McGUINNESS and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2010] AATA 324

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 324

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/1419

GENERAL ADMINISTRATIVE DIVISION		)
Re		JOHN McGUINNESS

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr S E Frost, Senior Member

Date 4 May 2010

Place Sydney

Decision The decision under review, being the substituted Centrelink decision dated 23 March 2010, is affirmed.

......................[sgd]......................

S E Frost,
  Senior Member

CATCHWORDS

SOCIAL SECURITY- age pension- method used to reassess the value of assets- method set out in Departmental Guidelines- substituted decision by Centrelink affirmed

LEGISLATION

Social Security (Administration) Act 1999 – s 180

Social Security Act 1991 – s 1084A

OTHER MATERIAL

Centrelink: The Guide to the Social Security Law, section 4.6.6.10

REASONS FOR DECISION

4 May 2010 Mr S E Frost, Senior Member       

Introduction and background

1.      John McGuinness has been receiving age pension since May 2000.  The rate of pension he receives varies from time to time, depending on the value of assets owned by him and his wife, and the level of income they earn.

2.      In February 2008 Mr McGuinness notified Centrelink that he had disposed of part of his portfolio of BHP Billiton shares.  This notification prompted a reassessment by Centrelink of the value of all the assets he held.  Centrelink then notified Mr McGuinness that the fortnightly rate of pension payable to him would change. 

3.      Over the next several weeks Mr McGuinness told Centrelink about a further six transactions he undertook with respect to his share portfolio.  Each of these communications caused Centrelink to reassess the value of his total assets, so that he received a number of letters notifying him of his revised fortnightly pension entitlements.

4.      Eventually, Mr McGuinness asked Centrelink to review the very first pension recalculation decision, which was made on 27 February 2008.  After an initial review, the case came to an Authorised Review Officer, Ms Jenny Grant.  According to her report dated 27 May 2008 (the Grant report), Ms Grant reviewed the decisions made on various dates to calculate Mr McGuinness’ rate of pension “since 22/2/08 on the basis of particular share values.”  She also reviewed the methodology that Centrelink had used to reassess the value of his assets during the latter half of 2007.  In relation to the 2007 period, Ms Grant was satisfied that Mr McGuinness’ share values had been properly calculated, but in relation to the 2008 period she wrote to him in the following terms:

(a) in the period from 25/3/08 to 7/4/08 your shares are to be valued at the ASX share prices at close of trading on 12/3/08; and

(b) from 8/4/08 your shares are to be valued at the ASX share prices at close of trading on 26/3/08.

5.      Ms Grant sent her report to the Centrelink office in Coffs Harbour for implementation.  A Complex Assessment Officer (CAO), Ms Robyn O’Rourke, recalculated Mr McGuinness’ pension entitlements and concluded, contrary to the Grant report, that he had been overpaid.

6.      Mr McGuinness has a firm view that Centrelink failed to implement Ms Grant’s report properly.  That view is based on his observation that the share values that Centrelink used in its initial reassessments were greater than the Australian Stock Exchange (ASX) share prices fixed upon in Ms Grant’s report.  That should have led to the payment of pension arrears.  Instead, the assessment concluded that he had been overpaid $157.10, which Centrelink decided not to recover.  He sought review by the Social Security Appeals Tribunal (SSAT) but the decision was affirmed on 6 March 2009.

7.      Although Mr McGuinness’ dissatisfaction stems from what he believes to be the incorrect implementation of the Grant report by Centrelink, I do not propose to examine the way in which that report was implemented.  The method of implementation would only be a relevant factor if I agreed with the conclusions in the report as to the use of the ASX share values at the nominated dates.  However, since I disagree with Ms Grant’s conclusions in this respect, it would be pointless revisiting how Centrelink implemented her report. 

