Molinaro and Secretary, Department of Families, Community Services and Indigenous Affairs

[2007] AATA 2068

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 2068

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No V 200600615

GENERAL ADMINISTRATIVE  DIVISION		)
Re		GLORIA MOLINARO

Applicant

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

Respondent

DECISION

Tribunal Mr B.H. Pascoe, Senior Member

Date19 December 2007  

PlaceMelbourne

Decision The Tribunal sets aside the decision under review and, in its stead, remits the matter to the respondent with a direction that the applicant is entitled to special benefit pursuant to s 729 of the Social Security Act 1991 from 7 September 2005; unless the applicant lodges a claim and qualifies for disability support pension so that s 15(1) of the Social Security (Administration) Act 1999 should apply.

(sgd) B.H. Pascoe

Senior Member

SOCIAL SECURITY – application for special benefit – previous refusal of claim for disability support pension – whether Dairy Structural Adjustment Program payments income – effect of bankruptcy on entitlement to payments – whether claim deemed to be made earlier than actual date of claim

Bankruptcy Act 1966

Dairy Produce Act 1986

Social Security Act 1991

Social Security (Administration) Act 1999

Re Molinaro and Secretary, Department of Family and Community Services [2004] AATA 1333)

REASONS FOR DECISION

19 December 2007   Mr B.H. Pascoe, Senior Member

1. This is an application to review a decision of the respondent to reject a claim by the applicant, Mrs G. Molinaro, for special benefit pursuant to s 729 of the Social Security Act 1991 (the Act).  The claim was lodged on 7 September 2005 and the decision under review to reject the claim was made on 16 January 2006.

2.      At the hearing Mrs Molinaro was represented by Mr J. Taylor, a solicitor.  The respondent was represented by Mr A. Carson, an advocate with Centrelink.  Evidence was given by Mrs Molinaro.

3.      This matter has a very long history.  On 20 March 2003, Mrs Molinaro made application for disability support pension (DSP).  The claim was rejected on 22 August 2003 on the grounds that, although she met all of the qualifying criteria under s 94 of the Act, her income exceeded the permissible limits.  The income in question consisted of quarterly payments of $23,071 payable over eight years in satisfaction of a total entitlement of $738,264 under the Dairy Structural Adjustment Program (DSAP) within the Dairy Produce Act 1986.  That decision was affirmed by the Social Security Appeals Tribunal (SSAT) and by decision of Senior Member Handley of this Tribunal on 15 December 2004 (Re Molinaro and Secretary, Department of Family and Community Services [2004] AATA 1333).

4.      In his decision, Senior Member Handley noted that Mrs Molinaro had pledged her quarterly instalments of DSAP to the National Australia Bank as security for a loan of $552,192 made on 30 March 2001.  He found that the quarterly payments amounted to income as defined by the Act and affirmed the decision to reject the claim for DSP.  In concluding his reasons for decision Senior Member Handley noted that the payments regarded as income were applied entirely for the discharge of debt leaving Mrs Molinaro without access to funds for living expenses.  In these circumstances he recommended that a claim for special benefits should be favourably considered.

5.      Mrs Molinaro said that, at the time of the decision, she was too concerned with the health of both her husband and herself and the necessity of moving house to consider making the application for special benefit until September 2005.  Unfortunately, the respondent maintained the view that the quarterly instalments of DSAP continued to be income of Mrs Molinaro and rejected that application.

6.      Some further comments on the history of Mrs Molinaro are relevant to this matter.  At the time of her becoming entitled to DSAP, Mrs Molinaro had significant debts.  She approached the National Australia Bank which agreed to advance $552,192, which appeared likely to have been the net present value of the future entitlement to the quarterly instalments of $23,071 which she assigned to the bank.  The amount advanced was used to pay outstanding debts of Mrs Molinaro.  It would appear that the funds were inadequate as Mrs Molinaro was made bankrupt by a sequestration order of 19 November 2002 following a creditor’s petition.

7.      In his decision, Senior Member Handley noted that bankruptcy and a report from the trustee in bankruptcy that the DSAP payments would continue to be paid to the bank pursuant to the loan and that There will be no recovery from this source.  He concluded that Mrs Molinaro had a continuing entitlement to the DSAP payments while irrevocably bound to have them applied in repayment of the loan moneys and thus continued to have an income amount derived for her own use or benefit.

8.      With respect, I must disagree with these conclusions of Senior Member Handley.  It seems clear that the effect of bankruptcy changed any rights Mrs Molinaro may have had to the instalments of DSAP.  The effect of bankruptcy is to transfer title and rights in assets to the trustee, other than those exempt by the Bankruptcy Act 1966, and discharge liabilities from the bankrupt.  As from the date of bankruptcy, the bank could only look to any security pledged in relation to the loan and, if necessary, any distribution by the trustee from the bankrupt estate.  The DSAP entitlements irrevocably assigned as security to the bank were no longer an entitlement or asset of Mrs Molinaro in the same way as the debt to the bank was no longer a liability of hers as a consequence of the bankruptcy.  It follows that, as from 19 November 2002, it could no longer be said that she continued to derive the instalments of DSAP for her own use or benefit.

9. This conclusion leads to an anomalous result. Under s 729 of the Act, the respondent may determine that a special benefit should be granted. The primary requirement in that no other Social Security pension or benefit is payable in respect of the same period. On the basis of my conclusions, Mrs Molinaro was entitled to receive DSP from the date of her original application in 2003 subject to her continuing to satisfy s 94 of the Act. Certainly, she was so entitled, subject to any income or assets test, as at the date of her application for special benefit. On that basis she had no entitlement to special benefit. Unfortunately, the Tribunal decision of 15 December 2004 stands as a decision against entitlement to DSP at least at that date.

