrangement she and her parents had intended, my understanding of the legal position in South Australia is that the Certificate of Title is proof of a person’s interest in property. As Mr May was registered as a joint tenant, his interest in the property was equal to that of the other joint tenants.
That Mr May was intended to benefit from his legal interest in the property is reinforced by Mrs Mesalic’s evidence that the purpose of putting her parents’ names on the Certificate of Title was so that they would take ownership of the property in the event that something happened to Mrs Mesalic and her husband. At the resumed hearing, Mrs Mesalic further explained that she had also arranged for her superannuation to be left to her parents in that event, to be put towards their household bills. That evidence clearly demonstrates that it was intended that Mr and Mrs May would have a legal and beneficial interest in the property, as joint tenants, which would ensure they had a house to live in in the unlikely event that Mrs Mesalic and her husband predeceased them. It follows in my view that following his wife’s death in February 2014, Mr May’s status as a joint tenant gave him a one-third interest in the property.
As to the value of Mr May’s interest in the property as at the relevant date of 18 December 2014, I note this has become moot to some extent, due to the hardship determination which applied from when Mr May entered age care to when the property was sold. That determination was made on the basis that Mr May’s interest in the property was unrealisable during that period.
With respect to the period after that date, having regard to the statutory framework, I consider this to be outside the scope of the matter before me and I note this period will be the subject of a separate determination by the Department following my Decision. However I note there must be a very real issue as to whether, in light of the understanding which existed and the fact he made no contributions to the property, at the point when it was sold, Mr May had any legal entitlement to the proceeds, beyond the $3,000 he actually received. If he did, it may also be necessary to consider to what extent his share, or ‘deemed’ share, of the proceeds should be reduced by reference to the contributions he should arguably have made in exchange for a share in the proceeds of the property.
Notwithstanding his legal and beneficial interest in the property, the evidence before me is that Mr May was never expected to make any contributions to the property under the agreed arrangement, and nor did he expect to receive a share of the proceeds of sale. Mr Hay submitted that it would be incongruous to now conclude that he would be liable in equity to make contributions it was agreed he would not make. Equally, it may be incongruous to assume that he would be able to establish any legal entitlement to the proceeds of the sale, when the unanimous understanding of all concerned was that he would not be entitled to those proceeds. Arguably, the intended arrangement has been given effect, and even if he wished to make one, Mr May would not have a sound legal basis for a claim on the proceeds. That may lead to a conclusion that after 3 June 2015, no part of the proceeds of the sale (aside from the $3,000 he received) formed part of Mr May’s assets (or income).
However, as I have indicated above, the issue before me is limited to the value of Mr May’s assets as at 18 December 2014, and in particular what his share of the property was on that date. For the reasons I have given, I am satisfied that Mr May did have a legal and beneficial interest in the property on that date. I note that Mr May’s share of the property increased to one-third following the death of his wife, and I therefore propose to vary the decision of the ARO accordingly.
DECISION
The decision under review is varied, so as to provide that as at 18 December 2014, Mr May’s assets included a one-third share of the property at Paralowie (net of the mortgage on the property), which was not required to be disregarded pursuant to subs 44-26A(6) of the Aged Care Act 1997.
I certify that the preceding 29 (twenty-nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President K Bean ......... [Sgd] .....................................................
Admin Assistant
Dated 8 November 2016
Dates of hearing 21 March 2016 and 2 September 2016 Advocate for the Applicant Mrs D Mesalic Solicitor for the Respondent Mr A Hay
Department of Human Services
FOI and Litigation Branch
Key Legal Topics
Areas of Law
-
Administrative Law
-
Statutory Interpretation
Legal Concepts
-
Judicial Review
-
Statutory Construction
-
Standing
-
Jurisdiction
-
Intention
-
Procedural Fairness
2
0
2