8. In any event, a new CAO report was completed using what is described by the Respondent as more complete and accurate information about Mr McGuinness’ share transactions. On 23 March 2010, on the basis of this report and pursuant to s 180 of the Social Security (Administration) Act 1999 (the Administration Act), Centrelink set aside the decision of the SSAT and substituted a new decision to assess Mr McGuinness’ shares using information regarding his actual share transactions for the period under review. That substituted Centrelink decision is now the decision under review, and Mr McGuinness’ application to this Tribunal is to be treated as an application for review of that decision, as if the SSAT itself had set aside the original decision and substituted the new decision.

The issue

9.      The question now is whether the Tribunal should affirm, set aside or vary the decision under review.  Ultimately, that depends on whether I agree with the way Mr McGuinness’ shares were valued in the review undertaken on 23 March 2010.  This review, like the earlier recalculation referred to in paragraph 5 above, was carried out by CAO Ms Robyn O’Rourke.

The legislation

10. The shares that Mr McGuinness owns are “listed securities” within the meaning of that term in s 9 of the Social Security Act 1991 (the SS Act). They are to be valued under s 1084A of the SS Act, where they are referred to as “relevant investments”.

11. Section 1084A provides that, following an “initial” valuation, which in Mr McGuinness’ case would have occurred in 2000 when he first claimed the age pension, revaluations of relevant investments must occur:

(i)  on 20 March in each calendar year after 1996; and

(ii) on 20 September in each calendar year after 1996; and

(iii) when the person requests a revaluation of one or more of the person's listed securities and managed investments; and

(iv) following an event that affects the relevant investments and is the subject of a notice given under section 68 of the Administration Act.

12.     That revaluation must be undertaken, according to paragraph 1084A(b), “by the method set out in departmental guidelines”.

Departmental guidelines

13.     An extract from the Centrelink procedural guide, as quoted by Ms Grant in her report dated 27 May 2008, explains the revaluation process as follows:

Australian listed public company share prices are updated fortnightly and overseas listed public company share prices are updated bi-annually, on the shares database, in March and September, or upon request to the Financial Industry Network Support (FINS) Helpdesk.  However, these updates do not automatically apply to the shares recorded on the customer record.  Only a reassessment will update the market value of shares and managed investments held by a customer.

Reassessment (revaluation) of the customer’s shares occurs either:

·at the request of the customer

·when the customer advises a change in their share portfolio

·automatically in March and September during bulk updates.

Reassessment of any particular share will result in reassessment of all the customer’s listed shares and managed investments.  Therefore, customers may have an overall reduction or increase in their entitlement as a result of the reassessment due to the movement in the price of other listed shares or managed investments that will also be reassessed. (original emphasis)

14. Ms Grant seems to have assumed that this extract contains the “method set out in departmental guidelines” for the revaluation of relevant investments under s 1084A of the SS Act. However, a close examination of its contents reveals that it provides very little information, if any, about the “method” by which revaluations must be undertaken.

15.     In fact, the first paragraph provides only background information, and the second simply reiterates what is said in subparagraphs (i) to (iv) of paragraph 1084A(b).  It is only the first sentence of the final paragraph of the extract that approaches a “method” of revaluation.  To the extent that it incorporates a “method”, it states that once any of the circumstances in subparagraphs (i) to (iv) of paragraph 1084A(b) exist, a revaluation of the customer’s entire holdings of relevant investments must be undertaken.  The final sentence simply notes possible outcomes of the process.  It is clear, however, that the entire extract says nothing about how shares are to be valued.

16.     By contrast, the Secretary’s representative, Ms Prasad, has provided to the Tribunal, in the Secretary’s Statement of Facts and Contentions dated 26 March 2010, the following information taken from The Guide to the Social Security Law, at 4.6.6.10:

Valuation & revaluation of market linked managed investments & listed securities

The valuation and revaluation of market linked managed investments and listed securities is [sic] determined in accordance with the guidelines set out below.  Market linked managed investments are managed investments where the value of the investment fluctuates in line with market changes.