10.     At the conclusion of the hearing on 28 August 2007, the Tribunal raised with the parties a concern at the effect of bankruptcy on the issues in this matter.  The respondent sought and was granted leave to provide a written submission by 7 September 2007.  The applicant was to provide a response to the submission within seven days of receipt of that submission.

11.     After requests for further time, the respondent provided a submission dated 18 September 2007.  Unfortunately, no reference was made in that submission to the effect of bankruptcy on the DSAP amounts.  However, the submission concluded that Mrs Molinaro satisfied the pre-conditions of subsection 729(2) and that it was appropriate to grant special benefit, subject to the income and assets test but disregarding the DSAP payment.  It was submitted that such benefit be payable from the date of the claim, 7 September 2005.  The submission limited itself to accepting that in exercising the discretion under section 746, the quarterly DSAP payments between the date of the claim on 7 September 2005 through to 30 June 2008 ought to be disregarded in applying the income test to the payability of special benefit.  It is noted that the submission did not consider the proposition that the DSAP payments were not income of Mrs Molinaro for any income test pursuant to the Act.

12.     For Mrs Molinaro, Mr Taylor responded to the submission by submitting that the DSAP payments were not income since the date of bankruptcy, 19 November 2002.  It was contended that she was entitled to either DSP or special benefit from the date of her original application for DSP, 20 March 2003. 

13.     On 19 September 2007, the respondent sought leave to make further submissions by 26 September 2007.  Several further requests were made for additional time in which to make such submissions.  It was understood that the delay had been occasioned by the need to consult the two different Commonwealth Departments responsible for administering the two different types of benefit.  This further submission finally arrived on 8 November 2007.  It was disappointingly brief and unhelpful by stating:

1.The Secretary concedes that the payments from the Dairy Structural Adjustment Program should not be taken into account for the purposes of assessing the applicant’s entitlement to special benefit.

2.The Secretary does not concede that the applicant qualifies for special benefit as at the date of her claim lodged on 7 September 2005.  To be granted special benefit the applicant must first satisfy the conditions under subsection 729(2) of the Social Security Act 1999 and, if the applicant does satisfy those conditions, it is then for the Tribunal to consider whether to exercise the discretion to grant special benefit. 

How the Tribunal is meant to reconcile this submission with that of 18 September 2007 and what the respondent’s view of the effect of bankruptcy on whether Mrs Molinaro continued to derive income in the form of DSAP payments remains a mystery.  It must be assumed that the respondent understands the difficulty in which the Tribunal finds itself but was not prepared to make any constructive proposals for consideration.  It has to be said that the submissions are less than might have been expected from the respondent acting as a model litigant.

14.     If Mrs Molinaro’s likely entitlement to DSP is put aside, the Tribunal is left with no doubt that she satisfies the conditions of subsection 729(2) of the Act and that the discretion should be exercised to grant special benefit.  Pursuant to s 746 the rate of special benefit should be at the rate of Youth Allowance, Austudy payment or Newstart Allowance, whichever is the highest (s 746(2)).  Such benefit should be paid from the date of the claim, 7 September 2005.

15.     Subsections 15(1) and 15(2) of the Social Security (Administration) Act 1999 (the Administration Act) provide:

15(1)    For the purposes of the social security law, if:

(a)a person makes an incorrect claim; and

(b)the person subsequently makes a claim for a social security payment for which the person is qualified; and

(c)the Secretary is satisfied that it is reasonable that this subsection be applied;

the person is taken to have made a claim for that social security payment on the day on which he or she made the incorrect claim.

15(2)For the purposes of this section, a claim made by a person is an incorrect claim if:

(a)the claim is for a social security payment, other than a supplementary payment; and

(b)when the claim was made, the person was not qualified for the payment claimed but was qualified for another social security payment, other than a supplementary payment.

Mr Taylor seeks to argue that, if Mrs Molinaro was not qualified for DSP in March 2003, she was qualified for special benefit at that date and she should be taken to have claimed special benefit as at the date pursuant to s 15(1) of the Administration Act. However, I accept the respondent’s contention that the length of the delay in lodging the claim for special benefit in September 2005 following the Tribunal decision some nine months earlier, mitigates against the exercise of the discretion in s 15(1).

16.     As stated earlier, I am satisfied that Mrs Molinaro cannot be taken to have derived income from the DSAP payments from the date of her bankruptcy.  However, the Tribunal decision of 15 December 2004 was not the subject of any appeal to the Federal Court and must stand.  Its effect was that DSP was not payable to Mrs Molinaro during the eight years in which the DSAP payments continued.  It would, however, be open to the responsible authority to make a new decision in relation to that earlier period in the light of later and relevant information.

17. In any event, given my findings, it is open to Mrs Molinaro to now lodge a new claim for DSP; and Centrelink should apply s 15(1) of the Administration Act so that, if she was qualified for DSP pursuant to s 94 of the Act at that date, she should be taken to have made that claim on 7 September 2005. If such claim is made promptly, the delay since 7 September 2005 is clearly explicable by the time taken in having the matter heard and determined by this Tribunal and the foregoing findings.

18. It follows from the above, that the decision under review should be set aside and the matter remitted to the respondent with a direction that the applicant is entitled to special benefit pursuant to s 729 of the Act from the date of her application, 7 September 2005; unless the applicant makes a claim for and qualifies for DSP so that s 15(1) of the Administration Act applies.

I certify that the eighteen [18] preceding paragraphs are a true copy of the reasons for the decision herein of Mr B.H. Pascoe, Senior Member

Signed:  Lauren Spragg
  Clerk

Date/s of Hearing  28 August 2007
Date of Decision  19 December 2007
Advocate for the Applicant          Mr J. Taylor 
Advocate for the Respondent       Mr Andrew Carson