McCluskie and Secretary, Department of Social Services (Social services second review)
[2022] AATA 4221
•1 September 2022
McCluskie and Secretary, Department of Social Services (Social services second review) [2022] AATA 4221 (1 September 2022)
Division:GENERAL DIVISION
File Number(s): 2021/1480
Re:Ann McCluskie
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
Decision
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:1 September 2022
Date of written reasons: 7 December 2022
Place:Sydney
The decision under review is affirmed, and the matter is remitted to the Secretary for calculation of the total amount owing, which should include interest at the prescribed rate until the debt is repaid.
................................................[SGD]................................................
Emeritus Professor P A Fairall, Senior MemberCATCHWORDS
SOCIAL SECURITY – debt – Home Equity Access Scheme – whether valid loan created – no ground for waiver of debt – decision affirmed
LEGISLATION
Social Security Act 1991 (Cth), sections 23, 1133, 1134, 1135, 1138, 1139, 1140, 1142, 1222A, 1235
CASES
Awad and Secretary, Department of Social Services (Social services second review) [2021] AATA 3631
SECONDARY MATERIALS
Social Security Guide
REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
7 December 2022
BACKGROUND
The Home Equity Access Scheme (the Scheme) is established under the Social Security Act 1991 (Cth) (the SSA). It allows a homeowner who is eligible for the age pension to obtain periodic payments by way of loan from the Commonwealth secured by a charge over the home.[1] Until 2022, the Scheme was known as the Pension Loans Scheme (PLS). The Scheme is administered by Services Australia, and PLS payments are made in addition to age or other income support payments.
[1] See
The Social Security Guide (the Guide) relevantly explains the PLS in part, as follows:
The [Scheme] (known as the PLS prior to 1 January 2022) is a voluntary, reverse mortgage type loan available to anybody who:
·is of age pension age, or is partnered to somebody who is
·qualifies for either Age [Pension] … and
·owns real estate in Australia.
Through the [Scheme], a person can choose to receive:
·A fortnightly payment (combining any pension plus [Scheme] loan) of up to 150% of the maximum rate of fortnightly pension (including basic pension rate, pension supplement, [Energy Supplement], and [Rent Assistance], where applicable).
…
Example: A maximum rate age pensioner who owns their own home can receive a loan of up to 50% of the fortnightly maximum pension.
…
The person's outstanding debt is subject to a compound interest rate and the debt is secured by a statutory charge over the person's real estate in Australia (1.1.A.320). The debt would normally be paid back to the Commonwealth if the real estate is sold (unless the debt is transferred to another property), or from the person's estate after their death.[2]
[2] See instruction 1.2.3.50.
Payments made under the PLS are not income support payments. PLS payments are repayable with compound interest to the Commonwealth. The rate of interest payable is fixed from time to time by the Minister by legislative instrument.[3]
[3] Social Security Act 1991 (Cth), s 1135(4).
On 8 December 2008, Mr and Mrs McCluskie signed the loan application form, entitled Request for payment under the Pension Loans Scheme.[4] Payments of $813.61, $455.62 and $455.62 were made under the PLS scheme on 19 January 2009, 21 January 2009 and 4 February 2009 respectively.[5] Mr McCluskie accepted that these payments were received.[6]
[4] ST2, p 276.
[5] T17, p 64.
[6] Transcript, 1 September 2022, p 18.
On 11 February 2009, Mr McCluskie spoke to the Centrelink officer responsible for actioning the loan to say that he was unhappy with aspects of the arrangement.[7] Specifically, he was unhappy with the rate of interest, and the fact that a relatively small loan of $16,000 was to be secured over a property worth $120,000.[8] Sometime around early February 2009, but probably after the third payment was made, he asked that no further payments be made under the Scheme, whereupon payments were suspended.[9]
[7] T17, p 73.
[8] Transcript, 1 September 2022, p 18.
[9] Transcript, 1 September 2022, p 18.
On 15 May 2009, Centrelink confirmed in writing to Mrs McCluskie that in consultation with Mr McCluskie, the process for registering a charge had been suspended.[10] Centrelink asked Mrs McCluskie to indicate whether she wished to continue receiving payments under the Scheme and if not, to make arrangements to repay the amount owing. The amount then owing was $1,755.52 plus $185.00 incurred by the Australian Government Solicitor (AGS) in registering a mortgage. As at 22 June 2009, the loan balance was $1880.12.[11] Mrs McCluskie did not respond to Centrelink letters sent on 15 May 2009, 28 May 2009, 14 August 2009, and 25 February 2010. The amount owing has escalated to a figure of $3290.15 (principal amount $1653.99 and interest $1636.16) as at 22 March 2022.[12]
[10] T5, p 41.