Initial valuation

When a customer’s new claim is determined, all of a customer’s market linked managed investments and listed securities are valued using the latest unit prices available to Centrelink.

Revaluation

The value of all of a customer’s listed securities and market linked managed investments are revalued using the latest prices available to Centrelink on 20 March and 20 September each year.

The value of a customer’s market linked managed investments and listed securities are also revalued:

·when a customer requests a revaluation of one or more of their market linked managed investments or listed securities, and

·after a notifiable event that affects one or more of the customer’s market linked managed investments or listed securities.

When one or more of a customer’s market linked managed investments and listed securities are revalued, all of the customer’s market linked managed investments and shares are revalued using the latest prices (emphasis added).

17. I am satisfied that this extract contains the “method set out in departmental guidelines” referred to in s 1084A of the SS Act for the valuation and revaluation of relevant investments. That “method”, which is noted once in relation to the initial valuation and twice in relation to revaluations, is to use the latest share prices available to Centrelink. That is not the method used in the Grant report. Instead, the method Ms Grant used was to apply the most recently notified ASX closing share prices. Those prices are not the “latest available to Centrelink” unless there has been no trading by the customer since that ASX download. If Mr McGuinness has either bought or sold shares since the most recent ASX download, then it is the unit price that he has paid or received that is the “latest available to Centrelink” for that class of share. If he has not traded a particular class of share since the most recent ASX download, then the price identified in that download will be the “latest available to Centrelink” for that class of share.

18.     Ms O’Rourke used this methodology in her most recent review, reported on 23 March 2010.  She also gave evidence at the hearing in Coffs Harbour on 8 April 2010, and attempted to explain to Mr McGuinness what she had done.  Regrettably, that attempt met with only limited success because of Mr McGuinness’ insistence that Ms O’Rourke’s approach must be wrong because it conflicted both with the Grant report and with certain correspondence that Mr McGuinness had received from Centrelink.  One such item of correspondence is a letter dated 26 August 2008, which states the following:

… share values are updated in bulk on the 20 March and 20 September each year and when a person requests an update.  The share values are updated fortnightly from the Australian Stock Exchange and it is this value that is used if you choose to have your share values updated (emphasis added).

19.     The underlined part of this extract is only consistent with the departmental guidelines outlined in paragraph 16 above if there has been no trading activity since the most recent ASX download: see paragraph 17 above.  To the extent that there is any inconsistency between the advice in that letter and the departmental guidelines, the advice must give way to the guidelines.

Conclusion

20. I am satisfied that the method used by Ms O’Rourke in her most recent review is the method that accords with the departmental guidelines. It follows that s 1084A of the SS Act has been complied with.

21.     Mr McGuinness did not dispute any of the share trading information on which Ms O’Rourke based her review.  Throughout the hearing, he concentrated only on the Grant report and how it had been implemented, although I continued to emphasise that I found the report unhelpful.  Nevertheless, I have reviewed the share movements and the share holdings included in Ms O’Rourke’s report and I am satisfied that the figures she has used are consistent with the figures Mr McGuinness has communicated to Centrelink during this long-running dispute.  I refer in particular to his letter dated 19 May 2009 where he identified a Centrelink error in his BHP holdings, and his letter dated 3 December 2009 in which he identified errors in the CAO’s report dated 18 July 2008.  Ms O’Rourke’s report incorporates these corrections.

Decision

22.     In the circumstances, the decision under review, being the substituted Centrelink decision dated 23 March 2010, is affirmed.

I certify that the twenty-two [22] preceding paragraphs are a true copy of the reasons for the decision herein of Mr S E Frost, Senior Member.

Signed:         ................................................................
           Ms B Dhanasar, Associate.

Date of Hearing  8 April 2010
Date of Decision  4 May 2010.
Appearance for the Applicant            Mr J McGuinness, Self Represented
Appearance for the Respondent        Ms R Prasad, Centrelink Legal Services