[11] T19, p 191.
[12] ST, p 1.
On 30 August 2016, Centrelink sent Mrs McCluskie a notice following contact by Mr McCluskie to resolve the outstanding PLS debt.[13] The notice stated that Centrelink agreed to accept Mr McCluskie’s offer to repay the debt amount less the legal costs incurred of $259.66. The notice stated, in part:
As at 22 August 2016 the amount owing was $2,764.27 less the legal costs $259.66 arrives at total amount owing $2,504.61.
The amount that would be accepted as settlement is $2,504.61 and this amount would be accepted until 4 September 2016.
If settlement was to take place on or after 5 September 2016, the amount that would be accepted as settlement is $2,509.67 and this amount would be accepted until 18 September 2016.
[13] T9, p 46.
Neither Mrs McCluskie nor Mr McCluskie responded to this offer.
On 12 July 2019, Centrelink informed Mrs McCluskie that the amount had increased to $2,913.28, which included the principal amount, legal costs and interest.[14]
[14] T11, p 49.
On 7 July 2020, the amount was $3,058.19, of which $1,404.20 was interest.[15]
[15] T13, p 54.
On 3 September 2020 an Authorised Review Officer (ARO) of Services Australia made a decision that the Applicant had a PLS debt of $3,079.41, comprising $1,653.99 principal loan and $1,425.42 interest.[16]
[16] T17, p 64.
On 24 February 2021, the Social Services and Child Support Division of the Tribunal (AAT1) made a decision affirming the decision of the ARO.[17]
[17] T2, p 7.
On 12 March 2021, Mrs McCluskie applied to the Tribunal for review of the AAT1 decision. In her application, she said:
I don’t believe that the review considered that due process took place in establishing the loan. Although an application for the loan did take place and when the terms of the loan were conveyed to me I was never asked if I agreed with them but I did object and in essence I considered that I was bullied at the time with Centrelink saying I had no way of getting out of the “contract” and that only the minister can change the law.
The decision refers to matters after it was assumed that Centrelink had worked through the correct procedure in advancing the loan. It is this matter that I believe is wrong. It is this matter that I objected to in 2009. There was no point in time when I was required to sign that I understood the loan terms. I was surprised that there was not even a ‘cooling off’ period.[18]
[18] T1, p 5.
The application was heard by the Tribunal on 1 September 2022. Mrs McCluskie was represented by her husband Mr McCluskie.
THE HEARING
Mr McCluskie was somewhat inconsistent as a witness. On one hand, he argued that his wife was not liable to repay the loan amount or interest, either because there was no valid application form, or because a critical step had not been taken as part of the application process, namely, an information session in which she was provided with all the essential details relating to the loan, security required, interest and so on. The argument that there was no valid application was based on the contention that her signature was in the wrong place.
I do not accept these arguments. Neither would provide any justification for failing to repay the principle sum in a timely manner, so as to avoid the accumulation of interest.
On the other hand, Mr McCluskie said that he was content to pay back the principal sum and had tried to do so in the past. He still maintained that no interest should apply. He said that he attempted to negotiate with Centrelink to repay only the principal amount and said:
Yes, and I - every so often I said that I was quite willing to pay the money but not the interest. And they said the debt wouldn’t be cleared unless you paid the whole lot. So I said look, sort it out, we’ll come to some sort of agreement on how we’re going to pay it and then it was found out that, you know, there was no way, you’ve got to be part of the pension loan scheme and you clear it up on your debt when you want to discharge the property or you pay it off now, that was the …[19]
[19] Transcript, 1 September 2022, p 19.
Under cross-examination, he conceded that his wife had received regular notices from Centrelink about the outstanding debt. He accepted that his wife did qualify for the Scheme, and that the money was paid pursuant to an application completed on 8 December 2008. She had not written to Centrelink to withdraw her participation from the Scheme, or to suggest that payments had been made in error.[20] He accepted that neither the principal sum nor the interest had been repaid.
[20] Transcript, 1 September 2022, pp 19-20, 25.
He said that he wanted to withdraw from the Scheme when he became aware of the applicable interest rate and the ancillary costs relating to the registration of a charge.[21]
[21] Transcript, 1 September 2022, p 16.
He contends that the debt can be waived as per instruction 6.7.1.10 of the Guide, which identifies the PLS as a ‘debt’ for the purposes of subsection 1222A of the SSA and therefore the debt waiver provisions in Part 5.4 of the SSA may apply.[22]
[22] Mr McCluskie’s email of 15 November 2021, ST8 p 291.
The Respondent notes that instruction 6.7.1.10 was amended on 24 January 2022 to remove reference to the creation of a PLS/Home Equity Access Debt under section 1135 as a debt under section 1222A of the SSA.[23]
[23] ST8 p 292.
I am satisfied that there are no provisions in Division 4 of Part 3.12 of the Act that allow discretionary waiver or write off of a PLS debt. I note that in Awad and Secretary, Department of Social Services (Social services second review) [2021] AATA 3631, the Tribunal confirmed that waiver of a PLS debt is not available under social security law, in part:
The Tribunal notes that there are no provisions in accordance with social security law to waive recoverable loans under the pension loans scheme … and there is no basis to waive or write off the pension loan scheme debt.
Therefore, the Tribunal is satisfied that the Applicant has incurred a pension loans scheme liability and the decision under review is affirmed in respect of the pension loan scheme debt.[24]
[24] Awad and Secretary, Department of Social Services (Social services second review) [2021] AATA 3631 at [79].
After hearing from Mr McCluskie, I made a decision affirming the AAT1 decision. I explained to Mr McCluskie that I understood the facts to be that his wife had received the money by way of loan, that no part of the principal or interest had been repaid, and that there was no ground for releasing her from the obligation to repay the money with interest.[25]
[25] Transcript, 1 September 2022, p 27.
On 9 November 2022, a request for written reasons was received by the Tribunal.
CONSIDERATION
As noted above, PLS amounts paid by the Commonwealth are secured against equity in the Applicant’s own home – for recovery from the estate if not paid earlier. In that sense, under the PLS, Applicants are simply unlocking funds in their own home and paying themselves an extra amount each fortnight. This is quite different from income support payments which are the property of the recipient and do not attract any repayment obligation.
The operation of the PLS is set out in Division 4 of Part 3.12 of the Social Security Act 1991 (Cth).
Section 1135 provides the method and manner for calculating the amount owing to the Commonwealth under the Scheme.
Section 1139 provides that a debt created by the PLS scheme is not to be recovered from a person by the Commonwealth until after the person’s death, or the death of his or her partner (under certain circumstances). Subsection 1139(4) provides:
(4)If the Secretary decides that the debt is to be recovered before the events referred to in subsection (1) or (2), the debt may be so recovered in spite of those subsections.
PLS debts are recoverable by way of enforcement of the related charge, subject to sections 1138, 1139 and 1140.
The non-recovery provisions in Part 5.4 of the SSA do not apply to debts created under the PLS because PLS debts are not included in the definition of ‘debt’ in section 1235. Therefore, for example, section 1222A has no application to PLS. Moreover, Centrelink does not have the authority to offset an amount owing under the PLS against future Centrelink entitlements.
I agree with AAT1 that there is no discretionary provision under the SSA which permits a decision-maker to waive or reduce the debt, which continues to accrue interest at the specified rate until it is repaid in full. Amounts paid under the PLS are not ‘social security payments’, because they are not included in the definition of a ‘social security payment’ in section 23 of the SSA. The fact that the payments from the PLS are used to ‘top-up’ pension payments does not obscure the fact that the PLS component is not a social security payment.
FINDINGS
I am satisfied that Mrs McCluskie was eligible to participate in the scheme when she applied in 2008, and made a valid application for a loan under the PLS. I accept that it was mutually agreed after discussions between Centrelink Australia and Mr McCluskie that no further payments would be made under the scheme. By that time, Mrs McCluskie had received three payments amounting to $1,724.85. No money has been repaid to Centrelink. The principal amount continues to attract compound interest at the prescribed rate.
Given the Applicant’s clear indication that she has no desire to participate in the PLS, I consider that the Secretary is entitled to exercise the power in subsection 1139(4) to recover the debts at the present time. Mrs McCluskie is required to repay the monies advanced with interest.
I accept that as of 22 March 2022, the full amount of the PLS debt stood at $3,290.15 (principal amount $1653.99 and interest $1636.16).
The repayment amount as at the date of this decision will require further adjustment to take into account accrued interest.
I therefore affirm the decision under review, and remit the matter to the Secretary for calculation of the total amount owing, which should include interest at the prescribed rate until the debt is repaid.
I certify that the preceding thirty six (36) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member
.....................................[SGD]...................................
Associate
Dated: 7 December 2022
Date(s) of hearing: 1 September 2022 Advocates for the Applicant: Mr R McCluskie, non-legal representative Solicitors for the Respondent: Mr McCluskie Gauci, Hunt & Hunt Lawyers
Key Legal Topics
Areas of Law
Administrative Law
Statutory Interpretation
Legal Concepts
Judicial Review
Jurisdiction
Statutory Construction
Remedies
Appeal
0
1
0